ANGELS’ ACADEMY SR. SEC.

SCHOOL
2023-2024
CLASS- XII
SUBJECT – ECONOMICS
HALF YEARLY
SET A
ANSWER KEY
1. (a) statement 1 is true and statement 2 is false
2. (a) Rs. 40
3. (a) Rs. 850
4. (a) transfer payment
5. Both are correct
6. (c) both statements are true
7. Assertion is false but reason is true
8. Rs. 1000 crores
9. Assertion is true but reason is false
10. Assertion is true but reason is false
11. In an economy, equilibrium level of income and employment is determined when AD (Aggregate
Demand) is equal to AS (Aggregate Supply). According to Keynes, AS may be assumed to be
elastic in an economy where full employment (of resources) is yet to be achieved. Accordingly,
AD becomes the principal determinant of equilibrium level of income.

In the following figure, AD represents Aggregate Demand curve and 45° line is the line of
reference, where AS =Y. Equilibrium level of income Y is determined at point E, where AD = AS.
Prior to point E, Aggregate Demand exceeds Aggregate Supply, leading to an increase in level of
income up to point E. Beyond point E, Aggregate Supply exceeds Aggregate Demand leading to a
fall in income back towards point E.
It is only when AS = AD, that the equilibrium is struck. Because the equality between AS and AD
implies that the desired level of output in the economy (as indicated by AS) is exactly equal to
the desired level of expenditure (indicated by AD) in the economy. So that, the entire output as
 planned by the producers (during an accounting year) is purchased by the buyers. There are no
undesired or unwanted inventories (stock of goods) with the producers.

OR
Domestic Income National Income
Measures the economic activity within the Measures the economic activity of a country, including both
domestic boundaries of a country. domestic and foreign sources.
Includes income earned by domestic Includes income earned by both domestic residents and foreign
residents, regardless of where they are residents within the country.
located.
Only includes income earned from Includes income earned from production within the domestic
production within the domestic economy. economy as well as from foreign sources, such as exports and
investments abroad.
Does not include income earned by Includes income earned by domestic residents abroad.
domestic residents abroad.
Considers only the value of goods and Considers the value of both domestic and foreign goods and services
services produced within the domestic used in the domestic economy.
economy.
Can be used to measure the standard of Can be used to measure the overall economic performance of a
living of domestic residents. country.
12. Fiscal deficit is the difference between total govt. receipts and total expenditures. Fiscal deficit
can lead to cost push inflation. The govt. being a major player in the market for borrowings and
doing away with the practice of getting currency notes printed exerts an upward pressure on
interest rates. Higher interest rates increases production cost, which is passed on to consumers,
thereby leading to higher prices. Fiscal deficit due to productive investment may have less
impact as it takes care of both the rise in demand and supply in comparison to expenditure
where productive activities do not occur.
13. Expenditure method = 1740
GNPFC = 1650
14. . Medium of exchange is the primary function and most important function of money.
Any commodity can be purchased or sold through the medium of money in other words, money
becomes the representative of general purchasing power. It is the function of money which has
made the work of exchange easy because money has the merit of general acceptability
This function of money has solved the problem of double coincidence of wants created by barter
system of exchange. Under the barter system, it was very rare when the owner of some goods or
service and at the same time he possessed that goods and services that the first person wanted.
OR
The sum of the Average Propensity to Consume (APC) and Average Propensity to save (APS) is
always equal to unity, i.e., APC + APS = 1. It is so because the money income can either be spent
on consumption or it can be saved. In case, we consider the ratio of consumption to money
income, we call it average propensity to consume, (APC), and the ratio of saving to income
represents average propensity to save (APS). It is for his reason that the sum of APC and APS
equals unity.
 Symbolically,
APC = C/Y and APS = S/Y
we know that Y = C + S
APC = APS = C/Y + S/Y = C+S/Y = Y/Y = 1
Hence APC + APS = 1
Yes, APS can be negative in a situation where S is negative (or when C > Y). This implies that the
consumption is greater than the income.
Example: Y=50, C = 60, S = -10
APS=SY=−1050=−0.2
15. (a) 1,25,000
(b) 5
16. (i) this is because of two reasons
(a) Exports refers to the purchase of domestically produced good by the rest of the world. Good
produced within the domestic territory of as country are to be treated as a part of GDP.
(b) Exports receipts refers to revenue of the firms from the sale of its output.
These are not the receipts of factor incomes from abroad which are to be in the form of
rent, interest, profit and wages.
(ii) (A) it should not be included because it is a transfer payment by the firm.
(b) It is included because it is investment expenditure ort capital formation
(c) It is not included because it is an intermediate consumption.
17. (a)
Basis Inflationary Gap Deflationary Gap
Meaning The excess of aggregate The shortfall of aggregate
demand above the level that demand below the level
is required to maintain that is required to maintain
full employment level of full employment level of
equilibrium is termed as equilibrium is termed as a
inflationary gap deflationary gap.
Effect Inflationary gap causes Deflationary gap causes
inflation and increases wages deflation and
and price level in decreases wages and
the economy. price level in the economy
Causes Some of the causes are as Some of the causes are as
follows: follows:
• Rise in one or more • Fall in one or more
components of AD components of AD
• Fall in tax rate • Rise in tax rate
• Rise in money supply • Fall in money supply
(c) Aggregate demand is a measurement of the total amount of demand for all finished goods
and services produced in an economy. Aggregate demand is commonly expressed as the
total amount of money exchanged for those goods and services at a specific price level and
point in time.
(d) Consumption Spending
 (e) Consumer spending represents the demand by individuals and households within the
economy. While there are several factors in determining consumer demand, the most
important is consumer incomes and the level of taxation.
(f) Investment Spending
Investment spending represents businesses' investment to support current output and
increase production capability.
OR
(i) The given statement is correct that high propensity to consume is a virtue as
consumption are considered as injection to the circular flow by increasing demand, as
increased demand leads to increased production of goods and services, leading to
increase in induced investment and hence, national income. On the other hand, saving
is known as leakages to circular flow by reducing consumption demand and hence
production, investment and national income fall.
(ii) (a) rising prices can be controlled by reducing govt expenditures
(b) Monetary policy measures such as increase in cash reserve ratio (explain)
18. (c) statement 1 is correct and statement 2 is incorrect
19. (a) both A and R are true and R is the correct explanation of A
20. (a) capitalist economy
21. Reason is true but assertion is false
22. Both A and R are true but R is not the correct explanation OF a
23. RAILWAY
24. Statement 1 is correct and statement 2 is incorrect
25. D -3
26. Women performs household activities
27. Assertion is true but reason is false
28. The abolition of intermediaries: the tenants are freed from being exploited by the Zamindar.
The ownership of landholdings: the policy of land to the tiller is based on the idea that the
cultivators will take interest in increasing output. Ownership of land enables the tiller to make
profit from the increased output.
Land ceilings: it means fixing the maximum size of land which could be owned by an individual.
The purpose of land ceiling was to reduce the concentration of land ownership in a few hands.
OR
a. Low level of literacy: the overall literacy level was less than 16%. Out of this, the female
literacy level was at a negligible low of about 7%.
b. Lack of adequate public health facilities: public health facilities were either unavailable to
large chunks of population or, when available, were highly inadequate. Water and air –
borne disese were rampant and took a huge toll on life.
c. High mortality rate: the overall mortality rate was very high. Infant mortality rate was quite
alarming about 218 thousands.
d. Low life expectancy: life expectancy was also very low – 44 years in contrast to the present
68 years.
e. Female Literacy level was about 7%.
f. Extensive poverty: extensive poverty prevailed in India during the colonial period which
contributed to the worsening profile of India’s population of time.
29. The given data indicates that over the given period, the proportion of workforce in primary
sector has gone down significantly. Whereas the employment share of both secondary sector
 and the service sector has increased gradually. While the share of secondary sector has gone up
by approximately 9%b recently, the corresponding figure for service sector has gone up by
approximately 7.1%
This also shows that dependency on agriculture remained high as secondary and service sector
wasn’t created enough employment.
30. (i) (a) it was an attempt to India corruption free
(b) It was expected to curb black money
(ii) This statement is appropriate. The argument in favour of this are
(a) By restricting the volume of imports, foreign currency will be saved for future generation
(b) Domestic industries will be protected from foreign competition by restricting imports. This
will increase domestic production enabling the local producers to become self sufficient
(c) This also helps government to regulate the industries
OR
During the reform period the growth of agriculture has declined because of following reasons
a. Public investment in agriculture sector has fallen in the reforms period
b. The removal of fertilizer subsidy has led to increase in the cost of production which has
several affected the small and marginal farmers
c. Due to reduction in import duties on agriculture product, removal of minimum support price
and lifting of quantitative restriction on agricultural products leads to increase in
international competition
d. Because of export oriented policy strategy in agriculture there has been a shift from
production for the domestic market towards production for the export market focusing on
cash crop in live of production of food grains.
31. (a) true because the supply of credit was irregular, exploit the cultivators, since the borrower are
illiterate the moneylenders often resorted to downright cheating such as failure to record the
repayment in full.
(b) False, economic growth is rise in GDP and economic development rise in GDP and equal
distribution of income.
32. Raju is right, the govt. intervention in these sector is essential; due to the following reasons
(i) Expenditure on education and health maker substantial long term impact and they
cannot be reversed
(ii) Individual consumers of education and health services do not have complete
information about the quality of services and their costs
(iii) The govt. has to ensure that private institutions in these sectors adhere to the
standards stipulated by the govt. and charge the correct price.
(iv) In developing economies, a substantial section of society cannot afford to have these
services by paying for it. Theses should be provided to them by the govt.
33. (i) the NEP 1991 is based on three major principles i.e. LPG
The chief casual factors
(a) Mounting fiscal deficit and BOP deficit
(b) Inflationary pressures
(c) Underperforming of the PSUs
(d) Depletion of the foreign exchange reserves
 (ii) I do not agree with the given statement. IMF and World Bank wanted to follow an open
economy model. The major condinatinality put downward by IMF before granting $ 7 billion
loan to India were
(a) Liberating trade and industry from wanted govt controls and restrictions
(b) Greater role of private sector in the functioning of an economy
(c) Shifting from closed economy to an open economy model or removal of trade barriers
between India and abroad.
34. (i) Worker population ratio is defined as the ratio between the total number of workers in a
country and the population in the country, multiplied by 100. Symbolically,
Worker population ratio
𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑜𝑟𝑘𝑒𝑟𝑠
× 100
𝑡𝑜𝑡𝑎𝑙 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛
(ii) Lack of agricultural marketing infrastructure often forces the farmers to sell their produce at low
prices for fear of spoilage or to pay off an imminent debt
This is tremendous distressed sale. Farmers tend to suffer highly on account of these sales, because
they not only get a low price for their produce, but are also cheated by use of false weights and are
charged a high commission.
(iii) Literacy rates in India have increased mainly because of the growth in the educational
facilities
However, with tremendous increase in the population, the absolute number of
illiterates have also increased.
OR
(i) (a) Organic farming requires inputs like organic manure, bio-fertilisers and organic
pesticides. Though they are cheaper yet farmers find it difficult to get them.
(b) The yield from organic farming is much less than that of modern agricultural
farming.
(c) The price of organic food is high, so it is difficult to sell them
(ii) The given statement is quite appropriate
Disadvantages:-
(a) For casual workers, the rights of the labour are not properly protected by labour laws.
(b) They do not have any compensation and support

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