CBSE Previous Year Question Papers Class 12 Economics with Solutions

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Class 12 Subject Economics Paper Set 3 with Solutions

SECTION - A

(Macro Economics)

Question 1: (Marks 1)

Which of the following is not a non-tax revenue receipt ? (Choose the correct alternative)

(A) Goods and Services tax

(B) External grants

(D) Disinvestment

Answer :

(A) Goods and Services tax

Question 2: (Marks 2)

Deflationary gap indicates__________(excess/deficient) demand in an economy. (Fill in the blank with correct answer)

Answer :

deficient

Question 3: (Marks 1)

State, whether the following statement is true or false:

“Government budget is an annual statement showing actual receipts and actual payments of the government for the last fiscal year.”

Answer :

False

Question 4: (Marks 1)

Name the components of money supply.

Answer :

1) Currency held with public.

2) Demand deposits of commercial banks.

Question 5: (Marks 1)

If the exchange rate of the home currency rises, the value of exports of the economy is likely to_______. (Fill in the blank with correct answer)

Answer :

fall.

Question 6: (Marks 1)

State the meaning of Involuntary Unemployment.

Average Propensity to Save (APS) is the ratio of _______ and_________. (Fill in the blank with correct answer)

Answer :

Involuntary Unemployment refers to a situation in which all those people who are willing and able to work at the existing wage rate do not get work.

total savings and total income

Question 7: (Marks 1)

State, whether the following statement is true or false:

“The official reserve transactions are taken as the accommodating item in Balance of Payment (BOP).”

Answer :

True

Question 8: (Marks 1)

Under Statutory Liquidity Ratio, commercial banks are required to keep a fraction of ________ in the form of liquid assets.

(A) Total deposits

(B) Term deposits

(D) Current deposits

Answer :

(A) Total deposits or (C) Total demand and term deposits (one mark should be allotted to any of the two)

Question 9: (Marks 1)

Define ‘Foreign Exchange Rate’.

Answer :

Foreign Exchange Rate is the rate at which the currency of one country is exchanged with the currency of another country.

Question 10: (Marks 1)

Primary deficit can be zero if_________. (Fill in the blank with correct alternative)

(A) Fiscal deficit= Interest payments

(B) Fiscal deficit< Interest payments

(D) Revenue deficit< Fiscal deficit

Answer :

(A) Fiscal Deficit = Interest Payments

Question 11: (Marks 3)

Distinguish between a ‘Current account deficit’ and a ‘Trade deficit’.

“Balance of payment (BOP) is always balanced in the accounting sense”. Defend or refute the given statement with valid reasons.

Answer :

Current Account Deficit (CAD) refers to excess of payments for value of import of visible items, invisible items and unilateral transfers over the receipts from value of export of visible items, invisible items and unilateral transfers. Whereas;

Trade deficit refers to the excess of the payments for value of import of visible items over the value of receipts of export of visible items.

The given statement is defended, as Balance of payment (BOP) is based on the principles of double entry book keeping system. Any deficit/ surplus created through autonomous transactions are corrected by the corresponding surplus/deficit in accommodating transaction by monetary authority.

Question 12: (Marks 3)

From the following data, calculate (a) Revenue deficit and (b) Fiscal deficit:

Answer :

Revenue Deficit= [(ii)-{ (i)+(iii) }]

=3821-(1000+2000)

= ₹ 821 crores

Fiscal deficit = [ { (ii) +(v) }- { (iii) +(i) +(iv) +(vi) } ]

= [(3821+574)- (2000+1000+100+135)]

=[(4395)-(3235)] = ₹1160 crores

Question 13: (Marks 4)

In the given figure, what does the gap ‘KT’ represent? State and discuss any two fiscal measures to correct the situation.

For Visually Impaired Candidates :

What is meant by deflationary gap ? State and discuss any two fiscal measures to correct the situation of deflationary gap.

Answer :

KT’ represents inflationary gap

Two fiscal measures are –

a) Increase in Taxes - To curb the inflationary gap the government may increase the taxes. This may reduce the purchasing power in the hands of the public which in turn may reduce the Aggregate Demand in the economy to bring it equal to the Aggregate Supply.

b) Reduction in Government Expenditure- To curb the inflationary gap the government may reduce its non developmental expenditure. This may reduce the purchasing power in the hands of the people which in turn will reduce the Aggregate Demand in the economy to bring it equal to the Aggregate Supply.

For Visually Impaired Candidates :

Answer :

Deflationary gap is that situation when Aggregate Demand is lesser than Aggregate Supply corresponding to full employment level.

Two fiscal measures are to control it are:

a) Decrease in Taxes - To curb the deflationary gap the government may decrease the taxes. This may increase the purchasing power in the hands of the people which in turn may increase the Aggregate Demand in the economy to bring it equal to the Aggregate Supply.

b) Increase in Government Expenditure- To curb the deflationary gap the government may increase its expenditure. This may increase the purchasing power in the hands of the people which in turn may increase the Aggregate Demand in the economy to bring it equal to the Aggregate Supply.

Question 14: (Marks 4)

“To boost the falling demand in the economy, the Reserve Bank of India recently reduced Repo rate.” Elaborate the rationale behind the steps taken by the Central Bank.

Answer :

Repo rate is the rate at which Reserve Bank of India lends funds to the commercial banks for a short period of time. A decline in repo rate may induce commercial banks to reduce the lending rates. This may encourage demand for loans in the market leading to greater funds at the disposal of general public. This may lead to creation of higher Aggregate Demand in the economy.

Question 15: (Marks 4)

Calculate Gross Value Added at Market Price (GVAMP) from the following data :

The value of the Nominal Gross National Product (GNP) of an economy was ₹ 2,500 crores in a particular year. The value of GNP of that country during the same year, evaluated at the price of base year was ₹ 3,000 crores.

Calculate the value of GNP deflator of the year in percentage terms. Has the price level risen between the base year and the year under consideration?

Answer :

GVAMP = [(ii)+(iii)+(iv)]-(v)

= [200+(-)10+10]-120

=200-120

= ₹80 lakhs

Calculate the value of GNP deflator of the year in percentage terms. Has the price level risen between the base year and the year under consideration

Question 16: (Marks 6)

Answer the following questions based on the data given below:

(i) Planned investment = ₹ 100 crore

(ii) C = 50+ 0.5 Y

(a) Determine the equilibrium level of income.

(b) Calculate the saving and consumption expenditure at equilibrium level of National Income.

Answer :

(a) At equilibrium level of income, Y = C +I

Y = (50 + 0.5Y) +100

Y- 0.5Y= 150

Y= 150/0.5 = ₹ 300 crores

Equilibrium level of income = ₹ 300 crores

(b) S= - C +( 1-b) Y

= - 50 + (1-0.5) (300)

= ₹ 100 crores

Y = C+S

300 = C + 100

C = 300-100 = ₹ 200 crores

Question 17: (Marks 6)

Define the problem of double counting in the estimation of National Income. Discuss two approaches to correct the problem of double counting.

Define the following :

(a) Capital Goods

(b) Gross Domestic Product

(d) Income from property and entrepreneurship

Answer :

Problem of double counting in the estimation of National Income arises due to counting the value of commodities more than once. This leads to overestimation of the value of goods and services produced in the economy.

Two approaches to correct the problem of double counting are-

i) Final Output Method: According to this method, value of only the final goods and services should be added to determine the national income.

ii) Value Added Method: According to this method, sum total of the value added by each producing unit should only be taken in consideration. It means the value of intermediate consumption should not be considered.

a) Capital Goods are those final goods which help in further production of other goods and services. e.g. machinery

b) Gross Domestic Product is the sum total of market value of all the final goods and services produces within the domestic territory of a country during a year.

c) Flow Variables are those economic variables which is measured over a period of time e.g. national income

d) Income from property and entrepreneurship is the income which arises from ownership of physical/financial/intellectual property and reward to the entrepreneur for his contribution to the production of goods and services in the form rent, royalty, interest and profit.

SECTION B

(Indian Economic Development)

Question 18: (Marks 1)

__________ is one of the taxes eliminated after implementation of Goods and Services Tax (GST). (Fill in the blank with correct answer)

Answer :

Value Added Tax

Question 19: (Marks 1)

_________ and _______ currency notes of old Mahatma Gandhi series were banned as legal tender money on 8th November, 2016. (Choose the correct alternative)

(A) ₹ 50 and ₹ 100

(B) ₹ 500 and ₹ 1000

(D) ₹ 500 and ₹ 200

Answer :

(B) ₹ 500 and ₹ 1000

Question 20: (Marks 1)

Fixing of maximum land holding (ownership) for an individual is known as_______. (Fill in the blank with correct answer)

Answer :

land ceiling

Question 21: (Marks 1)

Central Pollution Control Board (CPCB) has identified____ categories of large and medium industries as polluting industries. (Choose the correct alternative)

(A) 15

(B) 17

(D) 13

Answer :

(B) 17

Question 22: (Marks 1)

“Google in India has hired 4000 graduate students.” (Pick the correct type of employment) The given statement deals with formal sector/ informal sector employment.

Answer :

formal sector

Question 23: (Marks 1)

The first Industrial Policy Resolution in Independent India was introduced in the year__________ (Choose the correct alternative)

(A) 1948

(B) 1950

(D)1956

Answer :

(A) 1948

Question 24: (Marks 1)

State the meaning of Cooperative Marketing.

Answer :

Cooperative Marketing is a system in which the farmers pool their marketable surplus of crops and distribute the sale proceeds on the basis of each individual share.

Question 25: (Marks 1)

Define ‘Human Capital Formation’.

Identify the correct sequence of alternatives given in column II by matching them with their respective years in column I:

Choose the correct alternative from following :

(A) a-(iv), b-(i), c-(ii), d-(iii)

(B) a-(iv), b-(ii), c-(i), d-(iii)

(D) a-(iv), b-(ii), c-(iii), d-(i)

Answer :

Human Capital Formation refers to the process of addition made to the stock of skilled and capable people in the country over a period of time. (any other valid definition)

Question 26: (Marks 1)

State the meaning of ‘Commune’.

Answer :

Commune refers to a system of collective farming under which people were made to cultivate farm land in China under Great Proletarian Cultural Revolution.

Question 27: (Marks 1)

Arrange the following events in chronological order and choose the correct alternative :

(i) Establishment of People’s Republic of China

(ii) Creation of Pakistan

(iii) First Five-Year Plan of India

(iv) First Five-Year Plan of China

Alternatives :

(A) (i), (iv), (ii), (iii)

(B) (iii), (ii), (i), (iv)

(D) (iv), (iii), (ii), (i)

Answer :

Question 28: (Marks 3)

“It is necessary to create employment in the formal sector rather than in the informal sector.” Defend or refute the given statement with valid arguments.

State and discuss any two challenges in the Power sector of India.

Answer :

The given statement is true and can be defended on the following arguments:

(i) Formal sector of employment provides greater job security as compared to informal sector of employment.

(ii) Under the formal sector of employment people are entitled to better social security benefits. (Marks are to be awarded to any other valid argument)

The challenges of the power sector in India are-

(i) India’s installed capacity to generate electricity is inadequate and remains underutilised. The operational efficiency of power projects which is reflected by the Plant Load Factor (PLF) is low in India.

(ii) State Electricity Boards (SEBs) are suffering due to transmission and distribution losses, wrong pricing of electricity and other inefficiencies. (Marks are to be awarded to any other valid point)

Question 29: (Marks 3)

“Rapid increase in economic growth surely trickles down to the people under the absolutely poor category.” Defend or refute the given statements with valid arguments.

Answer- This statement is refuted because-

(i) Population growth has resulted in a very low growth in per capita income

(ii) The Green Revolution has increased the regional disparity and also the gap between the rich and the poor farmers.

(iii) The gains of economic growth have been grabbed by the rich. (any other valid argument to be awarded marks)

Question 30: (Marks 4)

“Agriculture sector appears to be adversely affected by the economic reform process.” Explain the given statement.

India is often called the ‘Outsourcing Destination’ of the world. Discuss the prime reasons for this name given to India.

Answer :

The agricultural sector was adversely affected by the reform process in the following manner-

(i) Public investment in agriculture sector especially in infrastructure like irrigation, power etc. has been reduced in the reform period

(ii) Removal of fertilizer subsidy has increased the cost of production affecting thereby the small and marginal farmers

(iii) Increased international competitiveness due to liberalisation and reduction of import duties.

(iv) Shift from food crops to cash crops due to export-oriented policy in agriculture led to a rise in prices of food-grains

Reasons for India as outsourcing destination-

(i) Availability of skilled manpower- India has vast skilled manpower which enhances the faith of MNCs.

(ii) Favourable Government policies- MNCs get various types of lucrative offers from the Indian government such as tax holidays, tax concessions etc. (any other valid argument should be allotted marks)

Question 31: (Marks 4)

“India, China and Pakistan have travelled more than seven decades of developmental path with varied results.” Explain the given statement with valid arguments.

Answers :

i. Till the late 1970s, all the three countries were maintaining the same level of low development.

ii. Over the last three decades, the three countries have taken different levels of development

- India has performed moderately over the years. Majority of its people still depend on agriculture. Infrastructure is lacking and more than one fourth of its population live below poverty line.

- Pakistan performed low because of political instability, overdependence on remittances and foreign aid along with volatile performance of agriculture.

- China has used the market system to succeed in raising the rate of growth in economy with stress on alleviation of poverty. (to be marked as a whole) (any other valid argument should be allotted marks)

Question 32: (Marks 4)

Discuss briefly the rationale behind choosing ‘Self-reliance’ as a planning objective for the Indian economy.

Answers :

The objective behind self-reliance were-

i. To reduce foreign dependence: Planning objective of ‘Self-reliance’ targeted to promote economic growth and modernisation, the Indian five year plans in the early years of post independence era stressed on the use of domestic resources in order to reduce our dependence on foreign countries.

ii. To avoid foreign interference: In the post independence era it was feared that the dependence on the imported food supplies, foreign technology and foreign capital may increase foreign interference in the policies of our country.

Question 33: (Marks 6)

(a) State the meaning of ‘Poverty Line’.

(b) Define the following:

(i) Carrying capacity of environment

(ii) Absorptive capacity of environment

Answers :

(a) Poverty Line is the cut off point on the line distribution which divides the population of the country as poor and the non-poor. It can be determined in terms of calorie intake and monthly per capita expenditure (MPCE).

b) (i) Carrying capacity of environment – It implies that the resources extraction is not above the rate of regeneration of the resources and wastes generated are within the assimilating capacity of the environment.

(ii) Absorptive capacity of the environment- It means the ability of the environment to absorb degradation without causing environmental damage. (any other relevant definitions should be allotted marks)

Question 34: (Marks 6)

(a) ‘‘Ujjwala Yojana has been a game changer for rural India.’’ State any three conventional fuels being targeted under the LPG cylinder distribution scheme (Ujjwala Yojana).

(b) ‘‘The Indian Health System needs a stronger dose of public expenditure to cure itself.’’ Justify the given statement with valid arguments.

(a) Why are less women found in regular salaried employment ?

(b) Analyse the recent trends in sectoral distribution of workforce in India :

Trends in Employment Pattern (Sectorwise), 1993 – 2012 (in %)

Answer :

a) The conventional sources of energy causes environmental pollution therefore the government have introduced the ‘Ujjwala Yojna’ as a game changer for rural India by providing free LPG gas cylinders (cleaner fuel) to rural households. The three conventional fuels targeted under Ujjawala Yojana are:

(i) Agricultural waste and dried dung

(ii) Firewood

(iii) Coal

(b) The statement is defended as the improvement in the health system in India has been unreasonably slow since independence. Indian health system has been a victim of a relatively low public expenditure.

The health expenditure as a percentage of GDP is abysmally low as compared to some of the major developing countries. It stood at around 4.7% of the total GDP in the year 2014-15. Thus, actually Indian health system needs the increased dose of public expenditure to cure itself.

a) (i) Lesser women are found in regular salaried employment in India, as such jobs require skills and high level of literacy.

(ii) Lack of mobility among women in India due to social constraints.

(b) The given data indicates that over the given period, the proportion of workforce in primary sector has gone down rapidly. Whereas, the employment share of both secondary sector and the services sector has increased. While the share of secondary sector has gone up by approximately 9% recently, the corresponding figure for services sector has gone up by approximately 7%.

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