CBSE Sample Papers for Class 12 Economics Term 2 Set 1 with Solutions

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 1 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

Question 1.
Distinguish between final goods and intermediate goods. (2)
Or
Distinguish between positive externalities and negative externalities.
Answer:
Final goods refer to those goods which are used either for final consumption or for investment purposes, e.g. milk purchased by a consumer or machine purchased by a manufacturer, whereas intermediate goods refer to those goods which are used either for resale or for further production purposes, e.g. milk purchased by a diary firm.

Or
Positive externalities refer to benefits caused by one entity to another, without being paid for it, e.g. vaccination taken by an individual aganist Covid-19 reduces its risk to spread to others, whereas negative externalities refer to the harms caused by one entity to another without being penalised for it, e.g. individual’s not wearing face masks increases the chance of infection due to Covid-19.

Question 2.
Calculate equilibrium level of income for a hypothetical economy, for which it is given that
(i) Autonomous Investments = ₹500 crores, and
(ii) Consumption function, C = 100 + 0.80Y (2)
Or
Calculate Change in Income (ΔY) for a hypothetical economy. Given that
(i) Marginal Propensity to Consume (MPC) = 0.8, and
(ii) Change in Investment (ΔI) = ₹1,000 crore
Answer:
Given Consumption function is,
C = 100 + 0.8 Y
Autonomous investments = ₹500 crores We know, at equilibrium level
Y = C + I
∴ Y = 100 + 0.8 Y + 500
Y – 0.8Y = 600
0.2 Y = 600
Y = ₹3,000 crores
Or
Given, ΔI = ₹1,000 crores
MPC = 0.8
As we know,

Multiplier (K) = $\frac{1}{1-\mathrm{MPC}}=\frac{1}{1-0.8}=\frac{1}{02}$
= 5 times
We know
$\begin{aligned}
&K=\frac{\Delta Y}{\Delta I} \\
&5=\frac{\Delta Y}{1,000}
\end{aligned}$
ΔY = ₹5,000 crores

Question 3.
“As the income increases, people tend to save more”. Justify the given statement. (2)
Answer:
Income of a consumer is either consumed or saved. At a lower level of income, a consumer spends a larger proportion of his/her income on consumption expenditure (basic survival requirements). As the income increases, owing to the psychological behaviour of a consumer (rational), people tend to consume less of the increased income and save more for future uncertainty leading to rise in APS.

Question 4.
State and discuss any two indicators that help in measuring the health status of a country. (2)
Or
Compare and analyse the ‘women worker population ratio’ in rural and urban areas based on following information

Worker Population Ratio in India, 2017-2018

Sex	Worker Population Ratio
Sex	Total	Rural	Urban
Men	52.1	51.7	53.0
Women	16.5	17.5	14.2
Total	34.7	35.0	33.9

Answer:
Two indicators that help to measure the health status of a country are

Infant Mortality Rate (or IMR) indicates the number of children that survive first year of their life per 1,000 live births.
Literacy Rate measures the proportion of literate population in the age group of seven years or above and to read or write any one language.

Or
The data in the given table reveals that

Women constitute 16.5% of the total worker population in the economy.
The number of women workers in rural areas (17.5%) is relatively higher than the number of women workers in urban areas (14.2%).
Due to the abject poverty in rural areas, rural women are compelled to work more than their urban counterparts as the male member do not earn sufficient income for family livelihood.

Question 5.
“Investment in infrastructure contributes to the economic development of a country”.

Justify the given statement with a valid argument. (2)
Answer:
The given statement is true. Infrastructural development in an economy increases productivity, induces higher investment, facilitates employment and generates more income. With the rise in income, the quality of life of the people improves and leads to economic growth. Thus, conclusively we may say that infrastructure contributes to the economic development of a country.

Question 6.
Giving valid reasons explain which of the following will not be included in estimation of national income of India?
(i) Purchase of shares of X. Ltd. by an investor in the national stock exchange.
(ii) Salaries paid by the French Embassy, New Delhi to the local workers of the housekeeping department.
(iii) Compensation paid by the government of India to the victims of floods. (3)
Or
Estimate the value of nominal gross domestic product for a hypothetical economy, the value of real gross domestic product and price index are given as ₹500 crores and 125 respectively.
Answer:
(i) As such transactions are mere paper claims or transfer of ownership and do not lead to any value addition, these transactions are not included in national income.
(ii) Salaries paid by French Embassy to an Indian resident will be included in national income as factor income received from abroad.
(iii) Compensation paid to flood victims by the government of India is mere transfer payment and does not lead to any flow of goods and services in an economy. Thus, it is not included in national income.

Nominal GDP = Rea; GDP × $\frac{\text { Price Index }}{100}$
= 500 × $\frac{125}{100}$ = ₹625 crores

Question 7.
Study the following information and compare the Economies of India and Singapore on the grounds of ‘Investment in infrastructure as a percentage of GDP’ (3)

Some Infrastructure in India and Other Countries, 2018

Sources World Development Indicators 2019. World Bank website: www.worldbank.org.; BP Statistical Review of World Energy 2019. 69th Edition.

Note (*) refers to Gross Capital Formation.

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

Sino-Pak Friendship Corridor
The China-Pakistan Economic Corridor (CPEC) has deepened the decades-long strategic relationship between the two nations. But it has also sparked criticism for burdening Pakistan with mountains of debt and allowing China to use its debt-trap diplomacy to gain access to strategic assets of Pakistan. The foundations of CPEC, part of China’s Belt and Road Initiative, were laid in May, 2013. At the time, Pakistan was reeling under weak economic growth. China committed to play an integral role in supporting Pakistan’s economy.

Pakistan and China have a strategic relationship that goes back decades. Pakistan turned to China at a time when it needed a rapid increase in external financing to meet critical investments in hard infrastructure, particularly power plants and highways. CPEC’s early harvest projects met this need, leading to a dramatic increase in Pakistan’s power generation capacity, bringing an end to supply-side constraints that had made rolling blackouts a regular occurrence across the country.

Pakistan leaned into CPEC, leveraging Chinese financing and technical assistance in an attempt to end power shortages that had paralysed its country’s economy. Years later, China’s influence in Pakistan has increased at an unimaginable pace.

China as Pakistan’s Largest Bilateral Creditor China’s ability to exert influence on Pakistan’s economy has grown substantially in recent years, mainly due to the fact that Beijing is now Islamabad’s largest creditor. According to documents released by Pakistan’s finance ministry, Pakistanis total public and publicly guaranteed external debt stood at $ 44.35 billion in June 2013, just 9.3 percent of which was owed to China. By April 2021, this external debt had ballooned to $ 90.12 billion, with Pakistan owing 27.4 percent-$ 24.7 billion of its total external debt to China, according to the International Monetary Fund (IMF).

Additionally, China provided financial and technical expertise to help Pakistan build its road infrastructure, expanding North-South connectivity to improve the efficiency of moving goods from Karachi all the way to Gilgit-Baltistan (POK). These investments were critical in better integrating the country’s ports, especially Karachi, with urban centers in Punjab and Khyber- Pakhtunkhwa provinces.

Despite power asymmetries between China and Pakistan, the latter still has tremendous agency in determining its own policies, even if such policies come at the expense of the long-term socio-economic welfare of Pakistani citizens.

Source (https://www.usip.org/publications/2021/05/pakistans-growing-problem-its-china- economic-corridor-modified)
Answer:
‘Investment in infrastructure as a percentage of GDP’ is that proportion of gross domestic product which is invested for the development of infrastructural facilities in a country.

According to the given data, it is evident that India is contributing 30% of its total GDP on infrastructural progress, which is just a notch ‘ above the corresponding figure of 28% for Singapore.

Considering the vast geography of India, this is a relatively lower proportion in this direction. If India wants to grow at a faster rate, it must concentrate on higher judicious investment on the development of infrastructure.

Question 8.
Outline and discuss any two economic advantages of China Pakistan Economic Corridor (CPEC) accruing to the economy of Pakistan. (3)
Answer:
Economic advantages of China Pakistan Economic Corridor (CPEC) to the economy of Pakistan are

China provided financial and technical expertise to help Pakistan build its road infrastructure, supporting employment and income in the economy.
CPEC has led to a massive increase in power generation capacity of Pakistan.
It has brought an end to supply-side constraints in the nation, which had made blackouts a regular phenomenon across the country.

Question 9.
Analyse the implication of bilateral ‘debt-trap’ situation of Pakistan vis-a-vis the Chinese economy. (3)
Answer:
China has become famous for its ‘Debt-trap Diplomacy’ in recent times. Under this, China provides financial and technical expertise/ assistance to help various nations to bring them under its direct or indirect influence.

The first and the foremost implication of the diplomacy is that Beijing has now become ’ Islamabad’s largest creditor.

According to documents released by Pakistan’s finance ministry, its total public external debt stood at $ 44.35 billion in June 2013, just 9.3 percent of which was owed to China. By April 2021, this external debt had ballooned to $ 90.12 billion, with Pakistan owing 27.4 percent -$24.7 billion – of its, total external debt to China, according to the IMF. This clearly indicates diplomacy.

Question 10.
Explain how ‘non-monetary exchanges’ impact the use of gross domestic product as an index of economic welfare. (3)
Answer:
Non-monetary exchange transactions are not included in the estimation of Gross Domestic Product (GDP) on account of practical difficulties like non-availability of reliable data or inability to estimate its market value. Although these activities enhance public welfare which may lead to underestimation of GDP. e.g., kitchen gardening, services of homemaker etc.

Question 11.
“Monetary measures offer a valid solution to the problem of inflationary gap in an economy”. State and discuss any two monetary measures to justify the given statement. (5)
Answer:
Inflationary gap refers to the situation when Aggregate Demand (AD) is more than Aggregate Supply (AS) at the full employment level.

Two measures which may be used to solve the problem of inflation are :
(i) An increase in Cash Reserve Ratio (CRR) may reduce the credit creation capacity of the commercial banks in the economy.

This may lead to a fall in the borrowings from banks causing a fall in consumption and aggregate demand in the economy and helps to correct the inflationary gap in the economy.

(ii) Sale of government securities in the open market by the central bank will adversely affect the ability of the commercial banks to create credit in the economy. As a result, aggregate demand in the economy may fall due to fall in consumption and correct the inflationary gap in the economy.

Question 12.
(i) From the following data, calculate the value of domestic income (3)

S.No.	Items	(₹ in crores)
(a)	Compensation of Employees	2,000
(b)	Rent and Interest	800
(c)	Indirect Taxes	120
(d)	Corporate Tax	460
(e)	Consumption of Fixed Capital	100
(f)	Subsidies	20
(g)	Dividend	940
(h)	Undistributed Profits	300
(i)	Net Factor Income From Abroad	150
(j)	Mixed-Income of Self-employed	200

(ii) Distinguish between ‘value of output and ‘value added’. (2)
Or
(i) Given the following data, find net value added at factor cost by Sambhav (a farmer) producing wheat (3)

S.No.	Items	(₹ in crores)
(a)	Sale of wheat by the farmer in the local market	6,800
(b)	Purchase of tractor	5,000
(c)	Procurement of wheat by the government from the farmer	200
(d)	Consumption of wheat by the farming family during the year	50
(e)	Expenditure on the maintenance of existing capital stock	100
(f)	Subsidy	20

(ii) State any two components of ‘net factor income from abroad’. (2)
Answer:
(i) Domestic Income (NDP_FC) = Compensation of Employees + Rent and Interest + Corporate Tax + Dividend + Undistributed Profits + Mixed-Income of Self-employed
= 2/100 + 800 + 460 + 940 + 300 + 200
= ₹4,700 crore

(ii) Value of output is the estimated money value of all the goods and services, inclusive of change in stock and production for self-consumption, whereas, value-added is the excess of value of output over the value of intermediate consumption.
Or
(i) Net Value Added at Factor Cost (NVA_FC) = Sale of wheat by the farmer in the local market + Procurement of wheat by the government from the farmer + Consumption of wheat by the farming family during the year + Subsidy – Expenditure on the maintenance of existing capital stock
= 6,800 + 200 + 50 + 20 – 100
= ₹6,970 crore

(ii) Component of net factor income from abroad are (any two)

Net compensation of employees.
Net income from property and entrepreneurship.
Net retained earnings of resident companies abroad.

Question 13.
(i) “Pesticides are chemical compounds designed to kill pests. Many pesticides can also pose health risks to people even if exposed to nominal quantities.”

In the light of the above statement, suggest any two traditional methods for replacement of the chemical pesticides. (2)

(ii) “In recent times, the Indian economy has experienced the problem of casualisation of the workforce. This problem has only been aggravated by the outbreak of Covid-19.”

Do you agree with the given statement? Discuss any two disadvantages of casualisation of the workforce in the light of the above statement.
Answer:
(i) The traditional practices that can help in controlling contamination without the use of chemical fertilizers, are as follows

(a) Neem trees and its by-products are a natural pest-controller, which have been used since ages in India. Recently, the government promoted the sale Neem coated urea as a measure of natural pest control.

(b) Large variety of birds should be allowed to dwell around the agricultural areas, they can clear large varieties of pests including insects.

(ii) The given statement is quite appropriate with reference to the ‘casualisation of labour’ in India. This is because of the following disadvantages of casualisation of the workforce

(a) For casual workers, the rights of the labour are not properly protected by labour laws. Particularly, during pandemic times, as demand for goods and services fell the casual workers were left jobless, without any compensation or support.

(b) During the Covid-19 lockdown, millions of casual workers lost their jobs, raising the question of their survival. Also, additional health expenditure added to their troubles. If such workers had been working under the formal sector, it would have given them some respite in their difficult times. Thus, this had led to increase in the problem further.