\nDepreciation<\/td>\n 60<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nOr \nCalculate Net Value Added a Factor Cost (NVAFC<\/sub>)<\/p>\n\n\n\nItems<\/td>\n \u20b9 (in crores)<\/td>\n<\/tr>\n \nSales<\/td>\n 1,750<\/td>\n<\/tr>\n \nPurchase of Raw Material<\/td>\n 1,300<\/td>\n<\/tr>\n \nIndirect Taxes<\/td>\n 175<\/td>\n<\/tr>\n \nConsumption of Fixed Capital<\/td>\n 125<\/td>\n<\/tr>\n \nClosing Stock<\/td>\n 110<\/td>\n<\/tr>\n \nOpening Stock<\/td>\n 115<\/td>\n<\/tr>\n \nSubsidies<\/td>\n 10<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nAnswer: \nGross Value Added at Market Price (GVAMP<\/sub>) \n= Net Value Added at Factor Cost (NVAFC<\/sub>) + Depreciation + (Sales Tax – Subsidy) \n= 240 + 60 + (45 – 15) = \u20b9330 lakh \nNow, GVA = Value of Output – Intermediate Consumption 330 = 600 – Intermediate Consumption \n\u21d2 Intermediate Consumption = 600 – 330 = \u20b9270 lakh \nOr \nNet Value Added at Factor Cost (NVAFC<\/sub>) = Sales + Change-in-stock – Purchase of Raw Material – Consumption of Fixed Capital – (Indirect Taxes – Subsidies) \n= 1,750 + (-5)-1,300 – 125 -(175 – 10) \n= 1,750 – 5-1,300 – 125 – 165 = \u20b9155 crore \nNote Change-in-stock = Closing Stock – Opening Stock = 110-115 = – \u20b95 crore<\/p>\n <\/p>\n
Question 8. \nExplain the relationship between Marginal Propensity to Consume (MPC) and Multiplier (K).<\/p>\n
Direction Read the following text carefully and answer questions 9 and 10 given below<\/p>\n
Health and education are today largely paid for and almost entirely administered by governmental bodies or non-profit institutions. The situation is worse for developing countries like India. This situation has developed gradually and is now taken so much for granted that little explicit attention is any longer directed to the reasons for the special treatment of education even in countries that are predominantly free enterprise in organisation and philosophy. The result has been an indiscriminate extension of governmental responsibility.<\/p>\n
The role assigned to government in any particular field depends, of course, on the principles accepted for the organisation of society in general. In a free private enterprise exchange economy, government’s primary role is to preserve the rules of the game by enforcing contracts, preventing coercion, and keeping markets free.<\/p>\n
Beyond this, there are only three major grounds on which government intervention is to be justified. One is ‘natural monopoly’ or similar market imperfection which makes effective competition (and therefore thoroughly voluntary exchange) impossible.<\/p>\n
A second is the existence of substantial ‘neighbourhood effects,’ i.e., the action of one individual imposes significant costs on other individuals for which it is not feasible to make him compensate them or yields significant gains to them for which it is not feasible to make them compensate him\u2014circumstances that again make voluntary exchange impossible.<\/p>\n
The third derives from an ambiguity in the ultimate objective rather than from the difficulty of achieving it by voluntary exchange, namely, paternalistic concern for children and other irresponsible individuals. The belief in freedom is for ‘responsible’ units, among whom we include neither children nor insane people.<\/p>\n
In general, this problem is avoided by regarding the family as the basic unit and therefore, parents as responsible for their children; in considerable measure, however, such a procedure rests on expediency rather than principle. The problem of drawing a reasonable line between action justified on these paternalistic grounds and action that conflicts with the freedom of responsible individuals is clearly one to which no satisfactory answer can be given.<\/p>\n
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Source https:\/\/zmvw.edchoice.org\/who-we-are\/our-legacy\/articles\/the-role-of-government-in-education\/ \nAnswer: \nRelationship between MFC and Multiplier (K) \nThe value of multiplier is determined by the value of MPC. \nWe know that, K = \\(\\frac{\\Delta Y}{\\Delta I}\\)<\/p>\n
K.\u0394I = \u0394Y or \u0394l = \\(\\frac{\\Delta Y}{K}[latex] or [latex]\\frac{\\Delta Y}{K}\\) = \u0394I<\/p>\n
We also know that, Y = C + I or \u0394Y = \u0394C + \u0394I or \u0394I = \u0394Y – \u0394C<\/p>\n
On putting the value of \u0394I from equation (ii) in the equation (i), \n\\(\\frac{\\Delta Y}{K}\\) \u0394Y – \u0394C<\/p>\n
On dividing the above equation by \u0394Y, \n\\(\\frac{\\Delta Y}{K} \\times \\frac{1}{\\Delta Y}=\\frac{\\Delta Y}{\\Delta Y}-\\frac{\\Delta C}{\\Delta Y} \\text { or } \\frac{1}{K}=1-\\frac{\\Delta C}{\\Delta Y} \\text { or } K=\\frac{1}{1-\\Delta C \/ \\Delta Y}\\) \nHere, \\(K=\\frac{1}{1-M P C}\\) \n\u2235 \\(\\frac{\\Delta C}{\\Delta Y}=\\mathrm{MPC}\\)<\/p>\n
This shows that there is a direct relationship between Multiplier (K) and Marginal Propensity to Consume (MPC). As the value of MPC rises, the value of multiplier also rises and vice-versa.<\/p>\n
e.g., if MPC = 0.75 then, \\(\\frac{1}{1-0.75}\\) = 4 and when the value of MPC = 0.80, then K = \\(\\frac{1}{1-0.80}\\) = 5.<\/p>\n
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Question 9. \nDeepak argues that in the present era, there is no need for government intervention in health sector. However, his friend Raju argues that health care services create social benefits and are an important component of human development and therefore, there is a need for government intervention in health sector. Decide with reasons, who is right in both of them? \nAnswer: \nRaju is right, the government intervention in this sector is essential due to the following reasons<\/p>\n
\nExpenditure on health, make substantial long-term impact and it cannot be reversed. Hence, this sector needs to be regulated.<\/li>\n Individual consumers of health services do not have complete information about the quality of services and their costs.<\/li>\n The government has to ensure that private institutions in this sector adheres to the standards stipulated by the government and charge the correct price.<\/li>\n<\/ol>\nQuestion 10. \nBriefly explain the importance of social infrastructure. \nAnswer: \nThe significance of social infrastructure lies in the following (any three)<\/p>\n
\nIt helps in building a healthy generation for future, that will be more productive and efficient. “Q<\/li>\n Social infrastructure helps in the growth of literacy, which in turn helps in the growth of the society.<\/li>\n It further helps in the skill formation, which is an important parameter in the context of economic XI growth.<\/li>\n It helps in improving and providing a quality life to the people.<\/li>\n Social infrastructure helps in the formation of human capital, which complements the physical capital to form an efficient system of growth and development.<\/li>\n<\/ul>\n <\/p>\n
Long Answer (LA) Type Questions (5 Marks)<\/span><\/p>\nQuestion 11. \nExplain briefly the various development strategies of China. \nOr \nChina has been able to develop rapidly as compared to India and Pakistan. Why? \nAnswer: \nCertain development strategies of China are discussed below \n(i) Great Leap Forward (GLF) Campaign This campaign, initiated in 1958, aimed at industrialising the country on a massive scale. People were encouraged to setup industries in their backyards. In rural areas, communes were started. Under the commune system, people collectively cultivated land.<\/p>\n
(ii) Great Proletarian Cultural Revolution (1966-76) In 1965, Mao Tse Tung started a cultural revolution on a large scale. In this revolution, students and professionals were sent to work and learn from the countryside.<\/p>\n
(iii) 1978 Reforms Since 1978, China began to introduce many reforms in phases. The reforms were initiated in agriculture, foreign trade and investment sector. In agriculture, lands were divided into small plots which were allocated to individual households.<\/p>\n
They were allowed to keep all income from the land after paying taxes. In later phase, reforms were initiated in industrial sector. All enterprises which were owned and operated by local collectives in particular, were allowed to produce goods.<\/p>\n
(iv) One-Child Norm The Chinese government introduced one-child norm to check its growing population. Couples were allowed to have only one child. In case, they gave birth to second child, social assistance was to be stopped.<\/p>\n
(v) Special Economic Zones SEZs were set up for the development of the most backward regions of the country by encouraging new industries.<\/p>\n
<\/p>\n
Or \nChina has been able to develop rapidly as compared to India and Pakistan due to the following reasons<\/p>\n
\nChina initiated to implement the economic reforms in 1978 without any compulsion by the World Bank and IMF.<\/li>\n China established infrastructure in the field of health and education that helped effectively in improving the social and economic indicators.<\/li>\n China implemented land reforms that increased the productivity.<\/li>\n There was long existence of decentralised planning.<\/li>\n The size of individual enterprises was kept small.<\/li>\n<\/ul>\nAll the factors mentioned above helped positively towards economic development.<\/p>\n
Question 12. \nExplain briefly the steps taken in estimating national income by the value added method. Also, explain any two precautions required to be taken in this method. \nAnswer: \nSteps for measuring national income by value added method (product method) are enumerated below<\/p>\n
Step 1 Classify All the Production Units The units are traditionally classified into primary, secondary and tertiary sectors which are further classified into sub-sectors like agriculture, manufacturing, banking, etc.<\/p>\n
Step 2 Estimate NVAFC<\/sub> of each industrial sector by taking the following sub-steps \n(i) Estimate Value of Output It can be estimated by two ways \n(a) A sum of sales and net addition to stocks (If entire output is not sold within the year). \n(b) Quantity of output multiplied by price (If entire output is sold within the year).<\/p>\n(ii) Deduct Intermediate Consumption It should be deducted from the value of output to arrive at GVAMP<\/sub>, (Intermediate consumption already includes imports). \n(iii) Deduct Consumption of Fixed Capital It should be deducted from GVAMP<\/sub> to arrive at \nNVAMP<\/sub>. \n(iv) Deduct Net Indirect Tax It should be deducted from NVA to arrive at NVAFC<\/sub> of an industrial sector.<\/p>\nStep 3 Take the sum of NVAFC<\/sub> of all the industrial sectors of the economy. By doing so, we will arrive at net domestic product at factor cost. ENVAFC<\/sub> = NDPFC<\/sub><\/p>\n <\/p>\n
Step 4 Add net factor income from abroad to NDPFC<\/sub> to arrive at National Income.<\/p>\nNational Income (NNPFC<\/sub>) = NDPFC<\/sub> + Net Factor Income from Abroad (NFIA)<\/p>\nPrecautions to be taken while computing national income by this method are given below<\/p>\n
\nTake the value of final product only i.e., intermediate goods not to be included.<\/li>\n Do not include exports, if total sales are given.<\/li>\n<\/ul>\nQuestion 13. \n(i) Calculate investment expenditure from the following data about an economy which is in equilibrium \nNational Income = \u20b91,000 \nMarginal Propensity of Save = \u20b90.20 \nAutonomus Consumption Expenditure = \u20b9100<\/p>\n
(ii) Free play of market mechanism is often talked about in economic theories of both microeconomics and macroeconomics. This is consideied as an efficient system that doesn’t require involvement of authorities to correct any economics discomforts. Briefly explain the macroeconomic automatic adjustment mechanism. \nAnswer: \n(i) Given, Y = \u20b91,000 \nMPS = 0.20, \\(\\bar{C}\\) = \u20b9100, I = ? \nb or MPC = 1 – MPS \n= 1 – 0.20 = 0.80 \nY = C +1 \nor Y = \\(\\bar{C}\\) + bY +1 \n1,000=100 + 0.80 x 1,000 + I \nI = 1,000 – 900, I = 100<\/p>\n
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(ii) When Aggregate Supply is greater than Aggregate Demand (AS > AD) or when Aggregate Demand is greater than Aggregate Supply (AD > AS), there are auto-mechanisms in a free market economy that tend to restore the equality between Aggregate Supply and Aggregate Demand. This mechanism is termed as adjustment mechanism.<\/p>\n","protected":false},"excerpt":{"rendered":"
Students can access the\u00a0CBSE 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 6 with Solutions General Instructions : This is a subjective question paper containing 13 questions. …<\/p>\n","protected":false},"author":29,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":""},"categories":[84914],"tags":[],"yoast_head":"\n
CBSE Sample Papers for Class 12 Economics Term 2 Set 6 with Solutions - CBSE Labs<\/title>\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\t \n\t \n\t \n