CBSE Class 12 Economics Question Paper 2020 (Series: HMJ/4) with Solutions

Students can use CBSE Previous Year Question Papers Class 12 Economics with Solutions and CBSE Class 12 Physics Question Paper 2020 (Series: HMJ/4) to familiarize themselves with the exam format and marking scheme.

CBSE Class 12 Economics Question Paper 2020 (Series: HMJ/4) with Solutions

Time Allowed: 3 hours
Maximum Marks: 80

General Instructions:
(i) Questions paper comprises two Sections-A and B. All questions are compulsory.
(ii) Questions number 1-10 and 18 – 27 are very short-answer questions carrying 1 mark each. They are required to be answered in one word or one sentence each.
(iii) Questions number 11 – 12 and 28 – 29 are short-answer questions carrying 3 marks each. Answers to them should not normally exceed 60 – 80 words each.
(iv) Questions number 13 -15 and 30 – 32 are also short-answer questions carrying 4 marks each. Answers to them should not normally exceed 80 -100 words each.
(v) Questions number 16-17 and 33 – 34 are long answer questions carrying 6 marks each. Answers to them should not normally exceed 100 – 150 words each.
(vi) Answers should be brief and to the point, also the above word limit be adhered to as far as possible.
(vii) There is no overall choice. However, an internal choice has been provided in 2 questions of one mark, 2 questions of three marks, 2 questions of four marks and 2 questions of six marks. Only one of the choices in such questions have to be attempted.
(viii) In addition to this, separate instructions are given with each section and question, wherever necessary.
* Modified as per Latest CBSE Curriculum.

Question 1.
Two components of money supply are …………. and ………….. (Fill up the blank with correct answer) [1]
Or
The main aim of monetary policy is …………. (Choose the correct alternative.)
(a) to bring price stability in the economy
(b) employment generation in the country
(c) to increase trade surplus
(d) to generate greater tax revenue
Answer:
Two components of money supply are Currency with the public and Demand Deposits.
Or,
(a) to bring price stability in the economy.

Question 2.
State, whether the given statement is true or false:
‘Unexpected obsolescence is a component of depreciation.’
Answer:
False; Unexpected obsolescence is treated as Capital loss.

Question 3.
₹2,000 note lying in wallet of Rohini, a student, is an example of ……….. (stock/ flow) variable. (Fill up the blank with correct alternative) [1]
Answer:
Stock

Question 4.
Define Intermediate consumption. [1]
Answer:
Intermediate consumption is the expenditure on raw materials and any other input which is used up in the process of production.

Question 5.
Loans offered by commercial banks …………….. (increase/decrease) the money supply in the economy. (Fill up the blank with correct alternative) [1]
Answer:
Increase

Question 6.
The sum of factor payments is equal to . (Choose the correct alternative.) 1
(a) Domestic Income
(b) National Income
(c) Per Capita Real Income
(d) Per Capita Nominal Income
Answer:
(a) Domestic Income

Question 7.
State, whether the given statement is true or false: [1]
‘Expenditure on Ujjwala Yojana launched by the Government is an example of capital expenditure.’
Answer:
True; as it is a step towards human resource development and women empowerment.

Question 8.
Define full employment. [1]
Answer:
Full employment refers to a situation in which all those who are able and willing to work in an economy at the existing wage rate are working (employed). It is measured in the context of working population only.

Question 9.
If the value of Average Propensity to Consume (APC) is 0.8 and National Income is ₹4,000 crore, the value of savings will be …………. (Choose the correct alternative.) [1]
(a) ₹100 crores
(b) ₹200 crores
(c) ₹800 crores
(d) ₹500 crores
Answer:
(c) ₹800 crores

As we know, Al’S + APC = 1 ⇒ APS = 1 – 0.8 = 0.2
Now, APS = \(\frac{S}{Y}\) = 0.2 = \(\frac{S}{₹4,ooo}\)
∴ S(Savings) = 4,000 × 0.2 = ₹800 crores

Question 10.
Give any one example of ‘debt creating capital receipts’ in the Government Budget. [1]
Answer:
Borrowing is an example of debt creating capital receipts in the government budget.

Question 11.
‘Domestic services (Household services) performed by a woman are not considered as an economic activity.’
Defend or refute the given statement with valid reason. [3]
Answer:
I defend this statement that domestic services performed by women are not considered as an economic activity. It is because such activities are performed out of love and affection and such services are not rendered for the purpose of earning income, hence it is difficult to assess their market value. Also, they do not add to the flow of goods and services in the economy and do not use the organised market structure as well.

Question 12.
Calculate Net Value Added at Factor Cost (NVAFC) from the following data: [3]
Or
State the three components of Income from Property and Entrepreneurship.
Answer:
GVA_MP = Value of Output – Intermediate Consumption = 800 – 200 = ₹600 crores
.-. NVA_FC = GVA_MP – Depreciation – (indirect taxes – subsidies)
= 600 – 20 – (30 – 50) = ₹600 crores

Or, Income from property and entrepreneurship is also called as Operating Surplus.
Income from property and entrepreneurship is in the form of:
– rent (from land)
– interest (from capital) and
– royalty (from patents/ copyrights)
– profit (dividend, corporate tax, undistributed profits or retained earnings)

Question 13.
Elaborate the objective of ‘allocation of resources’ in the Government Budget. [4]
Answer:
Allocation of resources. Government has to provide public goods. Public goods such as national defence, government administration etc. are different from private goods. These goods cannot be provided through market mechanism but are essential for consumers and, therefore, government has to provide them. Because of that government has to allocate resources between private goods and public goods.

Private goods are limited to some individuals but public goods are available to all. Secondly, private goods are available to those only who can buy them but this is not the case with regard to public goods. Public goods are available to those also who cannot afford them financially.

Question 14.
Define effective demand. Discuss how, effective demand can be restored, if ex-ante Aggregate Demand (AD) is more than ex-ante Aggregate Supply (AS). [1+3]
Answer:
Effective demand refers to that level of output where aggregate demand is equal to aggregate supply corresponding to full employment of resources.

Excess of ex-ante Aggregate Demand (AD) over ex-ante Aggregate Supply (AS) means that buyers (consumers and firms) are planning to buy more goods and services than what producers are planning to produce. In this situation, inventory levels start falling and come below the desired level. To bring back the inventory at the desired level, producers expand production. This raises the employment level, output level and in turn income level. These levels keep on rising till AD becomes equal to AS and the economy reaches its equilibrium.

Question 15.
Explain the function of Central Bank as ‘Banker, Agent and Advisor’ of the Government.
Or
Elaborate, how does a Central Bank stabilize money supply through ‘Bank Rate’. [4]
Answer:
The Central Bank acts as a banker, agent and a financial advisor to the government.
As a banker, it carries out all banking business of the government.

(i) It maintains a current account for keeping their cash balances.
(ii) It accepts receipts and makes payments for the government and carries out exchange, remittance and other banking operations.
(iii) It also gives loans and advances to the government for temporary periods.
— As an agent, the Central Bank also has the responsibility of managing the public debt.
— As a financial advisor, the Central Bank advises the government from time to time on economic, financial and monetary matters.

Or

Bank rate is the rate at which the central bank of a country gives credit to the commercial banks to meet their long-term needs. Through changes in bank rate, the central bank affects the money supply in the economy.

Decrease in Bank Rate. When credit is to be expanded or money supply is to be increased, the central bank reduces the bank rate. A low bank rate encourages the banks to keep a small proportion of the deposits as reserves and use a greater portion for giving out loans to the borrowers or investors. Thus, money supply increases. On the other hand, when money supply is to be reduced, Central Bank raises the bank rate. An increase in bank rate increases the cost of borrowings of commercial banks forcing them to increase the lending rates which discourages the borrowers from taking loans. This decreases money supply in the economy.

Question 16.
Sfate, giving valid reasons whether the following statements are true or false: [2×3=6]
(a) Trade deficit is always a great cause of worry for an economy.
(b) Depreciation of currency has same effect on exports as devaluation of currency.
(c) ‘Indians investing in assets abroad’ will be recorded under debit side of capital account in Balance of Payments.
Answer:
(a) False; Initially, a trade deficit may imply an increase in the country’s standard of living because its residents gain access to a wider variety of goods and services at competitive prices. It can also reduce the threat of inflation. But, when a country persistently experiences a trade deficit there are predictable negative consequences that can affect economic growth and, stability. Therefore, a trade deficit may not always be a cause of worry for an economy.
(b) True; In both the situations (depreciation and devaluation) exports of goods and services increase as the other countries are able to buy more goods from the domestic country, hence exports are encouraged.
(c) True; Indians investing in assets abroad will lead to an outflow of foreign exchange and such transactions are recorded on the debit side (negative items) of capital account in Balance of Payments.

Or

(a) Explain, what can be the likely impact of depreciation of the home currency on imports to the country. [3]
(b) Distinguish between Current Account Deficit (CAD) and Current Account Surplus (CAS). [3]
Answer:
Or
(a) Depreciation means fall in the value of the domestic currency in terms of a foreign currency. It makes the domestic currency less valuable and more of it will now be required to buy one unit of the foreign currency. This implies that imports will become costlier as more will have to be paid to buy goods worth $1. Since foreign goods become costlier, it leads to a decline in imports.
(b) Difference between Current Account Deficit and Current Account Surplus

Question 17.
(a) On the basis of following, information, identify whether the economy is in equilibrium or not:

Particulars	Amount
(i) Autonomous Consumption and Investment Expenditure (A)	₹500 crores
(ii) Marginal Propensity to Save (MPS)	0.2
(iii) National Income	₹4,000 crores

(b) Answer the following questions on the basis of the given figure: [1]

(i) What does the shaded area AOB indicate?
(ii) What is the significance of point B?
Answer:
(a) Given: \(\overline{\mathrm{A}}\) = \(\overline{\mathrm{C}}\) + I = ₹500 crores; MPS = 0.2; Y = ₹4,000 crore
We know that, AD = C + I
⇒ AD = C + MPC (Y) + I ⇒ AD = C + I + MPC (Y)
⇒ AD = 500 + (1 – 0.2)(4000) …[∴ MPC = 1 – MPS]
AD = 500 + 3200 = 3700 crores
Now, Y = AS = ₹4000 crores
At equilibrium level of Income AD = AS
Since, AD(₹3,700 crores) is less than AS (₹4,000 crores), the economy is not in equilibrium.

(b) (i) The shaded area (AOB) indicates negative savings or dis-savings. It shows negative savings equal to OA at zero level of income and zero saving at OB level of income,
(ii) Point B indicates the break-even point where savings are zero and consumption is equal to income, i.e., Y = C.

Section B: Indian Economic Development

Question 18.
…………….. policy followed in first seven five year plans of India, aimed at substituting imports with domestic production. (Fill up the blank with correct answer) [1]
Answer:
Import substitution

Question 19.
Which of the following is not a benefit of organic farming? (Choose the correct alternative) [1]
(a) Cheaper inputs
(b) Attractive returns on investment
(c) Greater import possibilities
(d) Higher nutritional value
Answer:
(c) Greater import possibilities

Question 20.
Define mixed economy. [1]
Answer:
A mixed economic system refers to a system in which the public sector and private sector are allotted their respective roles for solving the central problems of the economy.

Question 21.
World Trade Organisation (WTO) was established in 1995, as a successor organisation to ………….. (Fill up the blank with correct answer) [1]
Answer:
GATT (General Agreement on Trade and Tariff).

Question 22.
India is not a member of which of the following regional/global economic grouping? (Choose the correct alternative) [1]
(a) SAARC
(b) BRICS
(c) G-7
(d) G-20
Answer:
(c) G-7

Question 23.
In the past few decades ……………. (primary/secondary/tertiary) sector has created maximum jobs opportunities in India. (Fill up the blank with correct alternative) [1]
Answer:
Tertiary

Question 24.
The main aim of ‘Great Leap Forward’ (GLF) in China was to ensure rapid increase of …………. (Choose the correct alternative) [1]
(a) agriculture
(b) industries
(c) services
(d) exports
Answer:
(b) industries

Question 25.
Define disguised unemployment. [1]
Answer:
Disguised unemployment refers to a situation in which more people are engaged in work than are really needed.

Question 26.
State whether the following statement is true or false: 1
‘World Bank is also known as International Bank for Registration and Delimitation (IBRD).’
Or
Define Marketed Surplus.
Answer:
False. World Bank is also known as International Bank for Reconstruction and Development (IBRD).
Or,
Marketed surplus is that portion of the agricultural produce which is sold by the farmers in the market after meeting their own requirements.

Question 27.
Introduction of Economic Reforms in China took place in the year . (Choose the correct alternative) 1
(a) 1978
(b) 1980
(c) 1988
(d) 1991
Answer:
(a) 1978

Question 28.
Highlight the areas of concern in higher education. [3]
Or
“Human Capital Formation gives birth to innovation, invention and technological improvements.”
Answer:
Higher education has substantially expanded over time but there are certain aspects which are still lagging behind.
These are:
(i) The expansion in education is largely confined to general education. Of the total enrollment for higher education, only 20% is for professional education.
(ii) The problem of unemployment among those with higher education is assuming alarming proportions. There is a widening gap between job seekers with higher education and their demand in the job market.

Or

Yes, I agree with the given statement that Human capital formation raises the productivity and production as knowledgeable and skilled workers make better use of the resources. It not only increases the productivity of human resources but also stimulates innovations and creates ability to absorb new technologies. Education provides knowledge to understand changes in the society and scientific advancements facilitating inventions and innovations. Similarly, the availability of educated labour force facilitates adaptation to new technologies.

Question 29.
Do you agree with the given statement? Support your answer with valid arguments. Compare and analyse the given data of India and China, with valid reasons: [3]

Country	Annual growth rate of population (2015)	Gender ratio (Per thousand males)
India	1.2%	929
China	0.5%	941

Source: World Development Indicators, 2015. [3]
Answer:
Looking at the global population, out of every 6 people living in this world, one is an Indian and another a Chinese. Inspite of being the world’s most populous country, China’s annual growth rate of population (0.5%) is lower than compared to India’s annual growth rate of population (1.2%). This is largely due to the One Child Norm introduced in China in 1970s which reduced its population growth rate.

The gender ratio (proportion of females per 1000 males) is low because of bias against females in both the countries. In India it is 929 females per 1000 males as compared to 941 females per 1000 males in China.

Question 30.
Read the given excerpt and answer the questions given below: [4]
The case for privatisation is based on the belief that the private sector is more efficient, and that Public Sector Units do better when in private hands. In the Union Budget for 2021-22, Finance Minister Nirmala Sitharaman announced that outside four strategic sectors, Public Sector Units (PSUs) in the non-strategic sectors would be privatised or closed. In the strategic sectors also, a bare minimum of PSUs will be present. The four sectors are- atomic energy, space and defence; transport and telecommunications; power, petroleum, coal and other minerals; and banking, insurance and financial services. We have not been told the time frame for implementation of this policy. The expression being used is ‘privatisation’, not ‘disinvestment’, which is the sale of minority stakes in PSUs. In recent months, economists have said that the government needs to increase investment in infrastructure and, in the present fiscal situation, the necessary resources can come only from privatisation. There are two principal reasons for privatisation. The ideological reason is the superior efficiency that is said to be associated with the private sector relative to the public sector. The practical reason is that the government’s finances are strained and it looks to augment its resources by selling government assets, notably PSUs. [4]

(i) The Government in the recent drive to privatization plans to privatize its CPSEs leaving bare minimum presence in four sectors. Which of the following is not the strategic sector as given in the article?
(a) Coal and minerals
(b) Power and petroleum
(c) Textile and handlooms
(d) Energy space and defence
Answer:
(c) Textile and handlooms

(ii) DIRECTION: Read the given statements – Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Privatization of the PSUs by selling part of the equity of PSU to the public is known as disinvestment.
Reason (R): The purpose was to improve financial discipline, modernization and improved performance of the PSUs.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Answer:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

(iii) DIRECTION: Read the given statements – Assertion (A) and Reason (R). Choose /one of the correct alternatives given below:
Assertion (A): Privatisation can be done by disinvestment and strategic sales of shares of Central Public Sector Enterprises (CPSEs.)
Reason (R): Sale of part of shares but retaining the control over management is known as disinvestment. ”
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Answer:
(b) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).

(iv) During reforms how did the government make attempts to improve the performance of PSUs?
(a) By giving PSUs Financial support. .
(b) By giving them greater autonomy in managerial and operational decision making.
(c) By providing technological support.
(d) All of the above.
Answer:
(b) By giving them greater autonomy in managerial and operational decision making.

Question 31.
Discuss briefly any two salient features of India’s pre-independence occupational structure. [4]
Or
Discuss briefly the rationale behind choosing ‘self-reliance’ as a planning objective for Indian economy.
Answer:
During the colonial period, the occupational structure of India showed little signs of change:
(i) Predominance of agricultural sector. The agricultural sector accounted for nearly 72% of the workforce in 1951. Due to massive poverty and widespread illiteracy during the colonial rule, a large proportion of the population was engaged in farming ‘ and related activities to earn their subsistence.

(ii) Regional disparity. Some states like Tamil Nadu, Andhra Pradesh, Kerala and Bengal witnessed a decline in the dependence of workforce in the agricultural sector with a commensurate increase in the manufacturing and service sector. However, during the same time states such as Orissa, Rajasthan and Punjab showed an increase in the share of workforce in agriculture.

Or

Self-reliance means not depending on external help. This is another major objective which targets the non interference by foreign countries in areas of food supply, capital investment and debts. A nation .can promote economic growth and modernization by using its own resources or by using resources imported from other nations.

The first seven five year plans gave importance to self-reliance which means avoiding imports of those goods which could be produced in India itself. This policy was considered as a necessity in order to reduce our dependence on foreign countries specially for food. This policy was also considered necessary because it was feared that dependence on imported food supplies, foreign technology and foreign capital may make India’s sovereignty vulnerable to foreign interference in our policies.

Question 32.
“India is often called as ‘Outsourcing Destination’ of the world. Discuss the prime reasons for this name given to India. [4]
Answer:
Outsourcing, an emerging business activity, is one of the important outcomes of the globalisation process. In outsourcing, a company hires regular services from external sources mostly from other countries, which previously used to be provided internally like legal advice, computer service, advertisement etc. Most multinational corporations and even small companies are outsourcing their services to India because these can be availed at a cheaper cost with reasonable degree of skill and accuracy. The main services which are being outsourced to India by the other countries are voice based business processes (known as BPO), record keeping, accountancy, banking services, film editing and even teaching. India has become a destination for global outsourcing in the post-reform period because of its low-wage rates and availability of skilled manpower.

Question 33.
Define the following: [4]
(a) Carrying capacity of environment
(b) Bio-composting
(c) Sustainable Development
(d) Absorptive capacity of the environment
Answer:
(a) Carrying capacity of environment. Carrying capacity of the environment implies that the resource extraction is not above the rate of regeneration of the resources and the wastes generated are within the assimilating capacity of the environment.
(b) Bio-composting. It is the process of converting organic matter into compost which is now being widely used by most of the farmers.
(c) Sustainable development. It refers to the development strategy to meet the needs of the present generation without compromising the needs of the future generation.
(d) Absorptive capacity of the environment. Absorptive capacity means the ability of the environment to absorb degradation. In other words, the maximum amount of waste material that can be naturally absorbed by the environment on a sustainable basis, without causing environmental damage is called Absorptive.

Question 34.
(a) Define worker-population ratio. What does it signify? [3]
(b) Analyse the trends in sectoral distribution of work force in India on the basis of data: [3]
Trends in Employment Pattern (Sector-wise), 1972-2012 (in %)

Answer:
(a) Worker-population ratio refers to participation of people in the employment activity.
Worker-population ratio or Workforce participation ratio =
\(\frac{\text { Workforce or Total Workers }}{\text { Total Population }}\) × 100

Worker-population ratio is an indicator which is used for analysing the employment situation in the country. It helps us to know the proportion of population that is actively contributing to the production of goods and services of a country. If this ratio is higher, it means that engagement of people is greater. If this ratio is medium or low, it means that a very high proportion of the population is not involved directly in economic activities.

(b) The table shows that there was a decline in the workforce engaged in primary sector from 74% in 1972-73 to 48.9% in 2011-12. Secondary sector exhibited increase from 11% in 1972-73 to 24.3% in 2011-12. Tertiary sector showed the increase from around 15% in 1972-73 to around 27% in 2011-12.

Or

(a) “The Prime Minister urged to increase the rural income by increasing non-farm activities.” Explain how non-farm activities can lead to rise in income of people in rural sector.
(b) ‘Though the livestock population is quite impressive, it’s productivity remains low.’ Suggest ways to improve the livestock productivity in our country.
Answer:
(a) Some of the important non-farm areas-ef employment are:
Animal husbandry, Fisheries, Horticulture and other alternative livelihood options.
• Livestock production provides increased stability in income, food security, transport, fuel and nutrition for the family without disrupting other production activities. Today, livestock sector alone provides alternate livelihoods options to over 70 million small and marginal farmers including landless labourers.

• Performance of the Indian Dairy Sector over the last three decades has also been quite impressive. Milk production in the country has increased by more than 8 times between 1951-2014.

• Meat, eggs, wool and other by-products are also emerging as important productive sectors for diversification.

• In India, after progressive increase in budgetary allocation and introduction of new technologies in fisheries and aquaculture, the development of fisheries has come a long way. Today, the total fish production accounts for 0.8% of the total GDP.

• Horticulture is also an important factor for diversification in agriculture. The horticulture sector contributes nearly one-third of the value of agricultural output and 6% of GDP of India. India has emerged as a world leader in producing a variety of fruits like mangoes, bananas etc. and is the second largest producer of fruits and vegetables. The economic condition of many farmers engaged in horticulture has improved and it has become a means of improving livelihood for many unprivileged classes. Flower harvesting, nursery maintenance, hybrid seed production and tissue culture etc. are highly remunerative employment options for women in rural areas.

(b) The livestock productivity in our country is quite low as compared to other countries.
Following are some ways by which it can be improved upon:
(i) Improved technology and promotion of good breeds of animals can enhance livestock productivity.
(ii) Improved veterinary care and credit facilities to small and marginal farmers can enhance productivity and sustainable livelihood options.
(iii) Investment in infrastructure, marketing linkages and dissemination are other ways in which the productivity of livestock in our country can be increased.

CODE NO. 58/4/2

Note: Except for the following questions, all the remaining questions have been asked in Set I.

Question 3.
If income rises from ₹50,000 to ₹60,000, consumption increases from ₹40,000 to ₹48,000. In this situation, what will be the value of Marginal Propensity to Consume (MPC)? (Choose the correct alternative) [1]
(a) 0.80
(b) 0.20
(c) 0.10
(d) 0.90
Answer:
(a) 0.80

As we know, MPC = AC/AY = ₹(8,000/10,000) = 0.80

Question 8.
Define Inventory (stock). [1]
Answer:
Inventory or stocks refer to quantities which are measurable at a particular point of time.

Question 11.
“Management of a water polluting oil refinery says that it (oil refinery) ensures welfare through its contribution to Gross Domestic Product.”
Defend or refute the argument of management with respect to GDP as a welfare measure of the economy. [3]
Answer:
When per capita real GDP rises, it implies greater availability of goods and services and hence greater economic welfare. But rise in GDP may not be a true indicator of economic welfare due to certain limitations. The oil refinery/though, is contributing to the GDP of the country but it is decreasing economic welfare by not ensuring that it does not pollute the environment. This negative externality i.e., water pollution caused by the oil refinery adversely affects the health of the people, thereby decreasing economic welfare which is not considered in GDP and hence GDP is over estimated. Therefore, the statement is refuted.

Question 17.
(a) On the basis of following information, identify whether the economy is in equilibrium or not: [3]

Particulars	Amount
Autonomous Consumption and Investment Expenditure (A)	₹200 crores
Marginal Propensity to Consume (MPC)	0.70
National Income	₹1,000 crores

(b) Answer the following questions on the basis of the given figure:
(i) At which level of income, Average Propensity to Consume will be equal to one and why? 1 1/2
(ii) What is the significances of saving curve above the point B. 1 1/2

a) Given: \(\overline{\mathrm{A}}\) = \(\overline{\mathrm{C}}\) + I = ₹200 crores;
MPC = 0.70;Y = ₹1000 crores.
We know that, AD = C + I
⇒ AD = C + MPC(Y) + I
⇒ AD = 200 + 0.70 (1000) …[ C + I = A – (Given)
∴ AD = 200 + 700 = ₹900 crores
Now, Y = AS = ₹1000 crores
At equilibrium, AD = AS
Since, AD (₹900 crores) is less than AS (₹1000 crores), the economy is not in equilibrium.

(b) (i) APC will be equal to 1 at OB level of income because at this level savings is zero
(S = 0) and consumption is equal to income (C = Y).
(ii) Saving curve above and to the right of point B indicates positive saving because then income is greater than consumption(Y > C).

Question 18.
Which of the following countries adopted ‘One Child Policy’ as a measure to control population? (Choose the correct alternative) [1]
(a) India
(b) China
(c) Pakistan
(d) Russia
Answer:
(b) China

Question 30.
Distinguish between: [4]
(i) Tariff and non-tariff Barriers
(ii) Bilateral and multilateral trade.
Answer:
(i) Tariff and Non-Tariff barriers. Tariff barriers are generally imposed on imports to make them relatively costlier. It is imposed by government to provide protection to its domestic manufacturers and increase government revenue. Non-Tariff barriers are all the restrictions other than taxes imposed by the government on its imports, so as to provide protection to the domestic companies such as imposition of quotas.

(ii) Bilateral and Multilateral Trade. Trade between two countries is referred to as bilateral trade. Whereas trade involving more than two countries is referred to as multilateral trade.

Question 34.
(a) State and discuss any two environmental concerns faced by India in the present times. [3]
(b) Discuss the importance of credit in rural development. [3]
Answer:
(a) In the present period, the demand for resources is in far excess of supply and the population explosion and industrial revolution has increased the pressure on the absorption capacity of the environment.
Two pressing environmental concerns faced by India in the present times:
(i) Air pollution. Air pollution in India is widespread in urban areas where vehicles are the major contributors. It results in health problems and causes severe damage to the environment. The highest number of premature deaths in the world due to outdoor and indoor air pollution occur in India where pollution has resulted in ozone depletion which is leading to climate change.

(ii) Water contamination. Water contamination takes place when toxic substances enter water bodies and get dissolved and lie suspended in water. The contaminated water is devastating not only to people but also to animals. Polluted water is unsuitable for drinking, recreation, agriculture and industry. There is a serious need to prevent water contamination or pollution, otherwise the availability of freshwater may become the most crucial problem in India in the coming decades.

(b) In agriculture, due to a long time gap between crop sowing and realisation of income, farmers are in strong need for credit. Farmers need money to meet their initial investment on seeds, fertilizers, implements and other family expenses of marriage, death, religious ceremonies etc. Therefore, credit is one of the most important factors which contribute to agricultural production. An efficient and effective rural credit delivery system is crucial for raising agricultural productivity and incomes which will lead to rural development.

CODE NO. 58/4/3

Note: Except for the following questions, all the remaining questions have been asked in Set I and Set II.

Question 1.
If the value of Average Propensity-to Save (APS) is 0.2 and National Income is ₹4,000 crore, then consumption will be ……….. (Choose the correct alternative.) [1]
(a) ₹4,000 crores
(b) ₹3,200 crores
(c) ₹3,800 crores
(d) ₹2,600 crores
Answer:
(b) ₹3,200 crores

As we know, APC = 1 – APS = 1- 0.2 = 0.8
Now, C = APC × Y ⇒ C = 0.8 × 4,000 = ₹3,200 crores

Question10.
Define unplanned inventories (stock).
Answer:
Unplanned inventory is referred to the change in the stock of inventories which has occurred unexpectedly.

Question 13.
Define effective demand. Discuss how effective demand can be restored if ex-ante saving is less than ex-ante investment. [3]
Answer:
Effective demand refers to that level of output where Aggregate demand is equal to Aggregate supply.
It ex-ante savings is less than ex-ante investment, it means buyers are planning to buy less goods and services than producers are planning to produce. Thus the inventories with the producers will start rising. As a result, producers will plan to reduce the production. This will decrease the level of investment up to the level of ex-ante savings making them equal.

Question 16.
(a) On the basis of following information, identify whether the economy is in equilibrium or not: [3]

Particulars	Amount
Autonomous Consumption and Investment Expenditure (A)	₹700 crores
Marginal Propensity to Consume (MPC)	0.8
National Income	₹4,000 crores

(i) At which level of income Average Propensity to Save (APS) will be equal to zero and why? 1 1/2
(ii) What does ‘OA’ signify with respect to consumption function. 1 1/2
Answer:
(a) Given: A = C + I = ₹700 crores; MPC = 0.80;Y = ₹4000 crores.
As we know, AD = C + I ⇒ AD_= C – + MPC (Y) + I
⇒ AD = 700 + 0.8 (4,000) …[ C – + I = A (Given)
AD = 700 + 3,200 = ₹3,900 crores
At equilibrium, AD = AS
Now, AS = Y = ₹4000 crores
Since, AD (₹3900 crores) is less than AS (₹4000 crores), the economy is not in equilibrium.

(b) (i) At OB level of income, APS will be equal to zero(APS = 0) because at this point
savings are zero ( break-even point where consumption is equal to income).
(ii) OA, being the amount of dis-saving, signifies autonomous consumption which is the minimum consumption at zero level of income.

Question 20.
Great Proletarian Cultural Revolution was introduced under the leadership of ………. (Choose the correct alternative) [1]
(a) Mao Zedong
(b) J.L. Nehru
(c) M.K. Gandhi
(d) M.A. Jinnah
Answer:
(a) Mao Zedong

Question 31.
“Some economists believe that the economic reforms have adversely affected the agriculture sector in India.”
Do you agree with the given statement? Justify your answer with valid reason. [4]
Answer:
Yes; I agree with the given statement. Reforms have not been able to benefit agriculture where the growth rate has been decelerating.

1. This happened because public investment in agricultural infrastructure like irrigation, power, roads, market linkages and research etc. which played a crucial role in the Green Revolution was reduced in the Reform period.
2. Removal of fertilizer subsidy increased the cost of production which severely affected the small and marginal farmers.
3. Indian farmers had to face increased International competition because of LPG policy which had encouraged reduction in import duties on agricultural products, removal of minimum support price etc. and lifting of quantitative restrictions on agricultural products.
4. There was more focus on production of cash crops instead of production of food ‘crops because of export-oriented policy strategies in agriculture which resulted in increase in prices of food grains.

Question 33.
What is meant by sustainable development? Discuss briefly any two strategies of Stistainable development.
Answer:
Sustainable development refers to the development strategy to meet the needs of the present generation without compromising the needs of future generation.
Strategies to achieve sustainable development in India:
(i) Use of non conventional sources of energy. India heavily depends upon thermal and hydro power plants to meet its power needs. Both of these pollute the environment extensively. Wind and solar energy, of which India has a vast potential, can be effectively tapped to replace thermal and hydro power. These sources can provide electricity without any adverse impact on environment.

(ii) Establishment of Mini Hydel plants. Mini Hydel plants can be set up to use the energy of streams which perennially flow from hilly areas. The energy of such streams can be used to move small turbines. Electricity so generated can be used locally. Mini Hydel plants are environment friendly as they do not change the land use pattern. Moreover, it does not require the use of large scale transmission towers and cables and so transmission losses are avoided.

(iii) Use of gases. Rural households in India generally used wood, dung cakes and other biomass as fuel. This practice has led to several problems like deforestation, reduction in green cover and air pollution. To meet this situation, subsidised LPG is being provided by the government. Besides it, gobar gas plants are being encouraged through easy loans and subsidies. In cities, the use of Compressed Natural Gas (CNG) as fuel in public transport system has substantially reduced the level of air pollution.

(iv) Adoption of old practices. Our age old practices like the agriculture system, healthcare system, housing, transport etc. were environment friendly. But moving away from these practices in recent times, has caused large scale environment damage. Going back to our roots and adopting our old techniques like Ayurveda, Unani, Tibetan and folk systems would be one way of ensuring sustainable development. Nowadays, people are moving more and more towards products which are herbal and organic in composition. Not only are these products environment friendly, they are relatively free from side effects and do not involve large scale industrial and chemical processing.

(v) Use of bio-compost. Indian farmers have switched over to the use of chemical fertilizers from bio-compost fertilizers, particularly since the mid 1960s. This has adversely affected the fertility of land and polluted the water bodies including the groundwater. However, in recent years, the demand for organic food is on the rise. Therefore, farmers have again started using organic manure and have started shifting towards organic farming.

(vi) Bio pest control. Since mid 1960, when Indian agriculture experienced Green Revolution, the use of more and more chemical pesticides became a common feature. However, its adverse impacts on food products, soil and water bodies soon became apparent. Even milk, meat and fish were found to be contaminated. To meet this challenge, we have now started using pesticides based on plant products, e.g., pest control products are being obtained from neem trees. Besides this, mixed cropping, i.e., growing different crops in consecutive years on the same piece of land has also helped the farmers. In addition, awareness is also spreading about various animals and birds which help in controlling pests.

(vii) Recycling of waste and ban on plastic bags. There is a need to develop the habit of , recycling of waste products in order to sustain the environment. Household waste can be used as manure for organic farming. The use of plastic bags should be banned as they do not decompose easily and cause a lot of harm to nature and the life it sustains. (any two)