Category: CBSE Sample Papers

Students can access the CBSE Sample Papers for Class 12 Accountancy with Solutions and marking scheme Term 2 Set 10 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Accountancy Standard Term 2 Set 10 with Solutions

Maximum Marks: 40
Time allowed: 2 Hours

General Instructions:

• This question paper comprises two Parts – A and B. There are 12 questions in the question paper. All questions are compulsory.
• Question nos. 1 to 3 and 10 are Short Answer Type I Questions carrying 2 marks each.
• Question nos. 4 to 6 and 11 are Short Answer Type II Questions carrying 3 marks each.
• Question nos. 7 to 9 and 12 are Long Answer Type Questions carrying 5 marks each.
• There is no overall choice. However, an internal choice has been provided in 3 questions of three marks and 1 question of five marks.

Part A
(Accounting for Not-for-Profit Organisations, Partnership Firms and Companies)

Short Answer (SA) Type I Questions (2 Marks)

Question 1.
Anurag, Aditya, and Tushar were partners in AJ Limited, which deals in bags, sharing profits in the ratio of 1:1:1. The firm closes its books on 31st March every year. On 1st June 2020, Tushar died due to Covid-19.
The partnership deed provided for the following on death of a partner
(i) Share of goodwill to be valued at one half of the net profit credited to deceased partner’s account during last four completed year. (Profits for the last four years were as under)
2019 = ₹ 80,000 2018 = ₹ 40,000 2017 = ₹ 80,000 2016 = ₹ 1,20,000
(ii) His share of profit from the closing of last financial year to the date of death which amounted to ₹ 2,200.
Your are required to pass journal entries for adjustment of Tushar’s goodwill and his share of profits till death.
Answer:

Working Note
Profit = 1,20,000 + 80,000 + 40,300 + 80,300 = ₹ 3,20,300
Tushar’s share in last four years’ profit = \(\frac{1}{3} \) x 3,20,300 = ₹ 1,36,567
Tushar’s share of goodwill = 1,36,567 x \(\frac{1}{2} \) = ₹ 53,333

2. State the accounting treatment for
(i) Unrecorded assets
(ii) Unrecorded liabilities
Answer:
Unrecorded assets and liabilities are not transferred to realisation account because they do not appear in the books.
Following accounting, procedure is followed
(i) Unrecorded Assets If amount is realised from sale of unrecorded assets, it is debited to cash/bank account and credited to realisation account, it being in the nature of gain. If unrecorded asset is taken by one of the partners, it is debited to concerned partner’s capital account and credited to realisation account.

(ii) Unrecorded Liabilities If unrecorded liability is paid, realisation account is debited and cash/bank account is credited with the amount paid, it being a loss. If a partner agrees to pay unrecorded liability, realisation account is debited and concerned partner’s capital account is credited. No entry is passed if unrecorded assets is given to discharge a recorded or unrecorded liability.

Question 3.
P, Q, and R are partners in a firm sharing profits in the ratio of 1:1 : 3 respectively. Their capital accounts showed the following balances on 31st March 2019 P – ₹ 1,00,000 ; Q – ₹ 1,50,000 and R – ₹ 2,00,000. Firm closes its accounts every year on 31st March. P retired on 31st March 2019.

The partnership deed provides for the following:
(i) The retiring partner’s share in the goodwill of the firm will be calculated on the basis of 2 years’ purchase of the average profit of last three years. The profits of the firm for the last three years were ₹ 80,000; ₹ 90,000 and ₹ 1,30,000 respectively.

(ii) His share in the reserve fund of the firm will be paid. The reserve fund of the firm was ₹ 80,000 at the time of P’s retirement. Prepare P’s capital account.
Answer:

Working Note
Firm’s goodwill = \(\left(\frac{80,000+90,000+1,30,000}{3}\right) \times 2\) = ₹ 2,00,000
P’s share of goodwill = 2 ,00,000 x \(\frac{1}{5}\) = ₹ 40,000 to be contributed by Q and R in gaining ratio, i.e. 1:3.

Short Answer (SA) Type II Questions (3 Marks)

Question 4.
X, Y, and Z are partners sharing profits in the ratio of 4 : 3 :1. Y retires, giving his share of profits to X and Z for ₹ 32,400; ₹ 14,400 being paid by X and ₹ 18,000 by Z. Profit for the year after Y’s retirement was ₹ 42,000. X and Z decide to share future profits and losses in the ratio of 2:1. You are required to give necessary journal entries to record the transfer of Y’s share to X and Z.
or
Pass the necessary journal entries for the following transactions on the dissolution of the firm of A, B, and C who were sharing profits in the ratio of 4:3:3.
(i) Bankers (Who granted loan of ₹ 7,000) accepted stock of ₹ 6,000 at a discount of 20% and the balance is cash.
(ii) Prepaid insurance of ₹ 5,000 and goodwill of ₹ 50,000 were appearing in balance sheet but no other additional information was given with regard to these two items. t
(iii) Workmen compensation reserve ₹ 30,000, workmen compensation paid ₹ 10,000.
Answer:

Question 5.
Jain Ltd. invited applications for 500, 9% debentures of ₹ 100 each at a discount of 6%. Application for 600 debentures were received. Pro-rata allotment was made to all the applicants. Pass necessary entries for issue of debentures and writing-off the discount.
Or ;
Prakash Ltd. invited applications for issuing 4,000,10% debentures of ₹ 100 each at a premium of ₹ 20 per debenture.
The full amount was payable on application. Applications were received for 5,000 debentures. Applications for 1,000 debentures was rejected and application money was refunded. Debentures were allotted to the remaining applicants. Pass necessary journal entries for the above transactions in the books of Prakash Ltd.
Answer:


Question 6.
A, B, and C are partners in a firm sharing profits in the proportion of 3:2:1. Their balance sheet as at 31st March 2020 stood as follows

B retired on 1st April 2020. He is entitled to
(i) Capital to his credit.
(ii) Share of general reserve.
(iii) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last 3 years less 20%.
The profits for the previous 3 years were I – ₹ 4,920, II – ₹ 5,400, and III – ₹ 5,880.
Prepare partners’ capital account.
Answer:

Working Note:
Total profit for 3 years = (4,920 + 5,400 + 5,880) = ₹ 16,200
Finn’s goodwill = (16,200 x 2)-20%(16,200 x 2)=32,400 -6,480 =₹ 25,920
B’s share of goodwill =25,920 x \(\frac{2}{6}\) = ₹ 8,640 to be contributed by A and C in gaining ratio, i.e. 3:1.

Long Answer (LA) Type Questions (5 Marks)

Question 7.
Following is the receipts and payments account of Sai Club for the year ended 31st December 2019
Receipts and Payments Account

With the additional information given below, prepare the income and expenditure account for the year ended 31st December 2019 and the balance sheet as on that date

Particular	31st December 2018(₹)	31st December 2O19(₹)
(i) Subscription Receivable	1,000	600
(ii) Subscription Received in Advance	200	400
(iii) Salary of Staff Outstanding	1,000	2,000
(iv) Canteen Expenses Prepaid	1,000	1,500
(v) Furniture at Book Value	14,000	–
(vi) Buildings	15,000	–
(vii) Fixed Deposit with Bank	10,000	10,000
(viii) Book Value of Furniture Sold during 2019 was ₹ 3,500
(ix) Charge Depredation on Furniture at 10%p.a. on the Closing Balance

Answer:

Question 8.
Following is the receipts and payments account of Happy Club for the year ended 31st
March 2020
Receipts and Payments Account

Additional Information
(i) Subscriptions outstanding as on 31st March 2019 were ₹ 4,000 and on 31st March 2020 ₹ 5,000.
(ii) On 31st March. 2020 salary outstanding was ₹ 1,200 and rent outstanding was 2,400
(iii) The club owned furniture ₹ 30,000 and books ₹ 14,000 on 1st April 2019.
Prepare income and expenditure account of the club for the year ended 31st March 2020 and ascertain capital fund on 31st March 2019. Also prepare a balance sheet as on 31 st March 2020.
Answer:


Note:
Subscription outstanding on 31st March 2020 is ₹ 5,000 which includes the subscription outstanding for the year, 2018-2019 ₹ 1,600 i.e., 4,000 -2,400 received during 2019-20. Hence, the subscription outstanding for 2019-20 is 3,400 (i.e., 5,000- 1,600). It should be noted that there ¡s a difference between subscription outstanding on 31st March 2020 and subscription outstanding for 2019-20 which indicates subscription outstanding only for 2019-20.

Question 9.
Pass the journal entries in the following cases
(i) Bhim Ltd. issued 20,000, 9% debentures of ₹ 50 each at a discount of 8% redeemable at par at any time after 9 years.
(ii) Bhim Ltd. purchased assets of ₹ 12,60,000 from Chinky Ltd. Bhim Ltd. paid this amount by issuing debentures of ₹ 100 each at a premium of 20%.
(iii) Bhim Ltd purchased assets of ₹ 8,40,000 and took over liabilities of ₹ 80,000 at an agreed value of ₹ 7,20,000. Bhim Ltd issued debentures of ₹ 100 each at par in full satisfaction of the purchase price.
Or
Pass journal entries in the following cases
(i) Prakash Ltd. secured a loan of ₹ 4,00,000 from Axis Bank issuing 3,000, 10% Debentures of 100 each as collateral security.
(ii) Prakash Ltd. also issued ₹ 2,00,000, 9% debentures of 100 each at premium of 5% redeemable at par
(iii) Prakash Ltd. also issued 35,000, 8% debentures of ₹ 100 each payable on application and redeemable at par at any time after 6 years.
Answer:

Working Note
Number of Debentures = \(\frac{\text { Amount Due to Vendor Company }}{\text { Issue Price Per Debenture }}=\frac{12,26,000}{100+20} \) = 10,500 Debentures
Number of Debentures Issued = \(\frac{7,20,000}{100}\) = 7,200 Debentures

Part B
(Analysis of Financial Statements)

Short Answer (SA) Type I Question (2 Marks)

Question 10.
What do you mean by comparative financial statements?
Answer:
Statements used to compare the items of income statement, i.e. statement of profit and loss and
balance sheet for ascertaining the trend of the performance and profitability of an enterprise are
known as comparative financial statements.

Short Answer (SA) Type II Question (3 Marks)

Question 11.
From the following information, prepare comparative statement of profit and loss for the year ended 31st March 2019 and 2018.

Or
From the following information which is taken from the books of Malakar Pvt. Ltd., prepare comparative statement of profit and loss for the year ended 31st March, 2019.

Answer:

Long Answer (LA) Type Question (5 Marks)

Question 12.
From the following information, prepare a cash flow statement for Ravi Ltd. Balance sheets of Ravi Ltd. as at 31st March, 2018 and 2019 are given below
Balance Sheet
as at 31st March, 2018 and 2019

Additional Information
(i) Debentures were issued on 1st April 2018.
(ii) During the year, a machine included in fixed assets costing ₹ 12,00,000 was purchased and another machine of the book value of ₹ 3,00,000 was sold at a loss of ₹ 20,000.
Answer:

Students can access the CBSE Sample Papers for Class 12 Accountancy with Solutions and marking scheme Term 2 Set 11 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Accountancy Standard Term 2 Set 11 with Solutions

Maximum Marks: 40
Time allowed: 2 Hours

General Instructions:

• This question paper comprises two Parts -A and B. There are 12 questions in the question paper. All questions are compulsory.
• Question nos. 1 to 3 and 10 are Short Answer Type I Questions carrying 2 marks each.
• Question nos. 4 to 6 and 11 are Short Answer Type II Questions carrying 3 marks each.
• Question nos. 7 to 9 and 12 are Long Answer Type Questions carrying 5 marks each.
• There is no overall choice. However, an internal choice has been provided in 3 questions of three marks and 1 question of five marks.

Part A
(Accounting for Not-for-Profit Organisations, Partnership Firms, and Companies)

Short Answer (SA) Type I Questions (2 Marks)

Question 1.
Surender, Ramesh, Naresh and Mohan are partners in a firm sharing profits in 2:1:2:1 ratio. On the retirement of Naresh, the goodwill was valued at ₹ 2,16,000. Surender, Ramesh, and Mohan decided to share future profits equally. Pass the necessary journal entry for the treatment of goodwill without opening a goodwill account.
Answer:

Working Note
Calculation of Gaining Ratio Gaining Ratio = New Share – Old Share
Surender = \( \frac{1}{3}-\frac{2}{6}=\frac{2-2}{6}=\frac{0}{6}\) = 0;
Ramesh = \( \frac{1}{3}-\frac{1}{6}=\frac{2-1}{6}=\frac{1}{6}\)
Mohan = \(\frac{1}{3}-\frac{1}{6}=\frac{2-1}{6}=\frac{1}{6}\)
Gaining Ratio of Ramesh and Mohan =1:1
Naresh’s share of goodwill =2,16,000 x \(\frac{2}{6}\) = ₹ 72,100.

Question 2.
Distinguish between sacrificing ratio and gaining ratio.
Answer:

Basis	Sacrificing Ratio	Gaining Ratio
Meaning	It is the ratio in which old partners agree to sacrifice their share of profit in favour of new partner.	It is the ratio in which continuing partners acquire the share of profit from outgoing partner.
Calculation	Sacrificing Ratio = Old Share – New Share	Gaining Ratio = New Share – Old Share

Question 3.
Mahesh, Ramesh, and Suresh are sharing profits in the ratio of 2: 2 :1. Ramesh died on 30th June 2021 due to brain stroke. Sales for the year ended 31st March 2021 amounted to ₹ 12,00,000. Sales of ₹ 4,00,000 amounted between the period from 1st April 2021 to 30th June 2021. The profits for the year ended 31st March 2021 amounted to 11,20,000. Pass the necessary journal entry to record Ramesh’s share of profit till the date of his death.
Answer:
Percentage of profits to sales
For the year ended 31st March, 2021 = \( \frac{1,20,000}{12,00,000} \times 100\)
Profits upto the date of death = 10% of 4,00,000 = ₹ 40,100 Ramesh’s share of profit = 40,100 x \(\frac{2}{5}\) = ₹ 16,300

Short Answer (SA) Type II Questions (3 Marks)

Question 4.
A, B, C, D, and E were partners in a firm sharing profits and losses in the ratio of 5: 4 : 3: 2 :1 respectively. Unfortunately, D and E met with an accident in which both of them died. The goodwill of the firm was valued at ₹ 1,50,000 and A, B and C decided to share the future profits and losses in the ratio of 4: 6: 5 respectively.
Give the journal entries to record the above.
Answer:


Question 5.
Wadhwa Ltd. issued 60,000,15% debentures of ₹ 10 each credited as fully paid to the promoters for their services and issued 15,000,15% debentures of ₹ 10 each credited as fully paid to the underwriters for the underwriting services. Journalise these transactions.
Or
Prabhu Darbaar Pvt. Ltd. issued 20,000, 9% debentures of ₹ 100 each to the public at 10% discount on 1st April 2020. These debentures are redeemable after 6 years at a premium of 10%. Pass the necessary journal entries for issue of debentures and writing-off Toss on issue of debentures’ in same year of issue, if company has a balance of ₹ 1,60,000 in its securities premium reserve account.
Answer:

Working Note
Total Loss on Issue of Debentures Account = Discount on Issue of Debentures + Premium on Redemption of Debentures Account
= 2,00,000 + 2,00,000 = ₹ 4,00,000.

Question 6.
Pass the necessary journal entries for the following transactions on the dissolution of firm of Anju, Manju, and Sanju (who were sharing profits in the ratio of 2: 2:1) after the transfer of all assets (other than cash) and external liabilities to realisation account.
(i) Debtors were of ₹ 62,100. Anju takes over debtors amounted to ₹ 60,000 at ₹ 58,600 and the remaining debtors were sold to a debt collecting agency at 50% of the value.
(ii) Sundry assets were of ₹ 58,500. Manju is to take over some sundry assets at ₹ 36,(XX) (being 10% less than the book value). Sanju is to take over remaining sundry assets at 80% of the book value.
(iii) Sanju assumes the responsibility of discharge of Mrs. Sanju’s loan of ₹ 5,750 together with accrued interest of ₹ 1,150.
Or
Nisha and Saisha were partners. Nisha retired on 1st April 2020. The partnership deed provided for the following
(i) Profits to be divided as Nisha \(\frac{1}{2}\) , Saisha \(\frac{1}{3}\) and \(\frac{1}{6}\)th to be transferred to reserves.
(ii) The accounts are closed on 31st March each year.
(iii) At the time of retirement, he was entitled to the following
(a) Capital to the credit on the date of retirement.
(b) Share of goodwill based on three years’ purchase of the average profits of the preceding 3 years.

Additional Information:
Nisha’s capital ₹ 3,60,000, Saisha’s capital ₹ 2,40,000, reserves ₹ 90,000, cash ₹ 3,30,000 and investment ₹ 2,10,000. Prepare Nisha’s capital account. The profits for the three preceding years were ₹ 2,52,000, ₹ 2,70,000, and ₹ 2,97,000.
Answer:

Working Notes:
1. Calculation of Average Profit
Last 3 years’ total profit =2,52,100 + 2,70,100 + 2,97,000 = ₹ 8,19,000
Average Profit = \(\frac{8,19,000}{3}\) = ₹ 2,73,000

2. Calculation of Nisha’s Share of Goodwill
Firm’s Goodwill = Average Profit x Number of Years’ Purchase =2,73,100 x 3 = ₹ 8,19,000
Nisha’s Share of Goodwill = 8,19,100 x \(\frac{3}{5}\) = ₹ 4,91,400, to be contributed by Saisha.
(∵ Generally used 3:2)

3. Calculation of Nisha’s Share in Reserves
90,000 x \(\frac{3}{5}\) = ₹ 54,000

Long Answer (LA) Type Questions (5 Marks)

Question 7.
From the following receipts and payments account, prepare income and expenditure account for the year ending 31st December 2020 and balance sheet.
Receipts and Payments Account

Additional Information:

Particulars	1st January 2020 (₹)	31st December 2020 (₹)
(i) Subscription Received in Advance	600	1,920
(ii) Outstanding Subscription	1,200	2,220
(iii) Stock of Stationery	720	480
(iv) Books	8,100	9,900
(v) Furniture	9,600	4,800
(vi) Outstanding Rent	600	1,200

Answer:

Question 8.
Pass the necessary journal entries in the following cases
(i) Zen Ltd. invited applications for issuing 1,000,12% debentures of ₹ 100 each at a discount of 5%. These debentures were redeemable after three years at par. Applications for 1,200 debentures were received. Pro-rata allotment was made to all the applicants.

(ii) Designs Unlimited is in garment business. As its corporate social responsibility, it decided to install 100 toilets in the schools. The project was named Swastha Bharat. It purchased materials worth ₹ 2,25,000 from Indian Traders Ltd. Payment made as ₹ 5,000 by a cross cheque and remaining by issuing 10% debentures of ₹ 100 each at 10% premium.
Or
Complete the following journal entries


Answer:

Working Note Number of Equity Shares Issued = \(\frac{\text { Amount Due }}{\text { Issue Price }}=\frac{2,20,000}{110} \)
= 2,000 Debentures

Question 9.
Following receipts and payments account was prepared from the cash book of Youth Club for the year ending 31st December 2020.
Receipts and Payments Account

Prepare income and expenditure account for the year ended 31st December 2020 and a
balance sheet on that date after the following adjustments
(i) It was decided to treat \(\frac{1}{3}\) rd of the amount received on account of donation as income.
(ii) Insurance premium was paid in advance for 3 months.
(iii) Interest on investment ₹ 2,200 accrued was not received.
(iv) Rent ₹ 1,200, salary ₹ 1,800 and advertisement expenses ₹ 2,000 outstanding as on 31st December, 2020.
Answer:

Part B
(Analysis of Financial Statements)

Short Answer (SA) Type I Question (2 Marks)

Question 10.
State whether the following would result into inflow, outflow or no flow of cash.
(i) Declaration of a final dividend.
(ii) Payment of cash to creditors.
Answer:
(i) No flow of cash as final dividend is declared only, not yet paid.
(ii) Outflow of cash as payment to creditors leads to a decrease in cash.

Short Answer (SA) Type II Question (3 Marks)

Question 11.
From the following information given, prepare a common size statement of profit and loss

Particulars	2019 (₹)	2020 (₹)
Revenue from Operations	10,00,000	12,50,000
Depreciation and Amortisation	20,000	30,000
Changes in Inventories of Stock-in-trade	30,000	(20,000)
Other Expenses	30,000	50,000
Purchases of Stock-in-trade	7,20,000	8,70,000
Tax	50,000	50,000

Or
From the following balance sheets of Narayan Ltd, prepare a comparative balance sheet.
Balance Sheet
as at 31st March 2020 and 2019

Answer:

Long Answer (LA) Type Question (5 Marks)

Question 12.
From the following, calculate the net cash flow from operating activities


Additional Information
During the year, a piece of machinery costing ₹ 15,000 on which depreciation charged was ₹ 5,000 was sold for ₹ 5,000. Depreciation provided on fixed assets ₹ 15,000.

Dividend on equity shares @ 8% was paid on opening balance. An income tax ₹ 11,250 was provided. Additional debentures were issued at par on 1st October 2019 and bank loan was repaid on the same date. At the end of the year, preference shares were redeemed at a premium of 5%.
Answer:

Working Notes
1. Calculation of Net Profit before Tax

Particulars	Amt (₹)
Closing Balance of Profit and Loss A/c	37,500
(+) Opening Balance of Profit and Loss A/c (Debit)	35,000
(+)Transfer to Reserve	7,500
(+) Dividend on Equity Shares	9,000
(+) Dividend on Preference Shares	3,750
(+) Provision for Tax	11,250
Net Profit before Tax	1,04,000

Students can access the CBSE Sample Papers for Class 12 Economic with Solutions and marking scheme Term 2 Set 7 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Economics Term 2 Set 4 with Solutions

General Instructions :

• This is a subjective question paper containing 13 questions.
• This paper contains 5 questions of 2 marks each, 5 questions of 3 marks each and 3 questions of 5 marks each.
• 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
• 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
• This question paper contains Case/Source Based Questions.

Maximum Marks: 40
Time: 2 Hours

Short Answer (SA) Type I Questions (2 Marks)

Question 1.
Derive the formula, \(K=\frac{1}{\mathrm{MPS}^{\prime}}\)
where, K = Investment Multiplier; MPS = Marginal Propensity to Save
Or
Complete the following table

Answer:
We know that, \(K=\frac{\Delta Y}{\Delta I}\)
Where, K = Investment Multiplier
ΔY Change in Income
Δl = Change in Investment
Also, ΔY = ΔC + Δl [ΔC = Change in Consumption]
⇒ Δl = ΔY – ΔC
Now, \(K=\frac{\Delta Y}{\Delta Y-\Delta C}\) [∵ Δl = ΔY – ΔC]
Dividing the numerator and denominator by ΔY, we get
Formulae used Y = C + S, MPC = \(\frac{\Delta C}{\Delta Y}\)

Question 2.
Mention the steps taken in derivation of consumption curve from saving curve.
Answer:
Derivation of consumption curve from saving curve

• Saving curve starts below the origin as dis-savings, consumption curve will be above the origin equal to the amount of dis-savings at zero level of income.
• Saving becomes zero with increase in level of income, consumption becomes equal to income at this point.
• As income increases further, saving becomes positive and consumption becomes less than income.

Question 3.
Calculate value of output from the following data

Items	(₹ in crores)
Net Value Added af Factor Cost	100
Intermediate Consumption	75
Excise Duty	20
Subsidy	5
Depreciation	10

Or
If the Real GDP is ₹300 and Nominal GDP is ₹330, calculate Price Index (base = 100).
Answer:
Value of Output = NVA_FC + Depreciation + (Excise Duty – Subsidy) + Intermediate Consumption
= 100 + 10 + (20 – 5) + 75 = 185 + 15 = ₹200 crore
Or Real GDP = ₹300
Nominal GDP = ₹330
Pnce Index = x 100 = \(\frac{330}{300}\) x 100 = 110

Question 4.
Observe the table given below carefully and answer the question
Select Demographic Indicatiors, 2017-18
Source World Development Indicatiors 2019, www.warldbank.org

As per the above data, the sex ratio is biased towards females in all the three countries. Give reason, why?
Answer:
The sex ratio of all the three countries is biased towards women due to the preference for male child (son). China implemented one child policy but the preference for male child remained high. In Pakistan also, high fertility rate is due to the same phenomenon. In India, this situation is due to low literacy rate.

Question 5.
Which phenomenon refers to reduction in the ozone layer in the stratosphere? What are its effects?
Or
Briefly state any two functions of environment.
Answer:
Ozone depletion refers to reduction in ozone layer in the atmosphere. The following are its effects

• More ultraviolet radiation comes to Earth causing damage to living organisms, skin cancer in humans and low production of phytoplankton affecting acquatic organisms.
• Influences the growth of terrestrial plants.

Or
The following are the main functions of environment (any two)

1. It supplies both, renewable and non-renewable resources.
2. It helps to assimilate waste, provided if it is within the carrying capacity of the environment.
3. It helps to sustain life.
4. It provides scenic beauty.

Short Answer (SA) Type II Questions (3 Marks)

Question 6.
State whether the following statements are true of false.

1. Autonomous consumption increases with level of income.
2. Savings are negative at low level of income.
3. At the break-even point, APC is equal to unity.

Answer:

1. False, autonomous consumption is the minimum basic consumption which every individual has to consume for survival and cannot be avoided. Thus, it remains constant at all income levels including zero.
2. True, when income exceeds consumption, saving is negative.
3. True, at break-even point, income and consumption are equal.

Question 7.
Show how the sum of value added is equal to sum of factor incomes?
Or
Giving appropriate example, explain the consideration of ‘interest’ in the national income accounting.
Answer:
Sum of value-added refers to the value of final goods and services produced in the economy during the period of one year. Net value added at factor cost implies cost of the factors of production in terms of rent, interest, profit and wages. This is equal to income generated. Hence, the fact that value-added is identical with income generated.

Or In national income accounting, interest as a factor payment is defined as the amount payable by a production unit for the borrowed money. If the money is provided by the owner himself, it is termed as imputed interest. It is calculated based on actual interest paid by some other production unit. Hence, interest as factor payment includes both actual as well as imputed interest.

Question 8.
Observe the graphical information given below:

Distribution of Employment by Gender

Giving suitable reason, explain why female workers gives more preference to self-employment over regular salaried employment?

Direction Read the following text carefully and answer questions 9 and 10 given below One of the most compelling reasons for studying environmental science and management is the fact that, in the view of many leading authorities, we are now experiencing an environmental crisis, indeed, many authors have claimed that the present environmental crisis is unprecedented in its magnitude, pace and severity (Park 2001). Awareness of this environmental crisis has grown since the 1970s, partly as a result of the prominence given to major so-called ‘environmental’ disasters such as the Sahelian droughts of the 1970s and 1980s and the nuclear accident at Chernobyl in 1986.

A major assessment of the global environment published in 1999, the UNEP Global Environment Outlook 2000 Report (UNEP 1999), drew attention to two critical, recurring themes

(i) the fact that the global human ecosystem is threatened by grave imbalances in productivity and in the distribution of goods and services – as evidenced by the fact that a large proportion of the human population lives in poverty and that a widening gap exists between those who benefit from economic and technological development and those who do not

(ii) the fact that accelerating changes are occurring at the global scale, with rates of economic and social development outstripping progress in achieving internationally co-ordinated environmental stewardship-with the result that improvements in environmental protection due to new technologies are being ‘cancelled out’ by the magnitude and pace of human population growth and economic development.

Consequently, a wide range of environmental problems has emerged, those problems include anthropogenic climate change (‘global warming’), the depletion of stratospheric ozone (the ‘ozone hole’), the acidification of surface waters (‘acid rain’), the destruction of tropical forests, the depletion and extinction of species, and the precipitous decline of biodiversity.

Yet, while all of these problems have physical (environmental) manifestations, their causes – and their potential solutions – are invariably bound up with human attitudes, beliefs, values, needs, desires, expectations and behaviours.

Thus, the symptoms of the environmental crisis cannot be regarded purely as physical problems requiring solutions by environmental ‘specialists’, instead, they are intrinsically human problems and they are intimately related to the question of what it means to be human.

Source https://wwiv.soas.ac.uk/cedep-demos/000_P500_ESM_K3736-Demo/unitl/page_ll.htm
Answer:
Female workers gives more preference to self-employment due to the fact that they are expected to look after the household work along with earning income to support the family. In case of regular salaried employment, everyone employed need to serve fixed working hours every day, that becomes difficult for most of the women in the country. In self-employment, women can work at their ease along with other family responsibilities thus more preferred.

Question 9.
“Opportunity costs of negative environmental impact are high.” Comment.
Answer:
The negative environmental impact has high opportunity costs as explained below

(i) The industrial development in past has polluted and dried up rivers and other aquifers making water an economic good. Also, cleaning up of polluted rivers and replenishing water resources require huge investments.

(ii) The intensive and extensive extraction of both renewable and non-renewable resources has exhausted some of these resources. Huge amount of funds need to be spent on technology and research to explore new resources.

(iii) The health costs of degraded environmental quality are also rising as decline in air and water quality has resulted in increased incidence of respiratory and water-borne diseases.

(iv) Global environmental issues such as global warming and ozone depletion also contribute to increased financial commitments for the government.

Thus, it is clear that the opportunity costs of negative environmental impacts are high.

Question 10.
There exists a positive correlation between environmental sustainability and economics development. Do you agree? Give suitable reason in support of your answer.
Answer:
There are two views on the inter-relation between economic development and the environment. They are as follows

(i) According to the first view, economic development degrades our environment by using natural resources for production of goods and services. Economic development results in pollution in the form of air pollution, water pollution and land pollution.

(ii) According to the second view, economic development improves environmental quality. The discovery of new materials and sources not only use fewer natural resources, but sometimes replace them. Thus, with economic development, degradation of environment decreases.

From the above discussion, we find that relationship between environment and economic development is dynamic and complex if not positive.

Poverty in developing countries is also said to be responsible for environmental degradation. Poor people rely on natural resources heavily for their survival, which leads to over use of natural resources.

Besides, when the cultivable land becomes short relative to population, the poor are forced to make their subsistence by cultivating fragile land on hills and mountains resulting in soil erosion on a large scale. It is in such environment that poverty becomes a vicious circle.

Long Answer (LA) Type Questions (5 Marks)

Question 11.
Calculate Gross National Product at Factor Cost (GNP_FC) from the following data by
(i) Income method
(ii) Expenditure method

Items	₹ (in crores)
Private Final Consumption Expenditure	1,000
Net Domestic Capital Formation	200
Profits	400
Compensation of Employees	800
Rent	250
Government Final Consumption Expenditure	500
Consumption of Fixed Capital	60
Interest	150
Net Current Transfers from Rest of the World	(-) 80
Net Factor Income from Abroad	(-)10
Net Exports	(-) 20
Net Indirect Taxes	80

Or
(i) Calculate national income from the data given below by the expenditure method.

Items	₹ (in crores)
Persona] Consumption Expenditure	3,500
Consumption of Fixed Capital	50
Net Fixed Capital Formation	1,250
Change-in-stock	500
Exports	400
Imports	750
Net Indirect Taxes	40
Governments’ Consumption Expenditure	1,600
Net Factor Income from Abroad	(-)10
Wages and Salaries	450

(ii) Write any three precautions of expenditure method of national income.
Answer:
(i) Income Method
Net Domestic Product at Factor Cost (NDP_FC) = Compensation of Employees + Operating Surplus (Profits + Rent + Interest) + Mixed Income
= 800 + (400 + 250 + 150) + 0
= 800 + 800
= ₹1,600 crore

Gross National Product at Factor Cost (GNP_FC) = NDP_FC + Net Factor Income from Abroad + Depreciation
= 1,600 + (-10) + 60
= 1,660 – 10
= ₹1,650 crore

(ii) Expenditure Method
Gross Domestic Product at Market Price (GDP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation + Net Exports ,
= 1,000 + 500 + (200 + 60) + (-20)
= 1,000+ 500 + 260 – 20
= ₹1,740 crores

Gross National Product at Factor Cost (GNPPC) = GDP – Net Indirect Taxes + Net Factor Income from Abroad (NFIA)
= 1,740 – 90
= ₹1,650 crore
Or
(i) Estimation of national income by expenditure method Net Domestic Product at Market Price (NDP_MP) = Personal Consumption Expenditure + Net Fixed Capital Formation + Change-in-stock + Government Consumption Expenditure + Net Exports (Exports – Imports)
= 3,500 + 1,250 + 500 + 1,600+ (-) 350
= ₹6,500 crore

Net National Product at Factor Cost (NNP_FC) = NDP_MP – Net Indirect Taxes + Net Factor Income from Abroad
= 6,500 + 40 + (-) 10
= ₹6,450 crore

(ii) The main precautions required to be taken in estimating national income by expenditure method are
(a) Expenditure on intermediate products should not be included to avoid the problem of double counting.

(iii) According to the second view, economic development improves environmental quality. The discovery of new materials and sources not only use fewer natural resources, but sometimes replace them. Thus, with economic development, degradation of environment decreases.

From the above discussion, we find that relationship between environment and economic development is dynamic and complex if not positive.

Poverty in developing countries is also said to be responsible for environmental degradation. Poor people rely on natural resources heavily for their survival, which leads to over use of natural resources.

Besides, when the cultivable land becomes short relative to population, the poor are forced to make their subsistence by cultivating fragile land on hills and mountains resulting in soil erosion on a large scale. It is in such environment that poverty becomes a vicious circle.

Question 12.
(i) High propensity to consume is a virtue, while high propensity to save is not. Do you agree? Why or why not?

(ii) The Global Pandemic of Covid-19 led to rise in unemployment as the impact of lockdowns caused fall in demand. Briefly explain how it impacts output, income and general price levels in an economy.
Answer:
(i) The given statement is correct that high propensity to consume is a virtue as consumptions are considered as an injection to the circular flow of income by increasing demand, as increased demand leads to increased production of goods and services, leading to increase in induced investment and hence, national income. On the other hand, savings are considered as leakages from the circular flow of income by reducing consumption demand and hence production, investment and national income also fall.

(ii) The given situation indicates deficient demand in an economy. Deficient demand causes the economy’s income, output, employment and prices to decline, thus pushing the economy into under employment equilibrium.

Question 13.
China’s rapid industrial growth can be traced back to its reforms in 1978. Do you agree? Elucidate.
Answer:
Yes, China’s rapid industrial growth is traced back to its reforms in 1978, which were introduced in phases. In the initial phase, reforms were initiated in agriculture, foreign trade and investment sectors. Commune lands were divided into small plots which were allocated to individual households for use and not for the ownership. They were allowed to keep all income from the land after paying stipulated taxes. This led to an increase in agricultural productivity.

In the later phase, reforms were initiated in the industrial sector. Private sector firms and township and village enterprises, were allowed to produce goods. Enterprises owned by government (known as State Owned Enterprises-SOEs), were made to face competition at this stage to enhance their efficiency.

Dual pricing was followed. Prices were fixed in two ways, farmers and industrial units were required to buy and sell fixed quantities of inputs and outputs on the basis of prices fixed by the government and the rest were purchased and sold at market price. Introduction of Special Economic Zone (SEZ) led to development of most backward regions of the country by starting up small, medium and large scale industries.

Students can access the CBSE Sample Papers for Class 12 Economic with Solutions and marking scheme Term 2 Set 7 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Economics Term 2 Set 2 with Solutions

General Instructions :

• This is a subjective question paper containing 13 questions.
• This paper contains 5 questions of 2 marks each, 5 questions of 3 marks each and 3 questions of 5 marks each.
• 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
• 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
• This question paper contains Case/Source Based Questions.

Maximum Marks: 40
Time: 2 Hours

Short Answer (SA) Type I Questions (2 Marks)

Question 1.
How is stock different from flow? Give one example.
Or
Distinguish between consumption goods and capital goods.
Answer:
Stock refers to the value of a variable measured at a particular point of time, whereas flow refers to the value of a variable measured during a period of time. e.g. money supply is stock in nature, while saving is flow in nature.
Or
Consumption goods are those goods which are consumed by a consumer for final use and not meant for reproduction or reselling. On the other hand, capital goods are also final goods used by the producers for production of other goods or services for long period of time.

Question 2.
In an economy, the equilibrium level of income is ₹ 12,000 crore. The ratio of Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) is 3:1.
Calculate the additional investment needed to reach a new equilibrium level of income of ₹ 20,000 crore.
Or
Answer the following parts
(i) If the value of Average Propensity to Consume (APC) is 1.5, what will be the value of Average Propensity to Save (APS)?
(ii) If MPC = 0.5, find the value of investment multiplier.
Answer:
Given \(\frac{\mathrm{MPC}}{\mathrm{MPS}}=\frac{3}{1}\)
Let MPC be 3x and MPS be 1x
Also, MPC + MPS = 1
∴ 3x + 1x = 1
⇒ 4x = 1
x = \(\frac{1}{4}\) = 0.25 or MPS = x = 0.25
MPC = 3x = 3 x 0.25 =0.75
Now, Change in Income (ΔY) = ₹8,000
\(K=\frac{1}{1-\mathrm{MPC}}=\frac{1}{1-0.75}=4, \quad K=\frac{\Delta \mathrm{Y}}{\Delta \mathrm{I}}\)
ΔY = ΔI.K; 8,000 = ΔI x 4 ⇒ ΔI = ₹2,000
So, investment in the economy should rise by ₹2,000 crore.
Or

(i) We know that,
APS = 1 – APC
∴ APS = 1 – 1.5 = -0.5

(ii) We know that, K = \(\frac{1}{1-\mathrm{MPC}}\)
∴ \(K=\frac{1}{1-0.5}=\frac{1}{0.5}=2\)

Question 3.
What will happen to an economy if aggregate demand falls below full employment level?
Answer:
When aggregate demand falls below full employment level, it leads to underemployment equilibrium. In other words, economy attains equilibrium at a level less than its full potential. This situation leads to fall in production, employment and general price level.

Question 4.
Compared to women, more men are found working in India. It has been observed that for every 100 urban females, only about 15 work. In rural areas, for every 100 rural women, only about 25 work. Why are women not working? Give any two reasons.
Or
“Regional inequality exists in health infrastructure in India.” Comment.
Answer:
The participation rate of women in the employment market, for both, rural and urban areas, is quite low.

Some of the reasons for such a low rate are given below (any two)
(i) India is typically a male dominated country. Because of this, females are accorded secondary status and parents do not take steps to educate them.
(ii) Even if they are educated, the social beliefs and set-up discourages them to work.
(iii) The women are themselves not inclined to work as they consider house-keeping as their primary work.
Or
The development of health infrastructure has shown gender, income and regional biasness in India. Rural areas do not have access to or cannot afford medical care. Even though majority of population lives in rural areas, only one-fifth of India’s hospitals are located in rural areas with only half the number of dispensaries.

Out of 6.3 lakh beds, roughly 30% of them are available in rural areas. The PHCs in rural areas do not offer basic medical care like X-ray or blood testing devices.

In rural areas, the percentage of people who have no access to proper aid has risen from 15 in 1986 to 24 in 2003. States like Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh are relatively lagging behind in healthcare facilities.

Question 5.
Explain any two measures by which the situation of excess demand can be corrected.
Answer:
Measures to correct the situation of excess demand are (any two)
(i) Increase in Bank Rate Increase in bank rate by the central bank makes loans costly for the commercial bank and further commercial banks increases interest on loans charged from the customers, leading to fall in demand.
(ii) Increase in Repo Rate Increase in repo rate by the central bank makes loans short-term costly for the commercial bank and further commercial banks increases interest on loans charged from the customers, leading to fall in demand.
(iii) Increase in CRR When CRR is increased by the central bank, it leaves commercial banks with less reserve, leading to fall in money supply and demand in the economy.

Short Answer (SA) Type II Questions (3 Marks)

Question 6.
Giving reasons, explain the treatment assigned to the following while estimating national income.
(i) Expenditure on adding a floor to a factory.
(ii) Payment of fees to an architect engaged by a firm.
(iii) Payment of royalty by a government firm.
Or
In a hypothetical economy, Real GDP is given as ₹200 crores and price index is given as 120. From the given data, estimate the value of nominal GDP.
Answer:
Treatment assigned to the following while estimating national income are as follows

1. Expenditure on adding a floor to factory is included in national income because it is a part of investment expenditure.
2. Payment of fees to an architect engaged by a firm is not to be included in estimation of national income as it is treated as part of intermediate consumption.
3. Payment of royalty by a government firm should be included while estimating national income because it is a kind of factor payment.

Question 7.
In a simple Keynesian two-sector model, government sector is expected not to involve in the production activity. Government is expected to stay out of market and maintain law and order. However, in a general economy, government has to play its part directly or indirectly. Directly, government is involved in production activities where market mechanism fails to attain desirable target. Indirectly, government is involved in terms of collecting tax and non-tax revenues.

Explain the impact on aggregate demand, if government involves in the economy both directly and indirectly.

Direction Read the following text carefully and answer questions 8 and 9 given below

Comparative development of India and its neighbours is an important knowledge to possess as an Indian citizen.

As a rational citizen of a country, it is crucial to have a deep understanding of the developments in your country. In fact, it is also very important to learn about the developmental processes of your neighbouring countries.

Not only citizens but countries are also eager to understand the developmental system of their neighbours. This understanding enables comprehension of strengths and weaknesses of yours as well as the neighbouring countries. Due to the process of globalisation, it is essential for every nation to compete with developed countries. Hence, it is important to study the comparative development of India and its neighbours.

The Chinese reform process began more strongly and comprehensively during the 1980s. At this time, India was in the mid-stream of a rather slow growth process. Although the two countries (Pakistan and India) started together, Pakistan has seen a better result in certain areas. However, India is better placed than Pakistan in the area of skilled manpower and research and development institutions.

It is common to find developmental strategies of a country as a model to others for lessons and guidance for their own development. Ii is particularly evident after the introduction of the reform process in different parts of the world.

In order to learn from economic performance of our neighbouring countries, it is necessary to have an understanding of the roots of their successes and failures. It is also necessary to distinguish between and contrast, the different phases of their strategies.
Answer:
Aggregate demand is the sum total of consumption expenditure, investment expenditure and government expenditure (when included). With the involvement of government directly aggregate demand will increase, whereas if government is included indirectly through taxes, it impacts consumption expenditure. Increase in taxes decreases disposable income and hence consumption and vice-versa in case of decrease in taxes.

Question 8.
“India, China and Pakistan have many similarities in their development strategies”. Elaborate any three points.
Answer:
India, China and Pakistan have many similarities in development strategies which are as follows (any three)
(i) All the three countries had started planning their development strategies in similar ways. India announced its Five Year Plan in 1951-56, while Pakistan announced its First Five Year Plan in 1956, which is called Medium Term Plan. China announced its First Five Year Plan in 1953.
(ii) India and Pakistan adopted similar strategies such as creating a large public sector and raising public expenditure on social development.
(iii) Till the 1980s, all the three countries had similar growth rates and per capita incomes.
(iv) Economic reforms took place in all the three countries. Reforms started in India in 1991, in China in 1978 and in Pakistan in 1988.
(v) In the initial phase of reforms, all the three countries gave more importance to public sector though India and Pakistan allowed private sector to function as well.

Question 9.
Mention the areas where Pakistan have performed better than India.
Answer:
Following are the areas/aspects where Pakistan has an edge over India
(i) Pakistan has higher percentage of workforce in service sector.
(ii) Rate of urbanisation is higher in Pakistan than India.
(iii) Access to improved water sources.

Question 10.
Distinguish between inflationary gap and deflationary gap.
Answer:
Differences between inflationary gap and deflationary gap are

Long Answer (LA) Type Questions (5 Marks)

Question 11.
Explain the following systems of Indian medicine.
(i) Ayurveda
(ii) Unani
(iii) Homeopathy
Answer:
The systems of Indian medicine are explained below
(i) Ayurveda It is one of the traditional systems. It is presumed that the fundamental and applied principles of Ayurveda got organised and enunciated around 1500 BC. Atharvaveda, the last of the four great bodies of knowledge known as Vedas, contains 114 hymns related to formulations for the treatment of different diseases.

Two major schools and eight specialisations got evolved from this body of knowledge. These schools had their respective compilations-Charaka Samhita for the school of medicine and Sushruta Samhita for the school of surgery.

The Ayurvedic practitioners recommend diet and lifestyle changes along with drug therapy. The methods of Ayurveda such as applying herbs and massage can simultaneously be applied alongwith other systems.

(ii) Unani Unani medicine also means ‘Greek medicine’, and is a form of traditional medicine widely practiced in South Asia. It refers to a tradition of Graeco-Arabic medicine which is based on the teachings of Greek physician Hippocrates, and Roman physician Galen and developed into an elaborate medical system by Arab and Persian physicians.

Unani medicine is based on the concept of the four humours, Phlegm, Blood, Yellow bile and Black bile. Unani medicine first arrived in India with establishment of Delhi Sultanate (1206-1527 CE) and Muslim rule over North India and subsequently flourished under Mughal empire.

(iii) Homeopathy It consists of two words ‘homeo’ meaning similar and ‘pathos’ meaning suffering. In this system, a drug and a disease that produce similar symptoms are believed to be having a neutralising effect on each other.

Thus, the homeopathic treatment is based on symptoms the body is showing and medication is given accordingly. It is popular among the people to its remarkable healing capacity. Also, its remedies are free from side effects.

Question 12.
Calculate national income by (i) Product Method (ii) Expenditure Method

Items	₹ (in crores)
Gross Value Added at Market Price by Primary Sector	2,400
Private Final Consumption Expenditure	6,000
Consumption of Fixed Capital	1,200
Net Indirect Taxes	960
Gross Value Added at Market Price by Secondary Sector	1,600
Net Domestic Fixed Capital Formation	1,760
Change in Stock	(-)160
Gross Value Added at Market Price by Tertiary Sector	5,600
Net Imports	400
Government Final Consumption Expenditure	1,200
Net Factor Income from Abroad	160

Or
Calculate (i) Gross domestic product at market price and (ii) Factor income from abroad from the following data

Items	₹ (in crores)
Gross National Product at Factor Cost	3,075
Net Exports	(-) 25
Compensation of Employees	1,500
Rent	400
Interest	450
Profit	650
Net Indirect Taxes	150
Net Domestic Capital Formation	400
Gross Fixed Capital Formation	425
Change in Stock	25
Dividend	150
Factor Income to Abroad	40

Answer:
(i) By Product Method
Gross Domestic Product at Market Price (GDP_MP) = Gross Value Added at Market Price in Primary Sector + Gross Value Added at Market Price in Secondary Sector + Gross Value Added at Market Price in Tertiary Sector = 2,400 + 1,600 + 5,600
GDP_MP = ₹ 9,600 crore

Net National Product at Factor Cost (NNPFC ) = GDP_MP +Net Factor Income from Abroad -Consumption of Fixed Capital-Net Indirect Tax
= 9,600 + 160 – 1,200 – 960 = 9,760 – 1,200 – 960
∴ NNP_FC = ₹ 7,600 crore

(ii) By Expenditure Method
Gross Domestic Product at Market Price (GDP_MP ) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation (Net Domestic Fixed Capital Formation + Consumption of Fixed Capital + Change in Stock) + Net Exports
= 6,000 + 1,200 + [1,760 +1,200 + (-160)] +(-400) = 7,200 + 2,800 – 400 = 1,000 – 400
∴ GDP_MP = ₹ 9,600 crore

Net National Product at Factor Cost (NNP_FC) = GDP_MP – Net Indirect Tax + Net Factor Income from Abroad – Depreciation
= 9,600 – 960 + 160 – 1,200 = 9,760 – 2,160
NNP_FC = ₹7, 600 crore

Or

(i) GDP_MP = Compensation of Employees + Rent + Interest + Profit + Net Indirect Taxes + Consumption of Fixed Capital
= 1,500 + (400 + 450 + 650) + 150 + (425 + 25 – 400) = ₹3,200 crore

Note Depreciation = Gross Domestic Fixed Capital Formation + Change in Stock
– Net Domestic Capital Formation

(ii) GNPFC =GDP_MP – Net Indirect Taxes + Factor Income from Abroad – Factor Income to Abroad
⇒ 3,075 = 3,200 -150 + Factor Income from Abroad – 40
⇒ 3075 = 3,010 + Factor Income from Abroad
⇒ Factor Income from Abroad = 3,075 – 3010 = ₹ 65 crore

Question 13.
(i) “Unemployment is one of the major problems that most of the developing countries face owing to multiple factors. However, unemployment needs to be involuntary in nature and not voluntary.” Based upon the above information, discuss the causes of unemployment in India.

(ii) “Development and growth are two interrelated concepts. Development surely depend upon growth. But any country’s development is not considered as good unless it is sustained over different generation.” Based upon this information, discuss any three strategies of sustainable development.
Answer:
(i) The causes of unemployment in India are given below (any two)
(a) Slow Economic Growth In Indian economy, the rate of economic growth is very slow.

This slow growth rate fails to provide enough employment opportunities to the rising population. Supply of labour is much more than the available employment opportunities.

(b) Rapid Growth of Population Constant increase in population has been a grave problem of India. It is one of the main causes of unemployment. The number of unemployed persons has actually increased instead of decreasing during the plan period.

(c) Faulty Employment Planning The Five Year Plans in India have not been designed for employment generation. A frontal attack to solve the problem of unemployment was missing. In the FYPs, it was assumed that economic growth will take care of unemployment problem.

(ii) Strategies of sustainable development are (any three)

(a) Use of Eco-friendly Fuel (CNG, LPG) The fuels such as petrol and diesel emit huge amount of carbon dioxide that add to the green house impact. In order to control pollution, the use of CNG and LPG should be promoted. These fuels are cleaner and eco-friendly. Also, pooling of vehicles in the locality should be promoted.

(b) Use of Renewable Resources (Wind power) India being a tropical country is well endowed with sunlight, water and wind energy. These natural resources are renewable and pollution free. Thus, attempts should be made to harness solar and wind energy by employing different technologies and to go for rain water harvesting. It would help in sustainable economic development.

(c) Recyclable Products The household waste materials like newspapers, old bottles, used batteries, etc should be accumulated and should be distinguished as biodegradable and non- biodegradable wastes. The biodegradable wastes are those wastes that can be decomposed and can be used as manure for organic farming. The non-biodegradable wastes like plastic, etc should be recycled and re-used. Use of polythene bags should be discouraged.

(d) Judicious Use of Electricity Electricity is a resource which is used in all households in our locality. It is one such resource which is already in short supply and may not be available to future generations, if we do not start using it judiciously.

Therefore, the easiest strategy for sustainable development is to use power in an efficient manner without wasting it. This can be done by using energy efficient equipments.

Students can access the CBSE Sample Papers for Class 12 Economic with Solutions and marking scheme Term 2 Set 7 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Economics Term 2 Set 3 with Solutions

General Instructions :

• This is a subjective question paper containing 13 questions.
• This paper contains 5 questions of 2 marks each, 5 questions of 3 marks each and 3 questions of 5 marks each.
• 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
• 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
• This question paper contains Case/Source Based Questions.

Maximum Marks: 40
Time: 2 Hours

Short Answer (SA) Type I Questions (2 Marks)

Question 1.
In an economy, investment increases by ₹100 crore. As a result, income increases by ₹250 crore. What is the value of multiplier? What does this imply? On the basis of the multiplier calculated, find out the change in income, if investment changes by ₹750 crore.
Or
If MPC is 0.9, what is the value of multiplier? How much investment is needed to increase national income by ₹5,000 crores?
Answer:
Given, Increase in Investment (ΔI) = ₹100 crore; Increase in Income (ΔY) = ₹250 crore
We know that, Investment Multiplier (K) = \(\frac{\Delta \mathrm{Y}}{\Delta \mathrm{I}}\)
⇒ \(\frac{\Delta \mathrm{Y}}{\Delta \mathrm{I}}=\frac{250}{100}=2.5\)

This implies that for every unit increase in investment, income increases 2.5 times. We know that,
Investment Multiplier = \(\frac{\Delta \mathrm{Y}}{\Delta \mathrm{I}}\)
So, \(2.5=\frac{\Delta \mathrm{Y}}{750}\)
⇒ Change in Income (ΔY) = 2.5 x 750
= ₹ 1,875 crore
Or
Given, Change in Income (ΔY) = ₹5,000 crore, MPC = 0.9, K = ?, ΔI = ?
By formula

Investment Multiplier (K) = 1/1 – MPC
K = 1/1 – 0.9.
= 1/0.1
∴ K = 10
Also, K = ΔY/ΔI
10 = 5,000/ΔI
ΔI = 5,000/10
= 500
So, K = 10 and ΔI = ₹500 crore

Question 2.
Are the following included in the estimation of national income of a country? Give reasons for your answer.
(i) Government expenditure on street lighting.
(ii) Receipts from the sale of land.
Or
Why should exports be included in GDP?
Answer:
(i) Government Expenditure on Street Lighting It is a part of the estimated value of output of services provided by government. Therefore, it is included in national income from the production angle.
(ii) Receipts from the Sale of Land Land is a free gift of nature and does not constitute current production. So, receipts from the sale of land has nothing to do with the measurement of national income.
Or
This is because exports are the part of domestically produced goods and services or because exports are a part of goods and services produced within the domestic territory of a country.

Question 3.
Explain the role of legal reserve in correcting the inflationary gap in an economy.
Answer:
Legal reserve ratio refers to that legal minimum fraction of deposits which the banks keep as cash with RBI and themselves. It is the sum total of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

To check the inflationary gap, the legal reserve ratio is increased. This reduces the loan disbursement capacity of the commercial banks which further leads to a fall in the level of aggregate demand in the economy. With a fall in demand, the level of inflation is checked.

Question 4.
“Unemployment is related to poverty.” Comment.
Or
The following table shows the population and worker population ratio for India in 1999 – 2000.

Can you estimate the workforce (rural and urban) for India?
Answer:
Poverty and unemployment usually go together. Those who fail to get employment become a burden on the limited family income and thus, depress already low levels of consumption.

Therefore, many programmes which aim at removing poverty provide employment opportunities to the poor like Prime Minister’s Rozgar Yojana, Swarna Jayanti Shahri Rozgar Yojana, etc. Most of the urban poors are either unemployed or intermittently employed as casual labourers.

Casual labourers are among the most vulnerable in society as they have no job security, no assets, limited skills, sparse opportunities and no surplus to sustain them. Poverty is therefore, closely related to unemployment.

Question 5.
“Sustainable development is a paradigm shift in development thinking.” Comment.
Answer:
Sustainable development implies meeting the basic needs of all and extending to all the opportunities to satisfy their aspirations for a better life, without compromising on the needs of future. The strategies for sustainable development imply the use of non-conventional sources of energy to minimise the adverse environmental impacts.

Promotion of natural resources, conservation, preserving regenerative capacity of ecological system and avoiding the imposition of environmental rules on future generations would lead to sustainable development.

Short Answer (SA) Type II Questions (3 Marks)

Question 6.
The government of India has recently launched ‘Jan-Dhan Yojana’ aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect national income of the country.
Or
Suppose the GDP at market price of a country in a particular year ₹2,200 crore. Net factor income from abroad was ₹200 crore. The value of indirect taxes less subsidies was ₹300 crore and national income was ₹1,700 crore. Calculate the aggregate value of depreciation.
Answer:
‘Jan-Dhan Yojana’ was launched with the aim to bring every individual into the financial market and a large number of bank accounts has also been opened, which has lead to an increase in the deposits with the commercial banks and hence it has enhanced their capacity to create credit in the economy. An increase in money supply would lead to increase in the rate of transactions and aggregate demand, leading to an increase in national income of the economy.
Or
Given, GDPMP = ₹2,200 crore, NFIA = ₹200 crore,
NIT = ₹300 crore, NNPFC- = ₹1,700 crore
∴ GDPFC = GDPMP – NIT
= 2,200 – 300 = ₹1,900 crore
GNPFC = GDPFC + NFIA
= 1,900 + 200
= ₹ 2,100 crore
GNPFC = NNPFC + Depreciation
2,100 =1,700 +Depreciation
Depreciation = 2,100 -1,700
= ₹ 400 crore

Question 7.
Observe the table given below carefully and answer the question
Public Health Infrastructure in India, 1951 – 2018

Sources National Commission on Macroeconomics and Health, Ministry of Health and Family Welfare, Government of India, New Delhi, 2005: National Health Profile for various years available on www.cbhidghs.nic.in

Based upon the above table, critically evaluate the progress in India’s health infrastructure.

Direction Read the following text carefully and answer questions 8 and 9 given below

Creative and qualified self-employed individuals contribute to economic growth by inventing new products, production processes, distribution methods and employing other people. Researchers are interested in self-employment if it can provide jobs to the unemployed population and also for those who face job discrimination. However, increase in self-employment is uncertain because entrepreneurial skills are assumed to be risky and JQ self-employed workers can learn their skills gradually after starting their businesses.

Economists pay special attention to finding the conceptual relationship between entrepreneurship as self-employment and economic development. Furthermore, studies show that the process of entrepreneurship has significant spatial auto correlation and affects neighboring countries. Various study model results indicates that employment and population are positively linked to self-employment. Also, results highlight the positive contribution of self-employment on rural economic development.

Self-employment is a valuable path to upward mobility, protects regions against economic downturns and helps many workers smooth their savings in the face of unexpected bills. “A higher share of self-employed workers in a country was unambiguously associated with greater resilience,” wrote economics professor Stephan Goetz, in an international comparison of how different regions bounce back during recessions.

Goetz notes that his study was in part inspired by prior research showing that regions with higher rates of self-employment seemed more resistant to the negative impacts of trade deals with lower-wage countries. Economic infrastructure definitely ensures the mobility of labour and capital within/from the economy. Infrastructures provide for a lot of employment generation and employment opportunities. They also play a crucial role in national defence activities.
Answer:
As shown in the given table between year 1951 to 2018, there has been constant improvement in the public health infrastructure in the country as the government’s investment increased for the provision of the health in the country. However, in the above time period, population have also increased rapidly and keeping in mind the growth rate of population the above health provision proved insufficient as there is a serious demand-supply mismatch leading to the poor of health infrastructure.

Question 8.
Highlight the importance of seller and more productive employment of the self-employed in India and suggest some measures that would help to increase their productivity.
Answer:
Self-employed includes employees, on account workers and unpaid family workers. In India, the self-employed constitute about 60% employees. The largest population of the self-employed is engaged in agriculture.

The incidence of under-employment is the highest among the self-employed. Therefore, priority should be given to improve their efficiency so that fuller and more productive employment yields them more reasonable incomes.

Following are some measures that mΔY be taken to ensure fuller and more productive employment for the self-employed (any two)

(i) A comprehensive system of assistance to farmers should be setup. It should provide them with ‘ credit, inputs like improved seeds, saplings, fish seedlings, fertilisers, technical guidance, irrigation facilities, etc. These facilities should be made available to persons having tiny holdings or no holdings.

(ii) There should be redistribution of land, followed by an effective programme of assistance and guidance to the beneficiaries.

(iii) The policy should emphasise further improvements in the support mechanism for the self-employed engaged in non-agriculture, e.g., technical guidance, credit, easy availability of equipment, infrastructural facilities, raw materials at reasonable prices, market guidance, etc.

Question 9.
“Infrastructure contributes to the economic development of a country”. Do you agree? Explain.
Answer:
Yes, I agree. Infrastructure and economic development go hand-in-hand. Infrastructure contributes to the economic development of a country in the following ways (any three)

(i) Impact on Productivity Infrastructure plΔYs a major role in the raising productivity of all the three sectors, viz. primary, secondary and the tertiary sector.

(ii) Induces Investment Infrastructure induces investment. A well developed infrastructure attracts foreign investors which opens new investment avenues and gives birth to profitable ventures.

(iii) Enhances Ability to Work Social infrastructure improves the quality of life of workers, thereby increasing their efficiency. Healthcare centres, educational institutions and other such facilities develop the skills of the workers, which increases their ability and efficiency to work.

(iv) Facilitates Outsourcing India is emerging to be a global destination for all kinds of outsourcing. For example, call centres, study centres, medical transcription and such other services, owing largely to its sound system of social and economic infrastructure.

Question 10.
What do you understand by Aggregate Demand (AD)? Briefly explain two of its components.
Answer:
Aggregate Demand (AD) refers to the sum total of expenditure that the people plan to incur on the purchase of goods and services produced in an economy (during the period of an accounting year) corresponding to their different levels of income.

Components of AD are (any two)
(i) Household Consumption Expenditure (C) This measures the demand for consumer goods i.e. that expenditure which people wish to make on consumer goods corresponding to different levels of income in economy.

(ii) Producer Investment Expenditure (I) This measures the demand for producer goods which lead to capital formation i.e. that expenditure which people wish to make on producer goods corresponding to different levels of income in economy.

(iii) Government Expenditure (G) It refers to public consumption expenditure (such as purchase of foods and clothes for military personnel) and investment expenditure (such as construction of road) made by government.

(iv) Net Exports (X – M) Exports (X) increase aggregate demand in domestic economy, while Imports (M) decrease it. Therefore, value of net exports (X – M) contributes to AD in domestic economy.

Long Answer (LA) Type Questions (5 Marks)

Question 11.
Given that national income is ₹80 crore and consumption expenditure is ₹64 crore, find out Average Propensity to Save (APS). When income rises to ₹100 crore and consumption expenditure to ₹78 crore, what will be the Average Propensity to Consume (APC) and Marginal Propensity to Consume (MPC)?
Answer:
Here in first condition, Y = ₹80 crore and C = ₹64 crore
Hence, S = Y – C = 80 – 64 = ₹16 crore
Now, Average Propensity to Save (APS)
\(\mathrm{APS}=\frac{\mathrm{S}}{\mathrm{Y}}=\frac{16}{80}=0.20\)

Again, when income and consumption expenditure rise,
Y = ₹100 crore and C = ₹78 crore

So, Average Propensity to Consume (APC)
APC \(=\frac{C}{Y}=\frac{78}{100}\) 0.78
Here, ΔY = 100 – 80 = ₹ 20 crore
ΔC = 78 – 64 = ₹ 14 crore

So, Marginal Propensity to Consume (MPC)
MPC = \(\frac{\Delta C}{\Delta Y}=\frac{14}{20}\) =0.70

Where, ΔC = Change in Consumption; ΔY = Change in Income ; ΔI = Change in Investment, K = Multiplier;

MPC = Marginal Propensity to Consume, APC = Average Propensity to Consume APS = Average Propensity to Save

Question 12.
(i) Calculate Gross Domestic Product at Market Price (GDP_MP) by using income method.

S.No.	Items	₹ (in crores)
(a)	Intermediate Consumption of Primary Sector Secondary Sector Tertiary Sector	1,000 800 600
(b)	Value of Output of Primary Sector Secondary Sector Tertiary Sector	2,000 1,800 1,400
(c)	Rent and Royalty	20
(d)	Compensation of Employees	800
(e)	Benefits of Rent Free Accommodation and Interest-Free Loans to the Employees	400
(f)	Mixed-Income of the People Using Family Inputs	1,300
(g)	Operating Surplus	600
(h)	Net Factor Income to Rest of the World	40
(i)	Interest	10
(j)	Consumption of Fixed Capital	80
(k)	Net Indirect Taxes	20

(ii) How do you distinguish between old-age pensions and retirement pensions in the context of estimation of national income?

Or
(i) GNP is the estimated value of the total worth of products and services earned by the normal residents of a country. But to find out NNP, GNP deducts depreciation, why should we deduct depreciation from GNP?

(ii) Find net value added at market price.

S.No.	Items	₹ (in lakhs)
(a)	Fixed Capital Good with a Life Span of 5 Years	60
(b)	Raw Materials	24
(c)	Sales	100
(d)	Net Change-in-stock	(-) 8
(e)	Taxes on Production	4

Answer:
(i) Calculation of GDP_MP by Income Method
Net Domestic Product at Factor Cost (NDP_FC)
= Compensation of Employees + Operating Surplus + Mixed Income
= 800 + 600 + 1300 = ₹2,700 crore
GDP_MP = NDP_FC + Net Indirect Tax + Depreciation
= 2,700 + 20 + 80 = ₹2,800 crore

(ii) Old age pensions are unilateral pΔYments or transfer pΔYments. These are not included in the estimation of national income. On the other hand, retirement pensions are like a deferred wage. These are related to factor services rendered by the recipients prior to their retirement. Accordingly, these are included in the estimation of national income.
Or
(i) The productive power of physical capital stock of a country diminishes gradually because of the wear and tear in the process of production. When the machine becomes totally unproductive, it has to be replaced by new machine. So, a sum of money is set aside every year into depreciation account and new machine can be purchased by utilising this accumulated sum.

So, depreciation is deducted from GNP in order to get more accurate measure of the sustainable production of goods and services in a country in a given year.

(ii) Net Value Added at Market Price (NVA_MP) = Sales + Net Change-in-stock – Raw Materials – Depreciation on Fixed Capital Good*
= 100 +(-8) – 24 – 12
= ₹56 lakh
*Depreciation on fixed Capital Good =
= \(\frac{60}{5}\) = ₹12 lakh

Question 13.
(i) “Out of the three countries namely India, China and Pakistan, China has out performed rest of neighbors in almost all areas, through its variety of reforms. Though the structural reforms of China are not free from criticism.” In the light of the statement, enumerate the failures of the structural reforms in China.

(ii) “Poverty is one of the major problems that every developing country faces. In case of Pakistan, its initial phases of reforms helped in reducing poverty, though it re-emerged later.” In the light of the statement, state the reasons for the re-emergence of poverty in Pakistan.
Answer:
(i) Following are the failure of structural reforms in China
(a) There was slow pace of growth and lack of modernisation in the Chinese economy under the Maoist rule.
(b) Maoist vision of economic development based on decentralisation, self-sufficiency and shunning of foreign technology had failed.
(c) Despite extensive land reforms, collectivisation, the great leap forward and other initiatives, the per capita gain in output in 1978 was the same as it was in the mid-1950s.

(ii) The percentage of poor was 40% in Pakistan during 1960s that reduced to 25% in 1980s and started going up in 1990s.

The causes for re-emergence of poverty are as given below(any two)
(a) The agricultural growth was not the result of technology improvement. Rather, it was based on good climatic conditions. When the conditions were good, the economic growth showed positive trends and vice-versa.
(b) In Pakistan, a considerable part of foreign exchange came from remittances from Pakistani workers in the middle East.
(c) In Pakistan, there is more dependence on foreign borrowings and increasing difficulty in paying back the loans.