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

Students can access the CBSE Sample Papers for Class 12 Economic 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 Economics Term 2 Set 11 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 Questions (2 Marks)

Question 1.
Giving reasons state whether the following statements are true or false
(i) If the ratio of MPC and MPS is 4 :1, the value of investment multiplier will be 4.
(ii) Sum of APC and MPC is always equal to 1.
Or
Briefly explain the components of consumption function.
Answer:
(i) No, the statement is false.
If the ratio of Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) is 4:1, then the value of investment multiplier is 5 and not 4.

Here, \(\begin{aligned}
\mathrm{MPC} &=\frac{4}{4+1}=\frac{4}{5}=0.8 \quad \text { as } \frac{\mathrm{MPC}}{\mathrm{MPS}}=\frac{4}{1} \\
K &=\frac{1}{1-0.8}=\frac{1}{0.2}=5
\end{aligned}\)

(ii) No, the statement is false.
The sum of Average Propensity to Consume (APC) and Marginal Propensity to Consume (MPC) is not necessarily 1. Consider the following schedule

In the given schedule, APC = 0.8 and MPC = 0.8 and 0.8 + 0.8 ≠ 1
Therefore, the sum of APC and MPC is not 1.
i. e., APC + MPC ≠ 1
Or
Consumption function refers to the functional relationship between consumption and level of income. This function is comprised of two components i.e., autonomous consumption that remains constant at all levels of income and induced consumption that depends upon the level of income and varies directly with income. The consumption function is mathematically expressed as
C = \(\overline{\mathrm{C}}\) + bY
b is Marginal propensity of consumption and measured as the slope of consumption function.

Question 2.
Explain the flow variables of injections and leakages along with suitable examples. Or Give the meaning of real flow and money flow.
Answer:
Injections These are the flow variables which cause an expansion or increase in the process of circular flow (or the process of income generation) in the economy.
Following are the examples of injections
(i) Investments
(ii) Exports

Leakages These are the flow variables which cause a contraction or decrease in the process of circular flow in the economy. All these variables reduce the flow of income in economy and are also called withdrawals.

Following are the examples of leakages

• Savings
• Imports

Or

Real Flow It refers to the flow of goods and services across different sectors of the economy, e.g. Flow of factor services from the household sector to the producing sector and flow of goods and services from producing sector to household sector.

Money Flow It refers to the flow of money, in terms of ‘payments and receipts’ across different sectors of the economy.

e.g. Flow of money from the household sector to the producing sector in terms of payments for the purchase of goods and services and flow of money by the producing sector to household sector in terms of factor payments.

Question 3.
Do you think regional inequality exists even in health infrastructure in India₹Give reasons for your answer.
Or
What role does government play in generating employment opportunities?
Answer:
The development of health infrastructure has shown gender, income and regional biasedness 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 7.13 lakh beds, roughly 30% of them are available in rural areas. The Public Health Centres (PHCs) in rural areas do not offer basic medical care like X-ray or blood testing devices.
Or
The government generates employment through direct and indirect efforts. The government makes direct efforts at employing people in various departments for administrative purposes.

It runs various enterprises and when the output of goods and services of these enterprises increase, it leads to further increase in employment.

The various private enterprises that are linked to the government enterprises might also benefit from increased output of these enterprises and thus, increase their output and employment also.

This way government indirectly generates employment also.

Question 4.
Explain the changes that will take place when planned savings are less than planned investments.
Answer:
In such a situation, the following changes will occur

• Existing stocks of the producers are not enough to cope with the level of AD.
• Profits will not be maximum, because the desired level of stock is not available.
• Producers will plan higher level of output for the subsequent years.
• Level of output and employment will rise to drive the economy to the point of equilibrium at point E.

Thus, the economy will come back to the state of equilibrium.

Question 5.
Observe the data given below and answer the question
Annual Growth of Gross Domestic Product (%), 1980-2017

Country	1980-90	2015-17
India	5.7	7.3
China	10.3	6.8
Pakistan	6.3	5.3

Source Key Indicators for Asia and Pacific 2016, Asian Development Bank, Philippines; World Development Indicators 2018

Comment on the growth rate trends witnessed in China and India in the last two decades.
Answer:
India, with democratic institutions, performed moderately, but the majority of its people still depend on agriculture. Infrastructure is lacking in many parts of the country. It is yet to raise the Standard of living of more than one-fourth of its population that lives below the poverty line.

On the other hand, the lack of political freedom and its implications in China are the major concern in the last two decades. The country used the market system without losing political commitment and succeeded in raising the level of growth along with poverty alleviation. China used the market mechanism to create additional social and economic opportunities.

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

Question 6.
Write any three sources of collecting data on unemployment in India.
Or
What is meant by jobless growth?
Answer:
Following are the sources of collecting data on unemployment in India

• Reports of census of India.
• National Sample Survey Organisation’s (NSSO) reports of employment and unemployment situation.
• Directorate general of employment and training date of registration with employment exchange.

Or

Jobless growth is defined as a situation in which there is an overall acceleration in the growth rate of GDP in the economy which is not accompanied by a commensurate expansion in employment opportunities. India is experiencing this situation since 1990s. This leads to widening the gap between income of rich and poor people as most of the portion of income gets concentrated in fewer hands ‘ and not reaching to the masses.

Question 7.
Explain externalities as a limitation of GDP.
Answer:
Externalities refers to the benefits (or harms) that a firm or an individual causes to another for which they are not charged (or penalised). Externalities do not have any market in which they can be bought and sold. e.g. river pollution created by an oil refinery has disastrous effects on aquatic life.

As a result, the fishermen of the river may be losing their livelihood. Such harmful effects that the refinery is inflicting on others, for which it will not bear any cost, are called negative externalities.

In such a situation, there will be either overproduction or underproduction in the market than what is socially desired.

Question 8.
“Government spends regularly in the economic activities to achieve various economic goals.” Show diagrammatically the impact on the equilibrium level of output of increased government spending.

Direction Read the following text carefully and answer questions 9 and 10 given below Social infrastructure is defined as the construction of buildings and maintenance for the same to support social services. There are certain types of social infrastructures like hospitals, government schools and universities, public safety, sports and recreation, the transportation facilities like the Indian Railways and many more.

These social infrastructures are under the control of the Government of India. These infrastructures are made to provide services to the people. Most of the time, the facilities provided are free. But sometimes, they are chargeable (a very less amount that all the people can afford).

Social infrastructure has its own importance. It helps in the development of the economy of the nation and also improves the quality of life of the people. There are people who live in slums and are below the poverty line. These social infrastructures help in providing facilities to these people so that they can have a quality check-up in good hospitals.

In addition to this, various medical camps are also organised by the government. These camps are held for free and people from different areas come and get themselves checked up. Social infrastructures hence play a vital role in the development of the economy.

Social infrastructures do help in the development of the economy but they also play a crucial role in the education sector. The students from the lower-middle class sections study hard and gain admission in the government schools and colleges.

Environmental considerations are a core component of quality infrastructure and there is a clear economic case for promoting environmental principles in infrastructure investment. Investments in clean energy infrastructure will be vital for increasing energy access and security while addressing climate change. Rising water stress and increasing supply variability, flooding, inadequate access to safe drinking water and sanitation, and higher levels of water pollution are undermining economic growth and development, presenting a compelling case to invest in infrastructure for clean water and sanitation.

Decisions on the location, type, design and timing of infrastructure developments can have profound implications for the environment, with poor quality infrastructure contributing to air pollution, climate change, changes in water quality and quantity, biodiversity loss and the degradation of ecosystems. Integrating environmental considerations into the planning and design of infrastructure can help avoid, minimise and mitigate the risks posed by environmental hazards such as flooding, landslides, fires, earthquakes and heatwaves over the lifetime of the infrastructure asset, improving the reliability of service provision, increasing asset life and protecting asset returns.

Source https://www.study24x7.com/article/1715/role-of-social-infrastructure-on-economic-developntent) and (https://www.oecd.org/g20/summits/osaka/OECD-Reference-Note-on-Environmental-and-Social- Considerations.pdf)
Answer:
The given figure illustrates how government spending affects equilibrium level of income. It is assumed that like investment expenditure, government spending is also autonomous of the level of income or that it is constant amount. AD function C +1 + G is parallel to the AD function.

Owing to upward shift in AD, equilibrium shifts from E₁ to E. Equilibrium level of income increases from OL to OL₁.

Question 9.
Briefly explain the importance of social infrastructure for a countries’ economic development.
Answer:
The importance of social infrastructure can be seen in the following ways (any three)

• It helps in the healthy and robust growth of the current generation so that they become a productive manpower in future.
• Social infrastructure helps in the growth of literacy rate, which in turn helps in the growth of the society by bringing positive and modem outlook.
• Social infrastructure helps in the skill formation, which is an important parameter in the context of economic growth and development as it helps in development and adoption of modem technologies.
• It helps in improving and providing a quality life to the people by increasing their income levels.

Question 10.
Explain the relationship between environment and the economic development.
Answer:
There are two views on how economic development affects the environment

According to first view, economic development degrades our environment by using natural resources for the production of goods and services.

Economic development results in pollution in the form of air pollution, water pollution and land pollution.

According to second view, economic development improves environmental quality. The discovery of new materials and sources not only use less of natural resources, but sometimes replace them.

Thus, with economic development, degradation of the environment decreases.

From the above discussion, we find that relationship between environment and economic development is dynamic and complex.

It is difficult to decide whether the economic development leads to degradation of environment or not.

Long Answer (LA) Type Questions (5 Marks)

Question 11.
(i) “ Intermediate goods are different from final goods”. Do you agree₹Give reasons for your answer.
(ii) Classify the following as intermediate good or final good
(a) Car purchased by a taxi operator for business use.
(b) Pen purchased by a retail dealer for selling in shop.
(c) Milk purchased by a sweet-maker for making sweets.
Or
From the following data, calculate national income by income method and expenditure method.

Items	₹ (in crores)
Interest	300
Rent	500
Government Final Consumption Expenditure	1,200
Private Final Consumption Expenditure	2,400
Profits	1,280
Compensation of Employees	2,000
Net Factor Income to Abroad	60
Net Indirect Taxes	120
Net Exports	(-) 80
Consumption of Fixed Capital	100
Net Domestic Capital Formation	680

Answer:
(i) Yes, I agree. The differences between intermediate goods and final goods are given below (any two)

Basis	Intermediate Goods	Final Goods
Final Use	These goods are not ready for use by their final users as they are still within the boundary line of production.	These goods are ready for use by final users as these goods have crossed the boundary line of production.
Value Added	Value is yet to be added to those goods.	Value is not to be added to these goods.
Inclusion in National Income	These goods are not included in estimation of national income.	These goods are included in the estimation of income.

(ii)

• Car purchased by a taxi operator is a final good, as it is to be used by him as a fixed asset.
• Pen purchased by a retail dealer for resale purposes is an intermediate good as value is yet to be added in it.
• Milk purchased by a sweet-maker is an intermediate good as it will be used as a raw material.

Or

Income Method
Net Domestic Product at Factor Cost (NDPFC) = Compensation of Employees + Operating Surplus + Mixed Income
= 2,000 + (300 + 500 + 1,280) + 0
= ₹4,080 crore

National Income (NNPFC) = NDPFC – Net Factor Income to Abroad
= 4,080 – 60
= ₹4,020 crore

Expenditure Method
Gross Domestic Product at Market Price (GDPMP ) = Private Final Consumptior Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation + Net Exports
= 2,400 + 1,200 + (680 + 100) + (- 80)
= ₹4,300 crore

National Income (NNPFC) = GDPmp – Depreciation – Net Factor Income to Abroad – Net Indirect Taxes
= 4,300 – 100 – 60 – 120
= ₹4,020 crore

Question 12.
Find equilibrium level of Savings (S) and Investments (I),
when Income (Y) = ₹4,400,
Marginal Propensity to Consume (MPC) = 0.75 and
Autonomous Consumption \((\bar{C})\) = ₹100.
Do you think that the concept of autonomous consumption is valid in real life?
Answer:
It is given that,
Income (Y) = ₹4,400
Marginal Propensity to Consume (MPC or b) = 0.75 and Autonomous Consumption \(\overline{\mathrm{C}}\) = ₹100
We know that,
Income (Y) = Consumption (C)+ Savings (S)
Also,
Consumption (C) = \(\overline{\mathrm{C}}\) + bY, so,
⇒ Y = C + bY + S
On substituting the given variables in eq. (ii), we get

4,400 = 100 + 0.75 x 4,400 + S
or 4,400 = 3,400 + S
⇒ S = ₹1,000
At equilibrium level, Savings = Investments
∴ Investments = ₹1,000

i.e., savings and investments at equilibrium level of income = ₹1,000.

Yes, I think that the concept of autonomous consumption is valid in real life because every individual needs a minimum consumption level to sustain himself, even if his income is zero.

Question 13.
Compare and contrast the development of India, China and Pakistan with respect to some salient human development indicators.
Answer:
The development of India, China and Pakistan with respect to some salient human development indicators can be assessed and compared with the help of the following points (any five)

1. China is ahead of India and Pakistan in human development indicators. China has better ranking in terms of income indicator such as Gross Domestic Product (GDP) per capita, or proportion of population below poverty line or health indicators such as mortality rates, access to sanitation, literacy, life expectancy or malnourishment.
2. India is ahead of Pakistan in reducing proportion of people below the poverty line as per Human Development Report, 2019.
3. India’s performance in education, sanitation and access to water is better than Pakistan.
4. Maternal mortality is very high in India and Pakistan as compared to China. In China, for one lakh births, only 29 women die whereas in India and Pakistan, more than 130 women die.
5. All the three countries provide improved water sources for most of their population.
6. Considering the international poverty rate of $ 2 a day, India has the largest share of poor among the three countries in absolute terms.