ECONOMICS (030) Class XII Session 2023-24 1. This question paper contains two sections Section A — Macro Economics Section B- Indian Economic Development Max. Marks: 80 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 Multiple Choice Questions (QI to QUO) 1x 10=10 1. “Considering the depreciation of Indian Currency (8) in the international market, the Reserve Bank of India (RBI) has decided to purchase Indian eurreney (2) in the open market.” This represents, (a) fixed (b) flexible (©) managed floating (4) manipulated exchange rate system. Ans: (c) managed floating 2. Statement 1: Demonetisation was the step taken by the Government of India in order to tackle the problems of corruption, black money, terrorism and circulation of fake curreney in the Indian Economy. Statement 2: Demonetisation has ensured improved tax compliance in India over the period of time. Inthe light of the given statements, choose the correct alternative from the following: (a) Statement | is false and statement 2 is true (b) Statement 1 is true and statement 2 is false (©) Both statements I and 2 are false (@) Both statements I and 2 are true Ans: (d) Both statements 1 and 2 are true 3. Complete the table Producer [Value of Intermediate [Value Output _| Consumption | Added Farmer [3,000 | — 3.000 Baker (i. [3,000 3,000 Retail Seller [6,600 | (ii) 600 Total Gi... [6,000 (iv). (a) 600, 15,600, 6,000, 6,000 (b) 6,000, 15,900, 6,000, 6,400 (c) 3,000, 9,000, 6,000, 6,600 (d) 6,000, 15,600, 6,000, 6,000 Ans: (b) 6,000, 15,900, 6,000, 6,400 (b) Gross Value Added = Value of Output — Intermediate Consumption (i), Bakers = 3,000 = Value of Output ~ 3,000 ‘Value of Output = 3,000 +3,000 = 6,000 (ii) Total of Value of Output = Farmer + Baker + Retail Seller = 3,000 + 6,000 + 6,600 = 15,600 (iii) Total of Intermediate Consumption = Farmer + Baker + Retail Seller 9000 = 0 + 3,000 + Retail Seller Retail Seller = 9,000 -3,000 = 6,000 (iv) Total of Value Added = 3,000+3,000 + 600 = 6,600Page 2 4, Identify the correct pair from the following Column 1 and Column I option fiom the alternatives given below Gross domestic product at Column Column 1 tharket price (GDP, AL [At the Break Even|() | Equals National Point Ancona G ent /public final B_ [IF MPC is equal t0/(i) [Value of kis conmumption expenditure one infinity or government purchase of C. | Value of aggregate | (iii) | Depends upon goods and services demand the investment D. | Consumption in the | (iv) |C>Y Private final consumption ccovony apenas Alternatives: eeu Grn domant pital ab formation or gros @)A-() investment or investment (©) D-() expealture (d) B- (ii) Ans: © (d) B - (ii) ‘5. Surplus in Balance of Payment (BoP) arises when: (a) Autonomous payments > Autonomous receipts (b) Autonomous receipts > Autonomous payments (©) Accommodating receipts > Accommodating payments (4) Accommodating payments > Accommodating receipts Ans: (b) Autonomous receipts > Autonomous payments 6. Read the given chart carefully and choose the correct (a) Import (b) Export (c) Net Import (a) Net Export Ans: (4) Net Export Ifthe value of export of goods of a country is €5,000 crores and the value of import of goods is %6000 crores, then trade balance will be: (a) 1,000 crores (b) 2,000 crores (©) -1,000 crores (d) -2,000 crores Ans: (c) -1,000 crores. BoT/Trade balane: = 25,000 - 26,000 =(-)€1,000 crores Identify the incorrect statement with reference to Balance of Payments (a) Export of machinery is recorded in capital account% 10. (b) Current account records Exports. and. Imports transactions of a nation. (6) Current account records all such transactions, hich do not impact asset or liability status of a ‘country, (4) Transfer of funds to the relatives abroad, entered on debit side of current account. Ans: (c) Working Note BoT/Trade balance = X - M 5,000 - 6,000 = (-) 1,000 crores (a) Export of machinery is recorded in capital account. Assertion (A): Acquisition of a domestic (Indian) company by a foreign (Australian) company will be recorded on the credit side of Balance of Payment Account Reason (R): It leads to outflow of foreign exchange from the domestic economy. Inthe light of the given statements, choose the correct, altemative from the following (a) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A) (b) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion 7) (©) Assertion (A) is false but Reason (R) is true (4) Assertion (A) is true but Reason (R) is false Ans: (d) Assertion (A) is true but Reason (R) is false Gifts and remittances to abroad are recorded on the_____side and___ account in BoP Account (i) debit (ii) exedit (iiiycurrent (iv) capital (@) (i)and (iv) (b) (ii) and (iv) (©) (i)and (iit) (4) (ii) and (iti) Page 3 Ans: (e) () and (ii), Short Answer Questions (QUI toQ12) 3.x 2=6 Il. Explain how the allocation of resources can be influenced in the government budget through taxes, expenditure and subsidies, Ans: Government can, through the budget, influence allocation of resources via the market mechanism, with the help of taxes, subsidies and by direct patticipation in production. Production units which produce harmful products like liquor, cigarettes, pan masala etc. can be heavily taxed. Tax concessions and subsidies should be given to encourage those production units which produce products that are useful for the masses. Government can also directly produce goods and services which are normally ignored by the private sector, on account of lack of enough profit from their production 12, Calculate Net National Product at Market Price from the following data tems (in erores) Net factor income from abroad Os Private final consumption expenditure 100 Personal tax 20 Gross national disposable ineome 170 Government final consumption 20 expenditure Corporation tax 15 Gross domestic capital formation 30 Personal disposable income 0Page 4 Net exports O10 ‘Savings of private corporate sector 3 ‘Net national disposable income 143 Explain how the government can use its budgetary policy in reducing the inequality of income in the country Ans: Here, NNP\e = Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation + Net Export = Depreciation + NFIA = 100 + 20 + 30 + (= 10) -25 + (5) =2 110 crore Depreciation = Gross National Disposable Income ~ Net National Disposable Income = 170 145 = 825 crore or Government's budget can certainly help in reducing the inequalities of income. This objective can be achieved by adopting two fiscal measures, (a) Government can levy higher rate of tax on the income and property of the rich and also on the luxurious goods consumed by them. This measure will reduce their disposable income. (b) Government can spend more amount on welfare maximization, like providing free services to the poor like free education, health facilities ete. By adopting these measures, government can try to narrow down the gap between the rich and the poor. Private Final Short Answer Questions (QI3 toQIS) 4.x 3= 12, 13, Blaborate the Banker's bank and supervisor’ function performed by the Reserve Bank of India, Ans: Under this function, central bank accepts the deposits from commercial banks and also advances loans to them as and when required. It maintains reserves of all commercial banks and utilises it to settle inter-bank claims. Being the supreme authority of the banking system, it acts as the financier of last recourse to the commercial banks. It forwards short-term eredit to the commercial banks against approved securities. ‘The central bank supervises, regulates and controls 14. the commercial banks. The regulation of banks ‘may be related to their licensing, branch expansion. liquidity of assets. management, amalgamation and liquidation, How is Real Gross Domestic Product (GDP) different from Nominal Gross Domestic Product (GDP)? Explain using a numerical example, or Interpret the given picture on account of GDP and Welfare Ans: Read GDP is the market value of the final goods and services produced within the domestic territory of a country, during an accounting year, as estimated at the base year prices. ‘Nominal GDP is the market value of the final goods and services produced within domestic territory of a country, during an accounting year, as estimated at the current year prices. Nominal GDP Real GDP = "Price index Let Real GDP = £240, Price Index = 120 Nominal GDP = Real GDP tise pslex. = 24042} = 288 or IfGDPof any country increases, it will not necessarily, increased the welfare as a consequence. Because rise in GDP may be concentrated in few hands. In an economy, all people do not earn the same amount of income. Some earn more and some earn less. In other ‘words, there is unequal distribution of income. Insuch cease, welfare may not increase as GDP increases x1015, Explain the “AD = AS’ approach of the theory of, income determination. Use diagram. What changes take place in the economy when AD > AS? Ans: National income is determined when AD = AS. In the given diagram, equilibrium is at point E, where the AD curve is intersected by the 45° line, The equilibrium income is denoted by OQ y Aguregate demand x Income + When AD > AS, this will lead to a fall in inventories with the producers, who will in tur produce more to reach the desired level of inventories. This raises AS, till it becomes equal to AD once again. Long Answer Questions (QU6(0QI7) 6 x2 16, (a) Define externalities. Give an example of negative externality. What is its impact on welfare? (b) On the basis of the following data about an economy which constitutes of only two firms A and B. find out the Value-added by Firm A and Firm B @ in crores) ()_[Sales by Firm A 300 (i) [Purchases from Firm B by | 120 Firm A (iil) [Purchases from Firm A by [180 Firm B (iv)_[ Sales by firm B 600 () [Closing Stock of Firm A [60 (Wi)_[Closing Stock of Firm B_ | 105 (vii) [Opening Stock of Firm A [75 (viii) [Opening Stock of Firm B [135 (ix)_[Indirect taxes by both Firms An (a) Externalities refer to the benefits (or harms) a firm or an individual causes to another for which it is not paid (or penalised). Example of negative externality is river polluted by an oil refinery. Negative externality like the one mentioned reduces welfare through negative/harmful effect ‘on the health of the peaple, due to pollution (b) Value-added by Firm A = (i) + (v - vii) -¢ = 300+ 60-75 - 120 = 2165 crores Value-added by Firm B = (iv) + (vi - viii) - Gil) = 600 + 105 — 135 — 180 = 390 crores Why is AD curve also called C+ 1 curve? What are its ‘components? Explain Show graphically the derivation of savings function from consumption function, Ans: In two sector economy, AD curve is also called C+1 curve because it gives the value of final demand in an economy which is nothing but a sum of final consumption demand (C) and final investment demand (1), Its components are (a) Private consumption expenditure: It refers to the planned expenditure on final output by the households during a period of time. It is determined by the disposable income of the householdsPage 6 (b) Investment expenditure: It refers to the planned expenditure on new capital assets by the producers during a period of time. It includes expenditure ‘on inventories, fixed capital like machinery, residential construction, ete Government expenditure: It is the planned consumption expenditure of the government on providing free services to the people like roads, police, defence ete. (4) Net exports (X—M) It refers to the planned net expenditure by the foreigners on the products produced in the country during a period of time, or Derivation of the savings curve from consumption curve We can find savings at different income levels by taking the vertical difference between the consumption curve and the 45° line. In the given diagram, at point B, income and consumption expenditure are equal. Thus, savings at OQ is zero. ‘To the left of point B, consumption expenditure curve is higher than the 45° line, This means savings are negative on incomes less than OQ level, To the right of point B, consumption expenditure curve is lower than the 43° line, i e., expenditure is less than the 45° line, ic, the consumption expenditure is less than income at income levels higher than OQ and savings are positive For deriving the savings curve from the consumption curve, we draw a perpendicular from point B on the consumption curve, intersecting the X axis on the lower part of the diagram, at point B, which must be ‘on X axis, because savings are zero. Take OC of the Y axis on the lower part of the diagram as equal to. OT on the Y axis of the upper part ofthe diagram, This gives point ~T from where the savings curve will start Now, joining points =C and B and extending the straight line upwards, we get the savings curve ~ CBS © Section B -Indian Economic Development Multiple Choice Questions (Q18 to Q27) 1x 10: 18. As per scholars, what was the reason of fall in GDP growth rate in 2015-17 in Pakistan’? (a) Reform process (b) Corruption (c) Political instability (a) All of these Ans: (d) All of these 19, Identify the correct pair from Column I and Column and choose the correct alternative: Column It It is in Pune. These are the fruit markets in Andhra Pradesh, ‘Column 1 ‘A__[Apni Mandi |G) B. [Rythu Bazars | (i) Hadaspur Mandi |(iii) [It isin Punjab, Haryana and Rajasthan, D_ | Uzhavar Sandies (iv) | These are farmers markets in Maharashtra Alternatives: (a) C- (i) (b) D-(iv) (©) A-( (@) B-Gii) Ans: (a) B- Gi) 20. Arrange the following events of Pakistan in chronological order and choose the correct alternative (i) Nationalisation of capital goods21. 2. 2. (Gi) Initiation of reforms (iii) Pakistan got independence (iv) Announcement of First Five Year Plan ‘Choose the correct alternative: (a) (i), Gv), (i), (ii) (b) Gv). Gi), Gi), @) ©) id. 6), (d) (aii), (i), @, Gv) Ans: (©) (it), Gi), (0, (i) In context of the given image, identify the correct option: (A): Largest democracy of the world wedded with secular ancl deeply liberal constitutaion Development strategies (B): Militarist poltieal power structure (C): Command economy and recently moving towards democratic system and more liberal economy. (a) A- India; B - China; C - Pakistan (b) A- Pakistan, B - India; C - China (c) A+ China, B - India; C - Pakistan (d) A> India; B- Pakistan; C - China Ans: (@) A- India; B - Pakistan, C - China Nations are forming regional and global economic ‘groupings for: (a) to understand developmental processes of their neighbouring nations (b) strengthening their own economies (0) Neither (a) nor (b) (d) Both (a) and (b) Ans: (d) Both (a) and (b) Assertion (A): Animal husbandry is the part of diversification of productive activities in rural area Reason (R): It provides stable employment ‘opportunities in off season, Page 7 In the light ofthe given statements, choose the correet alternative from the following: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A) (b) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion a) (©) Assertion (A) is false but Reason (R) is true (4) Assertion (A) is true but Reason (R) is false Ans: (b) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) 24. The motive of British Government behind de- industrialisation was: (i) To get raw material from India at cheap rate (ii) To sell British manufactured goods in Indian ‘market at high prices (iii) To focus on development of agriculture (iv) To get finished products trom India at cheap rate Choose correct option (a) Only (ii) (b) (i)and (i) (©) Only (iv) (@) Gi and Gv) Aw (b) Gand (i) 25, Study the following picture and answer the given question ‘Women in rural households take up bee keeping as anPage 8 entrepreneurial activity Such kind of activities may be envisaged under as diversification activity (a) animal husbandry (b) fisheries (©) horticulture (2) poultry Ans: (c) horticulture 26, Statement |: India has an edge over Pakistan in health facilities and skilled manpower. Statement 2: Pakistan has an edge over India in reducing the proportion of population below poverty line Inthe light of the given statements, choose the correct alternative from the following: (a) Statement | is false and statement 2 is true (b) Statement 1 is true and statement 2 is false (©) Both statements I and 2 are false (@) Both statements 1 and 2 are true Ans: (b) Statement 1 is true and statement 2 is false 27, By May 2019, nearly____crore women in India have become member lakh women SHGs, (4.44 () 2.4 (©) 7,64 @ 6,54 Ans: (6,54 Short Answer Questions (Q28 to Q29) 3K 2=6 28, How are small scale industries distinguished from large scale industries? What were the drawbacks of the licensing policy followed by the government before 1991” Ans: Small scale industries are distinguished from the large scale industries on the basis of the maximum investment allowed on the fixed assets of a unit, the number of workers employed and the use of energy. This definition of a small scale industry changes from time to time. In 1950, a small scale industrial unit was one which invested a maximum of rupees five lakhs. At present, the maximum investment allowed is ten crores. ‘The Licensing Policy before 1991 discouraged small entrepreneurs to set up new enterprises. It also encouraged favouritism and corruption. It benefited only the big industrial houses. The need to obtain a license to start an industry was misused by some industrial houses. The big industrial houses would get a license not for starting a firm but to prevent competitors from starting new firms. The excessive regulation of what came to be called permit license raj prevented certain firms from becoming more efficient 29. Itis believed by some of the economists that ‘once the technology is found profitable and is widely adopted, subsidies should be phased out’, AccepURefute the above statement, Ans: It is true that subsidies do provide an incentive for adoption of the new HYV technology by farmers in general and small farmers in particular. But subsidies should be phased out only after the technology is found profitable and widely adopted ie, after they have served the purpose. + Subsidies indeed are a huge burden on government finances. They (like fertiliser and Pesticide subsidy) at times result in over use of resources, which in tun can prove harmful to the environment. Sometimes subsidies provide an incentive for wasteful use of resources. + Subsidies should be provided only for the benefit of the poor farmers and not for the big and rich farmers, so as to attain the goal of equity and not violate it ‘Short Answer Questions (Q30 to Q32) 4.x 3= 12 30, Interpret the given picture on account of current3. environmental challenges. SYOURTURNKOW | ae se| |e _ a4 |e Ans: The given image indicates the state of confusion between “protecting the environment” and ‘economic development ‘The economic significance of the environment is evident with the range of ecosystem that it offers. On the other hand, rapid industrialisation and urbanisation are inevitable to bring in desired levels of economic development However, these activities have huge negative environmental consequences such as pollution. Thus development goals must be pursued without affecting environment. What role can the government play in human capital formation in India? or How is agricultural diversification helpful farmers? Explain. Ans: Both education and health have been considered important means for human capital formation. ‘The provision of basic education and health facilities has been accepted as a goal in all societies, It is important that these facilities be made available free for the poor classes who cannot afford them in order to ensure better skills and health of manpower. However, the private sector will not be forthcoming, in making large investments in areas non-profitable or fee distribution of such services. Hence, the government has an important role to play to ensure their availability for or + Agricultural diversification is helpful for farmers, in the sense that the big risk which they face in solely depending upon farming for livelihood Page 9 gets reduced + Diversification towards new areas is also necessary to provide productive sustainable ‘options to the livelihood of the rural masses. + Diversification provides supplementary and gainful employment during off-season. + Diversification in agriculture thereby enhances the income level of rural people. Hence, it helps to overcome poverty of the farmers. 32, Elucidate the role played by the industrial sector in India Ans: Itis commonly stated that poor countries can progress only in the light of a good industrial sector. This is because of the following reasons ‘+ Industrial sector provides employment which is more stable in nature in contrast to employment in agriculture. + It also promotes modernisation and overall prosperity. + On account of the above, the Five Year Plans laid a lot of emphasis on industrial development ‘This was because at the time of independence the number and variety of industries was very narrow and was restricted largely to cotton textiles and jute industry. So the country was in dire need of expanding the industrial base, with a variety of industries, in order to grow. Long Answer Questions (Q33 to Q34) 6 x 2= 12 33. Compare the traditional approach with the recent approach towards environment. or Study the following chart showing the workers in formal and informal sectors and analyse the trend of the two variables from 2011-12Page 10 Ans: While comparing the traditional approach with the recent approach towards environment we observe that in the early traditional days, ie, before rapid surge in population and before industrialisation took place the demand for environmental resources and services ‘was much less in relation to their supply. This implied that pollution was within the absorptive capacity of the environment. Rate of resource extraction was also less than the rate of regeneration of these resources. As a result, the environmental problems did not arise But with the advent of industrial revolution the population explosion took place. As a result the demand for resources both for production and consumption purposes crossed/exceeded the rate of the regeneration of the resources, This put immense pressure on the absorptive capacity of the environment AS a matter of fact a reversal of supply demand relationship exists for environmental quality. This implies that these days not only the demand for environmental resources and services has increased ‘manifold but their supply is scarce due to the overuse and misuse of these resources. As an outcome pollution and waste generation have taken a serious tum today. These call for immediate and urgent attention to avoid an environmental and economic crisis or The given flow chart shows the distribution of male and female workers in the formal and informal sector in the country. + There are about 473 million workers (310+ 133) in the country, out of which 30 million workers are in the formal sector and 70 million are in the informal sector + About 6% people are employed in the formal sector and the rest 94% are employed in the informal sector. + Out of 30 million formal sector workers, only 6 million, that is, only about 21 per cent are women and the rest 24 million are men, that is, 79 percent + Inthe informal sector, male workers account for {69 per cent (310 million) of the workforce and the female workers account for just 31 percent (133 million), 34, Read the following text carefully and answer the given questions on the basis of the same and common understanding: ‘The term ‘sustainable development’ was used by the Brundtland Commission (1987) which coined what has become the most often-quoted definition of sustainable development “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Sustainable development does not focus solely on environmental issues. The United Nations 2005 World Summit Outcome Document refers to the four “interdependent and mutually reinforcing pillars’ of sustainable development as including: economic development, social development and environmental protection The fourth pillar is indigenous people and culture, Proponents of Sustainable Development argue that it provides a context in which overall sustainability is improved where cutting edge Green development is unattainable. For example, a cutting edge treatment plant with extremely high maintenance costs may not be sustainable in regions of the world with fewer financial resources. Sustainability requires that human activity only use mature’s resources at a rate, which they can be replenished naturally, Inherently, the concept of sustainable development is intertwined with the concept of carrying capacity. (a) What is sustainable development? Does sustainable development solely focus on environment? Why? (b) Explain any two strategies development in India. for sustainableAn (@) (b) The development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs is known as sustainable development Sustainable development does not solely focus ‘on environment as it has four pillars to focus on including environmental protection, economic development, social development and indigenous people and culture ‘The two strategies for sustainable development in India are (i) Biocomposting: Farmers had over a period of last five decades totally neglected the use of compost and completely switched over to chemical fertilisers, which adversely affected the productive land and water bodies, But now in large numbers, the farmers have again started using compost made from organic wastes of various kinds, Earthworms can convert organic matter into compost faster (ii) Biopest Control: Dueto the green revolution, ‘more and more use of chemical pesticides for higher yield led to the contamination of food products, like milk, meat and fish, soil, water bodies and even ground water were polluted with pesticides. But now efforts are being made to bring in better methods of pest control like the ones based on plant products like neem trees are proving quite useful, Also, there is widespread awareness about various animals and birds which help in controlling pests. Like snakes are one of ‘the prime group of animals which prey upon rats and various other pests. Owls, peacocks and lizards also play an important role in preying upon vermin and pests, Page 11