Class XII – Economics Sample Paper – 2

Ans. d) Rs. 5000

Ans. c) Measurement of the general price level

Ans. b) Medium of Exchange

Ans. b) Statement 2 is true and Statement 1 is false.

Ans. c) All of these

Ans. a) Moral suasion

Ans. c) Both Statements 1 and 2 are true.

Ans. d) All of these

Ans. d) A is false but R is true.

Ans. b) It lends money to public at a very low interest

Ans. NNP_FC = GNP_MP – Depreciation – Net Indirect tax

NNP_FC = 65,000 – 12,000 – (6,000 – 1,000)

NNP_FC = 48,000 crores

Ans. i. By separating the act of sale and purchase, money has overcome the problem of double coincidence of wants.

ii. Money serves as a medium of exchange. Accordingly, the scope of exchange has greatly widened.

iii. Money facilitates storage of value which is difficult in the barter system.

iv. Money facilitates satisfaction of wants even in the smaller units which is not possible in the barter system.

Ans. Legal reserve ratio consists of both CRR and SLR. However, SLR is the percentage of liquid assets as a ratio of total deposits at a bank to be maintained by the bank with itself.

Ans. Nominal Gross Domestic Product (GDP) – It refers to GDP at current prices. It is the market value of the final goods and services produced within the domestic territory of a country during an accounting year, as estimated using the current year prices. Nominal GDP = Q x P

Real Gross Domestic Product (GDP) – On the other hand, is measured as a product of current year output (Q₁ ) and base year price (P₀ ). Real GDP will increase if the output of goods and services produced in an economy increases.

Real GDP = Q x P*

For Example: Suppose the current year’s production in a hypothetical economy is 1,000 units at a price of Rs 500, the GDP at current year price is 1000 500 = ₹ 5,00,000, so the nominal GDP is ₹ 5,00,000.

Suppose base year price is ₹ 400, the GDP at base year prices is 1000 400 = ₹ 4,00,000. So the Real GDP is ₹ 4,00,000.

Ans. Purchase or sale of financial assets like shares is not included while calculating national income. As such transactions are mere paper claims and do not lead to any value edition.

Ans. It will be included in the domestic income as Indian embassy is a part of domestic territory of India. However it will not be included in the national income as it is a part of factor income paid abroad. It is subtracted from domestic income to get national income.

Ans. It is not taken into consideration while calculating national income because it is not a financial expense that a producer has to bear.

Ans. When Aggregate Demand is less than Aggregate Supply, it means that households are planning to consume less than what the firms expect them to. This will lead to unintended rise in inventories. To restore the desired /intended level of inventories, producers may reduce production, As a result, there may be a decrease in the output, employment and income level of the economy.

Ans. (i) Merchandise: It refers to all such items of exports and imports which are visible and therefore also called ‘Visible Trade’ relating to exports and imports. Current account showing export and import of visible is often referred to balance of trade account.

(ii) Invisible: It refers to all such items which are rendered to rest of the world or received from the rest of the world in the form of services. They can be either factor or non-factor services. Factor services involve payments in terms of factor income (investment income + compensation of employees). Non-factor services include following principal services like travel, transport, insurance,banking and services rendered to the rest of the world are treated like exports and the services received from the rest of the world are treated like imports.

(iii) Current transfers: It refers to unilateral transfers i.e., gifts or donations. These are broadly divided as (a) Official transfers (b) private transfers.

Ans. The process of money creation by the commercial banks starts as soon as people deposit money in their respective bank accounts. After receiving the deposits, as per the central bank guidelines, the commercial banks maintain a portion of total deposits in form of cash reserves. The remaining portion left after maintaining cash reserves of the total deposits is then lent by the commercial bank to the general public in form of credit, loans and advances. Now assuming that all transactions in the economy are routed through the commercial banks, then the money borrowed by the borrowers again comes back to the banks in form of deposits. The commercial banks again keep a portion of the deposits as reserves and lend the rest. The deposit of money by the people in the banks and the subsequent lending of loans by the commercial banks is a never-ending process. It is due to this continuous process that the commercial banks are able to create credit money a multiple time of the initial deposits. Money created by commercial banks can be ascertained by using the given formula:

Ans.

Ans. i. Interest received on loan is a revenue receipt because it neither creates any liability nor causes a reduction in assets of the government.

ii. Disinvestment receipts from sale of a government company are capital receipts as it causes a reduction in assets of the government.

iii. Financial assistance by the Government of USA for promoting girl education in India is a revenue receipt as it neither creates any liability nor causes a reduction in assets of the government.

Ans. d) Fiscal policy

Ans. a) Both National and International

Ans. d) 6%

Ans. a) Both A and R are true and R is the correct explanation of A.

Ans. b) All of the given

Ans. c) There is no unemployment

Ans. d) Air Pollution

Ans. b) B – II

Ans. c) land settlement system

Ans. a) Both statements 1 and 2 are false.

Ans. In both nations, the contribution of the agricultural sector to GDP is the least of the three sectors. Whereas; the service sector is the highest contributor to GDP in both nations.

The contribution of the agriculture sector to the GDP in India stands at 16% which is approximately more than double of China, i.e. 7%.

In China, the contribution of the industrial sector (41%) is way ahead of India (30%), owing to technological upliftment and rapid industrial growth in China in the 1970s. The service sector contributes more than half to the GDP in both India (54%) and China (52%) indicating the scale of economic growth in the two nations.

Ans. If the rate of resource extraction exceeds the rate of regeneration, it leads to reduction in carrying capacity of the environment. The environment is able to perform its functions uninterruptedly so long as the demand for these functions is within the carrying capacity of the environment. This means that the resources are not extracted beyond the rate of their regeneration. If there is a disequilibrium (i.e. demand being more than supply), the environment fails to replenish itself, which will lead to environmental crisis. Therefore, to maintain a healthy environment, the carrying capacity of the environment must be valued and respected.

Ans. Pesticides are chemical compounds designed to kill pests. Many pesticides can also pose health risks to people even if exposed to nominal quantities. The traditional practices can help in controlling contamination without the use of chemical fertilizers, as follows:

i. Neem trees and its by products are a natural pest-controller, which has been used since ages in India. Recently, the government promoted the sale of Neem coated urea as a measure of natural pest control.

ii. Large variety of birds should be allowed to dwell around the agricultural areas. They can clear large varieties of pests including insects.

Ans. Immediately after the adaptation of new constitution on January 26, 1950, the Planning commission came in to existence. Planning Commission is a constitutional body. Prime Minister is ex-officio chairman of this commission. The broad functions of Planning Commission are:

i. Assessment of material, capital and human resources

ii. Formulation of plan for their most effective and balanced utilization

iii. Determination of priorities and allocation of resources etc.

iv. To execute suitable policies for the economic development of India.

Ans. Privatization refers to a process that reduces the participation of the government/public sector in the economic activities of a country.

The following are the objectives of privatisation:

i. To make use of privately owned resources for the collective welfare of the people.

ii. To reduce the role of the state in economic activities.

iii. To improve the efficiency and performance of government undertakings.

iv. To reduce the budgetary deficit of the country.

v. To promote the inflow of foreign direct investment.

Ans. Recently World Bank has published a report called ‘India and the Knowledge economy-Leveraging Strengths and opportunities’. The report states that India should continue to leverage its strengths to become a leader in knowledge creation and use. To get the benefits from knowledge revolution, the country needs to implement the various policy and institutional changes. The report further states that if it uses its knowledge economy as much as Ireland does, then the per capital income of India will increase from a little over US $ 1000 in 2002 to US $ 3000 in 2020. It also claims that Indian economy has all the key ingredients required for making this transition like a critical mass of skilled workers, a well functioning democracy, and a diversified science and technology infrastructure.

Ans. During British rule, the agriculture sector experienced stagnation due to the following factors:

The colonial government introduced the Land Settlement system. The zamindars used to exploit cultivators by extracting a major portion of the produce in the form of rent leading to misery among the farmers.

Lack of irrigation facilities and low level of technology contributed to the dismal level of agricultural productivity, which aggravated the plight of the farmers.

Ans. Women are paid fewer wages for the same work as compared to men because:

(a) There are rules but these are not followed especially in informal sector.

(b) There is a social prejudice which claims that males are more productive than females.

(c) Males are more committed to their work life. Females have dual responsibility which reduces their commitment to their work life.

(d) Since females do not have complete financial responsibility, they agree to work for lower wages.

(e) Males have better physical abilities as compared to females

Ans. The given data indicates that over the given period, the proportion of workforce in primary sector has gone down from 64% in 1993-94 to 44.6% in 2017-18, this account to nearly a fall of 20% over the years. Whereas, the employment share of both secondary and the services sector has increased in India. The share of secondary sector has gone up by approximately 9% (from 16% in 1993-94 to 24.4% approximately in 2017-18), the corresponding figure for services sector has gone up by 11% (from 20% in 1993-94 to 31% approximately in 2017-18).

These sectoral changes have been very significant in the growth journey of India, showing the gradual shift of the workforce from primary sector to the secondary and tertiary sector.

Ans. The given statement is defended

• Demand in the Foreign markets was destroyed by imposing heavy duty on the exports of Indian Handicrafts.
• Demand in the Domestic Market (i.e.Indian Market) was destroyed by allowing duty-free import of British goods in the Indian market.

Ans. Ryotwari System: It was the way of collecting tax revenue (in British controlled areas in India) directly from cultivators of farmland.

• In Ryotwari System the ownership rights were handed over to the peasants. British Government collected taxes directly from the peasants.

– The revenue rates of Ryotwari System were 50% where the lands were dry and 60% in irrigated land

Mahalwari System: This system consisted of landlords or zamindars representing an entire village or even a group of villages. Along with the tillers, they were jointly as well as individually responsible for the payment of revenues. The land under this system included the land of the villages as well as adjoining forestland and pastures.

– The Mahalwari system had many provisions of both the Zamindari System and Ryotwari System.

– In this system, the land was divided into Mahals. Each Mahal comprises one or more villages.

– Ownership rights were vested with the peasants

Ans. Due to following reasons, agricultural sector appears to be adversely affected by the reform process:

i. Public investment in agricultural sector, especially in infrastructure which includes irrigation, power, roads, market linkages and research and extension has been reduced in the reform period. Investment on research and development was reduced considerably as compared to the Green Revolution time.

ii. The removal of fertiliser subsidy has led to increase in the cost of production, which has severely affected the small and marginal farmers.

iii. Due to adherence to WTO commitments, various changes in policies like reduction in import duties on agricultural products, removal of Minimum Support Price (MSP) and lifting of quantitative restrictions on agricultural products have increased the threat of international competition to the Indian farmers. Tough competition in the international market along with traditional techniques of farming adversely affected the poor farmers.

iv. Export-oriented policy strategies in agriculture have marked a shift from production for the domestic market towards production for the export market which has led to more focus on cash crops like cotton, jute etc. as compared to production of foodgrains. This led to reduced availability of food grains.

v. The shift towards the production of cash crops exerted an inflationary pressure on the prices of food grains. This resulted in and adverse effect on the agricultural sector’s performance as the cost of producing food grains became more expensive.