CBSE Class 12 Economics Question Paper 2015 (Delhi) with Solutions

Students can use CBSE Previous Year Question Papers Class 12 Economics with Solutions and CBSE Class 12 Economics Question Paper 2015 (Delhi) to familiarize themselves with the exam format and marking scheme.

CBSE Class 12 Economics Question Paper 2015 (Delhi) with Solutions

Time Allowed: 3 hours
Maximum Marks: 80

General Instructions:

1. All questions in both the sections are compulsory.
2. Marks for questions are indicated against each question.
3. Question Nos. 1-10 and 18-27 are very short/objective type questions carrying 1 mark each. They are required to be answered either in one word or one sentence each.
4. Question Nos. 11-12 and 28-29 are short-questions carrying 3 marks each. Answers to them should normally not exceed 60 words each.
5. Question Nos. 13-15 and 30-32 are also short-answer questions carrying 4 marks each. Answers to them should normally not exceed 70 words each.
6. Question Nos. 16-17 and 33-34 are long-answer questions carrying 6 marks each. Answers to them should normally not exceed 100 words each.
7. Answer should be brief and to the point and the above word limits should be adhered to as far as possible.
   * Modified as per Latest CBSE Curriculum.

Section A: Introductory Macroeconomics

Question 1.
What is ‘aggregate supply’ in macroeconomics? [1]
Answer:
Aggregate Supply refers to the money value of total quantity of final goods and services that all the producers are willing to supply in an economy in a given time period.

Question 2.
The value of multiplier is: (Choose the correct alternative) [1]
(a) 1/MPC
(b) 1/MPS
(c) 1/1-MPS
(d) 1/MPC-1
Answer:
(b) 1/MPS

Question 3.
Borrowing in government budget is: (Choose the correct alternative) [1]
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit
(d) Deficit in taxes
Answer:
(b) Fiscal deficit

Question 4.
The non-tax revenue in the following is: (Choose the correct alternative) [1]
(a) Export duty
(b) Import duty
(c) Dividends
(d) Excise
Answer:
(c) Dividends

Question 5.
Other things remaining unchanged, when in a country the price of foreign currency rises, national income is: (Choose the correct alternative) [1]
(a) Likely to rise
(b) Likely to fall
(c) Likely to rise and fall both
(d) Not affected
Answer:
(a) Likely to rise

Question 6.
Name two ‘invisibles’ of the balance of payments account. [1]
Answer:
Insurance and banking

Question 7.
Which of the following is not a flow? (Choose the correct alternative) [1]
(A) Capital
(b) Income
(c) Investment
(d) Depreciation
Answer:
(A) Capital

Question 8.
Which of the following is not a function of money? [1]
(a) Medium of exchange
(b) Price stability
(c) Store of value
(d) Unit of account
Answer:
(b) Price stability

Question 9.
State the components of money supply. [1]
Or
Define cash reserve ratio.
Answer:
The components of money supply are currency with the public and demand deposits of banks at a given point of time.

Or

Cash Reserve Ratio (CRR) is the minimum amount of funds that a commercial bank has to maintain with the Central bank in the form of deposits.

Question 10.
What is ‘trade balance’? [1]
Answer:
Trade balance, also known as balance of trade refers to the difference in the value of imports and exports of visible items only, i.e., material goods.

Question 11.
If Real GDP is ₹ 200 and Price Index (with base = 100) is 110, calculate Nominal GDP. [3]
Answer:

Question 12.
Name the broad categories of transactions recorded in the ‘capital account’ of the Balance of Payments Accounts. [3]
Or
Name the broad categories of transactions recorded in the ‘current account’ of the Balance of Payments Account.
Answer:
Capital account of Balance of Payments Account records all those transactions between the residents of a country and the rest of the world, which cause a change in the assets or liabilities of the residents of the country or its government.
Capital account is concerned with financial transfers. So, it does not have any direct effect on income, output and employment of the country.

The categories of transactions recorded in the Capital Account are:

1. Borrowings and lendings to and from abroad by private individuals, institutions, government, etc.
2. Investments to and from abroad. It includes investments from abroad (credits) in shares of Indian companies, real estate, etc. It also includes investment by Indian residents in shares of foreign companies, real estate abroad, etc.
3. Changes (Increase and Decrease) in foreign exchange reserves. Treated as a financial asset of the government, a withdrawal from this reserve leads to a decrease in foreign financial asset (recorded on credit side) and vice-versa.

Or

Categories of transactions recorded in the Current Account of the Balance of Payments Account are as follows:

1. Export and Import of goods (visible). Balance of these visible exports and imports is known as balance of trade.
2. Export and Import of services (invisible trade). Like shipping, banking, insurance, etc.
3. Unilateral transfers. It includes gifts, donations, personal remittances, etc.
4. Income receipts and payments to and from abroad. It includes investment income in the form of interest, rent and profits.

Question 13.
Explain the ‘bank of issue’ function of the central bank. [4]
Or
Explain ‘Government’s Bank’ function of central bank.
Answer:
Central Bank has the sole authority for issue of currency in the country. In India, RBI has the sole right of issuing paper currency notes (except one rupee notes and coins, which are issued by the Ministry of Finance). The reason for this is that it brings about uniformity in note circulation and gives the Central Bank direct control over the money supply. It promotes efficiency in the financial system.

Or

A central bank conducts the banking accounts of government departments. It performs the same banking functions for the government as a commercial bank performs for its customers. It accepts their deposits and undertakes inter-bank transfers. It also gives loans to the government. As an agent, it manages the government’s public debt. It undertakes payment of interest on this debt and other related services to public debt. It accepts the payment of taxes from the public on behalf of the government and makes payments for the cheques issued by the government.

It also gives advise to the government regarding money market, capital market, government loans and on economic policy matters.

Question 14.
Government of India has recently launched ‘Jan Dhan Yojna’ aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect national income of the country? [4]
Answer:
The ‘Jan Dhan Yojna’ launched by the government aims at having at least one bank account per household. Bank accounts or demand deposits are a part of the money supply of the country.

• Opening more bank accounts means more bank deposits. More the demand deposits more would be the money supply.
• Also increase in the amount of the demand deposits, legal reserve ratio remaining the same, increases a bank’s capacity for money creation or credit creation as new deposits in banks lead to creation of more deposits by banks.
• Increase in the deposits with commercial banks would mean an increase in their lending capacity.
• More lending by banks means more investment and capital formation in the economy.
• As a result, aggregate demand rises leading to an increase in the national income of the country.

Question 15.
An economy is in equilibrium. Calculate national income from the following: [4]
Autonomous consumption = 100
Marginal propensity to save = 0.2
Investment expenditure = 200
Answer:
Autonomous consumption, \(\overline{\mathrm{C}}\) = 100; MPS = 0.2
MPC = 1 – MPS
= 1 – 0.2 = 0.8
and I = 200 ……[AD = AS = Y and AD = C + I
To calculate National Income or Y:
At equilibrium Y = C + I
and C = \(\overline{\bar{C}}\) + MPC (Y)
∴ Y = \(\overline{\bar{C}}\) + MPC (Y) + I ⇒ Y = 100 + 0.8 × Y + 200
Y = 300 + 0.8Y ⇒ Y – 0.8Y = 300
0. 2Y = 300 ⇒ Y = \(\frac{300}{0.2}\) = 1,500
∴ National Income or Y = 1,500

Question 16.
Calculate National Income: [6]

Or

Calculate National Income by
(i) Income Method and
(ii) Expenditure Method from the following data:

Answer:
NDP_MP
= Private final consumption expenditure + Government final consumption expenditure + Net domestic Capital formation + Net exports
= 400 + 200 + 100 + 40 = ₹740 crores
NNP_FC (National Income)
= NDP_MP – Net factor income paid to abroad – Net indirect taxes
= 740 – 10 – 80 = ₹650 crores

Or

National Income (Income method)
= Compensation of employees + Interest + Rent + Profits – Net factor income to abroad
= 350 + 60 + 70 + 200 – 50 = ₹630 crore
National Income (Expenditure method)
= Private final consumption expenditure + Government final consumption expenditure + Gross domestic capital formation + Net exports – Consumption of fixed capital – Net indirect taxes – Net factor income to abroad
= 440 + 250 + 90 + (-20) – 20 – 60 – 50 = ₹630 crore

Question 17.
Explain the concept of Inflationary Gap. Explain the role of Repo Rate in reducing this gap.
Answer:
Concept of inflationary gap. If equilibrium level of income is determined after the stage of full employment, it is a situation of excess demand. Excess demand refers to the situation when aggregate demand (AD) is more than the aggregate supply (AS) corresponding to full employment level of output in the economy. Excess demand gives rise to inflationary gap. Inflationary gap refers to the gap by which actual aggregate demand exceeds the aggregate demand required to establish full employment equilibrium.

As a result of excess demand, prices increase because corresponding to increase in demand, output cannot increase. Repo rate is the rate of interest charged by Central Bank on loans given to commercial banks. During a situation of excess demand leading to inflation, the Central Bank raises the repo rate which discourages commercial banks in borrowing from the Central Bank.

Increase in repo rate forces commercial banks to increase their own lending rates making credit costlier. As a result, the demand for loans falls discouraging investment. Also reduction in availability of credit helps in correcting the situation of excess demand and reducing inflationary gap.

Section B: Indian Economic Development

Question 18.
What was the life expectancy during British rule in India? [1]
(a) 32
(b) 52
(c) 40
(d) 48
Answer:
(a) 32

Question 19.
In which of the following years India devalued its currency? [1]
(a) 2011
(b) 2001
(c) 1991
(d) 1999
Answer:
(c) 1991

Question 20.
What do you understand by strategic sale? [1]
Or
Name any two Navratna Companies.
Answer:
Strategic sale refers to the sale of 51% or more stake of a Public Sector Undertaking (PSU) to a private organisation that bids the highest.
Or
Bharat Petroleum Corporation Limited (BPCL) and Oil and Natural Gas Corporation Limited (ONGC).

Question 21.
Define tariff barriers. [1]
Answer:
Tariff barriers are taxes imposed on the imports by the country to safeguard the interest of the domestic industries.

Question 22.
In which year education cess was imposed in India? [1]
(a) 2004
(b) 2001
(c) 1991
(d) 2011
Answer:
(a) 2004

Question 23.
Which of the following Indian states is well known for the efficient implementation of milk cooperatives? [1]
(a) Rajasthan
(b) Gujarat
(c) Punjab
(d) Andhra Pradesh
Answer:
(b) Gujarat

Question 24.
In which year, National Horticulture Mission was introduced? [1]
(a) 2005-06
(b) 2011-12
(c) 1999-00
(d) 2015-16
Answer:
(a) 2005-06

Question 25.
Define frictional unemployment. [1]
Answer:
Frictional unemployment is the unemployment which exists in any economy due to people being in the process of moving from one job to another. It reflects the time spent between jobs when a worker is searching for a job or transitioning from one job to another.

Question 26.
Which of the following financial institutions is the controller of monetary policy of the country? [1]
(a) RBI
(b) SBI
(c) ICICI
(d) IDBI
Answer:
(a) RBI

Question 27.
What do you understand by jobless growth? [1]
Answer:
Jobless growth is an economic phenomenon in which a macroeconomy experiences growth while maintaining or decreasing its level of employment. In simple words, it means that an economy is growing at a decent rate but is capable of generating very few job opportunities.

Question 28.
How has fragmentation of land holdings caused poverty in rural India? [3]
Answer:
A large section of the rural poor in India are small farmers owning land which is less fertile and totally dependent on rains. Their survival depends on subsistence crops and sometimes on livestock. With the rapid growth of population and without alternative sources of employment, the per head availability of land for cultivation has steadily declined leading to fragmentation of land holdings. Farming on such small uneconomic land holding does not help the farmer in any way. The income from various small land holdings is not sufficient to meet the family’s basic requirements pushing such households into chronic poverty.

Question 29.
What is information with reference to human capital? [3]
Or
Why do educational achievements differ in different states?
Answer:
Information with reference to human capital refers to information about the different types of jobs and their wages and salaries. It also refers to information about the various educational institutions, their cost structure and whether they are imparting the right type of educational skills or not. This information is necessary for making the correct decision regarding investment in human capital as investment in education and health has a long term impact which is irreversible.
Or, Regional differences in educational attainments exist due to the following reasons:

1. The per capita public expenditure on elementary education differs considerably across states from as high as ₹34,651 in Himachal Pradesh to as low as ₹4,088 in Bihar.
2. There are regional disparities in the employment opportunities existing in states.
3. Different income levels and the consequent diverse spending power of people is another reason for differences in educational achievements across states.

Question 30.
Briefly explain the factors responsible for the high growth of service sector. [4]
Answer:
The major factors that led to the growth of service sector in India are as follows:

1. Economic reforms. Liberalisation and various economic reforms initiated under m the New Economic Policy in 1991 reduced various restrictions on the movement
of International Finance and Technology. This led to inflow of foreign capital and technology paving the way for growth of service sector.

2. Cheap and skilled labour. Due to the availability of cheap and skilled manpower in India, developed countries found outsourcing their services to India profitable.

3. Growth of IT sector. The advancement and innovations in the IT sector enabled the use of internet, communication and electronic transactions across different countries which contributed to the growth of the service sector in India.

Question 31.
Small scale industries were a policy instrument meant to promote employment and equity in the economy. Comment. [4]
Answer:
A small scale industry is presently defined as one whose investment does not exceed ₹5 crores. At the beginning of planning (1951), it was defined as one whose investment did. not exceed ₹5 lakh. The role of Small Scale Industries (SSIs) in achieving the goals of employment and equity was underlined by Karve Committee (also called Village and Small Scale Industries Committee) in 1955.
It underlined the significance of small scale industries in terms of the following characteristics:

(i) Labour intensive and employment-friendly. Small scale industries are considered more labour intensive, i.e., they use more labour than the large scale industries and therefore, generate more employment.

(ii) Regional equality. Large scale industries are often established close to the source of raw material as its transportation from a distant place adds to the cost of transportation. Small scale industries, on the other hand, have locational flexibility and can be established anywhere in the country. Therefore, they help in promoting regional equality. Their growth .helps in the decentralization of industries as large scale industries have a tendency to be concentrated only in a few developed areas within the economy.

(iii) Equitable distribution of income and wealth. Small scale industries need lesser investment as compared to large scale industries. Therefore, they do not lead to concentration of economic power but promote equality across different sections of the society. Equity is further promoted because of greater employment per unit of capital in a small scale industry as compared to a large scale industry.

Question 32.
What is informalisation of workforce? Discuss the factors responsible for it. [4]
Or
Discuss various reasons for lower women participation in work.
Answer:
Informalisation of workforce refers to a process where in the proportion of informal workers in the total force increases. It implies movement of workers from self employment and regular salaried employment to informal employment.

Following factors are responsible for the increasing informalisation of workforce:

1. Gap in demand and supply of labour. Due to inadequate employment opportunities, the supply of labour far exceeds its demand. Thus, the producers taking advantage of the situation resort to informalisation.
2. Cost reduction. In order to maximize their profits, the producers try to minimise their cost by employing more and more of casual labour.
3. Relaxation in labour laws. Due to relaxation in labour laws, the producers prefer to employ casual labour than regular workers.

Or

Women in general and urban women in particular do not participate much in work. The reasons for this are as follows:

1. Women education in India is still lagging behind implying less job opportunities for them.
2. The decision to work for women in urban areas is still taken by their families who do not wish them to work even though opportunities may be available.
3. Higher work participation in rural areas by women is due to poverty in rural areas. However, women workers in rural areas are generally engaged in low paid and less productive jobs.
4. Many activities performed by women like cooking, looking after the household, etc. are not considered productive activities and hence are not recognised as economic activities.

Question 33.
Read the excerpt from the article given below and answer the questions: [6]

On November 8, 2016, Prime Minister Narendra Modi in a surprise announcement said the
existing higher denomination currency ₹500 and ₹1,000 will cease to be legal tender. The PM said this is the government’s biggest push to fight black money and end corruption. The opposition, however, criticised the government for poor implementation of the scheme and said a lot of people have died standing in queues trying to get their hands on the new currency.

The government also introduced new ₹ 500 and ₹ 2,000 notes and urged people to move towards a cashless economy. But the opposition has been protesting the government’s decision, even stalling Parliament. A ‘Jan Aakrosh Diwas’was observed by Left and other major parties. This is not the first time that demonetisation has been implemented in India. In 1936, ₹10,000, which was The highest denomination note, was introduced but was demonetised in 1946. Though it was re-introduced in 1954 but later, in 1978, Prime Minister Morarji Desai in his intensive move to counter the black money, introduced The High Denomination Banks Act (Demonetisation) and declared ₹10,000 notes as illegal.

(i) What do you mean by demonetisation?
Answer:
It refers to the act of stripping a currency unit of its status of an official mode of payment or legal tender by the Reserve Bank of India.

(ii) ……. is the highest denomination note which has been demonetised.
(a) ₹10,000
(b) ₹500
(c) ₹1,000
(d) ₹2,000
Answer:
(a) ₹10,000

(iii) Which of the following was the objective of demonetisation?
(a) To eliminate fake currency
(b) To prevent terrorism financing
(c) Take away black money from the economy
(d) All of the above
Answer:
(d) All of the above

(iv) Before 2016 how many times demonetisation has been done?
(a) One
(b) Two
(c) Four
(d) None of the above
Answer:
(b) Two

(v) How did demonetisation impact demand deposit with banks?
Answer:
Demonetization led to an increase in bank deposits as unaccounted money in the form of ₹500 and ₹1,000 notes flowed into the Banks, thereby increasing the size of the deposits.

(vi) What was the aim of demonetisation?
Answer:
It aimed at fighting black money and ending corruption by ending the use of high- denomination notes for illegal transactions.

Question 34.
Give an appraisal of the development strategies followed by China. [6]
Answer:
China introduced reforms because the leadership was not happy with the slow pace of growth and lack of modernisation. They felt that the Maoist vision of economic development based on decentralisation, self-sufficiency and shunning of foreign technology, goods and capital had failed.

1. Despite extensive Land Reforms, collectivisation, the great Leap Forward and other initiatives, the per capita grain output had not increased much.
2. The establishment of infrastructure in the areas of education and health, land reforms, decentralised planning and existence of small enterprises had helped positively in improving the social and income indicators in the post-reform period.
3. Through the Commune system, there was more equitable distribution of foodgrains.
4. In agriculture, after the reforms, handing over plots of land to individuals for cultivation brought prosperity to a vast number of poor people.
5. It created conditions for the subsequent phenomenal growth in rural industries and built up a strong support base for more reforms.