Sample Paper 1 Economics Class 12th PDF

By DeeCee – Divine Classes Sample Paper 1 Economics TIME: 3 HOURS M.M.-80 GENERAL INSTRUCTIONS: 1. This question paper contains two s...

By DeeCee – Divine Classes Sample Paper 1 Economics TIME: 3 HOURS M.M.-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 Q 1. Suppose in a hypothetical economy, the income rises from ₹ 5,000 crores to ₹ 6,000 crores. As a result, the consumption expenditure rises from ₹ 4,000 crores to ₹ 4,600 crores. Marginal propensity to consume in such a case would be ______________________. (Choose the correct alternative) (1) (a) 0.8 (b) 0.4 (c) 0.2 (d) 0.6 Q 2. An Indian company located in India invests in a company located abroad. This transaction is entered in India's balance of payments account on: (choose the correct alternative) (1) (a) Credit Side of Current Account (b) Debit Side of Current Account (c) Credit Side of Capital Account (d) Debit Side of Capital Account Q 3. The ratio of total deposits that a commercial bank has to keep with Reserve Bank of India is called : (choose the correct alternative) (1) (a) Statutory liquidity ratio 1 By DeeCee – Divine Classes (b) Deposit ratio (c) Cash Reserve Ratio (d) Legal reserve ratio Q 4. Read the following statements carefully: (1) Statement 1: Export of financial services by India will be recorded on credit side of current account. Statement2: Foreign Direct Investments in India will be recorded on credit side of capital account. In the light of the given statements, choose the correct alternative: a) Statement 1 is true and statement 2 is false b) Statement I is false and statement 2 is true c) Both statements and 2 are true d) Both statements 1 and 2 are false Q 5. Which of the following is not a flow? (1) (a) Capital (b) Income (c) Investment (d) Depreciation OR Foreign embassies in India are a part of India’s: (Choose the correct alternative) (a) Economic territory (b) Geographical territory (c) Both (a) and (b) (d) None of the above Q 6. If MPC = 1, the value of multiplier is: (1) (a) 0 (b) 1 (c) Between 0 and 1 (d) Infinity Or The monetary policy generally targets to ensure _______________. 2 By DeeCee – Divine Classes (a) Price stability in the economy (b) Employment generation in the country (c) Stable foreign relations (d) Greater tax collections for the government Q 7. Which of the following is not a problem of barter system of exchange? (1) (a) Store of Value (b) Double Coincidence of Wants (c) Unit of Account (d) Unemployment Q 8. Who regulates money supply? (1) (a) Government of India (b) Reserve Bank of India (c) Commercial Bank (d) Planning Commission Or The following information is given for an imaginary country: Current Account Amount (in ₹ Crore) Visible Exports 100 Visible Imports 150 Invisible Exports 70 Invisible Imports 30 Net current transfer balance 15 Balance on current account will be __________________ of ₹ ____________ thousand Crore. a) deficit, 10 b) surplus,5 c) deficit, 5 d) surplus, 10 Q 9. Aggregate supply and ______________ are always equal. (1) (a) National Income (b) Aggregate Demand 3 By DeeCee – Divine Classes (c) Marginal Propensity to save (d) Average Propensity to Consume Q 10. When planned saving is less than planned investment, it indicates a situation when: (1) (a) AD < AS (b) AD = AS (c) AD > AS (d) None of these Q 11. From the following data relating to a firm, calculate its net value added at factor cost: (3) Particulars ₹ in Lakhs (i) Subsidy 40 (ii) Sales 800 (iii) Depreciation 30 (iv) Exports 100 (v) Closing stock 20 (vi) Opening stock 50 (vii) Intermediate purchases 500 (viii) Purchase of machinery for own use 200 (ix) Import of raw material 60 Q 12. Write difference between Balance of trade & Balance of Payment. (3) Or Write difference between Current Account & Capital Account. Q 13. In an economy, the consumption function is C = 500 + 0.75Y , (where C is consumption expenditure and Y is income. Calculate the equilibrium level of income and consumption expenditure, when investment expenditure is 5,000. (4) Q 14. Explain the ‘lender of last resort’ function of the Central Bank. (4) Q 15. Explain the process of money creation by commercial banks, giving a numerical example. (4) Q 16. a) Define Gross Domestic Product (GDP) deflator and discuss its importance. (3) b) State and discuss any two precautions to be considered while estimating national income by Expenditure Method. (3) Q 17. a) Distinguish between revenue receipts and capital receipts of the government, with suitable examples. (3) b) Distinguish between direct and indirect taxes, with suitable examples. (3) 4 By DeeCee – Divine Classes SECTION B – INDIAN ECONOMIC DEVELOPMENT Q 18. The foundation of British Empire in India was laid by Battle of Plassey fought in _______________. (1) (a) 1757 (b) 1857 (c) 1763 (d) 1747 Q 19. When was the planning commission set up? (1) (a) 1949 (b) 1950 (c) 1956 (d) 1850 Q 20. ____________ and ___________________ are the reasons for the slowdown of the Pakistan economy since independence. (1) I. Political instability II. Over-dependence or remittances from abroad III. Stable performance of agriculture sector IV. Growth of service sector Alternatives: (a) I and II (b) II and III (c) III and IV (d) I and IV Q 21. _______________ is the apex body which coordinates the functioning of different financial institutions, working for expansion of rural credit. (1) (a) NABARD (b) Self-Help Groups (c) Regional Rural Banks (d) Commercial Banks Q 22. Which type of economic system is followed in China? (1) (a) Mixed Economy (b) Socialist Economy (c) Capitalist Economy (d) None of these Q 23. ___________ five-year plan recognized the importance of Human Capital. (1) (a) Seventh 5 By DeeCee – Divine Classes (b) Third (c) Eight (d) Sixth Q 24. The process of moving from self-employment and regular salaried employment to casual wage work is known as: (1) (a) Informalization of work force (b) Casualization of work force (c) Both (a) and (b) (d) Neither (a) nor (b) Q 25. _____________ is not a cause for environmental degradation. (1) (a) Waste management (b) Deforestation (c) Global warming (d) Guarding green cover Q 26. Unemployment that occurs at certain seasons of the year is known as: (1) (a) Seasonal unemployment (b) Open unemployment (c) Hidden unemployment (d) None of these Q 27. ____________ means integrating the domestic economy with the world economy. (1) (a) Globalization (b) Privatization (c) Liberalisation (d) Disinvestment Q 28. India has abundant natural resources-substantiate the statement. (3) Q 29. Discuss the role of National Bank for Agricultural and Rural Development (NABARD) in rural credit. (3) Q 30. Mention the various indicators of human development. (4) Q 31. Why was it necessary for a developing country like India to follow self-reliance as a planning objective? (4) Q 32. Bring out the differences between human capital and human development. (4) Q 33. a) Define agricultural marketing. (2) b) Discuss briefly the importance of micro-credit programmes in rural development. (2) c) Enlist any two problems faced by farmers in the initial years of organic farming. (2) 6 By DeeCee – Divine Classes Q 34. Case Based Question: (6) India's post-1990 economic strategy entailed three important breaks with the past. To dismantle the vast network of controls and permits that dominated the economic system. To redefine the role of the state as a facilitator of economic transactions and as a neutral regulator rather than the primary provider of goods and services. To move away from a regime of import substitution and to integrate fully with the global trading system. The 1991 reforms unleashed the energies of Indian entrepreneurs and gave untold choice to consumers and changed the face of the Indian economy. The reform agenda constituted a paradigm shift, and has defined the broad contours of economic policy making for three decades. Liberalization was adopted as the guiding principle of governance and all governments since 1991, have broadly stuck to that path. Today we don't need a paradigm shift. We need to look at individual sectors and see which one of these needs, reforms to create a competitive environment and improve efficiency. The power sector, the financial system, governance structures and even agricultural marketing need reforms. Today's reforms also require much more discussion and consensus-building. The central government needs to work in tandem with state governments and consult different stakeholders impacted by reform decisions. Timing and sequencing are critically important in the new reforms agenda. Source: Excerpts from ‘Like 1991, the 2021 crisis presents an opportunity, by C.Rangarajan, 22nd January 2021 (livemint.com) Answer the following questions (A to F) on the basis of above case: A. According to the given text, ___________ was adopted as the guiding principle of governance and all governments since 1991. (A) Modernization (B) Liberalisation (C) Privatization (D) Globalization B. Read the following statements carefully and choose the correct alternatives given below: Statement 1: 1991 was a landmark moment in India's post-independence history as that changed the nature of the economy in fundamental ways. Statement 2: India's economic establishment launched a multipronged reforms agenda to repair India's macroeconomic balance sheet and ignite growth. Alternatives: (A) Both the statements are true. 7 By DeeCee – Divine Classes (B) Both the statements are false. (C) Statement 1 is true and Statement 2 is false. (D) Statement 2 is true and Statement 1 is false. C. Read the following statements-Assertion (A) and Reason (R): Assertion (A): India's pre-1990 economic strategy dismantles the vast network of controls and permits that dominated the economic system. Reason (R): The 1991 reforms unleashed the energies of Indian entrepreneurs, gave untold choice to consumers and changed the face of the Indian economy. From the given alternatives choose the correct one: Alternatives: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true but Reason (R) is false. (D) Assertion (A) is false but Reason (R) is true. D. In the light of the given text and common knowledge, identify the incorrect statement: - (A) A severe balance of payments problem triggered an acute economic crisis in 1991. (B) In 1991, the economic and political leadership launched a multipronged reforms agenda to repair the macroeconomic situation of the nation. (C) In post 1991 situation, the state was given the role of primary regulator of the economy. (D) Post pandemic, individual sectors should be looked closely. Sectors that need reforms should be identified and corrective action should be taken. E. Read the following statements carefully and choose the correct alternatives given below: Statement 1: Timing and sequencing are critically important in the post-economic reform agenda. Statement 2: Post pandemic reforms in India require a paradigm shift. Alternatives: (A) Both the statements are true. (B) Both the statements are false. (C) Statement 1 is true and Statement 2 is false. (D) Statement 2 is true and Statement 1 is false. 8 By DeeCee – Divine Classes F. Read the following statements- Assertion (A) and Reason (R): Assertion (A): The 1991 reforms released the vitalities of Indian businesspersons. Reason (R): The reform agenda established a paradigm shift and defined the broad outlines of economic policy making for years to come. From the given alternatives choose the correct one: Alternatives: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true but Reason (R) is false. (D) Assertion (A) is false but Reason (R) is true. 9 By DeeCee – Divine Classes ANSWER KEY Section A – Macro Economics Ans 1. (d) 0.6 Ans 2. (d) Debit Side of Capital Account Ans 3. (c) Cash Reserve Ratio Ans 4. c) Both statements and 2 are true Ans 5. (a) Capital Or Ans. (b) Geographical territory Ans 6. (d) Infinity Or Ans. (a) Price stability in the economy Ans 7. (d) Unemployment Ans 8. (b) Reserve Bank of India Or Ans. b) surplus,5 Ans 9. (a) National Income Ans 10. (c) AD > AS Ans 11. Net Value Added at Factor Cost = (ii) + (v) − (vi) – (vii)-(iii)+(i) = 800 + 20 – 50 – 500 – 30 + 40 = 280 Lakhs Ans 12. Basis Balance of Payment (BOP) Balance of Trade (BOT) Meaning It is an accounting statement that It refers to difference between provides a systematic record of all amounts of exports and imports of economic transactions, between visible items. residents of a country and rest of the world in a given period of time. Components It includes visible items, invisible It includes only visible items. items, unilateral transfers and capital transfers. Capital It records all transactions of capital It does not record any transaction of transactions nature. capital nature. 10 By DeeCee – Divine Classes Scope It is a wider concept and it includes It is narrower concept as it is only a BOT. part of BOP account. Settlement Unfavorable BOP can not be met Unfavorable BOT can be met out of out of favorable BOT. favorable BOP. Or Basis Capital account Current account Influence on the Capital transactions bring about a Current account transaction bring economy change in the capital stock of a country. a change in the current level of a country’s income. Concepts It is a stock concept as it includes all It is a flow concept as it includes all items expressing changes in stock. items of flow nature. Components Capital account = Borrowings and Current account = visible trade + Lendings to and from abroad + invisible trade + unilateral investment to and from abroad + transfers + income receipts and change in foreign exchange reserves. payments. Ans 13. (i) Equilibrium level of National Income (Y) At Equilibrium, Y = C + I [ AD = AS = Y and AD = C + I] (Or, Y = 500 + 0.75Y + 5,000 [C = 500 + 0.75Y] 0.25Y = 5,500 Y = 22,000 (ii) Consumption expenditure at equilibrium level of national income. Putting value of National Income of 22,000 in consumption function, we get: C = 500 + 0.75 X 22,000 C = 17,000 Equilibrium level of income = 22,000; Consumption expenditure at equilibrium level of income = 17,000. Ans 14. Lender of the last resort: When commercial banks fail to meet their financial requirement from other sources, they approach the central bank to give loans and advance as lender of the last resort. Central Bank assists these banks through discounting of approved securities and bills of exchange. Ans 15. MONEY CREATION OR CREDIT CREATION Through the process of money creation, commercial banks are able to create credit, which is in far excess of the initial or primary deposits. Let us now understand the process of money creation through an example: 11 By DeeCee – Divine Classes 1. Suppose, initial or primary deposits in banks is ₹1,000 and LRR is 20%. It means, banks are required to keep only ₹200 as cash reserve and are free to lend ₹800. 2. Suppose they lend ₹800 and borrowers withdrew the entire amount of ₹800 for making payments. The money spent by the borrowers come back into the banks in the form of deposit. As all the transaction rotated through bank hence, it will increase the demand deposits of bank by ₹800. 3. With the new deposits of ₹800, Bank keep 20% as cash reserves and lend the balance ₹640, which are used by the borrowers for making payments, which again comes back into the bank. In this round the deposits raised by ₹640. 4. The deposits keep on increasing in each round by 80% of last round deposits. At the same time, cash reserves also go on increasing, each time by 80% of the last cash reserve. Deposit creation comes to end when total cash reserves become equal to the initial deposit. Deposits (₹) Loans (₹) Cash reserves (₹) (LRR=20%) Initial deposit 1,000 800 200 Round 1 800 640 160 Round 2 640 512 128 Round 3 512 410 102 ------ ------ ----- ---- ----- ------ ------ ---- Total 5,000 4,000 1,000 5. From the above table, we have observed that intial deposits is the “five times” of reserves maintain by the banks. This “five times” is nothing, just only the value of “Money Multiplier”. Ans 16. a) GDP Deflator is the ratio of Nominal to Real GDP. It is a tool which is used to eliminate the effect of price fluctuations in the economy and to determine the real change in physical output of current year. GDP deflator helps in comparison of growth rate of the economy. b) i) Expenditure on second hand goods is not to be included in the final consumption expenditure as the production of these goods might not be attributed to the current year. ii) Expenditure on ‘intermediate goods’ are not to be taken into account, to avoid the problem of double counting of value of goods and services. Ans 17. a) Revenue receipts are those receipts which neither creates any liabilities nor causes any reduction in the assets of the government. For example: taxes, dividends received from public enterprises etc. Whereas; Capital receipts are those receipts which either creates liabilities or causes reduction in the assets of the government. For example: borrowings, disinvestments etc. 12 By DeeCee – Divine Classes b) Direct taxes are those taxes whose impact and incidence lies on the same entity. In other words, the liability of paying direct taxes can’t be shifted. For example: income tax. Whereas; Indirect taxes are those taxes whose impact and incidence may lie on different entities. In other words, the liability of paying indirect taxes can be shifted. For example: GST. SECTION B – INDIAN ECONOMIC DEVELOPMENT Ans 18. (a) 1757 Ans 19. (b) 1950 Ans 20. (a) I and II Ans 21. (a) NABARD Ans 22. (b) Socialist Economy Ans 23. (a) Seventh Ans 24. (b) Casualization of work force Ans 25. (d) Guarding green cover Ans 26. (a) Seasonal unemployment Ans 27. (a) Globalization Ans 28. The given statement is correct. India has abundant natural resources in terms of rich quality of soil, hundreds of rivers and tributaries, lush green forests, plenty of mineral deposits, etc. The black soil of the Deccan Plateau is particularly suitable for cultivation of cotton, leading to concentration of textile industries in this region. The Indo-Gangetic plains spread from the Arabian Sea to the Bay of Bengal are one of the most fertile, intensively cultivated and densely populated regions in the world. India's forests, though unevenly distributed, provide green cover for a majority of its population and natural cover for its wildlife. Large deposits of iron-ore, coal and natural gas are found in the country India alone accounts for nearly 20% of the world's total iron-ore reserves. Bauxite, copper, chromate, diamonds, gold, lead, lignite, manganese, zinc, uranium, etc. are also available in different parts of the country. Ans 29. National Bank for Agricultural and Rural Development (NABARD): It is the Apex Bank which coordinates the functioning of different financial institutions, working for expansion of rural credit. lts objective is to promote health and strength of credit institutions (namely, cooperatives, commercial banks and regional rural banks). Besides providing finance to credit institutions, NABARD also provides financial assistance to the non-farm sector, to promote integrated rural development and prosperity of backward rural areas. 13 By DeeCee – Divine Classes Ans 30. The indicators of human development are: (i) Life Expectancy (ii) Infant Mortality Rate (iii) Maternal Mortality Rate (iv) Mean years of Schooling (v) Percentage of the population below poverty line (vi) GDP per capita (vii) Percentage of the population having access to improved sanitation (viii) Percentage of the population having access to improved water sources (ix) Percentage of the population undernourished. Ans 31. The policy of self-reliance was considered a necessity because of two reasons: To reduce foreign dependence: As India was recently freed from foreign control, it is necessary to reduce our dependence on foreign countries, especially for food. So, stress should be give to attain self-reliance. To avoid Foreign Interference: It was feared that dependence on imported food supplies, foreign technology and foreign capital may increase foreign interference in the policies of our country. Ans 32. The differences between human capital and human development are: (i) Human capital considers education and health as a means to increase labour productivity. On the Si other hand, according to human development, education and health are integral to human well-being. (ii) Human capital treats human beings as a means to increase in productivity. Any investment in education and health is unproductive if it does not enhance output of goods and services. However, according to human development, human beings are ends in themselves. Human welfare should be increased through investments in education and health even if such investments do not result in higher labour productivity. Ans 33. a) Agriculture marketing is a process that involves the assembling, storage, processing, transportation, packaging grading and distribution of different agricultural commodities across the country b) Self-help groups (SHG’s) have emerged to fill the gap in the formal credit system in India as its delivery mechanism has not only proven inadequate but has also not been fully integrated into the overall rural social and community development. It came up as the micro finance program. Focus of SHGs is on those rural people, small and marginal farmers, agricultural and non-agricultural laborers who do not have sustainable access to formal banking system. 14 By DeeCee – Divine Classes c) i) Inadequate infrastructure and marketing ii) Compared to conventional farm products, organic products have more shorter shelf life span. Ans 34. A - (B) Liberalisation B- (A) Both the statements are true. C - (D) Assertion (A) is false but Reason (R) is true. D - (C) In post 1991 situation, the state was given the role of primary regulator of the economy. E - (C) Statement 1 is true and Statement 2 is false. F - (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). 15