Students must start practicing the questions from CBSE Sample Papers for Class 12 Economics with Solutions Set 2 are designed as per the revised syllabus.
CBSE Sample Papers for Class 12 Economics Set 2 with Solutions
Time Allowed: 3 Hours
Maximum Marks: 80
General Instructions:
- This question paper contains two sections
Section A- Macroeconomics
Section B- Indian Economic Development - This paper contains 20 Multiple Choice Questions of 1 Mark each.
- This paper contains 4 Short Answer Questions of 3 Marks each to be answered in 60 to 80 words.
- This paper contains 6 Short Answer Questions of 4 Marks each to be answered in 80 to 100 words.
- This paper contains 4 Long Answer Questions of 6 Marks each to be answered in 100 to 150 words.
Section A
(Macroeconomics)
Question 1.
The difference between narrow money and broad money is (1)
(a) coins and currency
(b) only currency
(c) saving deposits of banks
(d) time deposits with banks
Answer:
(d) time deposits with banks
Question 2.
“Current account deficit is unfavourable for the country” because (1)
(a) it signifies that the nation is a borrower from rest of the world
(b) it reflects that the country does not have enough foreign exchange to finance its international payments
(c) it has demerits for the country
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)
Question 3.
……… is equal to the difference between ‘AD beyond full employment’ and ‘AD at full employment’. (1)
(a) Recession
(b) Deflationary gap
(c) Inflationary gap
(d) None of the above
Answer:
(c) Inflationary gap
Question 4.
Statement I Profits received from investments abroad is recorded in the capital account.
Statement II Import of machines is recorded in the current account. (1)
Alternatives
(a) Statement I is true and Statement II is false
(b) Statement I is false and Statement II is true
(c) Both the statements are true
(d) Both the statements are false
Answer:
(b) Profit received from investments abroad affect neither the assets nor the liabilities of a country or its residents. Therefore it is recorded in current account.
Question 5.
Observe the given figure carefully and choose the correct pair from the alternatives given below (1)
(a) Flow, Stock
(b) Stock, Flow
(c) Flow, Flow
(d) Stock, Stock
Answer:
(a) Flow, Stock
Question 6.
Find the missing figures and choose the correct alternatives. (1)
Alternatives
(a) 50,200,0.25
(b) 200,50,0.25
(c) 50,200,0.50
(d) 200,50,0.50
Answer:
(b) (i) Δ Y = Y1 – Y0 ; Δ Y = 200-0 ; Δ Y = 200
(ii) Δ C = C2 – C1 ; Δ C = 400 – 350 ; Δ C = 50
(iii) M P C = \(\frac{\Delta C}{\Delta Y} \Rightarrow \frac{50}{200}\) ; M P C = 0.25
Question 7.
Which of the following statements do not support with the function of RBI as supervisor to the commercial banks? (1)
(a) Regulates the expansion, merger, acquisition etc. of the bank
(b) Formulates all rules and regulations for commercial bank
(c) Extend loans to the commercial bank
(d) Inspection of operations of banks
Answer:
(a) Regulates the expansion, merger, acquisition etc. of the bank
Question 8.
Suppose in a hypothetical economy, the income rises from ₹ 5,000 crore to ₹ 6,000 crore. As a result, the consumption expenditure rises from ₹ 4,000 crore to ₹ 4,600 crore. Marginal propensity to consume in such a case would be
(a) 0.8
(b) 0.4
(c) 0.2
(d) 0.6
Answer:
(d)
Question 9.
Who will be benefitted when there is an appreciation in a foreign currency in terms of domestic currency? (1)
(i) Importers
(ii) Exporters
(iii) Government
Codes
(a) (i) and (ii)
(b) (ii) and (iii)
(c) Only (ii)
(d) (i) and (iii)
Answer:
(c) Only (ii)
Question 10.
“Fiscal policy is a tool used by the government to stabalise the economy and promote economic growth.”
How does fiscal policy aim to stabilise the economy? (1)
(a) By controlling interest rates
(b) By regulating international trade
(c) By managing government spending and taxation
(d) By controlling the money supply
Answer:
(c) By managing government spending and taxation
Question 11.
Calculate ‘Gross National Product at Factor Cost’ (GNPFC) from the following data by expenditure method (3)
Items | ₹ (in crores |
Private final consumption expenditure | 1,000 |
Net domestic capital formation | 200 |
Profits | 400 |
Compensation of employees | 800 |
Rent | 250 |
Government final consumption expenditure | 500 |
Consumption of fixed capital | 60 |
Interest | 150 |
Net current transfers from rest of the world | (-) 80 |
Net factor income from abroad | (-) 10 |
Net exports | (-) 20 |
Net indirect taxes | 80 |
Or
Explain why subsidies are added to and indirect taxes are deducted from domestic product at market price to arrive at domestic product at factor cost?
Answer:
Expenditure Method
Gross Domestic Product at Market Price ( GDPNP)
= Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation + Net Exports
= 1,000 + 500 + (200 + 60) + (-20)
= 1,000 + 500 + 260 – 20 = ₹ 1,740 crore
Gross National Product at Factor Cost (GNPFC )
= GDPMP – Net indirect Taxes + Net Factor
Income from Abroad (NFIA)
= 1,740 – 80 + (-10) = 1,740 – 90
= ₹ 1,650 crore
Or
Subsidies by government are grants that decrease the factor price of a commodity, whereas, indirect taxes are paid by a firm and households that increase the factor price of a commodity.
Hence, to derive gross domestic product at factor cost from gross domestic product at market price. wé deduct indirect taxes and add subsidies.
Question 12.
“It records capital transactions between the residents of country and the rest of the world”.
Identify the account being highlighted in given statement and state any two components of the same. (3)
Answer:
Capital account is inighlighted in the given statement. (1)
Components of capital account are
(i) Foreign Investment It includes investment made by the residents of a country in rest of the world or by the residents of rest of the world in domestic country.
(ii) Borrowings Borrowings to and from abroad also affect the assets and are therefore recorded in capital account. (2)
Question 13.
In the given figure, what does the gap ‘KT’ represent? State and discuss any two fiscal measures to correct the situation. (4)
Answer:
‘KT’ represents inflationary gap which means aggregate demand is more than aggregate supply corresponding to full employment level.
(1)
Two fiscal measures to correct the situation of inflationary gap are
(i) Revenue Policy To correct the situation of inflationary gap, government raises the rate of all taxes.
This reduces the purchasing power by reducing disposable income (i.e. after tax income) of the people which in turn will reduce the aggregate demand in the economy.
(ii) Expenditure Policy To correct the situation of inflationary gap, government should reduce its public expenditure.
This reduces the purchasing power by reducing total income of the people which in turn will reduce the aggregate demand in the economy. (3)
Question 14.
Derive the formula,
K = \(\frac{1}{\mathrm{MPS}}\)
Where K =Investment Multiplier
MPS =Marginal Propensity to Save
Answer:
Question 15.
Read the given excerpt taken from the article “What is ‘money” published by The Economic Times on 20th September, 2022. “The money came into existence to overcome the drawbacks of the barter system.
Earlier, people used to exchange goods and services as a form of commerce. This often led to many disadvantages, one of which was the double coincidence of wants. To solve this problem, a standard ; medium of exchange, money, was introduced.”
Explain in brief the function of money highlighted in the given excerpt. (4)
Or
“Money is something which is used by everyone on a daily basis for variety of purposes including exchanging goods and services to investing purpose”. In the light of the statement, explain one primary function and one secondary function of money.
Answer:
‘Medium of exchange’ is one of the primary and most important functions of money.
Any commodity can be purchased or sold through the medium of money. In other words, money becomes the representative of general purchasing power. It is the function of money which has made the work of exchange easy because money has the merit of general acceptability.
This function of money has solved the problem of ‘double coincidence of wants’ created by the barter system of exchange.
Under the barter system, it was very rare when the owner of some goods or services could find someone who wanted his goods or services and at the same time, he possessed that goods or services that the first person wanted. e.g. A man wanting rice in exchange of wheat had to find a man wanting wheat in exchange of rice.
This made the exchange of goods and services difficult. But the evolution of money has solved this problem. A person can sell his wheat in the market for money and from that money he can purchase rice.
So, the ‘medium of exchange’ function of money has solved the problem of ‘double coincidence of wants’ related with the barter system of exchange.
Or
Money has overcome the problems under the barter systerm and thus, performs many functions.
Primary and secondary functions of money are
(i) Measure of Value Money serves as a measure of value as it works as a common denomination. The value of all goods and services is expressed in terms of money. Money is also regarded as ‘unit of account’ as it helps in calculating relative prices of goods and services. (2)
(ii) Store of Value A store of value implies a store of wealth. Money can be easily stored for future use. It is the most convenient and economical means to store earnings and wealth. It provides security to individuals against contingencies, unpredictable emergencies as well as to pay future debts. (2)
Question 16.
(i) “Management of a water polluting oil refinery says that the 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)
(ii) Giving reason, explain the treatment assigned to the following while estimating national income (3)
(a) Interest paid by banks on deposits by individuals
(b) National debt interest
Answer:
(i) The above argument is refuted. GDP is not considered a good measure of welfare as it fails to take into effect ‘externalities’.
Externalities refer to the benefits or harms that a firm or an individual causes to another for which they are not paid.
e.g. River pollution created by an oil refinery has disastrous effects on aquatic life.
It reduces the overall welfare of the society and create negative externality.
(ii) (a) Interest paid by banks on deposits by individuals should be included in estimation of national income as it will be treated as factor income.
(b) National debt interest should not be included in estimation of national income as it is assumed that government borrows for consumption and hence, it is treated as transfer payment.
Question 17.
(i) From the following data about a government budget, find out the following
(a) Revenue deficit (2)
(b) Primary deficit (3)
S.No. | Items | ₹ (in arab) |
i. | Tax revenue | 47 |
ii. | Capital receipts | 34 |
iii. | Non-tax revenue | 10 |
iv. | Borrowings | 32 |
v. | Revenue expenditures | 80 |
vi. | Interest payments | 20 |
(ii) State any two non-tax revenue/receipts received by the government.
Or
(i) “The fiscal deficit gives the borrowing requirement of the government”. Elucidate. (3)
(ii) Distinguish between primary and revenue deficit. (3)
Answer:
(i) (a) Revenue Deficit = Revenue Expenditure
(Tax Revenue+ Non-tax Revenue)
= 80 – (47 + 10) = 80 – 57 = ₹ 23 arab
(b) Fiscal Deficit = Borrowings
Borrowings =₹ 32 arab
So, Fiscal Deficit =₹ 32 arab
Primary Deficit = Fiscal Deficit – Interest
Payments =32-20=₹ 12 arab
(ii) Two non-tax revenue/receipts are
(a) Interest Interest received by the government on loans given.
(b) License Fees Fee charged by the government to grant permission for an act, such as driving license, permit, etc.
Or
Section B
(Indian Economic Development)
Question 18.
Observe the image given below and identify the type of economic structure (1)
(i) Fiscal deficit refers to excess of government expenditure over its receipts exclusive of borrowings. Thus, fiscal deficit points to borrowing requirements of the government to cape with its expenditure of the year.
Higher borrowing implies higher burden of repayments of loans and of interest on the future generation. As this burden mounts up, year after year, resources base for future generation tends to shrink. This will definately retard the process of future growth, particularly when borrowing by the government are used for non-productive purpose.
(ii) Difference between primary deficit and revenue deficit are
Basis | Primary Deficit | Revenue Deficit |
Meaning | Primary deficit is the difference between fiscal deficit and interest payments | Revenue deficit is the difference between revenue expenditure and revenue receipts. |
Implications | Primary deficit indicates the borrowing requirement of the government. | Revenue deficit shows the inefficiency of the government to meet its current expenditure. |
Scope | It has a narrow scope. | It has a wide scope. |
(a) Socialism
(b) Capitalism
(c) Mixed economy
(d) None of these
Answer:
(c) Mixed economy
Question 19.
The other name of Village and Small-Scale Industries Committee set-up in 1955 is …. (1)
(a) Lakdawala committee
(b) Karve committee
(c) Narasimham committee
(d) Hussain committee
Answer:
(b) Karve committee
Question 20.
The main aim of ‘Great Leap Forward’ (GLF) in China was to ensure rapid increase of ………….. .
(a) agriculture
(b) industries
(c) services
(d) exports
Answer:
(b) industries
Question 21.
When extraction is above the rate of regeneration of the resource and the wastage are outside the absorptive capacity of the environment, then environment fails to perform its one of the vital function. What is that function? (1)
(a) It supplies resources
(b) It assimilates waste
(c) It sustains life
(d) It provides aesthetic services
Answer:
(c) The environment is able to perform its functions as long as the demand on these functions is within its carrying capacity. When demand crosses environment’s carrying capacity then environment fails to perform its vital function of life sustenance and this results in an environmental crisis.
Question 22.
State the correct combination between the following columns (1)
Column I | Column II |
A. 1850 | (i) Establishment of TISCO |
B. 1921 | (ii) Introduction of railways by the British |
C. 1907 | (iii) First railway bridge linking Bombay with Thane |
D. 1854 | (iv) The year of great divide |
Codes
A B C D
(a) (ii) (iv) (iii) (i)
(b) (i) (iv) (iii) (ii)
(ii) (ii) (iv) (i) (iii)
(iii) (iii) (iv) (i) (ii)
Answer:
(c) (ii) (iv) (i) (iii)
Question 23.
Which sectors have faced some adverse impacts of NEP? (1)
(i) Agricultural sector
(ii) Industrial sector
(iii) Service sector
Codes
(a) (i) and (ii)
(b) (ii) and (iii)
(c) (i) and (iii)
(d) Only (i)
Answer:
(a) (i) and (ii)
Question 24.
Statement I Proportion of people below poverty line is more in India with respect to Pakistan.
Statement II Maternal Mortality Rate (MMR) is high in Pakistan with respect to China. (1)
Alternatives
(a) Statement I is true and Statement II is false
(b) Statement I is false and Statement II is true
(c) Both the statements are true
(d) Both the statements are false
Answer:
(b) Pakistan In 2011, 24.3% people were below poverty line in pakistan, while the ratio was 21.9 % in India.
Pakistan In 2017-19 MMR in China was 29 (per one lakh births) while it was 140 (per one lakh births) in Pakistan.
Question 25.
……… includes quantitative aspects of per capita, GDP and the quality aspects of performance in health and education.
(a) HD
(b) GDI
(c) HDI
(d) None of these
Answer:
(c) HOI
Question 26.
Identify the correct combination of the ‘Goals of human capital formation in India.’
(1)
(a) Quality education, skill development, employment generation, inclusive growth
(b) Healthcare access, skill development, infrastructure development
(c) Poverty allevation, gender equality, modernisation, self-reliance
(d) Literacy enhancement, environmental conversation, rural development, technology advancement
Answer:
(a) Quality education, skill development, employment generation, inclusive growth
Question 27.
Assertion (A) In 1970s, there was low population growth in China.
Reason (R) China introduced the one-child norm in late 1970s.
Alternatives
(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 28.
“Information technology plays a very significant role in achieving sustainable development and food security”.
Comment. (3)
Answer:
Information technology plays a very significant role in achieving sustainable development and food security in the following ways
(i) It tan act as a tool for releasing the creative potential and knowledge embedded in our people.
(ii) Issues like weather forecasting, crop treatment, fertilisers, pesticides, storage conditions, etc. can be well administered, if expert opinion is made available to the farmers.
(iii) The quality and quantity of crops can be increased manifold, if the farmers are made aware of the latest equipments, technologies and resources.
Question 29.
Defend or refute the statement with valid explanation
“There are more number of regular salaried employees found in urban areas than in rural areas”. (3)
Or
‘School dropouts are giving way to child labour”. Discuss how this is a loss of human capital?
Answer:
I defend the given statement. Regular salaried employees are more in urban areas than in rural areas due to following reasons
(i) Education and Training Regular salaried employment requires certain educational qualifications and professional skills. Education and training facilities are not as good in rural areas as in urban areas. Therefore, chances of regular employment are higher for urban people.
(ii) Infrastructure Large companies including MNCs are concentrated in the urban areas due to the presence of economic infrastructure and availability of modern facilities like banks, transport, communication, etc.
These companies hire regular salaried employees, which results in concentration their in the urban areas.
(iii) Agriculture Rural population is primarily engaged in agricultural sector and are not willing to take the risk of leaving their farms for regular salaried employment. This is also a reason for regular salaried employment to be less prevalent in rural areas.
Or
This is definitely a loss to human capital. If these children were allowed to complete their education, it is possible that some of them would have become doctors, engineers or government officials. heir productivity would have been more and they would have contributed towards human capital formation So, school dropouts are definitely a loss to human capital.
Question 30.
“Male child-preference is common in many developing countries including India, China and Pakistan”. Why do people practice discrimination between male and female child? (4)
Answer:
Both rural and urban populations have economic and traditional incentives to prefer sons over daughters. Sons are preferred as they provide the primary financial support to the parents.
A woman changes her surname to her husband’s surname after marriage.
For some families, one’s daughter-in-law’s name instead of a daughter’s name would be added in the book of family tree.
Therefore, if a family had no son, the fortune and name of the family would have no legal heirs. The choice of small families also affects the people’s views on the sex of their child.
Question 31.
Observe the picture given below and describe the state of Indian industries on the eve of independence. (4)
Answer:
The industrial development pattern on the eve of independence was characterised by the following elements
(i) The public sector enterprises such as railways, power, post and telegraph were confined to areas which would enlarge the size of market for British products in India.
(ii) The industrial growth was lopsided, in the sense that consumer goods industry was not adequately supported by the capital goods industry.
(iii) No priority was given for the development of basic and heavy industries. Tata Iron and Steel Corporation (TISCO) established in 1907, was the only basic industry in India.
(iv) The pattern of development in the industrial sector was lopsided and was dominated by the presence of small industries and large industries, but very few medium industries.
Question 32.
State whether the following statements are true or false, with valid arguments
(i) Substituting fertiliser subsidies with agricultural subsidies as the farmer was benefitting fertiliser industry and not the target group has been the topic of immense debate regarding provision of subsidies during 1960’s and 70’s.
(ii) The main reason for constituting Karve Committee in 1955 was setting capital good industries in rural areas and thus promoting rural development.
Or
“The railways affected the structure of the
Indian economy positively as well as negatively”. Discuss.
Answer:
(i) The given statement is true. It was argued that eliminating subsidies would increase the inequality between the small and large farmers, thus fertiliser subsidies which benefitted fertiliser industry and big farmers should be substituted with agricultural subsidies.
(ii) The given statement is false. In 1955, the Village and Small-Scale Industries Committee also called Karve Committee was set-up which explored the possibility of using small scale industries for promoting rural development.
Or The railways in India had both positive and negative impacts on the structure of the economy.
Positive Impacts
(i) Economic Integration The railways played a crucial role in connecting different regions of India, facilitating the movement of goods and services. This integration promoted trade and commerce, linking markets and industries across the country.
(ii) Political Interest The Britishers believed that the introduction of railways in India would provide political stability to the country. (2)
Negative Impacts
(i) To Promote the Commercial Interest of Britishers Industrialisation in Britain compelled the Britishers to look out for new markets for their finished goods and also identify the countries from where an, interrupted supply of raw material could be ensured for their factories.
(ii) For Military Motives The Britishers established railways because they felt that it would help in faster movement of troops and supplies at the time of internal revolution or for defence against external aggression. (2)
Question 33.
(i) “Agricultural marketing refers to the farmers’s act of bringing their produce to the market for sale”. Is the statement correct? Justify your answer. (3)
(ii) “Globalisation of the economy has helped the farmers in marketing their produce and has helped in raising their standard of living”. Do you agree, why? (3)
Or
(i) Enlist some problems faced by farmers during the initial years of organic farming.
(ii) “In recent times, the Indian economy has experienced the problem of casualisation of the workforce. This problem has only been aggravated by the outbreak of Covid-19.”
Do you agree with the given statement? Discuss any two disadvantages of casualisation of the workforce in the light of the above statement.
Answer:
(i) No, the statement is incorrect. Agricultural marketing does not simply refer to the farmers’ act of bringing their produce to the market for sale. It includes all those activities/processes which help them in getting maximum price for their produce. These processes include grading. packaging and storing.
(ii) Yes, I agree that globalisation has expanded the market of the national companies and has allowed various MNCs to operate in India.
So, several national and international fast food chains and hotels have been opened in India.
These organisations enter into contracts with the farmers to supply them farm products of the desired quality at reasonable prices, thus helping the farmers to market their produce.
Or
i) The problems faced by farmers during the initial years of organic farming are (any three)
(a) Organic farming requires inputs like organic manure, bio-fertilisers and organic pesticides. Though they are cheaper yet farmers find it difficult to get them.
(b) The yield from organic farming is much less than that of modern agricultural farming.
(c) The price of organic food is high, so it is difficult to sell them.
(d) Organic products generally have more blemishes and shorter shelf life.
(ii) The given statement is quite appropriate with reference to the ‘casualisation of labour’ in India. (1)
This is because of the following disadvantages of casualisation of the workforce.
(a) For casual workers, the rights of the labour are not properly protected by labour laws. Particularly, during pandemic times, as demand for goods and services fell the casual workers were left jobless, without any compensation or support.
(b) During the Covid-19 lockdown, millions of casual workers lost their jobs, raising the question of their survival. Also, additional health expenditure added to their troubles. If such workers had been working under the formal sector, it would have given them some respite in their difficult times. Thus, this had led to increase in the problem further. (2)
Question 34.
Read the following text carefully and answer the given questions on the basis of the same and common understanding
One of the most compelling reasons for studying environmental science and management is the fact that, in the view of many leading authorities, we are now experiencing an environmental crisis, indeed, many authors have claimed that the present environmental crisis is unprecedented in its magnitude, pace and severity (Park 2001).
Awareness of this environmental crisis has grown since the 1970 s, partly as a result of the prominence given to major so-called ‘environmental’ disasters such as the Sahelian droughts of the 1970s and 1980 s and the nuclear accident at Chernobyl in 1986.
A major assessment of the global environment published in 1999, the UNEP Global Environment Outlook 2000 Report (UNEP 1999), drew attention to two critical, recurring themes the fact that the global human ecosystem is threatened by grave imbalances in productivity and in the distribution of goods and services as evidenced by the fact that a large proportion of the human population lives in poverty and that a widening gap exists between those who benefit from economic and technological development and those who do not the fact that accelerating changes are occurring at the global scale, with rates of economic and social development outstripping progress in achieving internationally co-ordinated environmental stewardship with the result that improvements in environmental protection due to new technologies are being ‘cancelled out’ by the magnitude and pace of human population growth and economic development.
Consequently, a wide range of environmental problems has emerged, those problems include anthropogenic climate change (‘global warming’), the depletion of stratospheric ozone (the ‘ozone hole’), the acidification of surface waters (‘acid rain’), the destruction of tropical forests, the depletion and extinction of species, and the precipitous decline of biodiversity.
Yet, while all of these problems have physical (environmental) manifestations, their causes – and their potential solutions – are invariably bound up with human attitudes, beliefs, values, needs, desires, expectations and behaviours.
Thus, the symptoms of the environmental crisis cannot be regarded purely as physical problems requiring solutions by environmental ‘specialists’, instead, they are intrinsically human problems and they are intimately related to the question of what it means to be human.
Source https://www.soas.ac.uk/cedep-demos/ OOO_P500_ESM_K3736-Demo/unitl/page_11. htm
(i) “Opportunity costs of negative environmental impact are high.” Comment. (2)
(ii) There exists a positive correlation between environmental sustainability and economics development. Do you agree? Give suitable reason in support of your answer. (4)
Answer:
(i) The negative environmental impact has high opportunity costs as explained below
(a) The industrial development in past has polluted and dried up rivers and other aquifers making water an economic good. Also, cleaning up of polluted rivers and replenishing water resources require huge investments.
(b) The intensive and extensive extraction of both renewable and non-renewable resources has exhausted some of these resources. Huge amount of funds need to be spent on technology and research to explore new resources:
(ii) There are two views on the inter-relation between economic development and the environment.
They are as follows
(a) According to the first view, economic development degrades our environment by using natural resources for production of goods and services, Economic development results in pollution in the form of air pollution, water pollution and land pollution.
(b) According to the second view, economic development improves environmental quality. The discovery of new materials and sources not only use fewer natural resources, but sometimes replace them. Thus, with economic development, degradation of environment decreases.
From the above discussion, we find that relationship between environment and economic development is dynamic and complex if not positive.
Poverty in developing countries is also said to be responsible for environmental degradation. Poor people rely on natural resources heavily for their survival, which leads to over use of natural resources. Besides, when the cultivable land becomes short relative to population, the poor are forced to make their subsistence by cultivating fragile land on hills and mountains resulting in soil erosion on a large scale.
It is in such environment that poverty becomes a vicious circle.