CBSE Sample Papers for Class 12 Economics Term 2 Set 8 with Solutions

Students can access the CBSE Sample Papers for Class 12 Economic with Solutions and marking scheme Term 2 Set 8 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Economics Term 2 Set 8 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.
Give the differences between ex-ante savings and ex-post savings.
Or
What do you understand by frictional unemployment and structural unemployment? Explain briefly.
Answer:
Differences between ex-ante and ex-post savings are (any two)

Basis	Ex-ante (Planned) Savings	Ex-post (Actual) Savings
Meaning	It refers to the desired level of savings.	It refers to the realised level of savings.
Reaction with Investments	In an accounting year, planned savings may or may not be equal to planned investment.	In an accounting year, actual savings is always equal to actual investment. (This is according to the principle of National Income Accounting).
Determination of Income	Equilibrium level of income is determined where planned savings is equal to planned investment.	Actual savings has no relevance in the determination of equilibrium level of income.

Or
(i) Frictional Unemployment It is that unemployment which arises due to immobility of labour, shortage of raw material, power, wear and tear of machinery, search of jobs. It is generally associated with changing jobs in the economy.

(ii) Structural Unemployment It is that unemployment which results from long-term decline of certain industries. It arises when there is change in production technique. It also arises when labourers are trained in old and decaying industries and are not adequately equipped for new industries.

Question 2.
An increase of ₹250 crore in investment in an economy resulted in total increase in income of ₹1,000 crore. Calculate Marginal Propensity to Consume (MPC).
Answer:
Calculation of Marginal Propensity to Consume
Multiplier (K) = \(\frac{1}{1-\mathrm{MPC}}\)
4 = \(\frac{1}{1-\mathrm{MPC}}\) (∵ Multiplier is 4 as income increased 4 times due to increase in investment)
4 (1- MPC) = 1
4 – 4MPC = 1
4 – l = 4MPC
\(\frac{3}{4}\) = 0.75 = MPC
i.e., Marginal propensity to consume = 0.75

Question 3.
Whether the following items will be included in national income or not? Give reasons for your answer.
(i) Bonus to employees
(ii) Purchase of books by a student
Or
Briefly describe money flow.
Answer:
(i) Bonus to Employees It will be included. Bonus paid to the employees is a factor payment and thus included in national income.

(ii) Purchase of Books by a Student It will be included. Purchase of books by a student is included in private final consumption expenditure.
Or
In money flow, factor services by the households are exchanged for monetary compensations by the firms. The below circular flow ought to explain money flow in a two-sector economy without the presence of financial market.

Money flow in a two-sector economy without financial market

Question 4.
Write a short note on Special Economic Zone (SEZ).
Answer:
A Special Economic Zone (SEZ) is an area in a country that is subject to different economic regulations than other regions within the same country.

Its aim includes increased trade balance, employment, increased investment, job creation and effective administration. To encourage businesses to set up in the zone, financial policies are introduced.

Question 5.
“Low employment among women is a reflection of economic backwardness of a country.” Suggest some measures to increase employment opportunities for women.
Or
Explain what role do trade unions play in the protection of workforce, keeping in view that the worker participation rate is low in country.
Answer:
I shall suggest the following measures to increase the employment opportunities for women (any two)

Education and training opportunities for women should be further expanded, diversified and made easily accessible.
Residential accommodation for working mothers should be increased.
There should be much more facilities of creches and child care during the working hours of mothers.
There should be large scale publicity and building of public opinion in favour of employment of women.

Trade unions are voluntary organisations of workers formed to promote and protect the interests of workers through collective action.

The formation of trade unions was a reaction against the mechanisms of pauperisation, low pay, long working hours, child labour and generally appalling working conditions. Thus, the role of trade unions is to fight against poverty of workers, exploitation and the violation of their basic human dignity and to promote social justice in the global economy.

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

Question 6.
State whether the following statements are true or false. Give reason in support of your answer.

(i) The value of Average Propensity to Save (APS) can be negative.
(ii) The value of Marginal Propensity to Save (MPS) can be negative.
Or
State any three causes of deficient demand.
Answer:
(i) True, because in a condition when consumption is greater than income, then Average Propensity
to Save (APS) is negative due to dissavings. This relation can be expressed as
C > Y ⇒ APS > 1
(ii) False, because Marginal Propensity to Save (MPS) is ratio between additional savings and additional income which is always positive. Infact, MPS can never be negative.
Or
Deficient demand occurs due to following causes (any three)

Reduction in propensity to consume which reduces private consumption expenditure is a cause of deficient demand.
Sometimes, instead of making fresh investments, government resort to disinvestment causing fall in aggregate demand.
Decline in exports and rise in imports is yet another cause of deficient demand.
High rate of inflation is also a cause of deficient demand.

Question 7.
Why are exports included in the estimation of domestic product by the expenditure method?
Answer:
According to expenditure method, national income is measured in terms of expenditure on purchase of final goods and services in the economy during an accounting year.

Net exports is the difference between exports and imports during an accounting year. If goods exported exceed the goods imported, then this will result in increase in the income of the country.

With increased income, the expenditure will also increase, because of this reason exports are included in the estimation of domestic product by expenditure method.

Question 8.
Observe the data given below carefully and answer the question
The 10 Most Affected Countries in 2019

Source https://www.hindustantimes.com/india-news/india-seventh-most-ajfected-by-climate-change- in-2019-globally-report-101611552192319.html

As per the data given above, India is at number 7 in the list of top 10 countries that are most affected by the environmental changes. What contributed to the India’s environmental crisis?

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

Infrastructure is regarded as a core support system that enables an economy to grow and develop. Generally, the term infrastructure means technical structure such as roads, transport, communication, bridges, dams, power, public institutions like schools, hospitals, etc. These structures not only serve as basic input for various economic activities like production, investment, but also enable an economy to break the shackles of traditional and primitive social structures and customs.

The difference between a developed country and an underdeveloped country can be mainly attributed to the lack of sufficient and technically advanced infrastructure in the latter.

Infrastructure has two-fold benefits-as an input and as a support system. Infrastructure as an input (roads, bank and power) facilitates the production process and attracts investment from domestic as well as from foreign investors.

Infrastructure as a support system (such as schools, hospital) develops the quality of human capital by imparting quality and technical education and health facilities. This raises the standard and quality of living and helps the economy to eradicate major economic problems like poverty, unemployment and inequality. Hence, it can be concluded that the presence of quality and sufficient infrastructure is a necessary and sufficient condition for accomplishing economic growth and development.

However, the expansion of the private sector in India has forced the passages of a number of regulations to promote quality of care and protect consumers. This has expanded the role of government in developing and enforcing regulations in three areas of the health sector: drugs, medical practice and health facilities. These regulations have been promulgated by both national and state governments.

The challenge for the future will be to ensure the quality and efficiency of health services in both the public and private sectors through these regulatory mechanisms while seeking to promote national health objectives. Eighty per cent of spending on health in India is from personal funds, but existing laws do not ensure that private medical services maintain even minimum standards, says the report.

“Powerful medical lobbies have opposed government efforts to regulate the private sector,” it says, adding that India’s medical councils are not enforcing laws relating to registration and licensing of medical practitioners. In a section on private healthcare services, the report acknowledges problems that consumer health organisations have long complained about doctors over prescribing drugs, recommending unnecessary investigations and treatment, and failing to provide appropriate information for patients.

“The Indian Medical Association has consistently opposed any kind of regulation,” said Ravi Duggal, coordinator of Mumbai’s Centre for Enquiry into Health and Allied Themes, a non-governmental organisation that has long been campaigning for minimum standards.

A survey in Mumbai in the mid-1990s showed gross deficiencies in the quality of medical services. “There were clinics operating out of residential flats, with kitchens turned into operating theatres,” said Dr Abhay Shukla, project coordinator at the centre.

Source https://www.ncbi.nlm.nih.gov/pmclarticleslPMC314535l(Modified)
Answer:
The environmental problems which may arise in India due to population growth, increased industrial and agricultural activities and depletion of natural resources in the next 25 years, are discussed here. Selected aspects of problems which require special attention are treated with particular emphasis on rural situations. The present status of the various aspects of human settlement such as quality of air, water, sanitation, health and housing as well as aspects of conservation of forests, soils and wildlife, is outlined as far as possible in a quantitative manner. It is visualised that environmental management will have to be more serious and of growing dimensions in the coming years.

Question 9.
In your view, is it essential for the government to regulate the fee structure in healthcare institutions? If so, why?
Answer:
Health is the basic requirement of human beings, so that they may be able to live a life of dignity. It is the responsibility of government to ensure health facilities to even the poorest of the poor.

For this purpose, either the government should itself provide these services through government . hospitals or encourage private sector participation in these sectors.

As India has a vast population which still lacks healthcare, it does not seem feasible for government alone to fulfill the requirement in this sector due to lack of resources.

Hence, private sector is allowed to operate in this sector. But private sector works with profit as the primary motive and so, if government does not regulate the fee structure in healthcare institutions, the fee may become too high to be in affordable limits of common people.

Question 10.
Why infrastructure is called the support system on which depends the efficient working of a modern economy?
Answer:
Infrastructure is the basic fundamental structure of the economy that is required for economic development. It increases the productivity of the factors of production and improves the quality of life of its people. Also, efficient working of a modem economy depends on development of infrastructure.

Agricultural production depends largely on the adequate expansion and development of irrigation facilities and power supply needed for the same. Industrial production increase depends on the development of power and electricity generation, transport and communication. Thus, high productivity is possible only when the country have a strong support system in terms of infrastructural facilities.

Long Answer (LA) Type Questions (5 Marks)

Question 11.
State the similar developmental strategies pursued by India and Pakistan on their path to development.
Answer:
India and Pakistan have followed following similar strategies in their respective development plans

India and Pakistan both started their development process on the basis of economic planning after getting independence in 1947.
Both of them have adopted the mixed economic system involving the co-existence of both the public and the private sector.
Both the countries relied more on the public sector for initiating the process of growth and development.
Both of them introduced economic reforms around the same time to strengthen their economies. Pakistan initiated reforms in 1988 and India followed in 1991.
They both have announced Five Year Plans for growth and development.

Question 12.
(i) From the following data, calculate national income by income method.

Items	₹ (in crores)
Government Final Consumption Expenditure	400
Subsidies	40
Rent	800
Wages and Salaries	2,400
Indirect Tax	240
Private Final Consumption Expenditure	3,200
Gross Domestic Capital Formation	480
Social Security Contributions by Employer	220
Royalty	100
Net Factor Income Paid to Abroad	120
Interest	80
Net Domestic Capital Formation	440
Profits	520
Net Export	280

(ii) Can Gross Domestic Product (GDP) be greater than Gross National Product (GNP)? Explain.
Or
(i) What is the difference between depreciation and depreciation reserve fund?
(ii) Assuming real income to be ₹200 crore and price index to be 135, calculate nominal income.
Answer:
(i) National Income by Income Method
Net National Product at Factor Cost (NNP_FC) = Rent + Wages and Salaries + Social Security Contribution by Employer + Royalty + Interest + Profits – Net Factor Income paid to Abroad
= 800 + 2,400 + 220 +100 + 80 + 520 – 120
= ₹ 4,000 crores

(ii) Gross Domestic Product (GDP) can be greater than Gross National Product (GNP), if net factor income from abroad is negative.

Net factor income from abroad will be negative if factor payments from abroad are less than factor payments to abroad.
Or
(i) Difference between depreciation and depreciation reserve fund.

Basis	Depreciation	Depreciation Reserve Fund
Concept	It is the loss of value of fixed assets in use, on account of normal wear and tear.	It is a provision of funds created by producers to cope up with depreciation losses.
Effect	It leads to correct computation of profit.	These funds are used for the replacement of fixed assets when these are worn out.
Reason	Expected or foreseen obsolescence, normal wear and tear.	Obsolete/outdated assets need to be replaced.

(ii) Given,
Real Income = ₹200 crores and Price Index = 135, Nominal Income = ?
We know that, Price Index = \(\frac{\text { Nominal Income }}{\text { Real Income }} \times 100\)

On substituting the vanables, we get, 135 = \(\frac{\text { Nominal Income }}{\text { 200 }} \times 100\)

⇒ Nominal Income 135 x 2 = 270 or ₹ 270 crore.

Question 13.
(i) In an economy, total savings are ₹2,000 crore and the ratio of average propensity to save and average propensity to consume is 2 : 7. Calculate the level of income in an economy.
(ii) How bank rate is different from repo rate? Which instrument is more effective for term goals to curb inflation?
Answer:
(i) Here,
S = ₹2,000 crore
\(\frac{\mathrm{APS}}{\mathrm{APC}}\) = \(\frac{2}{9}\), APS = \(\frac{S}{Y}\)
Here, S = APS x Y = \(\frac{2}{9}\) x Y (Where, Y = Income)
or 2,000 = \(\frac{2}{9}\) x Y
or Y = \(\frac{2}{9}\) x 2,000
So, National Income = ₹19,000 crore

(ii) Bank rate is the rate at which RBI lends to commercial bank for a period of more than 90 days, however repo rate is the rate at which RBI lends funds to commercial banks for a period ranging from 1 to 14 days. Repo rate is more effective tool to curb inflation in short-run.