SKV VIDHYAASHRAM SR.

SECONDARY SCHOOL
Economics (030)
Class XI | 2024-25

TERM EXAMINATION
Maximum marks: 80 Time Allowed: 3 hours
General Instructions:
1. This question paper contains Section A, B, C and D of 34 questions.
2. Answers should be brief and to the point.
3. Answers to the questions carrying 3 marks may be from 50 to 75 words.
4. Answers to the questions carrying 4 marks may be about 150 words.
5. Answers to the questions carrying 6 marks may be about 200 words.
6. Attempt all parts of the questions together.
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SECTION-A
I. Answer the following (1X20=20)
1. Read the following statements carefully:
Statement 1: The level of consumption has a direct impact on the amount of savings the households can
accumulate over time.
Statement 2: Higher consumption often lead to lower savings, while lower consumption tend to facilitate
higher levels of savings. In light of the given statements, choose the correct alternative from the following:
a) Statement 1 is true and Statement 2 is false. b) Statement 1 is false and Statement 2 is true. c) Both
Statements 1 and 2 are true. d) Both Statements 1 and 2 are false.
2. The scenario which would lead to an increase in GDP, but might not necessarily improve overall
welfare?
a) Reduction in income inequality b) Rapid growth of the financial sector c) Expansion of environmentally
harmful industries d) Increased government investment in education and healthcare
3. If the government implements a tax cut and people use most of their extra money to increase their
consumption, this suggest about the MPC that:
a) It is not applicable in this situation b) It is low, indicating people prefer saving over spending c) It is
negative, indicating people are decreasing their consumption d) It is high, indicating people are
responsive to changes in income
4 A positive balance in the Capital Account of the Balance of Payments
of a country indicates that:
a) trade balance is positive b) currency is depreciating c) it is experiencing a budget surplus
d) it is receiving more foreign investments than it is making abroad
5. In the web of financial interactions, when individuals harmoniously enter into agreements to honor the
repayment of a loan at a designated point in the future, they are engaging in which pivotal function of
money:

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a) a safe place to keep the wealth b) a tool that helps to compare the value of different things
c) a bridge between people who want to buy things and people who want to sell things d) a steady
foundation that helps to agree on how to settle debts or loans at a later time
6. Punjab National Bank receives a deposit of 80,000 and the reserve requirement is 10%. If the bank
decides to hold reserves equal to 20% of the deposit instead of the required amount, how much excess
reserve does the bank hold?
a) 4,000 b) 8,000 c) 12,000 d) 16,000
7. The interaction between the concept of the price level and the dynamics of aggregate demand in an
economy is interconnected as:
a) the price level increases, aggregate demand increases b) the price level increases, aggregate demand
decreases c) changes in the price level have no impact on aggregate demand d) the relationship between
the price level and aggregate demand is unpredictable.
8.Which of the following is a step that the central bank will take to encourage greater investment in the
economy?
a) It will look to increase the cash reserve ratio b) It will look to reduce the cash reserve ratio c) It will look
to increase the bank rate d) It will look to sell the government securities in the open market
9.Which of the following is a step that the central bank will take to increase the overall availability of
credit?
a) It will sell the government securities in the market b) It will buy more government securities from the
market c) It will raise the reverse repo rate d) It will raise the repo rate
10. Which of the following statements is true about the Indian monetary system?
a) The Indian monetary system is based on the gold standard b) The Indian monetary system is based on
the credit money standard c) The Indian monetary system is based on the paper standard
d) The Indian monetary system is based on the metallic standard
11. Which of the following statements represents the main function of the central bank in a country?
a) It is responsible for the regulation over the supply of money in the market b) It is responsible for the
issuance of notes within the country c) It acts as a banker both to the government and to other banks in the
country d) All of the above
12. Which of the following statements is true about demand deposits?
a) It includes both fixed deposits and current account deposits b) It includes both savings account deposits
and fixed deposits c) It includes both current account deposits and savings account deposits d) It includes
fixed deposits, current account deposits and savings account deposits
13. Which of the following statements is true about the central bank?
a) It regulates the entire banking system in the country b) It is under the ownership of the central
government of a country c) It is the apex bank of a country d) All of the above
14. Which of the following statements about the bank rate is true?
a) Bank rate is different from interest rate b) Bank rate is the discount rate provided by the central bank of
a country c) Bank rate is defined as the rate at which the central bank of a country gives credit to the
commercial banks d) All of the above
15. Which of the statements gives a true picture of the effect of the central bank selling securities in the
market?
a) The credit creation capacity of commercial banks will fall b) The credit creation capacity of commercial
banks will rise c) The credit creation capacity of commercial banks may rise or fall d) There is no effect on
the credit creation capacity of commercial banks
16.Which of the statements gives a true picture of the effect of lowering the cash reserve ratio by the
central bank of a country?
a) The lending capacity of commercial banks will increase b) The lending capacity of commercial banks

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will decrease c) The lending capacity of commercial banks may increase or decrease d) There is no effect
on the lending capacity of commercial banks
17. Which of the statements gives an accurate picture of the effect of the rise of the reverse repo rate by the
central bank of a country?
a) The demand for goods and services in the country will decrease b) The demand for goods and services
in the country will increase c) The demand for goods and services in the country may increase or decrease
d) There is no effect on the demand for goods and services in the country
18. Which of the statements gives an accurate picture of the effect of the increase in the repo rate?
a) The money supply in the country will decrease b) The money supply in the country will increase
c) The money supply in the country will increase initially and then decrease d) There is no effect on the
money supply in the country
19. Which of the following statements is true about credit creation by banks?
a) Banks create credit on the basis of their total assets b) Banks create credit on the basis of their total
deposits c) Banks create credit on the basis of their total securities d) Banks create credit out of nothing
20. Which of the following is not the function of the central bank of a country?
a) Being the custodian of foreign exchange reserves b) Accepting deposits from the general public
c) Both a and b are correct d) Both a and b are incorrect
SECTION-B

II. Answer the following (3X4=12)

21. What are the four factors of production, and what are the remunerations to each of these called?
22. Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments?
Explain.
23. What are the functions of the commercial banks?
24. State the functions of money.
SECTION-C
III. Answer the following (4X6=24)
25. Describe the economic scenario when ex-post Aggregate Demand surpasses ex-post Aggregate
Supply and its potential consequences on price levels, production and employment.
26. Explain the Government's Budget and its various sources of revenue. Present three actual instances of non-tax
revenue earnings that a government could accumulate during its fiscal year
27. ) In the 2022-23 budget in India, a lot of importance has been given to reforming the education system
and all-inclusive welfare. Analyse the value of such an allocation.
28. Assuming that there exists a situation of excess demand in an economy leading to an inflationary gap,
Explain the impact of excess demand in the economy?
29. What is induced investment and autonomous investment? Explain with the help of a graph.
30. How does the government budget ensure economic equality in an economy?
.

SECTIOIN-D
IV. Answer the following (6X4=24)
31. Explain the functions of the Central Bank of India.
32. What is money? How did money overcome the limitations of barter system? Also, explain the
evolution of money.
33. What is Government budget? Explain the components of Government budget.
34. What is aggregate demand and aggregate supply. Explain with the help of a graph.