CBSE Class 12th Economics Question Paper Solved Last 10 Years with Solution

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Class 12 Subject Economics Paper Set 5 with Solutions

SECTION – A

(Macro-economics)

Question 1: (Marks 1)

To reduce credit availability in the economy, the Central Bank may ______. (Choose the correct alternative)

(a) buy securities in the open market.

(b) sell securities in the open market.

(d) reduce repo rate.

Answer :

(b) sell securities in the open market.

Question 2: (Marks 1)

_____ deficit includes interest payment by the Government on the past loans. (Fill up the blanks with correct answer).

Answer :

Fiscal/ Revenue

Question 3: (Marks 1)

State, whether the following statement is true or false: ‘Inventory is a stock variable’.

Answer :

True

Question 4: (Marks 1)

Which of the following is not a ‘factor payment’? (Choose the correct alternative)

(a) Free uniform to defence personnel.

(b) Salaries to the Members of Parliament.

(d) Scholarship given to the students.

Answer :

d) Scholarship given to the students.

Question 5: (Marks 1)

In case of an underemployment equilibrium, which of the following alternative is not true? (Choose the correct alternative)

(a) Aggregate demand is equal to Aggregate supply.

(b) There exist excess production capacities in the economy.

(d) Resources are fully and efficiently utilized.

Answer :

d) resources are fully and efficiently utilized

Question 6: (Marks 1)

State, whether the following statement is true or false: ‘All financial institutions are banking institutions’.

Answer :

False.

Question 7: (Marks 1)

Combined factor income, which can’t be separated into various factor income components, is known as ____. (Fill up the blanks with correct answer).

Answer :

mixed income of self employed.

Question 8: (Marks 1)

If Marginal Propensity to Save (MPS) is 0.25 and initial change in investment is ₹250 crores, then the final change in income would be . (Choose the correct alternative)

(a)₹ 1,000 crores

(b)₹ 1,200 crores

(c)₹ 500 crores

(d) ₹ 3,500 crores

Answer :

a) ₹ 1000 crores.

Question 9: (Marks 1)

Define the term ‘Public Goods’.

Answer :

Public goods are those goods or services that are collectively consumed. It is not possible to exclude anyone from enjoying their benefits and one person’s consumption does not reduce the availability to others. (any other valid definition to be allotted marks)

Question 10: (Marks 1)

Net Domestic Fixed Capital Formation + Change in Stock = . (Fill up the blank with correct answer)

When Nominal Gross Domestic Product (GDP) is ₹ 840 crores and price Index is 120, then the Real Gross Domestic Product (GDP) will be . (Fill up the blank with correct alternative)

(a) ₹ 700 crores

(b)₹ 900 crores

(d) ₹ 500 crores

Answer :

Net Domestic Capital Formation

a) ₹ 700 crores.

Question 11: (Marks 3)

‘Subsidies to the producers, should be treated as transfer payments.’ Defend or refute the given statement with valid reason.

Explain Circular Flow of Income in a two sector economy.

Answer :

The given statement is defended, as subsidy is a transfer payment. Subsidy is the financial assistance provided by the government to producers to fulfil its social welfare objectives. Government does not get anything in consideration for the same. It does not contribute to the current flow of goods and services and hence do not contribute to any value addition. (no marks to be allotted if reason is not given or is wrongly given)

Two sector model consists of production sector and household sector. Households are the owners of factors of production and supply factor services to production sector. The production units in return make factor payment. Households spend the entire income on the purchase of goods and services produced by firms. Thus, consumption expenditure flows from households to firms, completing the circular flow of income.

Question 12: (Marks 3)

Calculate Gross Value Added at Market Price :

Answer :

Gross Value Added at Market Price = (ii) + (iii)+(iv) – (v)

= 200+ (-)10 + 10 – 120

= ₹ 80 lakhs

Question 13: (Marks 4)

‘Taxation is an effective tool to reduce the inequalities of income.’ Justify the given statement with valid reasons.

Answer :

The given statement is appropriate. The government may impose higher taxes (both direct and indirect taxes) on the richer class, reducing their purchasing power. Government may use the same tax revenue to provide goods and services (free or at subsidized price) to the poorer section of society to support them. (to be marked as a whole) (No marks to be allotted if reason is not given or is wrongly given)

Question 14: (Marks 4)

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

FOR BLIND CANDIDATES

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

Explain, how the ‘Reverse Repo Rate’ helps in correcting Excess Demand in an economy ?

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:

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.

Reverse Repo rate is the rate of interest at which commercial banks can park their surplus funds with the central bank, for a relatively shorter period of time. To deal with the situation of excess demand this rate may be increase by the central bank. It may encourage the commercial bank to park their surplus funds with Central Bank. As a result, the availability of creating credit with the commercial bank will be reduced. Consequently, consumption expenditure and investment expenditure may get reduced, implying reduction in Aggregate Demand.

Question 15: (Marks 4)

Discuss the function of Central Bank as ‘Banker, Agent and Advisor’ to the Government.

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.

Question 16: (Marks 4)

(a) Differentiate between the concepts of ‘demand for domestic goods and services’ and ‘domestic demand for goods and services’.

(b) Distinguish between ‘Current Account Deficit’ and ‘Current Account Surplus’.

Answer :

a) The demand for domestic goods and services is the sum total of demand for goods and services by both the domestic and foreign countries; whereas, domestic demand for goods and services is the sum total of domestic demand for domestic as well as foreign goods.

b) 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;

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

Question 17: (Marks 6)

Answer the following questions based on the data given below :

(i) Planned Investments = ₹ 100 crore.

(ii) C = 50 + 0.50 Y

(a) Determine the equilibrium level of income.

(b) Calculate the value of Savings at equilibrium level of National Income.

Discuss the working of the adjustment mechanism in the following situations :

(a) If Aggregate demand is greater than Aggregate supply.

(b) If Ex-Ante Investments are less than Ex-Ante Savings.

Answer :

a) At Equilibrium

AD = Y = C+I

thus, Y = (50 + 0.5Y) + 100

Y – 0.5 Y = 150

Y = 150/0.5 = ₹ 300 crores.

So, equilibrium level of income = ₹ 300 crores.

b) Consumption at equilibrium level of income

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

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

Savings = ₹ 100 crores

Calculate the value of Investment Multiplier

a) 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.

b) If ex-ante investments are lesser than ex-ante savings, it means buyers are planning to buy less than what the producers are planning to produce. Thus, the un planned undesired inventories-in-hand of producers may rise. As a result, producers may plan to reduce output and employment. This mechanism will continue to operate till the two forces become equal.

SECTION – B

(Indian Economic Development)

Question 18: (Marks 1)

Policy of ‘Import Substitution’ was targeted to protect _ industries. (Fill up the blank with correct answer)

Answer :

domestic

Question 19: (Marks 1)

Which of the following is not used as a strategy for Sustainable Development ? (Choose the correct alternative)

a) Use of bio-gas

b) Use of solar power

(d) Use of hydel power

Answer :

c) Use of thermal power

Question 20: (Marks 1)

Maternal Mortality Rate is high in _ (China/Pakistan). (Fill up the blank with correct alternative)

Answer :

Pakistan

Question 21: (Marks 1)

State the meaning of ‘Marketed Surplus’.

State the meaning of ‘Subsidy’.

Answer :

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

Subsidy is the financial assistance provided by the government to producers to fulfil its social welfare objectives.

Question 22: (Marks 1)

State, whether the following statement is true or false : “As per the Human Development Report, 2018, India was ranked at 180th position.”

Answer :

False

Question 23: (Marks 1)

If a construction site Manager hires two workers on daily wages basis, such a situation is covered under (formal/informal) sector. (Fill up the blank with correct alternative)

Answer :

informal

Question 24: (Marks 1)

Which of the following countries initiated its process of Economic Reforms in the year 1991 ? (Choose the correct alternative)

a) Pakistan

(b)India

c) Russia

(d) China

Answer :

(b) India

Question 25: (Marks 1)

Greater proportion of women workers are found in (urban/rural) areas as a component of Indian work force. (Choose the correct alternative)

Answer :

rural

Question 26: (Marks 1)

State, whether the following statement is true or false : “GATT was established in 1923 with 48member countries.”

Answer :

False

Question 27: (Marks 1)

‘GLF’ with respect to the People’s Republic of China referredto as . (Choose the correct alternative).

(a) Giant Leap Forward

(b) Great Lead Forum

(d) Giant Lead Forum

Answer :

Question 28: (Marks 3)

Discuss briefly the concept of ‘Informalisation of workforce’ in India.

State any three challenges facing rural development in India.

Answer :

In the recent years India has witnessed an unprecedented shift of the workforce from the formal sector to informal sector. This process whereby, the proportion of informal worker in the total workforce increases is known as informalisation of workforce. The government has initiated the modernization of the informal sector and provision of social security of measure to the worker in the informal sector. (to be marked as a whole)

Three challenges faced by rural development in India are: a) development of human resource. b) development of infrastructure c) Measures for alleviation of poverty

Question 29: (Marks 3)

Compare and analyse the given data of India & 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 measure 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 at its annual population growth rate of 1.2% as compared to China’s annual population growth rate of 0.5% pa.

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)

Discuss briefly any two major steps taken by the Government of India on ‘Financial Sector’ front under the Economic Reforms of 1991.

Answer :

Two steps taken by the government of India on financial sector under the Economic Reforms of 1991 were: a. Change in the role of Reserve Bank of India (RBI): The role of RBI was reduced from regulator to facilitator of financial sector. This means that financial sector was given greater autonomy (to take decisions) on many matters independent of RBI.

b. Origin of Private Banks: The reform process led to establishment of private sector banks of Indian as well as foreign origin.

Question 31: (Marks 4)

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

Discuss briefly, the rationale behind “equity with growth” as planning objectives 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-forth 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.

Growth refers to increase in country’s capacity to produce the output of goods and services in an economy. Equity refers to reductions in inequality of income and wealth. When the objective of economic growth and equity are achieved, it may lead to development with social justice, which may increase the per capita availability of goods and services.

Question 32: (Marks 4)

State and discuss any two problems faced by power sector in India.

Answer :

Major challenges faced by power sector in India are, as follows:

(i) India’s installed capacity to generate electricity is not sufficient. Even the installed capacity is underutilized because power plants are not running properly.

(ii) State Electricity Board which distribute electricity are incurring losses due to obsolete transmission and distribution system and wrong pricing.

Question 33: (Marks 6)

(a) Explain, how does ‘Investment in Human Capital’ contributes to growth of an economy.

(b) State the meaning of ‘Agricultural Marketing’.

Answer :

a). Investment in Human Capital may contribute to growth of economy in the following ways:

I. Generally, the productivity of an educated, skilled and healthy workforce is relatively higher than an uneducated, unskilled and unhealthy worker. Such investment may increase the productivity of the economy as a whole.

II. Human Capital Formation may promote inventions, innovations and technological improvements. This may create the ability to adopt new technologies which increase the production and productivity in the economy.

(b) Agricultural marketing is a process that involves assembling storage, processing, transportation, packaging, grading and distribution of different agricultural commodities across the country.

Question 34: (Marks 6)

Critically examine the results of Poverty Alleviation Programmes implemented in India since Independence.

(a) “Ujjawala Yojana has been a game changer for rural India.” State any three conventional fuels being targeted under the Ujjawala Yojana.

(b) “Economists believe that India should spend atleast 6% of its GDP on Education for achieving desired results.”

Justify the statement with valid reason.

Answer :

Poverty Alleviation Programmes are the designated programmes to target reduction in/removal of poverty in a country. India, which inherited poverty from British rule, tried her level best to eradicate poverty through various Poverty Alleviation Programmes over the years. As a result, the percentage of absolute poor in some states has fallen well below the national average of poverty. However, the problems of malnourishment, hunger and illiteracy continue to be a common feature in many parts of India, because of the following reasons:

There has been no radical change in the ownership of assets.
Due to unequal distribution of land and other assets, benefits from such programmes have been appropriated by the non-poor.
Inadequate resource allocation for these programmes.
The Government officials responsible for implementing these programmes were ill motivated and inadequately trained.

To conclude we may say that poverty alleviation programmes were a great step but could not achieve desired results due to improper implementation. (to be marked as a whole)

(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 given statement is appropriate as it was recommended by the Education Commission of 1964-64. The government is spending 4 percent (approx.) of GDP on education, which is quite inadequate. Education is an important component of human capital formation as it helps in increasing the availability of skilled and educated labour force in the country which may result in greater production and economic growth.

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