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

Students can access the CBSE Sample Papers for Class 12 Economic 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 Economics Term 2 Set 10 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.
If the Real GDP is t 3,000 and price index is 175, then calculate the Nominal GDP. What does the price index of 175 indicate?
Or
“All producer goods are not capital goods”. Do you agree?
Answer:
Given, Real Gross Domestic Product = ₹3,000 and Price Index = 175
We know that,
\(\begin{aligned}
\text { Price Index } &=\frac{\text { Nominal GDP }}{\text { Real GDP }} \times 100 \\
175 &=\frac{\text { Nominal GDP }}{3,000} \times 100
\end{aligned}\)
Nominal GDP = 175 x 30= ₹5,250

The price index of 175 indicates that as compared to the base year, the prices have increased by 75% in current year.
Or
Yes, I agree that all producer goods are not capital goods, because producer goods includes

Goods which are used as raw material like wood, used to make furniture.
Goods which are used as fixed assets like plant and machinery.

Question 2.
“Investment demand includes financial investment like purchase of shares from secondary market.” Do you agree?
Or
What do you mean by consumption function?
Answer:
No, I do not agree. The term investment demand refers to the demand for real investment and not financial investment.

Real investment is concerned with the increase in stock of capital assets such as tools, equipments, inventories and also increase in stock of consumer goods.

Thus, it does not include investment in shares and securities.
Or
The functional relationship between the consumption expenditure and the income is known as consumption function. Symbolically,
C = f(Y), which is read as, ‘Consumption is a function of income’.

Consumption function in terms of an algebric expression can be written as C = \(\bar{C}\) + bY where, C = Consumption Expenditure
\(\bar{C}\) = Autonomous Consumption at Zero Level of Income
b = Marginal Propensity to Consume
Y = Income

Question 3.
Write a short note on G-20.
Or
Write a short note on BRICS.
Answer:
G-20 It is an international organisation comprising of the governments and Central Bank governors of 20 major economies.

It was founded in 1999 with an objective to study, review and promote high level discussions of measures to promote international financial stability.

The members include 19 individual countries, viz. Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, United States alongwith the European Union.

Or BRICS BRICS is the acronym representing association of five major emerging national economies, viz. Brazil, Russia, India, China and South Africa.

All the member countries are leading developing or newly industrialised countries and are characterised by their fast growing economies and those who significantly influence their regional affairs.

It was formed in 2011 and works on the principles of non-interference, equality and mutual benefit.

Which among mex rch2x pdf available in my website.

Question 4.
State whether the following statements are true or false.
(i) When Marginal Propensity to Consume (MPC) is zero, the value of the investment multiplier will also be zero.
(ii) Marginal Propensity to Consume (MPC) is the ratio between consumption and income.
Answer:

The given statement is false. When the value of MPC is zero, then the value of investment multiplier will be one as is proved below
Investment Multiplier (K) = \(\frac{1}{1-\mathrm{MPC}}=\frac{1}{1-0}=\frac{1}{1}=1\)
The given statement is false. MPC is the ratio between Change in Total Consumption (ΔC) and Change in Total Income (ΔY).

Question 5.
Observe the data given below carefully and answer the question
Trends in Output Growth in Different Sectors, 1980-2015

Above trend suggest that China and Pakistan have experienced decline in the growth of service sector while it increased in India. Give reason why?
Answer:
India have experienced increase in GDP contribution of service sector between 1980-90 to 2014-18 due to increase in employment and skill formation as compared to rest of the two countries.

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

Question 6.
Briefly mention salient demographic indicators of India, China and Pakistan.
Answer:
Demography is the study of population of the country. The components of the demographic profile of India, China and Pakistan are as follows (any three)

The population of Pakistan is least as compared to the other two countries in absolute numbers and accounts for approximately about one-tenth of China or India.
China has the highest population among the three countries but due to its geographical area, its density of population is the lowest.
The growth rate of population is highest in Pakistan followed by India and China. Through the introduction of One-child policy by China in the late 1970s, they controlled the growth rate of population.
The sex ratio is low and biased against females in all the three countries. Preference for male child is high in all these countries.
Urbanisation is high in both Pakistan and China with India having about 34% of its people living in urban areas.

Question 7.
Differentiate between stock and flow.
Or
Explain how ‘distribution of Gross Domestic Product’ is a limitation in taking Gross Domestic Product as an index of welfare.
Answer:
Difference between stock and flow (any three)

Basis	Stock	Flow
Meaning	It is that quantity of an economic variable which is measured at a particular point of time.	It is the quantity of an economic variable which is measured during a period of time.
Time	It has no time dimension.	It has time dimensions as per hour, per day, per month.
Concept	It is a static concept.	It is a dynamic concept.
Examples	Quantity of money, wealth, etc.	Consumption, investment, etc.

Or
If the Gross Domestic Product of a country is rising sharply, it may not necessarily indicate welfare. This is because the rise in GDP may be concentrated in the hands of very few individuals or firms. It means the gap between the rich and poor is widening due to these inequalities in the distribution of income. It means welfare of the common people does not rise with the rise in GDP.

Question 8.
In an economy, the equilibrium level of income is ₹12,000 crore. The ratio of Marginal Propensity to Consume and Marginal Propensity to Save is 3 : 1. Calculate the additional investment needed to reach new equilibrium level of income of ₹20,000 crore.

Direction Read the following text carefully and answer questions 9 and 10 given below

An effectiveness of infrastructure management can improve industrial policy and gain national competitiveness. According to research of the World Bank, there are several factors influencing the economy growth effectiveness and national competitiveness, including institutions, infrastructure, macroeconomic environment, health and primary education, technological readiness, market size, etc and also, there are various frameworks, models and analytical tools that can be used in studying the causal relationships between some key infrastructure factors and national competitiveness.

Based on existing models, this study aims to identify and discuss the key infrastructure factors that determine national competitiveness, which in turn influence positively on the total results of industrial policy. The results of study showed that national competitiveness is influenced basically by the level of institutional development and other seven factors, including infrastructure, in turn infrastructure factor is determined mainly by the quality of roads, railroad infrastructure, air transport and electricity supply.

The key institutional traps were singled out that prevent the development of the national economy. These findings contribute to an understanding of the key factors that determine economic growth, help to explain what infrastructure factors allows to be more successful in raising income levels and offer policymakers and business leaders an important tool in the formulation of improved economic policies and institutional reforms. Therefore, the infrastructure may include capital-intensive facilities that are not of public interest. But the public actively uses most of the infrastructure.

Economists refer to such objects as physical infrastructure or infrastructure capital. In the scientific literature, the role of infrastructure is evaluated by the services provided by the physical infrastructure assets. Infrastructure services, such as energy, transport, telecommunications, provision of water, sanitation and safe disposal of waste are fundamental to all kinds of household activities and economic production.

We agree with the Prud’homme (2004), Baldwin and Dixon (2008), that infrastructure is a long-term, spatially bound, capital-intensive asset with a long life cycle and the period of return on investment is often associated with a “market failure” (a situation in which the market system crashes and economic efficiency is not achieved).

For example, monopoly (if there is only one seller in the market, who can abuse its position and put a price on his product much higher than it costs), or a natural monopoly, it is a form of public goods with favourable externalities (including through external networks), which leads to reduce costs in the business, or provides significant social benefit (merit goods). Baldwin and Dixon (2008), in accordance with these features, divided infrastructure into three groups: machinery and equipment, buildings, engineering structures.

Source https://zvww.sciencedirect.com/science/article/pii/S2212567115003226 (Modified)
Answer:
Here, ΔY = ₹(20,000 – 12,000) crore
Or ΔY = ₹8,000 crore

∴ Additional investment required = ₹2,000 crore

Question 9.
Distinguish between social and economic infrastructure with example.
Answer:
Infrastructure means the basic facilities which are necessary for the development of a nation. Economic infrastructure is the combination of basic facilities which is helpful in economic development of an economy. In other words, it directly contributes in the production activities. Economic infrastructure is comprised of telecommunication, electricity, transportation, energy, etc. Social infrastructure is the combination of basic facilities which are necessary for human development. In other words, these infrastructures indirectly contribute in the production activities. Social infrastructure is comprised of health (hospitals), education (school, colleges, etc.) and housing. Both of these infrastructures are complementary to each other and are necessary for the overall development of an economy.

Question 10.
Briefly explain how infrastructural development promotes economic growth.
Answer:
Infrastructural development have a positive impact on economic growth as improvement in transportation, power, finance, etc., expand the size of markets and improve productivity significantly. Infrastructure brings modem technology and foreign investment in all sectors of the economy. It also helps in generating employment, hence generates demand and attracts foreign investment, that further helps in economic development.

Long Answer (LA) Type Questions (5 Marks)

Question 11.
(i) What would be the treatment of following in estimating national income of India?
Explain.
(a) Purchase of a machinery for manufacturing goods
(b) Teacher teaching his son at their home
(ii) Calculate Gross National Product at Factor Cost by expenditure method from the following data.

Items	₹ (in crores)
Net Domestic Capital Formation	5,000.
Compensation of Employees	18,500
Consumption of Fixed Capital	1,000
Government Final Consumption Expenditure	11,000
Private Final Consumption Expenditure	26,000
Rent	4,000
Dividend	2,000
Interest	5,000
Net Exports	(-) 1,000
Profits	11,000
Net Factor Income from Abroad	(-) 500
Net Indirect Taxes	2,500

Answer:
(i) (a) Purchase of machinery for manufacturing goods will be included in national income as it is part of investment expenditure.
(b) Teacher teaching his son at home is the part of services of self-consumption which will not be included in national income as their exact valuation is not possible.

(ii) By Expenditure Method
Gross National Product at Factor Cost (GNPFC) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation + Consumption of Fixed Capital + Net Exports + Net Factor Income from Abroad – Net Indirect Taxes
= 26,000 + 11,000 + 5,000 + 1,000 + (-1 ,000) + (-500) – 2,500 = 43,000 – 4,000 = ₹39,000 crore

Question 12.
Giving reasons, state whether the following statements are true or false.
(i) When MPC is zero, the value of investment multiplier will also be zero.
(ii) Value of APS can never be less than zero.
(iii) When MPC > MPS, the value of investment multiplier will be greater than 5.
(iv) The value of MPS can never be negative.
(v) APC is equal to unity when income becomes equal to saving.
Or
The savings function of an economy is S = – 200 + 0.25 Y. The economy is in equilibrium when income is equal to ₹2,000. Calculate
(i) Investment Expenditure at Equilibrium Level of Income (I)
(ii) Autonomous Consumption (Q
(iii) Investment Multiplier (K)
Answer:
(i) False, because when MPC = 0, Value of investment multiplier is one i.e., K = 1/1 – MPC = 1/1 – 0 = 1
(ii) False, because APS is negative when there are dis-savings.
(iii) True, if MPC is greater than 0.8 or false if MPC > 0.5 ubt not greater than 0.8.
(iv) True, MPS = AS/AY, if AS =0, then MPS can at the most be zero.
(v) False, APC is unity when income and consumption are equal
Or
(i) Investment Expenditure
Substituting the value of Y in saving function,
We get S = – 200 + 0.25 x 2,000 = ₹300
At equilibrium level of income, S = I
So, I = ₹300
Thus, investment expenditure at equilibrium level of income is ₹300. where, S = Savings
I = Investments, Y = National Income/Income

(ii) Autonomous Consumption
Consumption + Saving = Income … (i)
Autonomous consumption refers to that level of consumption expenditure where income is zero.

Here, if income (Y) = 0, Saving (S) = -200
Putting these value in equation (i), we get
Consumption + (- 200) = 0
Consumption = ₹200
So, Autonomous Consumption = ₹200.

(iii) Investment Multiplier
\(K=\frac{1}{\mathrm{MPS}}\)
From saving function, we know that Marginal Propensity to Save (MPS) = 0.25
Investment Multiplier (K) = \(\frac{1}{0.25}\) = 4

Question 13.
(i) You are residing in a village. If you are asked to advice the village panchayat, what kinds of activities would you suggest for the improvement of your village which would also generate employment?
(ii) “Economic development and sustainable development are two terms often used interchangeably, though they are not same”. In the light of the statement, differentiate between economic development and sustainable development.
Answer:

I would suggest the following activities to generate employment in village (any three)
- There should be multiple cropping in the village.
- Other activities related to agriculture such as plantation, horticulture, dairying, animal husbandry should be encouraged.
- Cottage industries should be encouraged.
- More and more facilities of education, health services, roads, etc. should be created in the village.
- Information technology sector should be encouraged.
The following are the points of difference between economic and sustainable development (any three)

Basis	Economic Development	Sustainable Development
Meaning	Economic development refers to the long-term increase in real per capital income and economic welfare.	In sustainable development, besides the increase in real per capital income, the welfare of the present and future generation is taken into consideration.
Use of Resources	It does not account for the exploitation of natural resources.	Sustainable development emphasises on rational utilisation of natural resources.
Use	It is generally used in the context of underveloped economies.	It is used for developed, developing as well as underdeveloped economies.
Focus	It lays special stress on the structural, technical and institutional changes in the economy.	It does not lay such stress on the structural, technical and institutional changes in the economy.