SAMPLE QUESTION PAPER -1

ECONOMICS (030) CLASS XII

TIME: 3 HOURS M.M. – 80

Q.NO. SECTION A – MACRO ECONOMICS MARKS

1 C 1
2 C 1
3 C 1
4 A 1
5 B 1
6 B 1
7 C 1
8 D 1
9 D 1
10 A 1
11 Ans- It is only in the accounting sense that balance of payment always 3
balances. From the practical point of view, it should not be interpreted as a
situation of zero net financial obligation for a country. A negative balance on
the current account is equated with positive balance in the capital account. But
the positive balance in capital account may have been achieved through loans
from rest of the world. All loans are financial obligations to rest of the world.
12 Ans: NNP at FC =(i)+(ii)+(iii)+(vi-vii)+ (viii)-(ix)+(x)= Rs.1965 Cr. 3

OR
Ans : (i) No, because American embassy is not a part of domestic territory of
India.
(ii) Yes, because Indian embassy in China is a part of domestic territory of
India. (iii) Yes, because the company within India’s domestic territory earns
profit.
13 Ans: Y = C + S 4
Consumption expenditure = 2/3 of income
Savings = 1/3 of income
Initial savings = 1/3 x 50, 000 = 16,666.67
Current savings = 1/3 x 75, 000 = 25,000
Change in savings = 25,000 - 16,666.67
= 8,333.33
14 Ans. India lacks financial inclusion. Most of households stay away from the
financial system (briefly, the banking system). They do not have their bank
accounts. Accordingly, their savings remain as idle cash balances at home.
The banks are advised to open zero balance accounts involving minimum
possible formalities. This will encourage the small account holders to park
their savings in the banks. The banks can convert these savings into
investment by way of loans to the investors. Thus, unproductive household
savings may be converted into productive investment. This will make a
significant contribution to the process of growth and development.
OR
Ans :
Reverse repo rate is the rate at which commercial banks may park their
surplus funds with the Central Bank.
In order to correct deflation in an economy, Reserve Bank of India (RBI) may
 decrease the reverse repo rate. With the decrease in reverse repo rate, it
becomes less lucrative for commercial banks to park their surplus funds with
the central bank. Consequently, this may lead to increase in their lending
capacity. Thereby, increase in the Aggregate Demand pulls the economy out
of deflation.
15 Ans :Money supply has two components: currency and demand deposits. 4
Currency is issued by the central bank whereas demand deposits are created
by the commercial banks. They create money in the form of demand deposit
related to the loans offered by them. Demand deposits of the commercial
banks are many times more than their cash reserves. This is based on the
historical experience of the banks that cash withdrawal of funds is only a
small percentage of the total demand deposits. The money created by the
commercial banks in the form of demand deposits is mainly used for
investment or production purposes. Any rise in investment leads to many
times more increase in the national income of an economy, via., the multiplier
effect.
16 Ans(A) : i)Revenue Deficit: = Revenue expenditure - Revenue receipts = 3(1+1+1)+2
22,250 - 17,750 = 4,500 cr
ii) Fiscal Deficit: = Revenue expenditure + Capital expenditure - Revenue
receipts - Capita l receipts (net of borrowing) = Borrowings = , 12,500 crore
iii) Primary Deficit: = Fiscal deficit - Interest payments = , 12,500 - 5,000 =
7,500 crore
(B) Capital goods are physical assets a company uses to produce goods
and services for consumers. Capital goods include fixed assets, such
as buildings, machinery, equipment, vehicles, and tools.
(C) Government seeks to allocate resources with a view to balance the
goals of all sections of the society. Production of goods and services
which are injurious to health may be discouraged through taxation
policy. Similarly, production of goods of socially beneficial nature
may be encouraged through subsidies.
(D) Fiscal policy refers to revenue and expenditure policy of the
government or budgetary policy of the government. Principal
objectives of fiscal policy are the same as the principal objectives of
the government budget.
17 Ans(a).: (i) Included because it is a final consumption expenditure.
Ans(b).: Income is a flow concept because it is measured per unit of time
period, viz., and income per month or per annum. Flow of income is circular
because, stemming from the production of goods and services by the
producing units, it translates into income of the households (as rewards for
their factor services to the producing units), and income translates into
expenditure on the goods and services produced in the economy. Thus,
production (value addition), income generation and expenditure propel each
other to form a circularity, which is called ‘Circularity of Income’.
SECTION B – INDIAN ECONOMIC DEVELOPMENT
18 C 1
19 B 1
20 A 1
21 D 1
22 C 1
23 C 1
24 A 1
25 B
26 C 1
27 C 1
28 Ans. It is true that the features of Indian agriculture reveal the story of its 3
backwardness. The notable features are: (i) low productivity, (ii) small size
of holdings, (iii) subsistence-oriented farming, (iv) existence of disguised
unemployment, and (v) use of backward technology. Each of these features
points to the backwardness of Indian agriculture.
OR
Ans. The agricultural sector was adversely affected by the reform process in
the following manner:
Public investment in the agriculture sector especially in infrastructure like
irrigation, power, etc. has been reduced in the reform period. The reduction
of fertilizer subsidies has increased the cost of production affecting thereby
the small and marginal farmers. Increased international competitiveness due
to liberalization and reduction of import duties. Shift from food crops to
cash crops due to export-oriented policy in agriculture led to a rise in prices
of food grains.
29 Ans: The given statement is correct. 3
Human capital formation not only increases the productivity of available
human resources but also stimulates innovation and creates ability to adopt
new technology. Investment in education creates ability to adopt newer
technology, facilitates invention and innovation since educated workforce
generally adapts to modern technologies and innovation.
30 Ans: Following strategies were common : 4

i) Five year plans were common in all the three countries.

ii) Dominance of Public sector.
iii) Inward looking and import substitution policies of economic growth
were adopted by all the three countries.
31 Ans(i) Yes it is true because: 4(2+2)
(a) Organic farming involves a labour-intensive process of production. India
has an edge because it has abundance of labour supply in the rural areas.
(b) Organic farming depends on cattle manure as a significant farm input.
India has an edge as it has huge stock of cattle population.
(ii) Yes it is true because:
Unemployment implies inability to use the existing manpower. GDP level
would definitely be much higher if all those who are able to work and
willing to work are actually engaged in work.
OR
Ans. (i) 'Start-ups' are expected to generate opportunities of self-
 employment, and are therefore, solution to the problem of unemployment.
Employment and Unemployment 255
(ii) 'Start-ups' are to be aided with technical and financial support by the
government. Accordingly, these are expected to encourage the use of latent
resources (particularly entrepreneurial skill and small savings). When latent
resources are used, employment opportunities are bound to arise.

32 Ans: The above picture shows the adverse situation arises due to the melting 4
of glaciers as a result of Global Warming. The further impact may be:
-the loss of habitat for many animals like Polar Bear etc.
-the danger of submerging many cities on coastal areas, etc. Any other valid
point(s).
33 Ans. (a)Despite a rise in GDP, unemployment continues to stay as a serious 3
issue owing to the following reasons: +
(i) Owing to rising population, labour force continues to rise at an alarming 3
rate.
(ii) Education and employment of women in India is no longer a social
taboo. This has led to a significant rise in the labour force.
(iii) Strategy of growth is such that we are relying more on the western
technology which is labour-saving.
Briefly, a significant rise in the supply of labour on the one hand and a
significant reliance on the technology, on the other hand, has led to GDP
growth without a significant conversion of labour force into workforce.
Hence, unemployment stays to be a serious issue.
Ans(b). Yes, I agree because conventional model of development brings the
following:
(i) There is unabated/unchecked flow of industrial waste into the rivers and
other water bodies in the country.
(ii) There is a massive unauthorised construction (unmindful of the rules and
regulations), leading to air pollution that impairs the quality of life.
(iii) Dumping in open causes Soilpollution.
Ans: (c) India has the following advantages which makes it a favourite
outsourcing destination: (i) India offers an abundant supply of labour at a low
wage rate, and (ii) India has achieved a revolutionary breakthrough in the IT
industry, which is the basic ingredient of outsourcing.
Ans: (d) subsidies are necessary for poor and marginal farmers, but they also
put a huge burden on the government's finances. While subsidies can have a
positive impact on the agriculture sector and the economy, they can also
lead to market distortions if not implemented properly. Therefore, it is
important for governments to carefully consider the impact of subsidies
before implementing them.

34 Ans (i)- at the first earth summit at Rio-de-Janeiro, in brazil, world leaders set 3+3
 out what today is conventional wisdom : social and economic human
progress - cannot be divorced from environmental protection unless both are
advanced together, both will flounder together. Sustainable development is as
much about health, education and jobs, as it is about the ecosystems.
(ii)- United nations development programme ( UNDP ) has long promoted
alternative approaches to measure human progress, along with the human
development index ( HDI ). Today, we are building on this legacy by
exploring how to adjust the index to reflect environmental sustainability, so
that governments and citizens might better track real progress towards truly
sustainable development. This must be our collective objective.
**********************************************************************************