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MOCK PAPER 2 (EXPECTED QUESTIONS)

Class 12 - Economics
Time Allowed: 3 hours Maximum Marks: 80

General Instructions:

1. This question paper contains two sections:

Section A – Macro Economics

Section B – Indian Economic Development

2. This paper contains 20 Multiple Choice Questions type questions of 1 mark each.

3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60 to 80 words.

4. This paper contains 6 Short Answer Questions type questions of 4 marks each to be answered in 80 to 100 words.

5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100 to 150 words.

SECTION A – MACRO ECONOMICS

1. Which is not a cause for disequilibrium in Balance of Payments? [1]

a) Political instability b) Change in taste and fashion

c) Large imports d) Low domestic prices

2. ________ is the main source of money supply in an economy ________. [1]

a) None of these b) Commercial bank, Central bank

c) Central bank, Central bank d) Central bank, Commercial bank

3. The Breakeven level of an economy is [1]

a) C = I b) AD = AS

c) C = Y d) C = AD
4. Flow is equal to ________. [1]

a) Closing stock - Opening stock b) Closing stock

c) Closing stock + Opening stock d) Opening stock

5. If MPC is equal to 1, the value of the multiplier is: [1]

a) between 0 and 1 b) infinity

c) 1 d) 0
OR
What does the term ceteris paribus mean?

a) other things remaining equal b) with the view that

c) things are different d) in reference to

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 6. The equilibrium level of output/Income under Keynesian Economics is determined when [1]

a) Y = A
¯
+ bY - I b) Y = A
¯
+ bY

c) Y = A
¯
+ bY d) Y = A
¯
× bY

OR
A situation corresponding to full employment of resources, where aggregate demand is equal to aggregate supply in
the economy is called:

a) both underemployment equilibrium and b) equilibrium without excess capacity

equilibrium without excess capacity

c) underemployment equilibrium d) full employment equilibrium

7. If the initial increase in the investment is Rs 1000 and MPC=0.8, the multiplier will be [1]

a) 5 b) 6

c) 3 d) 4
8. Identify the correct statement. [1]
A. Balance of trade and balance of payments mean the same thing.
B. Balance of trade is a wider concept than the balance of payments.
C. Balance of trade shows the difference between the quantities of exports and imports of services.
D. Balance of trade shows the difference between the value of exports and imports of goods.

a) Only D b) Only B

c) Only A d) Only C
OR
Accommodating Items are also called

a) None of the above b) On the line items

c) Above the line items d) Below the line items

9. Assertion (A): The principal function of the commercial bank is to control the supply of credit in the economy. [1]
Reason (R): It implies an increase or decrease in the supply of money in the economy by regulating the
creation of credit by commercial banks.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

10. Assertion (A): Forward exchange rate is the rate at which forward transactions are to be dishonored. [1]
Reason (R): Forward transactions are to be materialised at a future date.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

11. Explain the concept of mixed-income of the self-employed. [3]
12. Classify whether the following transactions are to be accounted in the current account or capital accounts of [3]
India's BOP.

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 a. Purchase to TISCO shares by a foreign resident
b. Sale of Indian Skirts in Germany
c. Infosys borrowing from a US Bank
d. Money sent by an Indian to her friend in Canada
e. Purchase of Land in England
f. Gifts received from a relative in USA.
OR
How is exchange rate determined in the foreign exchange market?
13. Explain the role of the following in correcting the deflationary gap in an economy: [4]
i. Open market operations
ii. Margin requirements
iii. Bank rate
14. Distinguish between inflationary gap and deflationary gap. [4]
15. What is monetary policy? State any three instruments of monetary policy. [4]
OR
Explain ‘banker to the government’ function of the Central Bank.
16. Answer the following questions: [6]
(i) How will you treat the following in the calculation of Domestic Income of India? Give reasons for your
answer.
i. Compensation of employees to the residents of Japan working in the Indian embassy in Japan.
ii. Rent paid by the Embassy of Japan in India to a resident Indian.
iii. Salaries to Indian residents working in the Russian embassy in India.
iv. Profits earned by Indian employees working in the US embassy in India.
(ii) Calculate GVA at factor cost of a firm:

Items (₹)

(i) Net production taxes 600

(ii) Product taxes 400

(iii) Price per unit of output 10

(iv) Net change in stocks (-) 50

(v) Purchases of raw materials 10000

(vi) Import of raw materials 3000

(vii) Import of machines 20000

(viii) Product subsidies 100

Additional information: Output sold is 2000 units.

17. Answer questions (i) & (ii) OR questions (iii) & (iv). [6]
(i) Explain the basis of classifying government receipts into revenue receipts and capital receipts. Which type
of these receipts are ‘borrowings by government’ and why?
(ii) Does public (government) debt impose a burden? Explain.
(iii) Explain revenue deficit in a government budget. What does it indicate?

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 (iv) Why is payment of interest a revenue expenditure?
SECTION B – INDIAN ECONOMIC DEVELOPMENT
18. What is the maximum number of hired workers in an establishment to remain in informal sector? [1]

a) 5 b) 10

c) 9 d) 12
19. The concept of Five Year Planning is outsourced from: [1]

a) Brazil b) Russia

c) USA d) Mexico
OR
In 1955, Karve committee was constituted for aiming the ________.

a) Modernisation b) Development of small scale industries

c) Self-reliance d) Industrial development

20. A good indicator of growth is steady increase in the [1]

a) Gross domestic product b) National income

c) Population d) Net domestic product

OR
Schedule A of IPR 1956 includes:

a) Those industries which are reserved for the b) Residual industries

public sector

c) Industries in which only Small Scale d) Those industries which are open for both
Industries can enter public and private sectors
21. When was the National Bank for Agricultural and Rural Development set up? [1]

a) 1982 b) 1992

c) 1962 d) 1972
22. Fiscal reforms comprise [1]

a) Reforms in Tax structure and Reforms in b) Reforms in Interest rates

Public expenditure and Public debt

c) Reforms in Public expenditure and Public d) Reforms in Tax structure

debt
23. ________ five year plan recognised the importance of human capital. [1]

a) Third b) Seventh

c) Eighth d) Sixth
24. Green Revolution introduced during the planning process was restricted mainly to crops like [1]

a) wheat and rice b) jowar and bajra

c) cereals and pulses d) cotton and jute

25. The ________ of the environment implies that the resource extraction rate is not above the rate of resources [1]

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 regeneration.

a) Opportunity cost b) Absorptive capacity

c) Assimilation capacity d) Carrying capacity

OR
Which of the following is an abiotic element?

a) Fisheries b) Birds

c) Plants d) Water
26. Assertion (A): Indian agriculture sector suffered due to partition. [1]
Reason (R): A sizeable proportion of the undivided countries' highly irrigated and fertilizers land went to
Pakistan.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

27. Assertion (A): Indian farmer continues to consider farming as a means of subsistence and less an as a business [1]
venture.
Reason (R): Indian farmers continues to focus on crops that offer them food security rather than those which
yield high profits.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

28. Explain the concept of Affluence trap as a cause of the environmental crisis. [3]
29. Explain the meaning of labour force, labour supply and workforce. [3]
OR
You are residing in a village. If you are asked to advise the village panchayat, what kinds of activities would you
suggest for the improvement of your village which would also generate employment?
30. Mention the salient demographic indicators of China, Pakistan and India on the basis of population and Density [4]
by studyng the table given below:-

Country (2015) Estimated population (in crores) Annual growth of population Density (per sq.km)

India 131.1 1.2 407

China 137.1 0.5 145

Pakistan 18.8 2.1 245

31. Answer first two questions (i & ii) OR answer the last question (iii): [4]
(i) Define privatisation as a process of economic reforms.
(ii) What are the objectives of WTO?
(iii) Write a short note on WTO.
32. State whether the following statements are true/false, with valid arguments: [4]
(i) Gender bias in India is a hindrance to the process of skill formation.
(ii) Brain-drain from India to USA is a serious bottleneck in human capital formation in India.

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33. Answer first 3 questions (i, ii, iii) OR last 2 questions (iv, v): [6]
(i) State any one limitation of organic farming.
(ii) Define the concept of micro-credit.
(iii) What is the objective of support price?
(iv) How does organic farming promote sustainable development?
(v) Why is it being considered necessary to replace the private moneylenders by institutional sources of
credit?
34. Read the following text carefully and answer the questions given below: [6]
Pakistan Faces a Long Road to Sustainable Growth
At the turn of the century, Pakistan had the highest GDP per capita when compared with India, Bangladesh, and
Vietnam. Twenty years later, it is at the bottom of the group. Political upheaval, a violent insurgency fed by the
war in Afghanistan, and the inability of successive governments to carry out reforms are to blame for this
decline. Today, a polarized political environment and elite intrigue among civilian, judicial, and military
institutions have made sustainable economic growth and reforms that much more unlikely. The COVID-19
pandemic has further sharpened the challenge.
Inflation is still the biggest issue facing the government today. Headline inflation climbed to 9 percent in
September 2020 and double-digit food inflation continues to erode citizens’ purchasing power. This has
worsened the situation for millions of households who have seen a decline in their purchasing power since 2016,
according to data from the Pakistan Bureau of Statistics. In its most recent monetary policy statement, the State
Bank of Pakistan raised its concerns as well, warning that while “core inflation has been relatively stable,” food
inflation remains a risk, “especially in the wake of recent flood-related damages and potential locust attacks.”
With households spending a larger share of their incomes on food—an emerging wheat crisis is compounding
problems—consumption spending on other items will remain subdued, leading to a lack of economic growth in a
country where consumer spending drives more than 80 percent of the economy.
At the same time, a weak economic recovery around the world, particularly in the European Union and the
United States, will subdue demand for Pakistan’s exports. After declining by 20 percent on a year-on-year basis
in August, exports grew by 6 percent in September. The outlook, however, remains bleak due to a weak global
economic recovery. The issue has been further exacerbated by chronic structural inefficiencies — exporters who
received additional orders in recent weeks are facing gas and cotton shortages. This means export growth is
unlikely to drive a significant uptick in economic activity and employment. As a result, the structural issue with
Pakistan’s economy, i.e., its inability to earn sufficient foreign income to pay for its import and debt servicing
needs, remains its Achilles’ heel.
Questions:
i. Discuss the underlying problem with Pakistan's sustainable growth?
ii. Anticipate the outcome of Pakistan’s foreign income vis-à-vis its export growth.

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