Kindly share you feedback about the website – Click here
GENERAL INSTRUCTIONS:
1. This question paper contains two sections: Section A – Macro Economics Section B – Indian Economic Development
2. This paper contains 20 Multiple Choice Questions of 1 mark each.
3. This paper contains 4 Short Answer Questions of 3 marks each to be answered in 60 to 80 words.
4. This paper contains 6 Short Answer Questions of 4 marks each to be answered in 80 to 100 words.
5. This paper contains 4 Long Answer Questions of 6 marks each to be answered in 100 to 150 words
SECTION A – MACRO ECONOMICS
1. Read the following statements carefully:
Statement 1: Consumption function assumes that, consumption changes at a constant rate as income changes.
Statement 2: Autonomous consumption is the ratio of total consumption (C) to total income (Y).
In light of the given statements, choose the correct alternative from the following:
a) Statement 1 is true and Statement 2 is false.
b) Statement 1 is false and Statement 2 is true.
c) Both Statements 1 and 2 are true.
d) Both Statements 1 and 2 are false.
View AnswerAns. b) Statement 1 is false and Statement 2 is true.
2. For a closed economy (with no foreign trade), which one of the following is correct?
a) GDP = GNP
b) GDP > GNP
c) GDP < GNP
d) GDP + GNP=0
View AnswerAns. a) GDP = GNP
3. The value of __________ can be greater than one.
(Choose the correct alternative to fill up the blank)
a) Marginal Propensity to Consume
b) Average Propensity to Consume
c) Marginal Propensity to Save
d) Average Propensity to Save
View AnswerAns. b) Average Propensity to Consume
4. As per the Reserve Bank of India (RBI) press report, dated 29th December, 2022: “Net external commercial borrowings to India recorded an outflow of US$ 0.4 billion in the second quarter (2022-23)”
The above transaction will be recorded in the _______ account on ______ side of Balance of payments account of India. (Choose the correct alternative to fill up the blanks)
a) current, credit
b) current, debit
c) capital, credit
d) capital, debit
View AnswerAns. d) capital, debit
5. “The value of all goods and services can be expressed in monetary units.” On the basis of the given statement, identify the function performed by money:
a) Medium of exchange
b) Store of Value
c) Unit of account
d) Means of standard of deferred payments
View AnswerAns. c) Unit of account
6. Find the missing figures and choose the correct alternative:
Alternatives:
a) 640,1000,4000,5000
b) 960,5000,4000,1000
c) 640,4000,1000,5000
d) 640,5000,4000,1000
View AnswerAns. d) 640,5000,4000,1000
7. Graphically, Aggregate Demand function can be obtained by vertically adding the _________ and _________ function. (Choose the correct alternative to fill up the blanks)
a) consumption, saving
b) consumption, investment
c) investment, saving
d) aggregate supply, consumption
View AnswerAns. b) consumption, investment
8. Identify the correct reason(s) that may affect the demand for foreign exchange in an economy.
I. Imports of visibles
II. Exports of invisibles
III. Remittances by residents working abroad
IV. Purchase of assets abroad
Alternatives:
a) I and II
b) II and III
c) III and IV
d) I and IV
View AnswerAns. d) I and IV
9. Suppose for a given economy,
S= -60 + 0.1Y
I= ₹ 4,000 crore
(Where S = Saving Function, Y = National Income and I = Investment Expenditure)
Equilibrium level of Income would be ₹ ______ crore.
(Choose the correct alternative to fill up the blank)
Alternatives:
a) 4,000 b) 40,000 c) 40,600 d) 60,400
View AnswerAns. c) 40,600
10. Read the following chart carefully and choose the correct alternative:
Alternatives:
a) Interest received on loans
b) Multilateral Loans
c) Portfolio Investment
d) Government Aid
View AnswerAns. c) Portfolio Investment
11. ‘Current account deficit in an economy must be financed by a corresponding capital account surplus’.
Do you agree with the given statement? Give valid reason(s) in support of your answer.
Ans. Yes, the statement can be agreed upon.
Since, in accounting sense; Current Account + Capital Account ≡ 0
If an economy is facing the situation of current account deficit (CAD), the same must be financed through surplus in capital account.
CAD may be setoff through net capital inflows. Transactions like selling off assets or borrowing from abroad, may be instrumental in balancing CAD in Balance of Payments account
12. (A) On the basis of the given data, estimate the value of Domestic Income:
Ans. (A) Domestic Income (NDP at FC) = (i) + (v) + (ii) + (iii) + (v) – (viii) – (vi)
= 600 + 200 + 200 + 40 + (-40) – 40 – 120
= ₹ 840 crore
OR
(B) State the meaning of the following:
(i) Externalities (ii) Operating Surplus (iii) Consumption Goods
View AnswerAns. (i) Externalities – Externalities refer to benefits (positive externalities)/ harms (negative externalities) which are caused by one entity to another without being paid/ penalised for it.
(ii) Operating Surplus – Operating Surplus is the sum total of rent, royalties, interest and profits. It is also known as non-wage income.
(iii) Consumption goods – Goods which are consumed by the ultimate consumers or meet the immediate need of the consumer are called consumption goods. It may include services as well.
13. For a hypothetical economy, the government incurs an investment expenditure of ₹1000 crore. If the value of Marginal Propensity to Save (MPS) falls from 0.25 to 0.10.
Calculate the value of increase in income due to change in the value of Marginal Propensity to Save (MPS)
View AnswerAns. Given, Change in Investment (DI) = ₹ 1,000 crore
Increase in Income (D𝐘)= 10,000 – 4,000 = ₹ 6,000 crore
14. (A) “In an economy, ex-ante Aggregate Demand is more than ex-ante Aggregate Supply.” Elaborate the possible impact of the same, on the level of output, income and employment.
View AnswerAns. (A) When ex-ante Aggregate Demand is more than ex-ante Aggregate Supply, it means that households are planning to consume more than what the firms expect them to. This will lead to unintended fall in inventories.
To restore the desired /intended level of inventories, producers may expand production. As a result, there may be an increase in the level of output, employment and income in the economy.
OR
(B) “With an objective to reduce inflation, Reserve Bank of India may promote the commercial banks to park their surplus funds with it.”
Discuss the rationale behind the step taken by the Reserve Bank of India.
View AnswerAns. (B) Reverse repo rate is the rate at which commercial banks may park their surplus funds with the Central Bank.
In order to decrease inflation in an economy, Reserve Bank of India (RBI) may increase the reverse repo rate. With the increase in reverse repo rate, it becomes lucrative for commercial banks to park surplus funds with the central bank. Consequently, this may lead to reduction in their lending capacity. Thereby, fall in the Aggregate Demand curbs the level of inflation.
15. Elaborate the ‘Banker’s Bank and Supervisor’ function performed by the Reserve Bank of India.
View AnswerAns. Central bank accepts the deposits from commercial banks and also advances loans to them as and when required. It maintains reserves of all commercial banks and utilizes it to settle inter-bank claims.
Being the supreme authority of the banking system, it acts as the financier of last recourse to the commercial banks. It forwards short-term credit to the commercial banks against approved securities.
The Central Bank supervises, regulates and controls the commercial banks. The regulation of banks may be related to their licensing, branch expansion, liquidity of assets, management, amalgamation and liquidation.
16. (A) On the basis of the given information, calculate the value of:
(i) Fiscal deficit
(ii) Primary deficit
(B) State any two features of public goods.
View AnswerAns. (A) (i) Fiscal Deficit = (iii) + (ii) – (iv)
= 10 + 15 – (50/100 x 20)
= ₹15 crore
(ii) Primary Deficit = Fiscal Deficit – (v)
= 15 – 4
= ₹11 crore
(B) Two features of public goods are:
· Non- excludable
· Non- rivalrous
OR
(C) Explain the economic stability objective of Government Budget.
View AnswerAns. (C) The government may need to correct the fluctuations (income, employment and prices) in the economy. These may depend upon the level of Aggregate Demand, which in turn depends upon the spending decision of households and firms. To stabilize the economy, under the state of inflation/deflation, Government may alter taxes/expenditure, accordingly.
(D) ‘Under the Ayushmaan Bharat Scheme, the Government provides free medicines to the economically backward section of the society’. Identify and discuss the nature of the government expenditure indicated in the given statement.
View AnswerAns. (D) Expenditure incurred by the government under Ayushmaan Bharat Scheme for providing free medicines to the economically backward section does not lead to any creation of assets or reduction in liabilities. Hence, it can be classified as revenue expenditure.
17. (a) Giving valid reasons, explain how the following would be treated while estimating domestic income?
(i) Payment made by American tourist for goods purchased in India.
(ii) Tomatoes grown by Ms. Puja in her kitchen garden.
(b) “Machine purchased by a firm is always a capital good.” Do you agree with the given statement? Give valid reasons for your answer.
View AnswerAns. (a) (i) Yes, it will be included in domestic income as goods purchased by American tourist is the expenditure made by him in India and will be included as exports.
(ii) No, it will not be included in domestic income because it is difficult to ascertain their market value. Moreover, such transactions are not undertaken for any monetary consideration.
(b) No. Capital goods are those final goods which help in the production of other goods and services. A machine purchased by a firm will be a capital good when it is used for the production of other goods and services. However, if it is purchased by a firm for resale purposes in the same year, it will be considered as an intermediate good and not a capital good.
SECTION B – INDIAN ECONOMIC DEVELOPMENT
18. Identify the correct combination of the ‘Goals of Indian Five Year Plans’:
a) Growth, Equality, Modernisation, Self-Reliance
b) Development, Equality, Modernisation, Sustainability
c) Good Health, Education, Modernisation, Sustainability
d) Growth, Equity, Modernisation, Self-Reliance
View AnswerAns. d) Growth, Equity, Modernisation, Self-Reliance
19. ‘China has performed exceedingly well in various health and economic indicators
Identify which of the following is not a health indicator?
a) Infant Mortality Rate (per 1000 live births)
b) Life Expectancy at Birth (years)
c) Percentage of people below poverty line (National)
d) Maternal Mortality Rate (per 1 lakh births)
View AnswerAns. c) Percentage of people below poverty line (National)
20. The shackles of agriculture during the colonial rule were permanently broken by the Green revolution that resulted from the application of ________. (Choose the correct alternatives to fill up the blank)
I. High Yielding Varieties (HYV)
II. Mechanization of Agriculture
III> Chemical Fertilizers and Pesticides
IV. Organic Fertilizers and Pesticides
Alternatives:
a) I, II, IV
b) I, II, III
c) II, III, IV
d) I, III, IV
View AnswerAns. b) I, II, III
21. Study the following picture and answer the given question:
Women in rural households take up bee-keeping as an entrepreneurial activity. Such kind of activities may be envisaged under ____________ as diversification activity.
(Choose the correct alternative to fill up the blank)
a) Animal husbandry
b) Fisheries
c) Horticulture
d) Poultry
View AnswerAns. c) Horticulture
22. Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from those given below.
Assertion (A): In 1991, as an immediate measure to resolve the Balance of Payments crisis, the rupee was devalued against foreign currencies.
Reason (R): Devaluation of currency was eminent, to replenish the deteriorated foreign exchange reserves.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true and Reason (R) is NOT the correct explanation of Assertion (A)
c) Assertion (A) is true, but Reason (R) is false
d) Assertion (A) is false, but Reason (R) is true
View AnswerAns. a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
23. Under _________ in China, 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 prices.
(Choose the correct alternative to fill up the blank)
a) Commune System
b) Great Leap Forward
c) Dual Pricing
d) Great Proletarian Cultural Revolution
View AnswerAns. c) Dual Pricing
24. Micro credit programmes play a vital role in ensuring an overall development of the rural economy as they____________.(Choose the correct alternative to fill up the blank)
(i) provide financial support
(ii) lead to women empowerment
(iii) enhance the reach of formal credit system
Alternatives:
a) (i) and (ii)
b) (ii) and (iii)
c) (i) and (iii)
d) (i), (ii) and (iii)
View AnswerAns. d) (i), (ii) and (iii)
25. _______may be defined as the measure of the extent of demographic participation in the social and political decision making.
(Choose the correct alternative to fill up the blank)
a) Economic indicator
b) Liberty indicator
c) Health indicator
d) Demographic indicator
View AnswerAns. b) Liberty indicator
26. Read the following statements carefully:
Statement 1: The nature of unemployment problem in India is uni-faceted.
Statement 2: Worker-Population ratio is an indicator used for analysing the employment situation in a country.
In light of the given statements, choose the correct alternative from the following:
a) Statement 1 is true and Statement 2 is false.
b) Statement 1 is false and Statement 2 is true.
c) Both Statements 1 and 2 are true.
d) Both Statements 1 and 2 are false
View AnswerAns. b) Statement 1 is false and Statement 2 is true.
27. From the set of the events given in column I and corresponding facts given in Column II, choose the correct pair of statements:
Alternatives:
a) A-I b) B-II c) C-III d) D-IV
View AnswerAns. c) C-III
28 (A) “During the colonial period, a number of socio-economic indicators were in a dilapidated state.”
List any three such indicators that led to the worsening of India’s demographic profile.
View AnswerAns. (A) India’s demographic indicators were in a dilapidated state during the colonial period as:
● The overall literacy level was less (below 16%).
● Life expectancy was very low (32 years).
● Alarming infant mortality rate (218/1000).
OR
(B) “The pre-independent India’s occupational structure experienced growing regional variation.”
Justify the above statement with valid explanation.
View AnswerAns. (B) The pre-independent India’s occupational structure experienced growing regional variation as:
● Parts of Madras Presidency, Bombay and Bengal witnessed a decline in the dependence of the workforce on the agricultural sector with a commensurate increase in the manufacturing and the services sectors.
● There had been an increase in the share of workforce in agriculture in states such as Orissa, Rajasthan and Punjab.
29 “Ravya was initially working as an office clerk in a firm. In the pursuit to attain, a higher position and income, she attended a few on-the-job training sessions. These sessions contributed positively to her skills and expertise.”
Explain the impact of Ravya’s decision on human capital formation.
View AnswerAns. On-the-job trainings have become an integral part of work environment in the recent times as they add to the productive capacity of employees. Firms encourage such trainings, as the benefits outweighs the cost of these trainings. It enables employees to develop skills and adapt modern technologies/ideas.
Thus, Ravya’s decision to attend on-the-job training sessions will have a positive impact on human capital formation.
30 “In the late 1970s, China introduced the One-child policy that led to arrest in the population coupled with skewed sex ratio.”
Justify the given statement with valid arguments in support of your answer.
View AnswerAns. China is the most populous country in the world. Its annual population growth rate was very high. The one-child norm introduced in China in the late 1970s is the major reason for fall in the population growth rate.
However, this measure led to a decline in the sex ratio. The number of females per 1000 males in China is approximately 949. One-child policy and prevalent son preference is the prime reason behind the skewed sex ratio.
31 (A) State and elaborate whether the following statements are true or false, with valid arguments:
(i) Agricultural marketing is a process that ensures the transportation of various agricultural commodities only.
(ii) Jan-Dhan Yojana has been a crucial step for financial resource mobilization in the Indian economy.
View AnswerAns. (A) (i) False. Agricultural marketing is a process that involves the assembling, storage, processing, transportation, packaging, grading and distribution of different agricultural commodities across the country.
(ii) True. Jan-Dhan Yojana has promoted thrift habits and efficient allocation of financial resources, particularly in rural areas. Formal banking system has mobilized a substantial amount under this yojana.
OR
(B) “Since independence, the government has been playing an important role in generating employment directly or indirectly.” Discuss.
View AnswerAns. Ans. Various government departments/enterprises employ people and increase their output of goods and services, leading to direct employment.
When the output of goods and services from government enterprises increases, then private enterprises which receive raw materials from government enterprises will also raise their output. Subsequently, private enterprises using these output are indirectly benefitted with increase in scale of production. This leads to an increase in the number of employment opportunities indirectly in the economy.
32.
Identify the situation depicted in the given image. Suggest the impact of the indicated situation, on the Indian economy.
View AnswerAns. The given image depicts the drift of the Indian workforce from the formal sector to the informal sector employment. This situation is popularly known as ‘informalisation of the workforce’.
In India, informal sector includes millions of farmers, agricultural labourers, non-farm casual wage labourers, owners of small enterprises and the self-employed people. The workforce in the informal sector does not get regular income; they do not have any protection or regulation from the government. Workers may be dismissed without any compensation/notice.
The Government is taking steps to safeguard the interests of the workers in the informal sector.
33. (A) Green revolution transformed India from a subsistent food grain economy to a food surplus economy.”
(B) “In order to protect domestic industries, India followed the regime of restrictions on imports.”
Briefly outline and discuss such steps taken by the government to promote import substitution policy.
View AnswerAns. (A) Before the advent of Green Revolution, a large proportion of agricultural produce was consumed by the farmers themselves instead of being sold in the market. Green Revolution led to an increase in the growth of agricultural output.
After the Green Revolution, a greater proportion of the agro-produce (wheat and rice) was sold by the farmers in the market. That led to the attainment of marketed surplus and converted India into a food surplus economy from the food scarce one.
(B) In order to protect domestic industries, India followed the import substitution policy. This policy aimed at substituting imports with domestic production. The domestic industries were protected from foreign competition by using the following tools:
i. Tariffs: Tariffs are a tax on imported goods that make imported goods dearer and discourage their usage.
ii. Quotas: Quotas specify the quantity of goods that can be imported.
OR
(C) “In India, after 1947 land reforms were introduced on a large scale.”
In the light of the given statement, discuss any one such land reform.
(D) “In the post-reform period, the Government of India decided to retain profit-making Public Sector Undertakings (PSUs). It provided a special status to PSUs to enable them to expand in the global market.”
Do you agree with the given statement? Give valid reasons in support of your answer.
View AnswerAns. (C) Land reforms were inevitable in the post-independence era. The policy makers of independent India introduced land reforms such as land ceiling, abolition of intermediaries etc.
Land ceiling means fixing up the maximum size of landholding which could be owned by an individual. This step was essential to promote equity in the agricultural sector so as to reduce the concentration of land ownership in a few hands.
(D) Yes. In order to improve efficiency, infuse professionalism and enable Public Sector Undertakings (PSUs) to compete more effectively in the liberalised global environment, the government identified profit making PSUs. Government declared them as Maharatnas, Navratnas and Miniratnas. PSUs were given greater managerial and operational autonomy, in taking various decisions.
As a result, over the years these Maharatnas, Navratnas and Miniratnas have performed exceedingly well and established themselves as market leaders.
34. Read the following text carefully:
Sustainable development is the development that meets the needs of the present, without compromising the ability of future generations to meet their own needs. India is critical in determining the success in a pursuit to achieve sustainable development.
The Union Budget 2023 presented by Finance Minister Nirmala Sitharaman builds on India’s commitment to lead the global action against climate change, preserve biodiversity and support sustainable development. The government has accelerated the pace of Green Growth as India is facing the grave reality of depleting natural resources, limited supply of water, minerals, and fossil fuels. In a bid to counter the climate threat, India has committed to achieving net zero by 2070; released a low-carbon development strategy; and introduced the concept of ‘LiFE’ (Lifestyle for Environment) to promote responsible consumption.
The Green Growth actions include several pointed measures that would facilitate the muchneeded steady decarbonization of Indian industries, reduce dependency on fossil fuel imports and establish technology and market leadership in this sunrise sector. For instance:
The allocation of Rs 35,000 crore of priority capital investment towards achieving net zero by 2070 and clean energy transition ensures the country’s energy security.
The outlay of Rs 19,700 crore for the Green Hydrogen Mission will mobilise a green hydrogen production capacity of 5 metric million tonnes by 2030.
Moreover, to encourage the optimal use of wetlands, enhance biodiversity, carbon stock, eco-tourism opportunities and income generation for local communities, the Amrit Dharohar scheme will be implemented over three years.
On the basis of the given text and common understanding, answer the following questions:
(i) Define sustainable development.
View AnswerAns. (i) Sustainable development is the development that meets the need of the present generation without compromising the ability of the future generations to meet their own needs
(ii) Briefly elaborate, any two reasons behind the objective of Green Growth being set up by the Indian Government.
View AnswerAns. (ii) The Indian Government has accelerated the pace of Green Growth as India is:
● Facing the grave reality of depleting natural resources, limited supply of water, minerals, and fossil fuels. This has created a number of environmental issues in the recent past in India.
● To counter the climate threat, India has committed to achieve net zero target by the year 2070. This will facilitate much needed decarbonization of Indian industries, reduce dependency on fossil fuel imports and to become a market leader in the sunrise industry.