CBSE Sample Papers for Class 12 Economics Term 2 Set 4 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 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)

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

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

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

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

Answer:

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.
True, when income exceeds consumption, saving is negative.
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.

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.