CBSE Class 12 Economics Question Paper 2020 (Series: HMJ/5) 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/5) to familiarize themselves with the exam format and marking scheme.

CBSE Class 12 Economics Question Paper 2020 (Series: HMJ/5) 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.

CODE NO. 58/5/1

Section A: Introductory Macroeconomics

Question 1.
To reduce credit availability in the economy, the Central Bank may …………. (Choose the correct alternative) [1]
(a) buy securities in the open market
(b) sell securities in the open market.
(c) reduce reserve ratio.
(d) reduce repo rate.
Answer:
(b) sell securities in the open market.

Question 2.
……………… deficit includes interest payment by the Government on the past loans. (Fill up the blank with correct answer) [1]
Answer:
Fiscal deficit includes interest payment by the government on the past loans.

Question 3.
State, whether the following statement is true or false: [1]
‘Inventory is a stock variable.’
Answer:
True. As it is related to a point of time.

Question 4.
Which of the following is not a ‘factor payment’? (Choose the correct alternative) [1]
(a) Free uniform to defence personnel.
(b) Salaries to the Members of Parliament.
(c) Rent paid to the owner of a building.
(d) Scholarship given to the students.
Answer:
(d) Scholarship given to the students.

Question 5.
In case of an underemployment equilibrium, which of the following alternative is not true? (Choose the correct alternative) [1]
(a) Aggregate demand is equal to Aggregate supply.
(b) There exists excess production capacity in the economy.
(c) Resources are not fully and efficiently utilised.
(d) Resources are fully and efficiently utilised.
Answer:
(d) Resources are fully and efficiently utilised.

Question 6.
State, whether the following statement is true or false: [1]
‘All’ financial Institutions are banking institutions.
Answer:
False; As a financial institution can be a banking institution only when it performs both the functions of accepting deposits and advancing loans.

Question 7.
Combined factor income, which can’t be separated into various factor income components is known as ………… (Fill up the blank with correct answer) [1]
Answer:
Mixed income of the self employed.

Question 8.
If Marginal Propensity to Save (MPS) is 0.25 and initial change in investment is ₹250 crores, then the final change in income would be ………. (Choose the correct alternative) [1]
(a) ₹1,000 crores
(b) ₹1,200 crores
(c) ₹500 crores
(d) ₹3500 crores
Answer:
(a) ₹1,000 crores

As we know, K = \(\frac{1}{2}\) = \(\frac{1}{0.25}\) = \(\frac{100}{25}\) = 4
Now ∆Y = K × ∆I = 4 × ₹250 = ₹1,000 crores

Question 9.
Define the term ‘Public Goods’. [1]
Answer:
Public goods are those goods which are provided to the society as a whole and where use by one individual does not reduce its availability to the others, e.g., Streetlights.

Question 10.
Net Domestic Fixed Capital Formation + Change in Stock = ……………. (Fill up the blank) [1]
Answer:
Net Domestic Fixed Capital Formation + Change in Stock = Net Domestic Capital Formation

Or

When Nominal Gross Domestic Product (GDP) is ₹840 crores and price Index is 120, then the Real GDP will be ……….. (Fill up the blank with correct alternative) [1]
(a) ₹700 crores
(b) ₹900 crores
(c) ₹800 crores
(d) ₹500 crores
Answer:
(a) ₹700 crores

Real GDP = \(\frac{\text { Nominal GDP }}{\text { Price Index }}\) × 100 = \(\frac{₹ 840}{120}\) × 100 = ₹700

Question 11.
‘Subsidies to the producers, should be treated as transfer payments.’ Defend or refute the – given statement with valid reason. [3]
Answer:
I refute the statement. Subsidies are different from transfer payments. Transfer payments refer to those payments in exchange of which no factor services are provided i.e., such payments are made with the mere motive of transferring the purchasing power to a specific section of the society such as old persons, destitute women etc. Examples of transfer payments are old age pension, unemployment allowance etc. Such payments are excluded from the estimation of National Income. Whereas subsidies are a form of financial or in kind support extended to an economic sector or institution generally with the aim of promoting economic and social policy. Subsidies are the economic assistance given by the government to firms and households with the motive of general welfare. They are often granted to promote exports or to encourage firms for setting up industries in backward areas or to encourage production of ceftain commodities.

Question 12.
Calculate Gross Value Added at Market Price:
Tablee 1
Answer:
Value of Output = Domestic Sales + Exports + Change in Stocks
= 200 + 10 +(-10) = 200
∴ GVA at MP= Value of Output – Single use producer goods
= 200 – 120 = ₹80 lakhs

Question 13.
“Taxation is an effective tool to reduce the inequalities of income.”
Justify the given statement with valid reasons. [4]
Answer:
Economic inequality is an inherent part of every economic system. Government tries to reduce such inequalities of income and wealth through its budgetary policy. One of the ways in which government aims to influence distribution of income is through progressive taxation, in which higher is the income, higher is the tax.

The Government puts a higher rate’5f’taxation on income of rich people and a lower rate of tax is changed on lower income groups. This reduces inequalities of income by reducing the difference between disposable income of the two income groups.

Question 14.
In the given figure, what does the gap ‘KT’ represent? State any two fiscal measures to correct the situation. [4]

Answer:
In the given figure, the gap KT represents inflationary gap. Inflationary gap is the amount by which the actual aggregate demand exceeds aggregate supply at level of full employment. It is a measure of the excess of aggregate demand over level of output at full employment. Inflationary gap is a measure of excess demand. Fiscal measures are budgetary tools that can be used by the government in order to deal with the problem of inflationary gap or excess demand.

Following two fiscal measures can help in rectifying the situation of inflationary gap:
(i) Taxes. During the time of inflationary gap or excess demand the main aim of government is to bring down the level of aggregate demand. Thus the government increase taxes especially on high income earners in order to cut down their purchasing power. Thus decrease in taxes is a powerful fiscal measure adopted by the government to rectify the situation of excess demand or inflationary gap.

(ii) Expenditure. Changes in expenditure of the government may also influence the level of aggregate demand in the economy. To correct the situation of inflationary gap government reduces its expenditure on various heads like health, education, law and order, subsidies etc.

Question 15.
Discuss the function of Central Bank as ‘Banker, Agent and Advisor’ to the Government. [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.

Question 16.
(a) Differentiate between the concepts of ‘demand for domestic goods and services’ and ‘domestic demand for goods and services.’ [3]
(b) Distinguish between ‘Current Account Deficit’ and ‘Current Account Surplus’. [3]
Answer:
(a) Demand for domestic goods and services refers to the demand for goods and services produced within the domestic territory by domestic as well as foreign consumers. However, domestic demand for goods and services is the demand for goods and services produced within the domestic territory as well as those produced outside the domestic territory by domestic consumers.

(b) Difference between Current Account Deficit and Current Account Surplus

Question 17.
Answer the following questions based on the data given below:
(i) Planned Investments = ₹100 crore.
(ii) C = 50 + 0.50 Y
(a) Determine the equilibrium level of income. [2]
(b) Calculate the value of Savings at equilibrium level of National Income. [2]
(c) Calculate the value of Investment Multiplier. [2]
Answer:
(a) Given: I = ₹100 crore; C = 50 + 0.50Y
Therefore, S = -50 + 0.50Y
At equilibrium level, S = I
Therefore, 100 = -50 + 0.50Y
⇒ 100 + 50 = 0.5Y ⇒ Y = ^ = 300
∴ Equilibrium level of Income, Y = ₹300 crore

(b) Savings at equilibrium level of national income:-
S = -50 + 0.5 × 300 = -50 + 150 = ₹100 crore
(c) Investment multiplier, K = 1/MPS = 1/0.5 = 2

Section B: Indian Economic Development

Question 18.
Policy of ‘Import Substitution’ was targeted to protect …………… industries. (Fill up the blank with correct answer) [1]
Answer:
Domestic.

Question 19.
Which of the following is not used as a strategy for Sustainable Development? (Choose the correct alternative) [1]
(a) Use of bio-gas
(b) Use of solar power
(c) Use of thermal power
(d) Use of hydel power
Answer:
(c) Use of thermal power

Question 20.
Maternal Mortality Rate is high in ……………. (China/Pakistan). (Fill up the blank with correct alternative) [1]
Answer:
Pakistan.

Question 21.
State the meaning of ‘Marketed Surplus’. [1]
Or
State the meaning of ‘Subsidy’.
Answer:
Marketed surplus is that portion of the agricultural produce which is sold by the farmers in the market after meeting their own requirements.
Or
Subsidies refer to the money that the government pays to help an organisation or to keep the cost of a service low.

Question 22.
State, whether the following statement is true or false: [1]
“As per the Human Development Report, 2018, India was ranked at 180th position.”
Answer:
False; Currently India ranks 130 on 2018 Human Development Index.

Question 23.
If a construction site Manager hires two workers on daily wage basis, such a situation is covered under ………….. (formal/informal) sector. (Fill up the blank with correct alternative) [1]
Answer:
Informal.

Question 24.
Which of the following countries initiated its process of Economic Reforms in the year 1991? (Choose the correct alternative) [1]
(a) Pakistan
(b) India
(c) Russia
(d) China
Answer:
(b) India

Question 25.
Greater proportion of women workers are found in …………… (urban/rural) areas as a component of Indian work force. (Choose the correct alternative) [1]
Answer:
Rural

Question 26.
State, whether the following statement is true or false: [1]
“GATT was established in 1923 with 48 member countries.”
Answer:
False; GATT was established in 1948 with 23 countries.

Question 27.
“GLF” with respect to the People’s Republic of China referred to as …………. (Choose the correct alternative) [1]
(a) Giant Leap Forward
(b) Great Lead Forum
(c) Great Leap Forward
(d) Giant Lead Forum
Answer:
(c) Great Leap Forward

Question 28.
Discuss briefly the concept of ‘Informalisation of workforce’ in India. [3]
Or
State any three challenges facing rural development in India.
Answer:
Informalisation of workforce refers to a situation wherein the proportion of informal workers in the total workforce increases. It implies movement of workers from self employment and regular salaried employment to informal employment.
This can happen due to many reasons. Some of which are as follows:
(i) Due to inadequate employment opportunities the supply of labour exceeds its . demand, which leads to informalisation of workforce.
(ii) In order to maximize their profits, producers try to minimise their cost by employing more and more of casual labour.
(iii) Due to relaxation in Labour Laws, producers prefer to employ casual labour than regular salaried workers.
Or
Economists have identified certain key issues that are associated with our rural development and need special attention for the upliftment of rural population.
Sonpe of the areas which are challenging and need fresh initiatives for development in rural India are:

1. Development of human resources. The action plan for rural development must focus on issues like literacy (specially female literacy), skill development and healthcare.
2. Land Reforms. These are required in order to improve agricultural productivity, abolish intermediaries and eliminate exploitation of cultivators.
3. Development of infrastructure. Infrastructure development like electricity, irrigation, credit, marketing, transport facilities etc. are the basic issues for rural development.

Question 29.
Compare and analyse the given data of India and China, with valid reasons. [3]
Tablee 3
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.
Discuss briefly any two major steps taken by the Government of India on ‘Financial Sector’ front under the Economic Reforms of 1991. [4]
Answer:
Financial Sector includes Financial institutions like commercial banks, investment banks, stock exchange operations and foreign exchange market. The financial sector in India is controlled by the central bank that is, the Reserve Bank of India.
The reforms introduced under the financial sector are:
(i) Change in the role of RBI. The role of RBI was reduced from regulator to facilitator of financial sector. As a result, the financial sector is now allowed to take decisions on many matters without consulting the RBI.
(ii) Increase in limit of Foreign Investment. The limit of foreign investment in banks was raised to around 51%. Foreign Institutional Investors such as merchant bankers, mutual funds and pension funds are now allowed to invest in Indian financial markets.

Question 31.
Discuss briefly any two salient features of India’s pre-independence occupational structure. [4]
Or
Discuss briefly, the rationale behind equity with growth as planning objectives 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

Growth refers to increase in the country’s capacity to produce goods and services within the country whereas equity means to ensure that the benefits of economic prosperity reach ,the poor sections as well instead of being enjoyed only by the rich. Economic growth , would become meaningless if the benefits are enjoyed only by a handful of people in the society. Equity implies that social justice and economic growth must be combined to ensure that every individual is able to meet his or her basic needs, Therefore, the rationale behind growth with equity is development with social justice which is one of the principal objectives of planning in India.

Question 32.
Diversification includes two aspects – one relates to change in cropping pattern and the other relates to shift of workforce from agriculture to other allied activities like livestock, poultry, fisheries, etc. and non-agriculture sector. The need for diversification arises from the fact that there is greater risk in depending exclusively on farming for livelihood. Diversification towards new areas is necessary not only to reduce the risk from agricultural sector but also to provide sustainable livelihood options to rural people. Much of agricultural employment activities are concentrated in the Kharif season. But during the Rabi season, in areas where there are inadequate irrigation facilities, it becomes difficult to find gainful employment. Therefore, expansion into other sectors is essential to provide supplementary gainful employment and in realising higher levels of income for rural people to overcome poverty and other tribulations. [4]

(i) ……………relates to shift of workforce from agriculture to two other allied activities.
(a) Micro cropping
(b) Diversification
(c) Both (a) and (b)
(d) None of these
Answer:
(b) Diversification

(ii) Livestock comes under the category of …………… activities.
(a) diversification
(b) agriculture allied activities
(c) agriculture
(d) commercial
Answer:
(b) agriculture allied activities

(iii) Emerging Challenges of rural development includes:
(a) Diversification of production activities
(b) Organic farming
(c) Both (a) and (b)
(d) None of these
Answer:
(c) Both (a) and (b)

(iv) Direction: Read the given statements – Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A) : The idea of Village Development being at the center of the overall development of the nation is relevant even today, when we see around us fast growing cities with large industries and modern Information Technology hubs.
Reason (R) : More than two third of India’s population depends on agriculture that is jset to become productive; one third of rural India still lives in abject poverty.
(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).

Question 33.
(a) Explain, how does ‘Investment in Human Capital’ contribute to the growth of an economy. [3]
(b) State the meaning of ‘Agricultural Marketing.’ [3]
Answer:
(a) Human capital can be defined as the knowledge, ability, skill and physical capacity of the people which helps them to produce more. It is the stock of skills and productive knowledge embodied in human beings. The process of development of human capital through investment in human capital is termed as human capital formation.
Following observations highlight how human capital formation contributes to the process of growth and development of an economy:
(i) Higher productivity of physical capital. Investment in human capital increases the stock of human capital leading to better and efficient utilisation of physical capital. This increases the productivity of physical capital accelerating the pace of economic growth.

(ii) Innovative skills. Larger the number of skilled and trained personnel, greater the possibilities of innovations in the areas of production and related activities. The availability of educated and skilled labourforce also facilitates the adaptation to new technologies easily.

(b) Agricultural marketing is a process that involves assembling, storage, processing, transportation, packaging, grading and distribution of different agricultural commodities across the country. The Government has adopted various measures for improving agricultural marketing such as regulation of markets, provision of infrastructural facilities, Cooperative marketing and different policy instruments like Minimum Support Prices (MSPs), Public Distribution System (PDS) etc.

Question 34.
Explain how the government has indirectly generated employment or created opportunities for employment generation. [6]
Answer:
When the output of goods and services from government enterprises increases, the private enterprises will also raise their output and hence increase the number of employment opportunities in the country. For example, when a government owned steel company increases its output, it will result in direct increase in employment in that government company. Simultaneously, private companies, which purchase steel from it will also increase their output and thus employment. This is the indirect generation of employment opportunities by the government in the country.

Moreover, many programmes that the governments implement, aimed at alleviating poverty, are through employment generation. They are also known as employment ‘ generation programmes. For example, Mahatma Gandhi National Rural Employment Guarantee Act 2005, Pradhan Mantri Jan-Dhan Yojna 2014, Swarna Jayanti Gram Swarozgar Yojna (SGSY), Pradhan Mantri Gramodaya Yojna, Valmiki Ambedkar Awas Yojna etc. All these programmes aimed at providing not only employment but also services in areas such as primary health, primary education, rural drinking water, nutrition, assistance for people to buy income and employment generating assets, construction of houses and sanitation, assistance for constructing houses, etc.

Or,

(a) “The developmental activities in India have resulted in pressure on its finite natural resources, besides creating impacts on human health and wellbeing.” Explain the statement. [3]
(b) “Economists believe that India should spend at least 6% of its GDP on Education for achieving desired results.” Justify the statement with valid reason. [3]
Answer:
(a) The threat to India’s environment is poverty- induced and at the same time due to affluence and a rapidly growing industrial sector. Air pollution, water contamination, soil erosion, deforestation and wildlife extinction are some of the most pressing environmental concerns, many of which have been caused due to improved standards of living, economic development and technical advancement. The development process has pplluted the atmosphere and water bodies leading to decline in the air and water quality. This has resulted in increased incidence of respiratory and water-borne diseases. Extinction of many resources due to indiscriminate use and extraction has also resulted in an environmental crisis.

(b) Human Capital Formation is associated with investment in man and his development as a creative and productive resource.
Investment in education helps in the economic growth of a country in many ways:
(i) It confers higher earning capacity on people as well as it improves their social standing.
(ii) It provides knowledge to understand the changes taking place in the society as well as stimulates innovations.
(iii) It also facilitates the adoption of new technologies.
The expenditure on education by government is very less as compared to the desired level of education expenditure recommended by the various commissions in the past. More than forty years ago, the Education Commission (1964-66) had recommended that at least 6% of GDP should be spent on education so as to bring a noticeable rate of growth in educational achievements. Compared to this the current level of a little over 4% has been quite inadequate. In 2009, the Government of India enacted the Right of Education Act to make free education a fundamental right of all the children in the age group of 6 to 14 years. The Government of India has also started levying a 2% education cess on all Union taxes. The revenues from which have been earmarked for spending on elementary education. Therefore, a goal of 6% needs to be reached and has been accepted as a must for the coming years in order to promote and encourage education in our country.

CODE NO. 58/5/2

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

Question 3.
State, whether the following statement is true or false: [1]
‘Purchase of machinery by a producer is an intermediate good.’
Answer:
False; Purchase of machinery by a producer is a final good.

Question 10.
Which of the following statement is incorrect? [1]
(a) Gross Domestic Product (GDP) at Market price = GDP at factor cost plus Net Indirect taxes.
(b) Net National product (GNP) at Market price = NNP at factor cost.
(c) Gross National Product (GNP) at Market price = GDP at Market price Plus Net factor income from abroad.
(d) Net National Product (NNP) at factor cost = National Income.
Answer:
(b) Net National Product (NNP) at Market price = NNP at factor cost

Or,

If the Real Gross Domestic Product (GDP) in an economy is ₹520 crores and Nominal Gross Domestic Product (GDP) is ₹650 crores, calculate the price Index.
Answer:

Real GDP = \(\frac{\text { Nominal GDP }}{\text { Price Index }}\) × 100
⇒ 520 = \(\frac{650}{\text { Price Index }}\) × 100
⇒ Price Index = \(\frac{65,000}{\text { 520 }}\) = ₹125 crores

Question 12.
Calculate Net Value Added at factor cost from the following data:
Tablee 4
Answer:
Value of Output = Sales + Unsold goods
= 20 + 2 = 122 lakh

Depreciation = \(\frac{\text { Durable Producer Goods }}{\text { Life Span }}\) = \(\frac{10}{10}\) = ₹1 lakh
GVA at \lP = Value of Output – single use producer goods
= 22-5 = 117 lakh

NVA at FC = GVA_MP – Depreciation – GST
= 17-1-1 = ₹15 lakh

Question 15.
Explain the ‘bank of note issue’ function of Central Bank. [4]
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.

Question 17.
(a) Recently Indian Rupee (?) has depreciated significantly. This has lead to distress for Indian Importers.’ Defend or refute the given statement with valid reasons. [3]
Answer:
(a) I defend this statement. Depreciation means a fall in the value of the domestic currency in terms of a foreign currency. It means that $1 will now be exchanged for more Indian rupees (?). In other words, more of domestic currency is now required to buy goods worth 1 Dollar which implies that imports from other countries will decrease as they will become costlier. This has lead to distress for the Indian importers.

(b) Distinguish between ‘trade deficit’ and ‘current account deficit’. [3]
Answer:

Question 18.
Define “Quota”. [1]
Answer:
Quotas are the non tariff barriers which refer to the maximum quantity of goods that can be imported from a country. Quotas restrict imports and hence protect the domestic producers from foreign competition.

Question 31.
“Modernisation as a planning objective shows a dichotomy with employment generation.” Justify the statement. [4]
Or
State the two-fold motive for the systematic destabilisation of indigenous Indian industries in the British era.
Answer:
Adoption of new technology in the production of goods and services to increase output is called modernization. The adoption of new technology and modern methods of production is necessary to increase the output of goods and services. It may create a contradictory situation in the country as far as employment generation is concerned. Adoption of the latest technology implies adopting capital intensive technology which requires less labour per unit of output. Thus modernization may lead to unemployment in the country in the initial stages, but if it is able to bring an increase in output and national income, it would create opportunities of employment and will not be a contradiction in the light of employment generation.

Or

The Britishers followed the policy of systematic destabilisation of indigenous Indian industries. The motive behind the de-industrialisation by the British government was two fold:
— to buy raw materials from India at cheap rates and to thus, reduce India to the status of a mere exporter of raw materials to the British modern Industries.
— to sell British manufactured goods in Indian market at higher prices, i.e., to turn India . into a sprawling ready made market for finished British goods.

Question 34.
(a) Discuss the need for on-the-job training for an employee. [3]
(b) Discuss the role played by horticulture in the direction of rural development in India. [3]
Answer:
(a) The productivity of physical capital is substantially enhanced with the improvement in human capital. Due to this reason, many firms provide on-the-job training to the workers. Such training can be provided fast and without much cost.
It increases the skill and efficiency of the workers and leads to an increase in production and productivity.
→ On-the-job training may take different forms:
(i) Workers maybe trained in the firm itself under the supervision of a skilled worker.
(ii) They may be sent for off-campus training.
Usually, after on-the-job training of employees, firms insist that the workers should work for a specified period of time so that the firm can recover the benefits of the enhanced productivity owing to the training provided by it. On-the-job training is considered as a source of human capital formation as the return of expenditure on such gaining, in the form of enhanced labour productivity, is more than its cost.

(b) Horticulture is an important diversification from agriculture.

• Blessed with a varying climate and soil conditions, India has adopted growing of diverse horticultural crops.
• India has emerged as a world leader introducing a variety of fruits like mangoes, bananas, coconuts, cashewnuts and a number of spices and is the second largest producer of fruits and vegetables.
• 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, propagation of fruits and flowers and food processing are highly remunerative employment options for women in rural areas.
• Horticulture has emerged as a successful sustainable livelihood option and needs to be encouraged significantly.

CODE NO. 58/5/3

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

Question 6.
State, whether the following statement is true or false: [1]
‘Margin requirement is raised by the Central Bank to increase money supply.’
Answer:
False; Central Bank reduces the margin requirements in order to increase money supply.

Question 10.
Rent + Interest + Profit = ………… (Fill up the blank with correct answer) [1]
Or
When Nominal Gross Domestic Product (GDP) is ₹850 crores and Price Index is 170, Real Gross Domestic Product (GDP) will be ………… (Fill up the blank with correct answer)
Answer:
Rent + Interest + Profit = Operating Surplus

Or

As we know, Real GDP = \(\frac{\text { Durable Producer Goods }}{\text { Life Span }}\) × 100 = \(\frac{850}{170}\) × 100 = ₹500 crores

Question 12.
Calculate Net Domestic Product at factor cost. [3]
Tablee
Answer:
NDP_FC = Interest + Compensation of Employees + Rent and Profit
= 700 + 3000 + 700 = ₹4,400 crores

Question 5.
Explain the function of Central Bank as ‘Banker’s Bank and Supervisor’. [4]
Answer:
Being the apex bank, the Central Bank acts as the banker to other banks, i.e., it has the same relationship with commercial banks as the latter maintains with the general public. As the banker to banks, the Central Bank functions in following capacities:

Custodian of Cash Reserves. It is the custodian of their cash reserves. Banks of the country are required to keep a certain percentage of their deposits with the Central Bank (known as Cash Reserve Ratio). In this way, Central Bank acts as a custodian of cash reserves of commercial banks.

2. Lender of the last Resort. When commercial banks fail to meet their financial requirements from other sources, they approach the Central Bank to give loans and advances as lender of the last resort.

3. Clearing House. It acts as a bank of central clearance, settlements and transfers. As all commercial banks have their accounts with the Central Bank, it can easily settle claims of various commercial banks against each other by making debit and credit entries in their accounts.

Act as a Supervisor. As a supervisor, the Central Bank regulates and controls the commercial banks by taking care of their licensing, branch expansion, etc.

Question 17.
(a) Explain the relationship between fall in price of a US Dollar ($) and its demand. [3]
(b) Distinguish between Autonomous items and Accommodating items. [3]
Answer:
There is an inverse relation between price of foreign exchange and the demand for foreign exchange (say US dollar) in terms of domestic currency (say Indian rupee). This means lower the price of foreign exchange, the higher is the demand for it. When price of foreign currency falls, imports from that country become cheaper. Imports increase and therefore demand for that currency increases. It can be explained further taking a concrete example. Suppose the present price of US dollar is ₹65. This means for buying goods worth 1 US dollar from America, India has to part with ₹65. Suppose, the price of US dollar falls to ₹60 a dollar, now India will part with ₹60 to buy goods of the value of one US dollar. Thus, Indians will import more from America and will demand more US dollars.

(b) Difference between Autonomous items and’Accommodating items
Tablee 6

Question 24
………………. is one of the main positive contribution made by the British in India.
(Fill up the blank with correct answer) [1]
Answer:
Introduction of Railways

Question 33.
(a) Distinguish between ‘Green Revolution’ and ‘Golden Revolution’. [4]
(b) (i) India has a comparative advantage in the field of organic farming. Explain the statement.
(ii) Name one major constraint which the farmers face which prevents them from switching to organic farming. [2]
Answer:
(a) Difference between Green Revolution and Golden Revolution
Tablee 7

(b) (i) India has comparative advantage in organic farming because it involves labour intensive process production, and India has abundance of labour.
(ii) ‘Low Yield and High Cost per Unit of Output’ is the principal constraint in / switching over from conventional farming to organic farming.