DAY STAR SCHOOL

II – TERM EXAMINATIONS – 2019

CLASS – XII, SUB: ECONOMICS
TIME: 3 HOURS, M.M: 80
(Candidates are allowed additional 15 minutes for only reading the paper.
They must NOT start writing during this time.)
PART- I
Answer all questions

Question 1 Answer briefly each of the following questions: [10x2]

(i) What do you mean by Micro economics?
(ii) Give two reasons for the downward slope of the Demand curve.
(iii) What is meant by Income elasticity of Demand?
(iv) Write the Law of Supply.
(v) Explain the meaning of M1 and M4 supply of money.
(vi) Write any two causes of disequilibrium in Balance of payment.
(vii) What is meant by deficit financing?
(viii) How is personal income calculated from private income?
(ix) Differentiate between intermediate and final goods.
(x)If the value of Mpc is 0.9, find the value of Multiplier.

PART- II
Answer any five questions

Question 2
a) Define price elasticity of supply. Draw when price elasticity of supply is: [3]
i)Equal to one.
ii)Greater than one.
b) Explain the relation between AC and MC with diagram. [3]
c) Explain with the help of a diagram the consumer’s equilibrium through utility approach. [6]

Question 3
a) Find out how much quantity/units of the commodity X and Y will a rational consumer buy in order to get
maximum satisfaction. [3]
Units MUx(units) MUy(units)
1 50 48
2 45 40
3 40 32
4 35 24
5 30 16
6 25 8
Note: prices of goods X and Y are 5/units and 8/units respectively. Income = 46.

b) The quantity demanded of a commodity at a price of 10 per unit is 40 units. Its price elasticity of demand
is -2.The price fall by 2 per unit. Calculate the quantity demanded at the new price. [3]
c) Study the diagram and answer the questions: - [6]

a).Pe is the equilibrium price. What prompt the government to

fix the price at P1?
b). What would be the effect of fixing price at P1.
Question 4
a) Explain the following types of cost:- [3]
(i). Social cost
(ii).Real cost
(iii). Implicit cost
b) Discuss three differences between Perfect competition and Monopolistic competition. [3]
c) Explain how a producer can attain equilibrium under Perfect competition through:- [6]
TR and TC approach.

Question 5
a) Write two differences between short run production function and long run production function. [3]
b) With the diagram explain how a perfectly competitive firm earns normal profit in short-run equilibrium. [3]
c) Explain the Law of variable proportion with the help of a diagram [6]

Question 6
a) Explain the primary functions of money. [3]
b) Discuss two functions of central bank. [3]
c) Explain the mechanism of credit creation by commercial banks with the help of an example. [6]

Question 7
a) Explain how public expenditure can be used as a tool to attain economic stability. [3]
b) How can the government correct an adverse BOP through the following:- [3]
i) Export promotion
ii) Import control.
c) Define fiscal deficit, primary deficit and revenue deficit. Discuss their implications with references to India. [6]

Question 8
a) Show relationship between APC and APS. [3]
b) Differentiate between Induced and Autonomous Investment with the help of a diagram [3]
c) Draw a diagram and explain the situation of excess demand in an economy. Also explain two monetary policies
to correct it. [6]

Question 9
a)Define compensation of employees and its main components. [3]
b) With the help of diagram, show the circular flow of Income in a three-sector model. [3]
c)Calculate National income from the following data by using Income method and Expenditure method: [6]

Items (₹) in crores

(i). Operating surplus 720

(ii). Net Exports 20
(iii). Interest 130
(iv). Private final consumption expenditure 2,000
(v). Net indirect tax 20
(vi). Compensation of employees 1,900
(vii). Net capital formation. 400
(viii). Consumption of fixed capital 100
(ix). Net factor income from abroad (-)20
(x). Change in stock 50
(xi). Rent 200
(xii). Employers contribution to SSI 100
(xiii). Government final consumption expenditure 600