DATE: 19.12.

2020
D.A.V. PUBLIC SCHOOL,SECTOR-14,GURUGRAM
PREBOARD EXAMINATION -I(2020-21)
CLASS -XII
SUBJECT-ECONOMICS
TIME: 3 Hours M.M :80
General instructions-
1. This question paper contains two parts :
Part A - Macroeconomics (40 marks)
Part B - Indian Economic Development (40 marks)
2. Marks for questions are indicated against each question.
3. Question No. 1 to 10 and Question No. 18 to 27 (including two Case Based
questions) are one mark questions and are to be answered in one word or sentence.
4. Question number 11-12 and question number 28-29 are 3 marks questions and are
to be answered in 60 to 80 words each.
5. Question number 13-15 and question number 30-32 are 4 marks questions and are
to be answered in 80 to 100 words each.
6. Question number 16-17 and question number 33-34 are 6 marks questions and are to
be answered in hundred to 150 words each.

PART A :MACROECONOMICS
1.When we speak of depreciation, we do not mean it is : 1
(a) A replacement cost.
(b) Caused due to unforeseen obsolescence.
(c) The wear and tear of plants and machinery due to use.
(d) Termed as consumption of fixed capital

2. Suppose you are a member of the “Advisory committee to the finance minister of 1
India.” The finance minister is concerned about the rising revenue deficit in the
budget. Suggest any one measure to control the rising revenue deficit of the government.

3. State giving reason whether the following statement is true or false :

Defence services expenditure is a capital expenditure. 1
Or
Revenue deficit increases when the government fails to recover loans forwarded to
different nations. True or false? Give reasons.

4. Other things remaining unchanged when in a country the price of foreign currency
increases national income is : 1
(a) Likely to rise (b) Likely to fall
(c) Likely to rise and fall (d) Not affected
 5. When the price of exports rises, it will : 1
(a) Increase the supply of foreign currency.
(b) Increase the demand of exports.
(c) Decrease the supply of foreign currency.
(d) Create a surplus in the balance of payments account.

6. State giving reason whether the following statement is true or false : 1

To increase the money supply in the economy, the Central Bank increases the margin
requirement.

Read the following news report and answer questions 7 - 9

India must not weaken its resolve on inflation-

Under the flexible inflation-targeting regime adopted by the country in 2016, it is currently set at
4%, with leeway of 2 percentage points above and below it. After Covid pushed our economy
into a deep recession, calls for this target band to be relaxed. Doing so would grant our Central
bank more space to keep its policy rates of interest low for longer in support of growth. The
prime purpose of the 2016 shift, the creation of a stable monetary base for sustainable long-term
growth.
It is true that India's economic contraction, as seen in early estimates for the first half of 2020-21
necessitated cheap credit as RBI's top priority in its laudable efforts to keep commerce going
and contain the pain. Unless supply somehow keeps pace, a sudden increase in demand could
push prices up. Ample liquidity underlines this risk. Apart from using other tools of cash
infusion, our central bank has dropped its key policy rate - the one at which it lends money to
banks by more than a whole percentage points in 2020 so far.
Mint ; December 14th, 2020

7. When is ‘cheap credit’ RBI’s top priority? 1

8. “Our Central Bank has dropped it’s key policy rate-the one at which it lends money to
banks.” The statement refers to - 1
(a) Open Market operations
(b) Reverse repo rate
(c) Repo rate
(d) Cash Reserve Ratio
9. Excess demand may lead to ________________in prices. 1

10. Show with the help of diagram the concept of Excess Demand. 1
11. “India’s GDP forecast : Moody’s revises India’s 2020 GDP forecast to -8.9 % from - 9.6%,
raises 2021 forecast to 8.6%.” The Economic Times; November 12, 2020.
Does increase in GDP mean greater per capita availability of goods in the economy.
Give valid reasons in support of your answer. 3
Or
Why should the aggregate final expenditure of an economy be equal to the aggregate
factor payments ? Explain.

12. Giving reasons state how the following are treated in estimation of national income : 3
(a)Receipts from the sale of land
(b)Payment of interest by a firm to a bank
(c)Expenditure on maintenance of factory building by a firm

13. “ True fiscal responsibility - slashing public expenditure amid a recession is a recipe for
serious economic disaster.” - The Hindu; 7th December, 2020
State and discuss any two fiscal measures that may be taken by the government of India
to correct the situation indicated in the above news report. 4

14. What are Official Reserve Transactions? Discuss their importance in Balance of
Payments. 4
Or
‘Devaluation and Depreciation of currency are one and the same thing.’ Do you agree?
How do they affect the exports of a country?

15. “Boom time for billionaires - Amid a raging pandemic and record levels of contraction in
the economy, the riches of India's super-rich-multiplied in some instances by over three
times. About 39% of India's wealth belongs to the richest 1% of Indians.”
The Hindu;7th December 2020
Explain how the government can use the budgetary policy in reducing inequalities in
income. 4

16. Suppose there are only two firms, A & B in an imaginary economy. Firm A uses no raw
material and produces cotton worth ₹50 lakhs. Firm A gives ₹20 lakhs to workers as wages
and keeps the remaining ₹30 lakhs to be distributed as rent, interest and profits. Firm A
sells its cotton to firm B, who uses it to produce cloth. Firm B sells the cloth produced to
consumers for ₹ 200 lakhs and gives ₹60 lakhs as wages and keeps the remaining income
generated as profits. Assuming no depreciation and indirect taxes or subsidies, calculate
GDP by -
Value Added Method (b) Income Method (c) Expenditure Method 6
17. (a) State which of the following statements are true or false. Give valid reasons. (3+3=6)
(i) According to Keynesian theory of employment, Ex-Ante savings and Ex-post
savings are always equal.
(ii) In a two-sector economy, if income is zero, consumption will also be zero.
(b) In an economy the equilibrium level of income is ₹12000 crore. The ratio of marginal
propensity to consume and marginal propensity to save is 3:1. Calculate the additional
investment needed to reach a new equilibrium level of income of ₹ 20000 crore.
Or
(a) State which of the following statements are true or false. Give valid reasons. (3+3=6)
(i) According to Keynesian theory of employment, state of under-employment can
never exist in an economy.
(ii) In a two-sector economy, if income is zero, average propensity to consume will
also be zero.
(b) The saving function of an economy is given as :
S = -250 + 0.25Y
If the planned investment is ₹ 2,000 crores, calculate the following :
(i) Equilibrium level of income in the economy.
(ii) Aggregate Demand if income is ₹ 5,000 crores.

PART B: INDIAN ECONOMIC DEVELOPMENT

18. China succeeded in achieving higher growth rate than India because : 1
(a) It followed communist pattern of the economy.
(b) It started reforms early.
(c) It gave much importance to the manufacturing sector.
(d) It gave much importance to the agricultural sector.

19. What are the various means by which countries are trying to strengthen their own domestic
economies? 1

20. During the British colonial rule, the various social development indicators were not quite
encouraging. The overall literacy level was (i) _______________. Out of this the female
literacy level was at a negligible low of about (ii)_____________. 1
Or
Land reforms were successful in ____________and _______________because these states
had the government committed to the policy of ‘land to the tiller’.
 21. In 1991, an immediate measure to resolve the Balance of payment crisis was : 1
(a) To free the determination of rupee value in the foreign exchange market from the
government control.
(b) Devaluation of rupee against foreign currencies
(c) Removing the trade barriers-quotas and tariffs.
(d) Simplification of export and import procedures.

22. Identify the correct sequence of alternatives given in column II by matching them with
respective terms in column I. 1

Column I Column II

(a) A UN conference on climate change, held (i) Emphasised the concept of

in Kyoto, Japan in 1997 sustainable development

(b) The CPCB (central pollution control (ii) To fight global warming
board)

(c) The United Nations Conference on (iii) Emphasised on protecting the

Environment and Development (UNCED) future generation.

(d) The Brundtland Commission (iv) Identified 17 categories of

industries (large and medium
scale) as significantly polluting.

23. “The recent spurt in export of AYUSH products due to COVID-19 pandemic was a
direct reflection of their growing popularity. “
AYUSH stands for _______________________________________. 1

Read the following news report and answer and answer questions 7 - 9
A mirage sold as a panacea for the unorganised sector -
Universal social security-
The codes mandate benefits of Employees State insurance (ESI) and provident fund (PF) only
for workers belonging to establishments employing 10 workers or more. This leaves out nearly
80% of all Indian workers - the informal sector - from the ambit of these benefits. These workers
have to be satisfied with the promise of some special schemes for them in their as yet undefined
future. The most ubiquitous workers we encounter in our daily life - our domestic help or the
street vendor, or even the paperboy who delivers the morning newspaper home are all left out of
reckoning of this universal coverage.
Promise of minimum wage-
The second claim for universal coverage was of the minimum wage. As per the Rangarajan
committee the percentage of people below the poverty line in 2011-12 was 30.95 in rural areas
and 26.4 in urban areas. According to the union labour minister, at present only around 30% of
all workers get covered under various minimum wages schedules. The government's remedy in
the codes is to include a floor wage covering all workers. At various instances the labour
minister announced a floor wage of ₹ 178 per day in 2019; and more recently the Finance
Minister announced ₹ 202. This is only a little more than half the ₹ 375 per day recommended
by the Labour Ministry's Expert Committee on wage in 2019; and also lower than the poverty
line family expenditure estimated by the government- appointed Rangarajan committee in 2011,
corrected for inflation. -The Hindu; 7th December 2020.

24. Those who work in private sector establishments which employ less than 10 hired workers
are called ___________________. 1

25. What are the benefits enjoyed by formal sector workers? 1

26. ‘The percentage of people below the poverty line in rural areas is more than urban areas’.
Why ? 1
27 Over the last four decades (1972-2012) people have moved from self-employment &
regular salaried employment to ____________, Scholars call this process as
____________________. 1

28. What are the main difficulties faced in the human capital formation in India? Explain. 3
Or
What factors contribute to human capital formation? Explain.

29. Compare and analyse the given data with valid arguments: 3
Some Infrastructure in India and other countries

Country Investment in Access to Access to Mobile Power

Infrastructure Improved Improved subscribers / Generation
as a % of GDP water sources Sanitation 100 people (billion
(2014) (%) (2015) (%) (2015) (2015) kwh)(2016)

China 46 96 77 93 6015

India 34 94 40 79 1423

Pakistan 15 91 64 70 105

Indonesia 35 87 61 132 249

30. The agricultural sector appears to be adversely affected by the reform process. Why?
Or
Why has the industrial sector performed poorly in the reform period? 4
31. (a) What is ‘Agricultural marketing’ ? (1+3=4)
(b) Discuss the measures initiated by the government in developing the rural marketing
aspect.

32. “China did not have any compulsion to introduce reforms as dictated by the World Bank and
International monetary fund to Indian and Pakistan.” (2+2=4)
(a) Why did China introduce structural reforms in 1978?
(b) Evaluate the various factors that led to the rapid growth in economic development in
China in the post reform period.

33. “Environmental crisis : a grim reality - the ongoing pandemic and unpredictable weather
systems are signs of a planet in peril. The need of the hour is sustainable economic
development.” 6
Explain briefly five strategies of sustainable economic development.

34. (a) ‘The demonetisation of country undertaken by the government of India on November 8
2016 had an adverse impact on the economic activities’ (3+3=6)
Do you agree with the statement? Give reasons in support of your answer.
(b) Explain how import substitution can protect the domestic industry and why policy
makers adopt such a policy of protection.
Or
(a) What is goods and service tax? State its aim and features. (3+3=6)
(b) As an important member of WTO India has been in the forefront of framing fair global
rules, regulations and safeguards and advocating the interest of the developing world.
However, some scholars question the usefulness of India being a member of the WTO.
Examine the above statement