CBSE Sample Papers for Class 12 Economics Term 2 Set 5 with Solutions

Students can access the CBSE Sample Papers for Class 12 Economic with Solutions and marking scheme Term 2 Set 5 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Economics Term 2 Set 5 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.
What do you understand by inflationary gap? Explain with the help of diagram.
Or
Explain the situation of deficient demand in an economy with the help of diagram.
Answer:
The extent to which current aggregate demand becomes higher than the aggregate demand required for full employment, is termed as inflationary gap.

In the figure given below, full employment equilibrium is struck at point E. If the level of demand increases to AD₁, it is in excess of what is required to maintain full employment. This causes inflation. Inflationary Gap = EF (The difference between AD and AD₁).

Or
The extent to which aggregate demand falls short of aggregate supply to maintain full employment equilibrium is known as deficient demand.

As shown in the diagram given below, deficient demand occurs when Aggregate Demand (AD) is less than what is required to maintain full employment in the economy. Full employment level of demand is indicated by AD₁. If demand level happens to be AD₂ the gap between AD₁ and AD₂, equal to ab, represents deficient demand.

Question 2.
Calculate sales from the following data

Items	₹ (in lakhs)
Net Value Added at Factor Cost (NVAFC)	300
Intermediate Consumption	200
Indirect Tax	20
Depreciation	30
Change-in-stock	(-) 50

Or
If Real GDP is ₹200 and Price Index (with base = 100) is 110, calculate Nominal GDP.
Answer:
Gross Value Added at Market Price = Net Value Added at Factor Cost + Depreciation + Net Indirect Tax
= 300 + 30 + 20 = ₹350 lakh

Also, Gross Value Added at Market Price = Value of Output – Intermediate Consumption ∴ 350 = Value of Output – 200
⇒ Value of Output = 350 + 200 = ₹550 lakh

Now,
Value of Output = Sales + Change-in-stock
550 = Sales+ (-50) ⇒ 550 = Sales – 50
⇒ Sales = 550 + 50 ⇒ Sales = ₹600 lakh
Or
Real GDP = ₹200
Price Index = 110
Nominal GDP = ?
Price Index = \(\frac{\text { Nominal GDP }}{\text { Real GDP }} \times 100\)
\(110=\frac{\text { Nominal GDP }}{200} \times 100\)
Nominal GDP = 110 x 2 = ₹220

Question 3.
Observe the data given below and answer the question

Indicators of Health in India in Comparison with Other Countries, 2016-2018

Source World Development Indicators 2019, World Bank, Washington.

In India, only 81 percent of total birth are attained by skilled professionals as per the given data above. State any two reasons for the same.
Answer:
Reasons for only 81 percent births attained by skilled professionals in India are

• Lack of availability of sufficient health centre at nearby place to accommodate all births.
• Lack of awareness among people due to illiteracy.

Question 4.
Complete the following table

Answer:

Formulae used MPC = \(\frac{\Delta C}{\Delta Y}\), C = Y – S; APC = \(\frac{C}{Y}\)

Question 5.
“In India, the nature of employment is biased towards self-employment, while regular salaried employment is biased towards urban areas.” In the light of the statement, state why are regular salaried employees more in urban areas than in rural areas?
Or
Argue in favour of the need for different forms of government intervention in health sector.
Answer:
Regular salaried employees are more in urban areas than in rural areas due to the following reasons (any two)
(i) Education and Training Regular salaried employment requires certain educational qualifications and professional skills. Education and training facilities are not as good in rural areas as in urban areas. Therefore, chances of regular employment are higher for urban people.

(ii) Infrastructure Large companies including MNCs are concentrated in the urban areas due to the presence of economic infrastructure and availability of modem facilities like banks, transport, communication, etc.

(iii) Agriculture Rural population is primarily engaged in agricultural sector and is not willing to take the risk of leaving their farms for regular salaried employment. This is also a reason for regular salaried employment to be less prevalent in rural areas.

Or

There is a need for different forms of government intervention in health sector due to the following reasons (any two)

(i) Private sector is governed by profit motive and hence does not provide health facilities at a reasonable cost which may be affordable to all.

(ii) Standard of health care needs to be maintained in order to develop human resources effectively and government intervention is needed for this.

(iii) Health is essential for social upliftment of backward and weaker sections of the society and government intervention in terms of policy and provision of infrastructure is required in health sector.

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

Question 6.
Explain any three precautions that are required to be taken care of while calculating national income by expenditure method.
Or
How will you treat the following while estimating domestic product of India?
(i) Rent received by a resident Indian from his property in Singapore.
(ii) Salaries to Indians working in Japanese Embassy in India.
(iii) Profits earned by a branch of an American Bank in India.
Answer:
The following precautions are to be taken care of while using expenditure method for calculation of Rational income (any three)

(i) Only expenditure on final goods and services is to be taken into account to avoid the problem of double counting.

(ii) Expenditure on paper claim such as shares and bonds is not to be included in total expenditure as there is no value addition corresponding to these items.

(iii) Expenditure on transfer payments by government is not to be included as these payments do not cause any value addition in the economy.

(iv) Expenditure on second hand goods is not to be included because these goods are already accounted for when they were initially produced and used by final users.
Or
(i) It will not be included in domestic product of India as this income is earned outside the domestic (economic) territory of India.

(ii) It will not be a part of domestic product of India as embassy of Japan in India is not a part of domestic territory of India. Hence, this income is not earned within the domestic territory of India.

(iii) It will be included in domestic product of India as the branch of American bank is located within the domestic territory of India. So, it is income earned within the domestic territory of India.

Question 7.
“Investment demand includes financial investment like purchase of shares from secondary market”. Do you agree?
Answer:
No, I do not agree. The term ‘investment’, here refers to real investment not the financial investment.

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

Question 8.
The Government of India is taking several steps to improve the public transport system. The Metro rail network is one such endeavour. The basic motive behind this strategy is to reduce environmental degradation. What are your views on this strategy?

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

It is widely accepted that investments in infrastructure can lead to direct and indirect jobs and usually have spill over effects into other economic opportunities. For example, good transport systems and agro-logistics services help move freight from farms to locations where value can be added (like intermediate processing, packaging and sorting of agricultural produce) and ultimately to consumers. However, the anticipated benefits of these investments are not always fully realised, or sometimes they happen much later. How can investments in infrastructure have a multiplier effect in stimulating the economy and eventually, facilitate job creation?

To maximise their impact, infrastructure projects should explicitly analyse and include complementary investments (e.g., industrial parks or processing facilities) and soft interventions (financial services, ICT, laws and regulations, etc.) needed to unlock the potential of new markets.

As part of a broader effort to link investment in rural roads to economic opportunities, the Roads to Jobs study analysed strategic value chains in the agriculture sector in Rajasthan, India, to better understand the challenges faced by farmers in accessing markets and provided recommendations to address constraints. However, the infrastructural development has been biased towards rural areas in India. Most of the infrastructural development is concentrated in urban areas thus, making it difficult to deal with the problem of unemployment in rural areas, specially with the nature of employment in rural areas.
Answer:
I think that the government’s strategy is correct. Improving the public transport system will motivate people to use this mode of transport instead of using their personal vehicles. This will definitely help to reduce environmental degradation as studies have indicated that emissions of harmful gases from trains per passenger/km are nearly half as that of a car. Also, one bus emits far fewer fumes than twenty cars. So, air pollution will reduce and the quality of environment will improve.

Question 9.
“Unemployment is most common problem of developing countries like India. Nature of unemployment varies between rural and urban areas.” Define any one type of unemployment found in rural areas. Also, suggest any two measures for reducing this kind of unemployment in India.
Answer:
Seasonal unemployment is one of the types of unemployment found in rural areas. It refers to the form of unemployment in which a worker is employed only during a particular season and then is laid off.

It occurs in case of agriculture, ice-cream factories, woollens factories, etc., which have a seasonal demand. They have busy seasons and slack seasons. In the off-season, there is no work and the result is seasonal unemployment.

Following measures may be suggested to reduce seasonal unemployment (any two)
(i) Promotion of multiple cropping, i.e. raising more than one crop on the same piece of land in a year by use of irrigation facilities, fertilisers, mechanisation, etc.

(ii) Development of activities allied to agriculture such as animal husbandry, dairy farming, horticulture, etc., to provide extra employment throughout the year.

(iii) Public investment in rural areas in such fields as irrigation, drainage, flood control, land and environment, improvement of rural roads, schools, hospitals, etc.

Question 10.
“Infrastructure is the basic fundamental structure of economic growth and development of any economy.” Justify the statement by explaining the inter-relation between infrastructural development and economic development. How does infrastructure contributes to the economic development of a country?
Answer:
Infrastructure and economic development go hand-in-hand. Infrastructure contributes to the economic development of a country in the following ways (any three)

(i) Generates Linkages in Production Better means of transport and communication and a robust system of banking and finance generates better inter-industrial linkages. It is a situation when expansion of one industry facilitates the expansion of the other.

(ii) Enhances Size of the Market Infrastructure enhances the size of the market by providing better transportation and warehousing facilities. These facilities enable large scale production of goods and services which further help a business to capture more markets.

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

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

Long Answer (LA) Type Questions (5 Marks)

Question 11.
Compare the development experience of India, with China and Pakistan with reference to gross domestic product of these countries.
Answer:
The following points are important in this context
(i) China has the second largest GDP (PPP) of US $ 22.5 trillion, whereas India’s GDP is US $ 9.03 trillion. Pakistan’s GDP (PPP) stands at $ 0.94 trillion, which is roughly 11% of India’s GDP.

(ii) In both India and Pakistan, the contribution of agriculture to GDP was at 16% and 24% respectively. However, in China it is only 7%.

(iii) In China, service sector contributes 52% towards GDP. However, in India and Pakistan, the service sector contributes 54% and 57% respectively towards GDP.

(iv) In China, the contribution of industrial sector is high at 41%. For India and Pakistan, it is 30% and 19% respectively.

(v) During 2004-05, GDP of both China and Pakistan declined while GDP of India increased.

Question 12.
(i) Calculate Gross National Product at Market Price.

Items	₹ (in crores)
Private Final Consumption Expenditure	3,000
Net Factor Income to Abroad	100
Government Final Consumption Expenditure	800
Net Export	(-) 200
Net Current Transfers from Rest of the World	300
Gross Domestic Fixed Capital Formation	600
Change-in-stock	(-)20
Net Indirect Taxes	400
Factor Income from Abroad	50
Net Domestic Capital Formation	500

(ii) Explain why subsidies are added to and indirect taxes deducted from domestic product at market price to arrive at domestic product at factor cost?
Or
(i) Explain how non-monetary exchanges are a limitation in taking domestic product as an index of welfare?

(ii) In a single day Aman, the barber collects ₹1,500 from haircuts; over this day his equipment depreciates in value by ₹150 of the remaining ₹1,350, Aman pays sales tax worth ₹90, takes home ₹600 and retains ₹660 for improvement and buying of new equipment. He further pays ₹60 as income tax from his income. Based on this information, complete Aman’s contribution to the following measures of income
(a) Gross domestic product
(b) NNP at market price
(c) NNP at factor cost
Answer:
(i) Gross National Product at Market Price (GNPmp) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Fixed Capital Formation + Change-in-stock + Net Export + Net Factor Income to Abroad
= 3,000 + 800 + 600 + (-20) + (- 200) -100
= 4,400-320
= ₹4,080 crore

(ii) Subsidies by government are grants that decrease the factor price of a commodity, whereas, indirect taxes are paid by a firm and households that increase the final factor price of a commodity. Hence, to derive Gross Domestic Product at Factor Cost from Gross Domestic Product at Market Price, we deduct indirect taxes and add subsidies.
Or
(i) The non-monetary exchanges, which take place in the informal sectors are not included in the calculation of GDP since money is not being used. This results in an underestimation of GDP. Hence, GDP calculated in the standard manner may not give us a clear indication of the productive activity and actual welfare of the country.

(ii) Given, Indirect taxes = ₹90, Personal tax = ₹60,
Depreciation = ₹150, Retained earnings = ₹660
(a) GDP_MP = ₹1,500
(b) NNP_MP = GDP_MP – Depreciation = 1,500-150 = ₹1350
(c) NNP_FC = NNP_MP – NIT = 1350 – 90 = ₹1,260

Question 13.
(i) Central Bank of the country uses different instruments to control the quantity of money supply in an economy at a given point of time along with the ability of the commercial bank to create credit. Briefly explain marginal requirement as an instrument of credit based upon the above statement.

(ii) India imports most of its petroleum demand from gulf countries. Any fluctuations in the price of crude oil impacts important economic indicators. In recent past, it has been observed that India is in the grip of rising prices. Suggest any two measures to deal with the situation.
Answer:
(i) Marginal requirement is the difference between the market value of securities provided by the borrower and the amount of loan granted to him. There will be reduction in marginal requirement in a situation of deficient demand. It implies that borrowers will get more credit against their securities. It will encourage borrowings. Margin requirement is raised to correct the situations of excess demand. Higher margin requirement acts as a disincentive to borrow.

(ii) Two measures to control the rising prices are
(a) Rising prices can be controlled by reducing government expenditure, especially non-developmental expenditure such as, expenditure on public administration, defence and subsidies on non-merit goods and other wasteful expenditure.

(b) Monetary policy measures such as increase in cash reserve ratio, mopping of excess liquid reserves with the banks through open market operations by the Central Bank, so as to reduce the availability of credit and as a result, rising prices can be controlled.