Economics Sample Paper for Class 12 With Solution NCERT CBSE Board 2020

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Class 12 Subject Economics Paper Set 4 with Solutions

SECTION – A

(Macro-economics)

Question 1: (Marks 1)

Two components of money supply are ________ and _________. (fill up the blank with correct answer)

The main aim of monetary policy is _____. (Choose the correct alternative)

(a) to bring price stability in the economy

(b) employment generation in the country

(d) to generate greater tax revenue

Answer :

Two components of money supply are

i) Currency with public

ii) Demand deposits held by commercial banks

(a) to bring price stability in the economy

Question 2: (Marks 1)

State, whether the given statement is true or false:

‘Unexpected obsolescence is a component of depreciation.’

Answer :

False

Question 3: (Marks 1)

₹ 2,000 note lying in the wallet of Rohini, a student is an example of ____ (stock/flow) variable. (Fill up the blank with correct alternative)

Answer :

Stock

Question 4: (Marks 1)

Define intermediate consumption.

Answer :

Intermediate consumption refers to the value of goods and services used during the production process.

Question 5: (Marks 1)

Loans offered by commercial banks _________ (increase/ decrease) the money supply in the economy. (fill up the blank with correct alternative)

Answer :

increase

Question 6: (Marks 1)

The sum of factor payments is equal to ______. a) Domestic Income b) National Income c) Per Capita Real Income d) Per Capita Nominal Income

Answer :

a) Domestic Income

b) National Income

Question 7: (Marks 1)

State whether the given statement is true or false:

‘Expenditure on Ujjwala Yojna launched by the Government is an example of capital Expenditure.’

Answer :

False

Question 8: (Marks 1)

Define full employment.

Answer :

Full employment refers to a situation where all those who are willing and able to work, at the prevailing wage rate get work.

Question 9: (Marks 1)

If the value of Average Propensity to Consume (APC) is 0.8 and National Income is ₹ 4,000 crores, the value of savings will be ___. (Choose the correct alternative)

a) ₹ 100 crores

b) ₹ 200 crores

c) ₹ 800 crores

d) ₹ 500 crores

Answer :

c) ₹ 800 crores

Question 10: (Marks 1)

Give any one example of ‘debt creating capital receipts’ in the Government Budget.

Answer :

Borrowings.

Question 11: (Marks 3)

‘Domestic services (Household Services) performed by a woman are not considered as an economic activity.’ Defend or refute the given statement with valid reason.

Answer :

The given statement is defended. As the activities which are performed by a woman (homemaker) cannot be evaluated in monetary terms. Therefore these activities are not considered as an economic activity.

Question 12: (Marks 3)

Calculate Net Value Added at Factor Cost (NVAFC) from the following data :

State the three components of Income from Property and Entrepreneurship.

Answer :

NVAFC = (i) – (ii) – (iv) – [(iii) – (v)]

= 800 – 200 – 20- [30 – 50]

= ₹ 600 crores

Three components of Income from Property and Entrepreneurship are

a) Rent / Royalty

b) Interest

c) Profit

Question 13: (Marks 4)

Elaborate the objective of ‘allocation of resources’ in the Government Budget.

Answer :

Allocation of resources: Government seeks to allocate resources with a view to balance the goals of all sections of the society. Production of goods and sevices which are injurious to health may be discouraged through taxation policy. Similarly, production of socially beneficial goods may be encouraged through subsidies. If private sector does not take initiative in certain activities (Public Goods) government may directly control them like water supply and sanitation etc.

Question 14: (Marks 4)

Define effective demand. Discuss how, effective demand can be restored, if ex-ante Aggregate Demand (AD) is more than ex-ante Aggregate Supply (AS).

Answer :

Effective Demand refers to that level of employment where Aggregate Demand is equal to Aggregate Supply.

If ex-ante Aggregate Demand (AD) is more than ex-ante Aggregate Supply (AS), it means buyers are planning to buy more than what the producers are planning to produce.

Thus, the inventories-in-hand of producers may fall. As a result, producers may plan to raise output and employment. This mechanism will continue to operate till the two forces become equal.

Question 15: (Marks 4)

Explain the function of central bank as ‘Banker, Agent and Advisor’ of the government.

Elaborate how a Central Bank stabilizes money supply through ‘Bank rate’.

Answer :

As the Government’s banker, the Central bank accepts receipts and makes payments on behalf of the government. It lends loans to the government for varied purposes. As the agent and advisor to the government, it manages public debt on behalf of the government and also advices on policy matters.

Bank rate is the rate of interest at which central bank lends money to commercial banks to meet their long term needs. An increase in bank rate may force commercial banks to increase their lending rate. It will make borrowings costlier to general public. This leads to discouraging people to borrow and will thus restrict money supply in the economy or viceversa.

Question 16: (Marks 6)

State, giving valid reasons weather following statements are true or false:

(i) Trade deficit is always a great cause of worry for an economy.

(ii) Depreciation of currency has same effect on exports as devaluation of currency.

(iii) ‘Indians investing in assets abroad’ will be recorded under debit side of capital account in Balance of Payments.

(a) Explain, what can be the likely impact of depreciation of the home currency on imports to the country.

(b) Distinguish between Current Account Deficit (CAD) and Current Account Surplus (CAS).

Answer :

(i) False, trade deficit is a lesser cause of worry if it reflects a rise in investment which will build the capital stock and increase the future output in an economy.

(ii) True, both depreciation and devaluation have same effect on exports of an economy. The two terms, although synonymous, are used in different context. The term devaluation is used in a fixed exchange rate system whereas depreciation is under the flexible exchange rate system.

(iii) True, Indians investing in assets abroad will lead to an outflow of foreign currency, it will be recorded under debit side of capital account of balance of payment.

a. Depreciation of home currency results in a fall in the value of domestic currency (say ₹) in terms of foreign currency (say $). Consequently foreign goods may become dearer in terms of the domestic currency, leading to losses for importers. Hence, imports of the economy may tend to fall.

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

Current Account Surplus (CAS) refers to excess of receipts from value of exports of visible items, invisible items and unilateral transfers over payments for value of import of visible items, invisible items and unilateral transfers.

Question 17: (Marks 6)

(a) On the basis of following information, identify whether the economy is in equilibrium or not :

(b) Answer the following questions on the basis of given figure :

(i) What does the shaded area AOB indicate ?

(ii) What is the significance of point B ?

For Visually Impaired Candidates only :

(b) (i) Define saving function.

(ii) What is the significance of dis-savings ?

Answer :

The economy is in equilibrium when AD = AS (Y)

AD = + MPC (Y)

AD = 500 + 0.8 (4,000) ( Given Y = ₹4,000)

AD = 500 + 3200

AD =₹ 3,700crores

Therefore, AD (₹ 3,700crores) < AS (₹ 4,000crores), the economy is not in equilibrium

(b): (i) The shaded area AOB represents the dis-savings.

(ii) Point B indicates break-even level of income where Consumption(C) is equal to Income (Y) or Savings (S) are zero.

For Visually Impaired candidates only

b) i. Saving function : Saving function refers to the functional relationship between Savings (S) and Income (Y)

ii) Dis-savings occur when Consumption (C) is greater than Income (Y). This signifies that spending for basic needs which are necessary for survival is financed by past savings and borrowings.

SECTION – B

(Indian Economic Development)

Question 18: (Marks 1)

_____policy followed in first seven five year plans of India, aimed at substituting imports with domestic production. (Fill up the blanks with correct answer)

Answer :

Import substitution

Question 19: (Marks 1)

Which of the following is not a benefit of organic farming?

a. Cheaper inputs

b. Attractive returns on investment

c. Greater import possibilities

d. Higher nutritional value

Answer:

c) Greater import possibilities

Question 20: (Marks 1)

Define mixed economy.

Answer :

Mixed economy is a market system will provide whatever goods and services it can provide well, and the government will provide essential goods and services which the market fails to do.

Question 21: (Marks 1)

World Trade Organisation (WTO) was established in 1995, as a successor organisation to _____. (Fill up the blank with correct answer)

Answer :

General Agreement on Trade and Tariff (GATT)

Question 22: (Marks 1)

India is not a member of which of the following regional/global economic grouping?

a ) SAARC

b) BRICS

c) G-7

d) G- 20

Answer :

c) G-7

Question 23: (Marks 1)

In the past few decades ______ (primary/ secondary/ tertiary) sector has created maximum job opportunities in India. (Fill up the blanks with correct alternative)

Answer :

tertiary

Question 24: (Marks 1)

The main aim of ‘Great Leap Forward’ (GLF) in China was to ensure rapid increase of _____. (Choose correct alternative)

a. agriculture

b. industries

c. services

d. exports

Answer :

b) industries

Question 25: (Marks 1)

Define disguised unemployment.

Answer :

Disguised unemployment is a situation where in the number of workers engaged in a work is more than actually/optimally required.

Question 26: (Marks 1)

State whether the following statement is true or false: ‘World Bank is known as International Bank for Registration and Delimitation (IBRD).’

Define Marketed Surplus

Answer :

False

The portion of agricultural produce which is sold in the market by the farmers is called marketed surplus.

Question 27: (Marks 1)

Introduction of Economic Reforms in China took place in the year____. (Choose the correct alternative)

a. 1978

b. 1980

c. 1988

d. 1991

Answer :

a.1978

Question 28: (Marks 3)

“Rapid increase in economic growth surely trickles down to the people under the absolutely poor category.”

Defend or refute the given statement with valid argument.

“Human Capital Formation gives birth to innovation, invention and technological improvements.”

Do you agree with the given statement ? Support your answer 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.

The given statement is correct. Human Capital Formation not only increases the productivity of available human resources but also stimulates innovation and creates ability to adopt new technologies. Investment in education creates ability to adopt newer technologies, facilitates invention and innovation since educated workforce generally adapts to modern technologies and innovation.

Question 29: (Marks 3)

Compare and analyse the given data of India and China, with valid reasons :

Source : World Development Indicators, 2015.

Answer :

a) The given data shows that China could arrest its annual population growth rate with the implementation of some stringent measures in late 1970’s like the introduction of One Child Norm. This step has been instrumental in controlling the growth of population in China. India stands virtually more than double to China’s annual population growth rate of 1.2% as compared to China’s annual population growth rate of 0.5% p.a.

b) The social dynamics of both the countries are similar to each other; sex ratio is low and biased in both the countries due to preference for male child. Whereas, India stands at 929 females per 1000 males, China is not far ahead at 941 females per 1000 males.

Question 30: (Marks 4)

a. State the names of six Indian Systems of Medicines (ISM) under AYUSH scheme of Government of India.

b. Name any two non-conventional sources of energy.

Answer :

(a) The six Indian Systems of Medicines (ISM) under AYUSH scheme of Government of India includes: Ayurveda, Yoga, Unani, Siddha, Naturopathy and Homeopathy.

(b) The two non-conventional sources of energy are: solar energy and wind energy.

Question 31: (Marks 4)

Discuss briefly any two salient features of India’s pre-independence occupational structure.

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

Answer :

The occupational structure of India on the eve of independence had the following two main features:

i) Predominance of agriculture sector: The agricultural sector accounted for the largest share of workforce with approximately three-fourth of the workforce depending on agriculture, directly or indirectly.

ii) Growing regional variation- Due to rise of manufacturing and services sector in some parts of India (like the then Madras, Bombay and Bengal Presidencies) the dependency ratio of workforce on agricultural sector declined.

The main rationale behind choosing „self-reliance‟ as a planning objective for the Indian economy 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 32: (Marks 4)

“India is often called the „Outsourcing Destination‟ of the world”. Discuss the prime reasons for this name given to India”.

Answer :

The prime reasons for India being called as the outsourcing destination of the world are:

(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.

Question 33: (Marks 4)

Define the following :

(i) Carrying capacity of environment.

(ii) Bio-composting

(iii) Sustainable Development

(iv) Absorptive capacity of the environment.

Answer :

(a) Carrying capacity of environment

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.

(b) Bio- composting

Bio composting - It refers to the process of converting organic waste of various types into natural manure.

Sustainable development - It refers to the development process that meets the needs of present generation without compromising on the ability of the future generations to meet their respective needs.

(d) Absorptive capacity of the environment

Absorptive capacity of the environment- It means the ability of the environment to absorb degradation without causing environmental damage.

Question 34: (Marks 6)

(a) Define worker-population ratio. What does it signifies ?

(b) Analyse the trends in sectoral distribution of work force in India on the basis of data :

(a) “The Prime Minister urged to increase the rural income by increasing non-farm activities.”

Explain how non-farm activities can lead to rise in income of people in rural sector.

(b) “Indian health system needs the increased dose of public expenditure to cure itself.”

Defend or refute the given statement with valid arguments.

Answer :

Define worker-population ratio. What does it signifies

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 (between 1993-94 and 2011-12) has gone up by approximately 9%, the corresponding figure for services sector has gone up by approximately 7%.

a. Non-farm activities (agro-processing industries, poultary, craft, handloom) provide alternative avenues for sustainable livelihood and may raise the level of income as the risks due to fluctuations in production and market prices is generally less. Agriculture in India is mainly a seasonal occupation, however, during off seasons, it becomes difficult to find employment and stabilize farmer’s income. Thus, the Prime Minister has urged appropriately in the best interest of the farmers of the rural India.

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, along with other reasons. 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 Gross Domestic Product (GDP) in the year 2014-15. Thus, actually Indian health system needs the increased dose of public expenditure to cure itself.

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