MARKING SCHEME - 2022 - 2023

ECONOMICS (030)
SECTION – A
MACRO ECONOMICS

1. (a) Statement 1 is true and statement 2 is false (1)

2. (a) Statement 1 is true and statement 2 is false (1)

3. (b) a unit of value (1)

(OR)

(b) Coins are issued by the Government of India. (1)

4. (b) Sells securities in the open market. (1)

5. (c) There is a decrease in the price of a foreign currency in terms of the

domestic currency. (1)
(OR)

(d) Autonomous transaction (1)

6. (d) 0.6
(OR)
(c) ₹800 crores

7. (a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct
explanation of Assertion (A).

8. (c) In the Managed floating exchange rate system, the central bank intervenes
to moderate exchange rate fluctuations.

9. (d) Assertion (A) is false, but Reason (R) is true.

10. (b) Exports will rise

11. GVA fc = (output × price) + (closing stock – opening stock) –

Intermediate cost + subsidy (1)
= (600 × 20) + (12,000 – 2000) – 12000 + 160
= (12,000) +10,000 – 12,000 + 160 (1)
= 22160 – 12,000
= 10,160 crores (1)
12. The transactions carried on by monetary authorities of a country, which causes
changes in official reserves are termed as official reserve transactions. (3)
Autonomous receipts and autonomous payments give rise to either deficit or
surplus on balance of payments. The central bank may finance a deficit by:
i) reducing reserves of foreign currency
ii) by narrowing from the IMF or monetary authorities.
This will be shown as decrease in reserves. The central bank may use surplus to
purchase foreign securities, foreign currency, gold etc, which may result in
increase in reserves of the nation.
A withdrawal from this reserve leads to decrease in foreign financial assets, and is
recorded on the credit side. Any addition to these reserves is increase in foreign
financial assets, and is recorded on the debit side.
(OR)

i) Investment from abroad: It is entered in the credit side of capital account as

it increases liabilities by inflow of foreign exchange. (1)
ii) Transfer of funds to relatives abroad: It is entered in the debit side of current
account as it is outflow of domestic currency without getting anything in return,
i.e., unilateral transfer. (1)
iii) Sale of machinery to abroad is export of goods and thus recorded in the Current
Account. (1)
Sale of machinery to abroad brings in foreign exchange and thus recorded on the
credit side.

13. (a) Given C = 80 + 0.75Y

And I = ₹200 crores
To calculate Y = 80 + 0.75Y + 200 (1)
Y – 0.75Y = 80 + 200
280 28000
Y = 0.25 = 25
= 1120 crores (1)

(b) New equilibrium level of income, if investment increases by ₹50 crores

Y = 80+0.75 Y +250
Y – 0.75Y = 80 + 250 (1)
330 = 1320 crores (1)
Y= 0.25

14. The Central Bank acts as a banker and as an agent to the government in various
respects: (4)
a) The Central Bank accepts receipts and makes payment for the
government and carries out exchange, remittance and other banking
operations.
b) It provides short-term credit to the government.
c) It provides foreign exchange to the government to repay external debt.
d) It advises the government on banking and financial matters.
15. (1 ½ )

The situation of deficient demand arises when planned aggregate expenditure falls
short of aggregate supply at the full employment level. It gives rise to deflationary
gap. Deflationary gap is the gap by which actual aggregate demand falls short of
aggregate demand required to establish full employment equilibrium. (1 ½ )

Measures to correct Deflationary Gap (any one) (1)

Government incurs expenditure on administrative and welfare activities.
An increase in expenditure will directly increase AD and help in correcting the
deflationary gap.
Lowering taxes raises disposable income of the people. Rise in disposable income
raises consumption expenditure. This will raise aggregate demand and thus help
in deficient demand.
(OR)

(4)

16. a) The Government’s objective of reducing the inequalities in income and wealth is
fulfilled. Government can impose higher rate of tax on income of the rich and on
the goods consumed by the rich. This will bring down disposable income of the
rich. The amount so collected can be spent on providing free services, like
education, subsidized food to the poor people. This will increase the disposable
income of the poor reducing the gap between rich and poor. (3)

b) Capital receipts: It refers to those monetary receipts which either create liability
for the government or cause reduction in the assets of the government. Sources of
capital receipts are: (3)
 * Borrowings: Government borrows from the market, i.e., from the public. It
also borrows from the central bank, i.e., Reserve Bank of India in India, and
from foreign governments and bodies. Raising of funds through borrowing
leads to increase in the liabilities of the government.
* Recovery of loans: Government grants various loans to state governments
or union territories. Recovery of such loans is a capital receipt as it
reduces the assets of the government.
* Disinvestment: It refers to the act of selling a part or the whole of shares
of selected public sector undertakings held by the government. They are
termed as capital receipts as they reduce the assets of the government.

17. a) Private Final Consumption Expenditure (PFCE):

PFCE = (i) – (iv) – (vi) – (xi) + (viii) +(ii) – (x)
NN𝑃𝑓𝑐 – GDCF – GFCE – NX + Consumption of fixed capital
+ Net Indirect Tax – Net factor Income from abroad (1)
= 50,000 -17,000 – 12,500 – 2000 + 700 + 1,000 – 500 (1)
= ₹19700 crores. (1)

b) Externalities also have impact on welfare but are not taken into account in
GDP. Some of the activities bring positive benefits and negative harm to
mass of people without any monetary exchange. (3)
(E. g) Construction of a flyover or a highway reduces transport cost and
journey time of its users who have not contributed anything towards its
cost. Expenditure on construction is included in GDP and positive
externalities flowing from it.

Similarly, GDP also does not take into account negative externalities.

Factories produce goods but at the same time create pollution of water and
air. The pollution harms people. The factories are not required to pay
anything for harming people. Producing goods increases welfare but
creating pollution reduces welfare.

(OR)

a) Net National Product at Market Price (NN𝑷𝒎𝒑)

= (Wages and salaries + Social security contributions by employers) +
(Rent + interest +Dividend + Undistributed profits + Corporate Tax) +
Net indirect tax – Net factor income to abroad (1)
= 1,000 + 100 +300 + 400 + 200 + 60 +50 +80 + (-) 20 (1)
= ₹2,170 crores. (1)
b) Do not include intermediate expenditure, as it is already included in the final
expenditure. In case intermediate expenditure, which may result in overestimation
of national income. (3)

Do not include expenditure on second hand goods, as it has already been included
in the national income of the year, they were bought/sold for the first time

Imputed expenditure on own-account production should be included, e.g.

production for Self-consumption, self-consumed services of owner-occupied
house.

Exclude the Expenditure on transfer payments as they are unilateral transfers

against which no good / service is provided in return. E.g. old age pension,
donations, scholarships, taxes etc.

SECTION – B
IED
18. (c) To stop the use of low denomination notes for terrorists activities. (1)
(OR)
(c) Both statements 1 and 2 are true

19. (d) iv. (d) (1)

20. (c) iii - (c) (1)

21. (b)Seventh (1)

(OR)
b) Use of thermal power

22. a) Statement 1 is true and Statement 2 is false. (1)

23. (b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the (1)
correct explanation of Assertion (A).

24. c) iii – c (1)

25. (a) Statement 1 is true and statement 2 is false. (1)

26. (c) Both statements 1 and 2 are true (1)

27. b) growth of students and professionals. (1)

(OR)
c) G – 7
28. i) Limiting the human population to a level within the carrying capacity of the
Environment. (3)
ii) Technological progress should be input efficient and not input consuming.
iii) Renewable resources should be extracted on a sustainable basis.
iv) For non-renewable resources rate of depletion should not exceed the rate
of creation of renewable substitutes.
c) Inefficiencies arising from pollution should be corrected.

29. Co-operative Credit Societies – This source of credit is the most economical and
important source of rural credit. It was set up with the aim of facilitating the
complete credit needs for small and medium farmers. (3)
Commercial Banks - Earlier, these banks were only received deposits from the
urban population and issued loans only for trade and industry. They generally
neglected agriculture and rural industries because by nature agriculture is a high-
risk venture. However, today these banks give both direct and indirect finance to
agriculture.
Regional Rural Banks – Government initiated Regional Rural Bank was set up
to examine the specific needs of landless workers, small and marginal farmers and
rural poor.
Land Development Bank – It essentially gives farmers a long-term loan option
upon the mortgage of their land at low-interest rates, over a period of 15 to 20
years. These type of loans are usually taken if the farmers have some land
developments work or digging of wells.
(OR)
i) Regulation of markets was the first step to create orderly and transparent (3)
marketing conditions. This policy benefits farmers as well as consumers.
ii) Provision of physical infrastructure facilities like roads, railways,
warehouses, godowns, cold storages and processing units.
iii) Cooperative marketing, in realizing fair prices for farmers’ products, is the third
aspect of government initiative. The success of milk cooperatives in
transforming the social and economic landscape of Gujarat and some other parts
of the country is testimony to the role of cooperatives.
iv) Assurance of minimum support prices (MSP for agricultural products).
v) Maintenance of buffer stocks of wheat and rice by Food Corporation of India.

30. Self-reliance refers to avoiding imports of those commodities which could be

domestically produced, in India itself. In the first seven five year plans, self-
reliance was considered a necessity in order to reduce our dependence on
imported food supplies, foreign technology and foreign capital. It was presumed it
may make India vulnerable to foreign interference in our policies. (2)

‘Modernization’ as aim of Five Year Plans refers to the adoption of new

technology by the producers to increase the output of goods and service.
It does not refer only to use of new technology but also to the change in social
outlook such as recognition of the rights of women to be equal as men. This is to
enable the use of the talents of women in the modern society. (2)
31. i) With the introduction of globalisation, foreign investors can now directly
invest in India. To promote this a Foreign Investment Promotion Board
(FIPB) has been set up. (4)
ii) New technology and management expertise is also brought along with
Foreign Direct Investment (FDI) Indian industries can make
technology agreements with the foreign suppliers of technology.
iii) There is unrestricted flow of goods and services, technology and
expertise between India and the rest of the world.
iv) It leads to improvement in the allocative efficiency of resources
and increases the average growth rate of the economy.
(OR)
In the context of Indian economy, it is very much required to be a member
of WTO (World Trade Organisation) after the introduction of economic
policies of liberalization, privatization and globalization.

i) WTO helps integration of the international states with equal opportunities

to trade in the international market.
ii) Developed country like India does get the chance to stand up against
the developed economies of the world.
iii) Growth of fair, transparent and healthy competition takes place due
to removal of tariff and non-tariff barriers.
iv) As an important member of WTO India has been in the forefront of
framing fair global rules and regulations. (4)

32. i) The population of Pakistan is very small and account for roughly about one-
tenth of China or India. China geographically occupies the largest area
among the three nations and its density is the lowest.
ii) One child norm was introduced in China in late 1970’s to check
population growth. This measure led to a decline in the sex ratio.
Due to one child norm, after few decades there will he more elderly people
in proportion to young people.
iii) The fertility rate is low in China and very high in Pakistan.
iv) Urbanisation is high in China. (4)

33. (a)Education Sector (2)

i) National Council of Educational Research and Training (NCERT):
ii) University Grants Commission (UGC):
iii) All India Council for Technical Education (AICTE):
Health Sector
i) Indian Council of Medical Research (ICMR)
(b) Expenditure on (2)
* Preventive medicine such as vaccination.
* Curative medicine such as interventions during illness.
* Social medicine such as spread of health literacy.
* Provision of clean drinking water.
* Good sanitation.
(c) i) The Government of India enacted the ‘Right of Education Act’ in 2009 to (2)
make free education a fundamental right of all children in the age group of
6 – 14 years.
ii) Government of India has started levying a 2 percent ‘education cess’ on all
Union taxes. The revenue earned from education cess is spent on elementary
education.
iii) The government sanctions a large outlay for the promotion of higher
education and new loan schemes for students to pursue higher education.
(OR)

a) Jobless growth takes place when a country produces more goods and services
without generating employment. (2)

b) Casualisation of workforce means movement from self-employment and

regular salaried employment to casual wage work. (2)

c) Sources of Data on Unemployment

Reports of Census of India. (2)
National sample Survey Organisation’s Reports of Employment and
Unemployment situation Directorate General of Employment and Training Data
of Registration with Employment Exchanges.

34. a) Protection from imports took two forms: tariffs and quotas. Tariffs are a tax on
imported goods; they make imported goods more expensive and discourage
their use. Quotas specify the quantity of goods which can be imported. Tariffs
and quotas restrict imports and protect the domestic firms from foreign
competition. (3)

b) Private entrepreneurs lacked sufficient capital for investment.

Government aimed at social welfare.
The government wanted to protect the indigenous producers from the foreign
competition. (3)