SAMPLE QUESTION PAPER (2021-22)
ECONOMICS
TERM II
CLASS 12
Time: 2 Hrs Max. Marks: 40
GENERAL INSTRUCTIONS
1. This is a subjective question paper containing 13 questions.
2. This paper contains 5 questions of 2 marks each, 5 questions of 3 marks each and 3 questions of 5 marks each.
3. 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words
4. 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words
5. 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words
6. This question paper contains Case/Source Based Questions.
Short Answer (SA) Type 1 Questions
1. How is stock different from flow? Give one example.
Ans. Stock refers to the value of a variable measured at a particular point of time, whereas flow refers to the value of a variable measured during a period of time. Eg. Money supply is stock in nature, while saving is flow in nature.
OR
Distinguish between consumption goods and capital goods.
Ans. Consumption goods are those goods which are consumed by a consumer for final use and not meant for reproduction or reselling. On the other hand, capital goods are also final goods used by the producers for production of other goods or services for long period of time.
2. In an economy, the equilibrium level of income is ₹12,000 crore. The ratio of Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) is 3:1.
Calculate the additional investment needed to reach a new equilibrium level of income of ₹20,000 crore
Ans. Given, MPC/MPS = 3/1
Let MPC be 3x and MPS be 1x
Also, MPC + MPS = 1
3x + 1x = 1
x = ¼ = 0.25
or MPS = x = 0.25
MPC = 3x = 3 x 0.25 = 0.75
Now, Change in Income (ΔY) = ₹8,000
K = 1/(1 – MPC) = 1/(1 – 0.75) = 4, K = ΔY/ΔI
ΔY = ΔI.K
8000 = ΔI x 4
ΔI = 2000
So, investment in the economy should rise by ₹2,000 crore.
OR
Answer the following parts
(i) If the value of Average Propensity to Consume (APC) is 1.5, what will be the value of Average Propensity to Save (APS)?
Ans. APS = 1 – APC
APS = 1 – 1.5 = -0.5
(ii) If MPC = 0.5, find the value of investment multiplier.
Ans. We know that, K = 1/(1 – MPC)
K = 1/(1 – 0.5) = 1/0.5 = 2
3. What will happen to an economy if aggregate demand falls below full employment level?
Ans. When aggregate demand falls below full employment level, it leads to underemployment equilibrium. In other words, economy attains equilibrium at a level less than its full potential. This situation leads to fall in production, employment and general price level.
4. Compared to women, more men are found working in India. It has been observed that for every 100 urban females, only about 15 work. In rural areas, for every 100 rural women, only about 25 work. Why are women not working? Give any two reasons.
Ans. The participation rate of women in the employment market, for both, rural and urban areas, is quite low.
Some of the reasons for such a low rate are given below:
(i) India is typically a male dominated country. Because of this, females are accorded secondary status and parents do not take steps to educate them.
(ii) Even if they are educated, the social beliefs and set-up discourages them to work.
(iii) The women are themselves not inclined to work as they consider house-keeping as their primary work.
OR
“Regional inequality exists in health infrastructure in India”. Comment.
Ans. The development of health infrastructure has shown gender, income and regional biasness 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 of the number of dispensaries
Out of 6.3 lack beds, roughly 30% of them are available in rural areas. The PHCs in rural areas do not offer basic medical care like X-ray or blood testing devices.
In rural areas, the percentage of people who have no access to proper aid has risen from 15 in 1986 to 24 in 2003. States like Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh are relatively lagging behind in healthcare facilities.
5. Explain any two measures by which the situation of excess demand can be corrected.
Ans. Measures to correct the situation of excess demand are
(i) Increase in Bank Rate: Increase in bank rate by the central bank makes loans costly for the commercial bank and further commercial banks increases interest on loans charged from the customers, leading to fall in demand.
(ii) Increase in Repo Rate: Increase in repo rate by the central bank makes loans short-term costly for the commercial bank and further commercial banks increases interest on loans charged from the customers, leading to fall in demand.
(iii) Increase in CRR: When CRR is increased by the central bank, it leaves commercial banks with less reserve, leading to fall in money supply and demand in the economy.
Short Answer (SA) Type Questions
6. Giving reasons, explain the treatment assigned to the following while estimating national income.
(i) Expenditure on adding a floor to a factory.
Ans. Expenditure on adding a floor to factory is included in national income because it is a part of investment expenditure.
(ii) Payment of fees to an architect engaged by a firm.
Ans. Payment of fees to an architect engaged by a firm is not to be included in estimation of national income as it is treated as part of intermediate consumption.
(iii) Payment of royalty by a government firm.
Ans. Payment of royalty by a government firm should be included while estimating national income because it is a kind of factor payment.
OR
In a hypothetical economy, Real GDP is given as ₹200 crores and price index is given as 120. From the given data, estimate the value of nominal GDP.
Real GDP = Nominal GDP/Price Index x 100
200 = Nominal GDP/120 x 100
Nominal GDP = (200 x 120)/100 = 240
7. In a simple Keynesian two-sector model, government sector is expected not to involve in the production activity. Government is expected to stay out of market and maintain law and order. However, in a general economy, government has to play its part directly or indirectly. Directly, government is involved in production activities where market mechanism fails to attain desirable target, Indirectly, government is involved in terms of collecting tax and non-tax revenues.
Explain the impact on aggregate demand, if government involves in the economy both directly and indirectly.
Ans. Aggregate demand is the sum total of consumption expenditure, investment expenditure and government expenditure (when included). With the involvement of government directly aggregate demand will increase, whereas if government is included indirectly through taxes, it impacts consumption expenditure. Increase in taxes decreases disposable income and hence consumption and vice-versa in case of decrease in taxes.
Read the following text carefully and answer questions 8 and 9 below:
Comparative development of India and its neighbours is an important knowledge to possess as an Indian Citizen.
As a rational citizen of a country, it is crucial to have a deep understanding of the developments in your country. In fact, it is also very important to learn about the developmental processes of your neighbouring countries.
Not only citizens but countries are also eager to understand the developmental system of their neighbours. This understanding enables comprehension of strengths and weaknesses of yours as well as the neighbouring countries. Due to the process of globalisation, it is essential for every nation to compete with developed countries. Hence, it is important to study the comparative development of India and its neighbours.
The Chinese reform process began more strongly and comprehensively during the 1980s. At this time, India was in the midstream of a rather slow growth process. Although the countries (Pakistan and India) started together, Pakistan has seen a better result in certain areas. However, India is better placed than Pakistan in the area of skilled manpower and research and development institutions.
It is common to find developmental strategies of a country as a model to others for lessons and guidance for their own development. It is particularly evident after the introduction of the reform process in different parts of the world.
In order to learn from economic performance of our neighbouring countries, it is necessary to have an understanding of the roots of their successes and failures. It is also necessary to distinguish between and contrast, the different phases of their strategies.
8. “India, China and Pakistan have many similarities in their development strategies”. Elaborate any three points.
India, China and Pakistan have many similarities in development strategies which are as follows
(i) All the three countries have started planning their development strategies in similar ways. India announced its Five Year Plan in 1951-56, while Pakistan announced its First Five Year Plan in 1956, which is called Medium Term Plan. China announced its First Five Year Plan in 1953.
(ii) India and Pakistan adopted similar strategies such as creating a large public sector and raising public expenditure on social development.
(iii) Till the 1980s, all the three countries had similar growth rates and per capital incomes.
(iv) Economic reforms took place in all the three countries Reforms started in India in 1991, in china in 1978 and in Pakistan in 1988.
(v) In the initial phase of reforms, all the three countries gave more importance to public sector though India and Pakistan allowed private sector to function as well.
9. Mention the areas where Pakistan have performed better than India.
Ans. Following are the areas/aspects where Pakistan has an edge over India.
(i) Pakistan has higher percentage of workforce in service sector.
(ii) Rate of urbanisation is higher in Pakistan than India.
(iii) Access to improved water sources.
10. Distinguish between inflationary gap and deflationary gap.
Ans. Differences between inflationary gap and deflationary gap are:
| Basis | Inflationary Gap | Deflationary Gap |
| Meaning | The excess of aggregate demand above the level that is required to maintained full employment level of equilibrium is termed as inflationary gap | The short fall of aggregate demand below the level that is required to maintain full employment level of equilibrium is termed as deflationary gap |
| Effect on Price Level | Inflationary gap causes inflation and increases wages and price level in the economy. | Deflationary gap causes deflation and decreases wages and price level in the economy |
| Level of Output | Level of output is constant at full employment | Level of output is less than that at full employment. |
Long Answer (LA) Type Questions
11. Explain the following systems of Indian medicine.
(i) Ayurveda
Ans. It is one of the traditional systems. It is presumed that the fundamental and applied principles of Ayurveda got organised and enunciated around 1500 BC. Atharvaveda, the last of the four great bodies of knowledge know as Vedas, contains 114 hymns related to formulations for the treatment of different diseases.
Two major schools and eight specialisations got evolved from this body of knowledge. These school had their respective compilations – Charaka Samhita for the school medicine and Sushruta Samhita for the school of surgery
The Ayurvedic practitioners recommend diet and lifestyle changes along with drug therapy. The methods of Ayurveda such as applying herbs and massage can simultaneously be applied along with other systems
(ii) Unani
Ans. Unani medicine also means ‘Greek medicine’, and is a form of traditional medicine widely practiced in South Asia. It refers to a tradition of Graeco-Arabic medicine which is based on the teachings of Greek physician Hippocrates, and Roman physician Galen and developed into an elaborate medical system by Arab and Persian physicians.
Unani medicine is based on the concept of the four humours, Phlegm, Blood, Yellow bile and Black bile. Unani medicine first arrived in India with establishment of Delhi Sultanate (1206 – 1527 CE) and Muslim rule over North India and subsequently flourished under Mughal empire.
(iii) Homeopathy
Ans. It consists of two words ‘homeo’ meaning similar and ‘pathas’ meaning suffering. In this system, a drug and a disease that produce similar symptoms are believed to be having a neutralising effect on each other.
Thus, the homeopathic treatment is based on symptoms the body is showing and medication is given accordingly. It is popular among the people to its remarkable healing capacity. Also. Its remedies are free from side effects.
12. Calculate national income by (i) Product Method (ii) Expenditure Method
| S. No | Items | ₹ (in crores) |
| (a) | Gross Value Added at Market Price by Primary Sector | 2,400 |
| (b) | Private Final Consumption Expenditure | 6,000 |
| (c) | Consumption of Fixed Capital | 1,200 |
| (d) | Net Indirect Taxes | 960 |
| (e) | Gross Value Added at Market Price at Secondary Sector | 1,600 |
| (f) | Net Domestic Fixed Capital Formation | 1,760 |
| (g) | Change in Stock | (-) 160 |
| (h) | Gross Value Added at Market Price by Tertiary Sector | 5,600 |
| (i) | Net Imports | 400 |
| (j) | Government Final Consumption Expenditure | 1,200 |
| (k) | Net Factor Income from Abroad | 160 |
(i) By Product Method
Gross Domestic Product at Market Price (GDPMP) = Gross Value Added at Market Price in Primary Sector + Gross Value Added at Market Price in Secondary Sector + Gross Value Added a market Price in Tertiary Sector.
= 2,400 + 1,600 + 5,600
= ₹9,600 crore
Net National Product at Factor Cost (NNPFC)= GDPMP + Net Factor Income from Abroad – Consumption of Fixed Capital – Net Indirect Tax
= 9,600 + 160 – 1,200 – 960 = ₹7,600
(ii) By Expenditure Method
Gross Domestic Product at Market Price (GDPMP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation (Net Domestic Fixed Capital Formation + Consumption of Fixed Capital + Change in Stock) + Net Exports
= 7,200 + 1,200 + [1,760 + 1,200 + (-160)] + (-400)
= 7,200 + 2,800 – 400 = 1,000 – 400
GDPMP = ₹9,600 crore
Net National Product at Factor Cost (NNPFC) = GDPMP – Net Indirect Tax + Net Factor Income from Abroad – Depreciation
= 9,600 – 960 + 160 – 1,200 = 9,760 – 2,160
NNPFC = 7,600 crore
OR
Calculate (i) Gross domestic product at market price and (ii) Factor income from abroad from the following data
| S. No | Items | ₹ (in crores) |
| (a) | Gross National Product at Factor Cost | 3,075 |
| (b) | Net Exports | (-) 25 |
| (c) | Compensation of Employees | 1,500 |
| (d) | Rent | 400 |
| (e) | Interest | 450 |
| (f) | Profit | 650 |
| (g) | Net Indirect Taxes | 150 |
| (h) | Net Domestic Capital Formation | 400 |
| (i) | Gross Fixed Capital Formation | 425 |
| (j) | Change in Stock | 25 |
| (k) | Dividend | 150 |
| (l) | Factor Income to Abroad | 40 |
13. (i) “Unemployment is one of the major problems that most of the developing countries face owing to multiple factors. However, unemployment needs to be involuntary in nature and not voluntary.” Based upon the above information, discuss the causes of unemployment in India.
Ans. the causes of unemployment in India are given below:
(a) Slow Economic Growth: In Indian economy, the rate of economic growth is very slow. This slow growth rate fails to provide enough employment opportunities to the rising population. Supply of labour is much more than the available employment opportunities.
(b) Rapid Growth of Population: Constant increase in population has been a grave problem of India. It is one of the main causes of unemployment. The number of unemployed persons has actually increased instead of decreasing during the plan period.
(c) Faculty Employment Planning: The Five Year Plans in India have not been designed for employment generation. A frontal attack to solve the problem of unemployment was missing. In the FYPs, it was assumed that economic growth will take care of unemployment problem.
(ii) “Development and growth are two interrelated concepts. Development surely depend upon growth. But any country’s development is not considered as good unless it is sustained over different generation.” Based upon this information, discuss any three strategies of sustainable development.
Ans. Strategies of sustainable development are
(a) Use of Eco-friendly Fuel(CNG/LPG): The fuels such as petrol and diesel emit huge amount of carbon dioxide that add to the greenhouse impact. In order to control pollution, the use of CNG and LPG should be promoted. These fuels are cleaner and eco-friendly. Also, pooling of vehicles in the locality should be promoted.
(b) Use of Renewable Resources (Wind Power): India being a tropical country is well endowed with sunlight, water and wind energy. These natural resources are renewable and pollution free. Thus, attempts should be made to harness solar and wind energy by employing different technologies and to go for rain water harvesting. It would help in sustainable economic development.
(c) Recyclable Products: The household waste materials like newspapers, old bottles, used batteries, etc should be accumulated and should be distinguished as biodegradable and non-biodegradable wastes. The biodegradable wastes are those wastes that can be decomposed and can be used as manure for organic farming. The non-biodegradable wastes like plastic, etc. should be recycled and re-used. Use of polythene bags should be discouraged.
(d) Judicious Use of Electricity: Electricity is a resource which is used in all households in our locality. It is one such resource which is already in short supply and may not be available to future generations, if we do not start using it judiciously.
Therefore, the easiest strategy for sustainable development is to use power in an efficient manner without wasting it. This can be done by using energy efficient equipment’s.