SAMPLE QUESTION PAPER-ECONOMICS-XII

1. This question paper contains two parts:

Part A - Macro Economics (40 marks)

Part B - Indian Economic Development (40 marks

2 Marks for questions are indicated against each question.

3 Question No. 1-10 and Question No. 18 – 27 are 1 mark questions and are to be answered in
one word/sentence.

4 Case Based Questions (CBQ’s) are Question No. 6-9 and Question No. 23-26.

5 Question No. 11-12 and Question No. 28 – 29 are 3 marks questions and are to be answered in
60 - 80 words each.

6 Question No. 13-15 and Question No. 30 – 32 are 4 marks questions and are to be answered in
80-100 words each.

7 Question No. 16-17 and Question No. 33 – 34 are 6 marks questions and are to be answered in
100-150 words each.

8 Answers should be brief and to the point and the above word limit be adhered to as far as
possible.

SECTION-A

Multiple choice questions (Q. no 1 to 5)

1. Direct tax is a tax whose : (1)

a) The liability to pay and incidence do not lie on the same person

b) The liability to pay lies on one and incidence lies on the other person

c)The liability to pay and incidence do lie on the same person

d) The liability to pay and incidence do lie on the government

2. Which among the following is the limitation of barter system of exchange. (1)

a) Lack of divisibility b)Lack of store of value

c) Lack of common measure of value d) All of these

3. Choose the correct statement from given below (1)

a)Balance of trade is a component of capital account of Balance of Payments.

b) Floating exchange rate is used to stabilize prices of foreign currency

c) Increase in the supply of foreign exchange rate leads to fall in its price

d) Rise in exchange rate leads to revaluation of currency

4. Read the following statements Assertion(A) and Reason(R). Choose one of the correct
alternatives given below (1)

Assertion(A) Depreciation of domestic currency leads to improvement in the balance of trade.

Reason(R) When exchange rate rises, domestic goods become cheaper in the international market

Alternatives:

a) Both Assertion(A) and Reason(R) are true , and Reason (R) is the correct explanation of the
Assertion(A)

b) Both Assertion(A) and Reason(R) are true , but Reason (R) is not the correct explanation of the
Assertion(A)

c) Assertion (A) is true, but Reason(R) is false.

d) Assertion (A) is true, but Reason(R) is true.

5. Write the correct pair (1)

Column I Column II

A. Export and Import of Goods 1. Accommodating item

B. Foreign Exchange Reserve 2. Autonomous item
C. Balance of Trade 3. Difference between Export and Import of
Visible items
D. Unilateral Transfers 4.Factor Incomes in the form of interest, rent, etc.
Codes

a) A-(i) b) B-(ii) c) C-(iii) d) D-(iv)

Case based question (Q.no.6 to9)

Read the following case study paragraph carefully and answer the following questions on the
basis of the same.

In the simple Keynesian model of income determination, we assume that there is no government
activity in the economy. If we remove this assumption to see how the equilibrium level of income
can be determined in the presence of economic activity of the government , it can be seen that ,
the government collects money from the economy and spends money into the economy.
Government expenditures and receipts have an important effect on the economy.

Government budget has two sides viz. the expenditure side and the receipt side. Money inflows in
the receipt side of the budget are of three types, i.e. taxation, public borrowing and sales of goods
and services; money outflow in the expenditure side of the budget are also of three types i.e
purchase of goods and services, transfer payment and repayment of debts. Taxation is a
compulsory contribution made by the people to the government against which no direct
payments are made by the government.

A taxpayer becomes poorer by the amount of taxes. Hence, the income available in the hands of
the people is reduced by the amount of taxes paid. Public borrowing is made through the sale of
new government bonds, which people voluntarily purchase. Neither their income nor their wealth
is deduced thereby. They simply alter the form and composition of wealth in the private sector.
An increase in the net indebtedness of the government to the central bank takes place through
the creation of new money by the central bank

6. If government increases its expenditure on the infrastructural project, how will this impact the
aggregate demand? (1)

a) Increase b) Decrease
c) Remains constant d) Increase in a three sector closed economy

7. what will be the impact on the aggregate demand, if the government increase tax rates as it is a
main source of government’s revenue (1)

a) Increase b) Decrease
c) Remains constant d) Either Increase or decrease .

8. Public borrowings by the government will lead to --------------(increase/decrease) money supply

in the economy. (1)

9. Suppose government gives subsidies to an industry to share its cost and help the industry to
establish it in the long run. This represents which of the following objectives of the government
budget? (1)

a)Reducing income inequality b) Reallocation of resources

c) Social Welfare d) Fiscal Discipline

10. Under -------system of exchange rate, countries were required to fix their currency against US
dollar. (1)

Or

Capital account of balance of payment is a ------------- concept.

11. Differentiate between central bank and commercial bank. (3)

12. Explain the effect of depreciationof domestic currency on exports. (3)

13. The value of nominal GNP of an economy in a particular year is Rs.1400 crore.The value of
GNP of that country during the same year evaluated at the prices of the base year was Rs. 1600
crore.

Calculate the value of GNP deflator of the year in percentage terms. Has the price level risen
between the base year and the year under consideration? (4)

14. Give the difference s between ex-ante savings and ex-post savings.

Or

What do you understand by frictional unemployment and structural unemployment? Explain

briefly. (4)

15. Categorise the following government receipts into revenue and capital receipts . Give reasons
for your answer (4)

1. Receipts from sale of shares of public sector undertaking.

2. Borrowings from public.

3. Profits of public sector undertaking.

4. Income tax received by the government.

16. Why are exports included in the estimation of domestic product by the expenditure method?

Can Gross Domestic Product be greater than Gross National Product? Explain. (6)

Or

From the following data, calculate national income by income method and expenditure method.

S.No. items Rs. In crores

1 Government final consumption expenditure 400
2 Subsidies 40
3 Rent 800
4 Wages and salaries 2400
5 Indirect tax 240
6 Private final consumption expenditure 3200
7 Gross domestic capital formation 480
8 Social security contributions by employer 220
9 Royalty 100
10 Net factor income paid to abroad 120
11 Interest 80
12 Net domestic capital formation 440
13 Profits 520
14 Net export 280

17. An increase of Rs. 250cr. In investment in an economy resulted in total increase in income of
Es. 1000Cr. Calculate the following (6)

a) Value of Multiplier(K)

b) Marginal Propensity to Consume(MPC)

c) Change in Consumption expenditure

d) Change in Savings

SECTION- B

Multiple choice questions(Q.No.18 to 22)

18. Green revolution introduced during the planning process was restricted mainly to (1)

a) Wheat and Rice b) Cereals and Pulses

c) Cotton and Jute d) Jowar and Bajra

19.Which of the following is not true for Small Scale Industries(SSIs) (1)

a) SSI is labour intensive and therefore, employment oriented.

b)SSI needs small investment and therefore , equity oriented.

c) SSI is capital intensive and therefore increases productivity.

d)SSI shows location flexibility and it is therefore, equality oriented.

 Or

British entered India through East India Company, the company came to India for

a) Spice trade b) Gold trade c)Iron trade d)None of these.

20. Choose the incorrect statement from the statements given below (1)

a) Till 1980’sIndia, China and Pakistan had similar growth rates and per capita income.

b) China introduced reforms in agriculture, foreign trade and investment sector in the initial
phases .

c) First five year plan of China commenced in 1956.

d) India and Pakistan both opted for mixed economic systems.

21. . Read the following statements Assertion(A) and Reason(R). Choose one of the correct
alternatives given below (1)

Assertion(A) ack of training in farming activity leads to low productivity and growth of agriculture
in India.

Reason(R).Reforms in India focused upon development of industries which was failed to generate
enough employment.

Alternatives:

a) Both Assertion(A) and Reason(R) are true , and Reason (R) is the correct explanation of the
Assertion(A)

b) Both Assertion(A) and Reason(R) are true , but Reason (R) is not the correct explanation of the
Assertion(A)

c) Assertion (A) is true, but Reason(R) is false.

d) Assertion (A) is true, but Reason(R) is true.

22. Write the correct pair (1)

Column I ColumnII
A Animal husbandry 1.Period between1991 and 2003
B Fisheries 2. Owing to this, milk production has increased more than
times between1960 and2009
C Horticulture 3.It is widely practised in the states of Kerala, Gujarat,
Maharashtra and Tamil Nadu.
D Golden revolution 4. This sector contributes69% towards the GDP of the
 country
Codes

A B C D A B C D

a) (i)(ii)(iii)(iv) b) ) (ii)(iii)(iv)(i)
c) (iii)(iv)(i)(ii) d) ) (iv)(i)(ii)(iii)
Case based questions(Q.No.23 to 26)

Read the following case study and answer the following questions:

Traditionally, economic theory has given emphasis on physical capital accumulation as the most
robust source of economic growth, at least in the short run, with exogenous technical progress
being the long run determinant of growth. The exogeneity of technical progress in the
neoclassical growth model and the difficulty of explaining the long term growth( because of
diminishing returns of physical capital) have restricted the analytical capacity of the neoclassical
model and it’s empirical verification.

Human capital theory suggests that individuals and society derive economic benefits from
investments in people( Sweetland1996), Education has consistently been emerged as the prime
human capital, but Becker(1993) and Schultz(1997) have argued that health and nutritional
expenditure is also a part of human capital investment. This is because education is perceived to
contribute to health and nutritional improvements.

Education, health, nutrition, water and sanitationcomplement each other, with investments in any
one contributing to better outcomes in the others(worldBank,2001). In models of economic
growth, human capital in the form of schooling or enrolment has been given a central place while
the role of health has remained peripheral.

Source: International journal of Economic Sciences and Applied Research.

23.Economic growth depends upon (1)

a) Development of Physical Capital b) Development of Human Capital

c) Development of Working Capital d) All of these.

24.Economic development depends upon which of the following components? (1)

a) Development of Physical Capital b) Development of Human Capital

c) Development of Working Capital d) All of these.

25.Human capital is ---------(broader/narrower) concept as compared to human development. (1)

26. Training is an important component of human capital formation process. Which of the
following are types of on-job-training? (1)

a) On-campus Training b) Off-campus Training

c) Botha) and b) d) None of these.

27. Economic reform in Pakistan was introduced in -----------(1988/1990) (1)

28.It has been realized that agricultural finance is not available in sufficient quantity at the right

time and at reasonable rate of interest. As an agriculturist, suggest any two measures to make the
existing system of agricultural finance serve fully the needs of agriculture effectively. (3)

29. Why and how do the firms give on-the job training to employees? (3)

Or

Why calorie based norm is not adequate to identify the poor?

30.Discuss the reasons as to green revolution was implemented in India?

Or

Why was it necessary for a developing country like India to follow self reliance as an objective of
economic planning? (4)

31.Low employment among women is a reflection of economic backwardness of a country.

Suggest some measures for increased employment opportunities for women. (4)

32. China’s rapid Industrial growth can be traced back to its reforms in 1978. Enumerate the
reforms initiated. (4)

33. Briefly discuss the financial sector reforms initiated in the New Economic Policy. (6)

34. India is a favorite outsourcing destination among MNCs. What are the factors responsible for
this trend?

Or

Discuss the various institutional sources of rural credit. (6)

 SAMPLE QUESTION PAPER-ECONOMICS-XII
1. This question paper contains two parts:
Part A - Macro Economics (40 marks)
Part B - Indian Economic Development (40 marks
2 Marks for questions are indicated against each question.
3 Question No. 1-10 and Question No. 18 – 27 are 1 mark questions and are to be answered in one
word/sentence.
4 Case Based Questions (CBQ’s) are Question No. 6-9 and Question No. 23-26.
5 Question No. 11-12 and Question No. 28 – 29 are 3 marks questions and are to be answered in 60 - 80
words each.
6 Question No. 13-15 and Question No. 30 – 32 are 4 marks questions and are to be answered in 80-100
words each.
7 Question No. 16-17 and Question No. 33 – 34 are 6 marks questions and are to be answered in 100-150
words each.
8 Answers should be brief and to the point and the above word limit be adhered to as far as possible.

SECTION - A (Macro Economics)

Q.No QUESTION Marks

Value of Money Multiplier ..................(increases/decreases/remains unchanged)
with an increase in Cash Reserve Ratio.
(Fill up the blank with correct alternative)
2 Define an intermediate good.
3 Average Propensity to Consume can never be .. .. . . . . . . . .. ... . . . . .. ... ....
(choose the correct alternative)
a) positive b) zero
c) more than one d) less than one
4 Name any two quantitative tools to control credit creation in an economy.
Or
What are demand deposits?
5 Write the correct sequence of options in column II by matching them with options
of column I
Column I Column II
A Induced Investment 1)An investment which is not influenced by expected
Profitability.
B Ex-ante saving 2) It is the consumption expenditure when income is 0
C Autonomous Investment 3) An investment which is influenced by expected
Profitability
D Autonomous 4) It refers to planned savings at different levels of
Consumption Income.

Case based questions(Q. No.6 to 9)

Read the following case study paragraph and answer the questions.
Prime Minister Narendra Modi’s second budget in seven months disappointed
investors who were hoping for big bang stimulus to receive growth in Asia’s third
largest economy.
2
 The fiscal plan delivered by Finance Minister Nirmala Sitaraman proposed tax
reductions for individuals and wider deficit targets, but failed to provide specific steps to
fix a struggling financial sector, improve infrastructure and create jobs. Stocks slumped,
reflecting the subdued sentiment.
“ Far from being a game changer , the budget provides little in terms of short term
growth stimulus” said Priyanka Kishore, head of India and South-East Asia economics
at Oxford Economics Ltd. In Singapore.” While Income tax cuts will provide some
relief on the consumption front, the multiplier effect is low and the overall stance of the
budget is not explanatory.
The focus now shifts to RBI’s interest rate decision on February 6,2020. However,
having already cut Interest rates five times last year and with inflation exceeding 7%,
well above the central bank’s target, there’s limited scope for Governor Shaktikant Das
to ease more.
6 A direct tax cut in government budget helps to stimulate economic growth by
a) increasing disposable income
b) increasing production activity
c) increasing demand
d) both a) and c)
7 Decreasing tax is a fiscal measure to deal with--------------( inflationary
gap/deflationary gap) situation in an economy.

8 What will be impact on credit creation ability of commercial banks if government

reduces income tax slabs?
a) there will be more credit creation in the economy
b) there will be less credit creation in the economy
c) there will be no impact on the creation
d) It depends upon the behavior of the targeted population.

3
9 Currency held by the public is a component of-------------measures of money supply.

10 Government expenditure on Mid-Day Meal scheme running in government (state

run) schools is a type of ... . . . . . . ....... . ...... . . . . ... expenditure in government budget.
(Fill up the blank with correct answer)
11 “India's GDP is expected to expand 7.5% in 2019-20: World Bank” 3
- The Economic Times.
Does the given statement mean that welfare of people of India increase at the same
rate? Comment with reason.
12 Calculate the value of Marginal Propensity to Consume (MPC), if in an economy,
autonomous consumption is 1 500 crores, ex-ante investments are I 4000crores and
equilibrium level of Income of the economy is I 18,000 crores. 3
Or
Suppose in a hypothetical economy, the savings increase by 1 20 crores when
national income increases by 1 100 crores. Compute the additional investments
needed to attain an increase in national income by I 6,000 crores?
3
13 Discuss any one of the following functions of a central bank: 4
a) As government’s bank b) Open market operations.
14 “Foreign Institutional Investors (FIIs) remained net seller in the Indian capital
markets over the last few weeks”. - The Economic Times.
State and discuss the likely effects of the given statement on foreign exchange rate 4
with reference to the Indian Economy.
Or
‘Many large Multinational Corporations (MNCs) have recently shifted their
investments from China and have started their production in India, thereby boosting
the Make in India plans of the Government’.
Presuming other factors being constant, discuss the effects of the given statement on 4
Foreign Exchange rates with reference to the Indian Economy.
15 Elaborate the objective of ‘reallocation of resources’ in the government budget.
4
16 a) ‘Real Gross Domestic Product is a better indicator of economic growth than
Nominal Gross Domestic Product’.
Do you agree with the given statement? Support your answer with a suitable
numerical example. 4
b) Calculate ‘Depreciation on Capital Asset’ from the following data

4
 S.no Particulars Amount (in Icrores)
i. Ca ital value of the asset 1,000
ii. Estimated life of the asset 20 years 2
iii. Scrap Value Nil

Or
a) ‘Circular flow of income in a two sector economy is based on the axiom that one’s
expenditure is other’s income’.
Do you agree with the given statement? Support your answer with valid reasons. 3

b) Calculate compensation of employees from the following data:

S.no Particulars Amount
(in Icrores)
i. Profits after tax 20
ii. Interest 45
iii. Gross Domestic Product at Market Price 200
iv. Goods and Services Tax 10
3
v. Consumption of Fixed Capital 50
vi. Rent 25
vii. Corporate Tax 5

17 ‘An economy is operating at under-employment level of income’. What is meant by

the given statement? Discuss one fiscal measure and one monetary measure to tackle 6
the situation.
SECTION-B (Indian Economic Development)
18 Name any two taxes which were subsumed in Goods and Services Tax (GST).
19 State weather the following statement is true or false:
‘The latest demonetization of currency was undertaken by the Government of India
on November 8, 2016’.
20 Identify the correct sequence of alternatives given in Column II by matching them
with respective terms in Column I:
Column — I Column — II
A. Land Ceiling Increase in production of food
grain using high yielding variety
seeds
B. Land reforms ii. Portion of agricultural produce
sold in the market
C. Green Revolution iii. Fixing the maximum limit of land
holding for an individual.
D. Marketed Surplus iv. Change in the ownership of land
(land to tillers)

21 Agriculture marketing does not comprise of ....................

(Choose the correct alternative)
a) Transportation of the produce to the market place for sale.
5
 b) Grading of the produce according to the quality.
c) Storage of the produce for sale in future.
d) Credit taken to meet expenditure on agriculture.
22 Under ...........................type of unemployment, marginal product gained by
employing one additional unit of labour is zero.
(Fill up the blank with correct answer)
Or
..................... an indicator which is used for analyzing the employment
situation of a country.
(Fill up the blank with correct answer)

Case based questions(Q. no23 to 26)

The country’s development is measured in terms of per capita consumption of electricity
which in turn depends on electricity generated. In India per capita consumption is quite
low and for the year 2007, it was only a meager 665KWHper annum in comparison to
about 12,000KWH for USA and 34,000in Norway which indicates fairly low level of
industrialization in the country. The peak power shortage of 9.8% has been plaguing
Indian power sector for 2007-2008.
As a result, regulators, worldwide are now implementing new regulatory schemes and
organizational reforms in an effort to improve the incentives for efficient operation of
electricity utilities. All this reforms are consistent with the view that competition should
be introduced into the electricity supply industry, whichever , it is technologically
feasible and India is not exception to this reforms.
A case study of Himachal Pradesh, which is a hilly state with different terrians in the
northern part of India has been carried out. This state has distinction of achieving 100%
electrification way back in 1989 and rapid load growth. With enactment of Electricity
Act 2003, there has been tremendous improvement in power sector of this state. There is
significant improvement in the areas of transmission and distribution, tariff
rationalization and in availability of power supply.
23 India generates its maximum energy by which of these sources?
a) Solar Energy b) Thermal Energy
c) Nuclear Energy d) Wind and Tidal Energy

24 Which of the following is /are major challenges of power sector in India?

a)Inefficient plant load factor b)Transmission and distribution losses

c)Losses of state electricity boards d) All of these

6
25 The average energy shortage in India in 2007-08 was----------(16.6%/ 9.8%) l

26
Which Indian state has achieved cent percent electrification in 1989?
a)Kerala b)Tamil Nadu

c) Himachal Pradesh d) Maharashtra

27 Introduction of Economic Reform in Pakistan took place in...............

(Choose the correct alternative)
a) 1978 b) 1980 c)1988 d) 1991

7
28 “Recently Indians have drifted away from the traditional knowledge and practices 3
and caused large scale damage to environment”.
Explain how, adopting the traditional practices can be helpful in achieving the
objective of sustainable development?
Or
‘Power sector in India has major issues with its installed capacity’. Discuss the given
statement.
29 ‘Education Commission 1964-66 had recommended that at least 6 per cent of GDP
must be spent on education’. How far India has been able to achieve the said goal? 3
30 ‘The opening up of the Indian Economy has led to a rapid increase in Foreign Direct
Investments and Foreign Exchange Reserves of the country’. Defend or refute the 4
given statement.
31 Define the following terms
a) Disinvestment b) Import Substitution 4
OR
Define the following terms
a) Outsourcing b) Quota
32 Answer the following questions on the basis of the following data:
a) Comment upon the population growth rates among the three 3
countries.
b) Which country has most skewed in sex ratio?
Country Estimated Annual Growth of Sex Ratio
Population Population (in %)
(in million)
India l3l1 1.2 929
China 137 l 0.5 941
Pakistan 188 2.1 947
Source: World Development Indicators, 2015, www.wor1dbank.org
33 “Rural Economic development is essential for Indian Economic development”. Do 6
you agree with the given statement? Support your answer with valid reasons.
34 ‘In spite of the increase in public health expenditure Indian Health System is an 6
ailing system in itself. Defend the statement citing any three major problems of
Health sector in India.
Or
Study the following chart showing the Growth of Employment and Gross Domestic Product
and analyse the trend of the two variables from 1990-2012.

8
9