INDIAN PUBLISHERS

RVS GROUP OF EDUCATIONS

Sample Paper -5 (2024-25)

CLASS-12-Economics

Time allowed: 3 hours

Maximum Marks: 80
General Instructions:
1. This Sample Paper Contain 34 questions in two sections :
Section A – Macro Economics (40 Marks)
Section B – Indian Economic Development (40 Marks)
2. The paper contains 20 Multiple Choice Questions (MCQs) of 1 mark each.
3. The paper contains 4 Short Answer Questions of 3 marks each (60–80 words).
4. The paper contains 6 Short Answer Questions of 4 marks each (80–100 words).
5. The paper contains 4 Long Answer Questions of 6 marks each (100–150 words).
6. All questions are compulsory.

Section A: Macro Economics (40 Marks)

1. Read the following statements carefully:

Statement 1: Inflationary gap refers to the gap which leads to an excess of aggregate
demand about the required level needed to maintain full employment
Statement 2: Deflationary gap refers to a shortfall of aggregate demand below the level that
is required to maintain full employment level
In light of the given statements, choose the correct alternative from the following: (1)

(a) Statement 1 is true and Statement 2 is false.

(b) Statement 1 is false and Statement 2 is true.

(c) Both Statements 1 and 2 are true.

 (d) Both Statements 1 and 2 are false.

2. The sum of factor payments is equal to: (1)

(a) Domestic income (b) National income

(c) Per capita real income (d) Per capita nominal income

3. The value of APC can be obtained by (1)

(a) Adding 1 to APS (b) Subtracting APS from 1

(c) Both of the above options (d) None of the above options

4. What is the name of the system in which goods and services are exchanged without use of
money? (1)

(a) Credit system (b) Debit system

(c) Cannot be said (d) None of the above options

5. Suppose money created by the banking system is Rs 1000 and the primary deposit is Rs 250. The
respective values of the deposit multiplier and Reserve ratio would be and ______ and ________

(a) 4,25% (b) 8,12.5% (c) 4,12.5% (d) 5.20%

6. Export and import of which of the following will be a component of balance of trade? (1)

(a) Insurance (b) Merchandise (c) Shipping (d) Banking

7. What is the meaning of the concept of autonomous consumption? (1)

(a) Consumption at zero level of income (b) Consumption which does not change with time

(c) Both of the above options (d) None of the above options

8. What is meant by foreign investment? (1)

(a) Amount at which foreigners invest

(b) Amount at which foreigners investing home country

(c) Both the options

(d) None of the above options

9. If the value of Average Propensity to Consume (APC) is 0.8 and National Income is 4,000 crores,
the value of savings will be _______ (1)

(a) ₹100 crores (b) ₹200 crores (c) ₹800 crores (d) ₹500 crores

10. 10. Trade deficit deals with the excess of imports: (1)

(a) True (b) False

(c) Depends upon the condition (d) Cannot be defined clearly

11. Recently Indian rupee has depreciated significantly which has led to distress for Indian importers.

defend or refute the given statement with valid reasons. (3)

12. If Nominal GDP is 330 and Real GDP is 300. Calculate Price Index (with base 100). (3)

OR

State the three components of Income from Property and Entrepreneurship.

13. In an economy, everytime income rises, 25 percent of the rise in income is spent on
consumption. Now suppose in the same economy investment rises by ₹250 crores calculate the
following. (4)
(i) Investment multiplier

(ii) Change in Consumption

14. (A) Explain the role of bank rate in dealing with the problem of deficient demand.

OR

(B) Explain the role of margin requirements in dealing with the problem of excess demand. (4)

15. Give difference between repo rate and reverse repo rate. (4)

16. (A) From the following information, determine: (a) Capital Expenditure, (b) Total Expenditure and

(c) Interest Payments:

S. No. Particulars (in crores)

(i) Fiscal Deficit 25000
(ii) Revenue Deficit 15000
(iii) Primary Deficit 10000
(iv) Revenue Receipts 10000
(v) Non-debt Creating Capital 20000
Receipts

(B) How budgetary expenditure can be calculated?

OR

C) Explain the Economic growth objective of government budget.

D) Giving reasons, classify the following into revenue receipts and capital receipts:

(i) Recovery of loans

(ii) Profits of public sector undertakings

(iii) Borrowings.
17.(a) Will the following be a part of domestic factor income of India? Give reasons for your answer.
[3]

(i) Salaries to Indian residents working in Russian Embassy in India.

(ii) Profits earned by a company in India, which is owned by a non-resident.

(b) Suppose a ban is imposed on consumption of tobacco. Examine its likely effects on GDP and
welfare. (3)

Section-B Indian Economic Development (40 Marks)

18._______________ was the objective of the Import substitution policy in India. (1)

(a) Production of high-quality products

(b) Protection of domestic industries from foreign competition

(c) Promote import

(d) Promote privatisation

19. In which year economic reforms were implemented in Pakistan? (1)

(a) 1980 (b) 1970 (c) 1988 (d) 1989

20. Consider the following statement with respect to Indian Agriculture and mention the correct
combination: (1)

I. Green Revolution led to the introduction of new technology.

II. Green Revolution started the usage of HYV seeds.

III. Green Revolution resulted in the improvement in oilseeds.

Alternatives:

(a) I and II (b) II and III (c) I only (d) None of these

21. Which of the following statements is not false? (1)

(a) Higher education takes a major share of the total educational expenditure in India.

(b) No education cess has been imposed by the government of India.

(c) Educational achievements in a country are indicated in terms of adult literacy level only

(d) Expenditure per student at the tertiary level is higher than that of the elementary level of
education.

22. Read the following statements: Assertion (A) and Reason (R). (1)
Choose the correct alternative from those given below.

Assertion (A): Green revolution is always harmful for a country

Reason (R): The evolution targets the growth of economy

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.

23. Which special strategy has been adopted by China in order to attract foreign investments? (1)

(a) Special economic zones (b) Normal economic zones

(c) Both of the other options (d) None of the other options

24. Which of the following factors was/were responsible for the neglect of the farming sector after
the green revolution? (1)

(i) Steel and cement sectors generated more revenue for the government as compared agriculture.

(ii) Large sector protest against favouring agriculture at the cost of other important sector such as
education and health sector

(iii) Attention of policy makers and aids organisations was diverted from the agriculture to other
sectors.

Alternatives:

(a) (i) and (ii) (b) (ii) and (iii) (c) (i) and (iii) (d) only (i)

25. Which of the following is cultivated under the field and branch of horticulture? (1)

(a) Fish (b) Hen (c) Both of the above (d) None of these

26. Read the following statements carefully: (1)

Statement 1: Pakistan has taken steps in order to boost up the growth of the economy

Statement 2: In 1970s capital goods industries were nationalised in pakistan

In light of the given statements, choose the correct alternative from the following:

(a) Statement 1 is true and Statement 2 is false.

b) Statement 1 is false and Statement 2 is true.

(c) Both Statements 1 and 2 are true.

(d) Both Statements 1 and 2 are false

27. From the set of the events given in column I and corresponding facts given in Column II, choose
the correct pair of statements: (1)

Column I Column II
A. India I Low Population
B. China II Low Fertility rate
C. Pakistan III Modernisation
D. Qualitative Aspects of HDI IV GDP

Alternatives:

(a) A-I (b) B-II (c) C-III (d) D-IV

28. What do you know about the volume and direction of trade at the time of independence? (3)

OR

'Composition of foreign trade of any country tells us about the nature of commodities that are
Exported and Imported. What can you state about the composition of foreign trade at the time of
independence?

29. Discuss briefly, why agricultural diversification is essential for sustainable livelihoods. (3)

30. What do you know about the two fastest growing economies, India and China? (4)

31. (A) Discuss the role played by horticulture in the direction of rural development in India. (4)

Or

(B) What are the factors that help us in recognizing an informal sector worker?

32. Study the following pie charts showing employment transition and analyse the trend. (4)
33. (A) How did government ensure that the small farmers also benefit from the Green Revolution as
the rich farmers? (3)

(B) Why did India need the policy of Import Substitution? (3)

Or,

(C) "Restrictive Tarde policy before 1991 was not a success". Support your answer with valid
explanation. (3)

(D) "Does modernization as a planning objective show a dichotomy with employment generation."
Justify the statement. (3)

34. Read the following text carefully and answer the questions given below: Chinese Economy Risks
Deeper Slowdown than Markets Realise - (Bloomberg, 24th October, 2021)

China's Economy risks slowdown faster than global investors realise. It is pushing to cut its
dependence on real-estate. It has started regulating sectors from education to technology, as it is
facing power shortage and the pandemic.

Many economists have warned that the GDP growth rate will fall to 8.2% this year and to below 5%
in the next year.

China is now planning to stabilise debt growth, curb inequality and channelize resources into hi-tech
manufacturing. Data released in last week already showed a sharp slowdown in third quarter GDP
growth to 4.9% from 7.9% in the previous quarter. There is more pain likely to come as electricity
shortage persist, while new COVID-19 infections are expected to rise in coming days.

Even before the pandemic hit, China was surprising economists with slower-than-expected growth
rate caused by the easing off debt risks.

China's Premier Li Keqiang, announced in March a growth target of "above 6%" in the coming
financial year.

China has signalled, in recent weeks that is could loosen some policies like telling banks to pick up
the pace of mortgage lending as a short term stimulus. Governor of People's Bank of China Yi Gang,
recently said he sees an expansion of about 8% for this year.

China's slowdown comes as the global recovery from COVID-19 risks looses momentum. Among
those at risks from falling investments in China are commodity exporters like Australia, South Africa,
Chile, Peru and Brazil. Slower trades could also hit countries like Malaysia, Singapore and Thailand.

The other risk it that China's policy-makers may struggle to flick the switch back to growth model if
they feel that's needed. Economists noted that the electricity shortages that are crimping industrial
production will make it harder to cushion growth by boosting investment in infrastructure. That kind
of policy could only work next year once the power crunch eases.

(i) State and discuss any two reasons that exhibit slowdown in the Chinese economy. (2)
(ii) Discuss briefly any two measures, which you may suggest as an economic advisor to the
Government of China. (4)
 Answer
Ans1.a

Ans2.a

Ans3.b

Ans4.d

Ans5.a

Ans6.b

Ans7.c

Ans8.b

Ans9.c

Ans10.a

Ans11. The given statement can be clearly defended as depreciation means the fall in the value of currency
which means if a country or any firm of a given nation is importing goods and services from outside or
foreign country then they have to pay more than the usual amount which is not good for the import
operations being performed within a given domain of time begin nation.
Ans.12 GDP Deflator or Price Index Base =100
(Nominal GDP/Real GDP) X100
=(330/330) X 100 = 110
OR
Three Component of Income from property and Entrepreneurship are
a.Rent/Royalty
b. Interest
c.Profit
Ans.13 (i) Clearly, the value of MPS = 25% =25/100=0.25
Investment Multiplier =K=1/1-MPC
= 1/1-0.25
=1/.75
=100/75
=1.33
Also, K = (ΔY)/( ΔI) 1.33 = (ΔY)/250
ΔΥ = 250 × 1.33 = 332.5 crores

(ii) ΔS= ΔY + Δ C
ΔS =332.5-2,250
ΔS = 750 crores
MPC = ΔC/ ΔΥ 0.75 = (ΔC)/3000
ΔC = 3,000× (75/ 100) = 2,250 crore
Ans.14 (A) Bank rate is that rate of interest at which the Central Bank lends money to the commercial
banks. In case of deficient demand, there is a need to liberalize credit. It can be done by reducing bank rate
so that the commercial banks also reduce their lending rate, thereby increasing the availability of credit in
the economy.
(B) Margin requirements is the difference between amount of loan offered and the market value of security
offered against the loan. Higher the margin requirement lesser will be the demand for loan. In this situation
of excess demand, there is a need to restrict loan/credit which can be done by raising the margin
requirements.

Ans15. (1) The basic difference between repo rate and reverse repo rate is that operate is the rate at which
loan is given by central bank to the commercial bank for a short period of time

(2) The rate at which bank earns interest is called reverse repo rate and its remove rights of liquidity in the
market in the field of economics within given nation begin period of time.

(3) The concept of reverse repo rate is used by Reserve Bank of India to induce funding which is very
important for the growth of economy. [4]

16. (a) Fiscal Deficit = Revenue Deficit + [Capital Expenditure - Non-debt Creating Capital Receipts]
25,000 15,000+ [Capital Expenditure - 20,000]

25,000 =15,000-20,000+ Capital Expenditure

25,000= -5,000+ Capital Expenditure

30,000 crores = Capital Expenditure

(b) Total Expenditure = Revenue Expenditure + Capital Expenditure

RD=Revenue Deficit
=25000+29000=54000 cr
(c) Primary Deficit = Fiscal Deficit-Interest Payment
10000= 25000-Interest payment
15000 = Interest Payment

B. Budgetary expenditure can be calculated by adding up two quantities namely revenue expenditure and
Capital expenditure

OR,

C. Economic growth: High productivity and overall growth of the standard of people is the main aim of the
Investment and budget of the government. Main focus is given both public and private sector in order to
create overall development of the country we can help in the prosperous growth of the economy and can
improve the education, health and housing level of the people in a given country.

(D) (i) It is a Capital Receipt as it reduces assets.

(ii) It is a Revenue Receipt as it neither reduces an assets nor creates liability.
(iii) Borrowings is a capital receipt as it creates a liability.

Ans17. (a) (i) It is not a part of domestic factor income, because it is earned outside the Domestic
Territory of India.
(ii) It is a part of domestic factor income, because company is located inside the Domestic Territory of
India.
(b) (i) GDP will decrease due to decrease in consumption and production of tobacco.
(ii) Ban on consumption of tobacco will increase the welfare of the people as it will reduce the
chances of cancer and it will have a positive impact on health of the people.

Ans.18 b

Ans.19 c

Ans.20 a

Ans.21 a

Ans.22 d

Ans23. a

Ans.24 d

Ans.25 d

Ans.26 c

Ans 27 b

Ans28. Volume: At the time of independence, the volume of India's trade increased tremendously.
Exports were more than imports. It exports were wheat, rice, sugar, precious stones, etc. and the
imports were wools, steel, pearls, copper, paper, perfume, etc.

Direction: With respect to direction, more than half of India's foreign trade was made with Britain.
The rest was allowed with other countries like China, Sri Lanka and Persia.

India's foreign trade under the British rule is described as below:

(i) The British followed a typical colonial pattern of trade in India, where it was made to serve their
interests. Britain maintained a monopoly control over India's foreign trade.

(ii) India exported raw materials to the home country of the Britishers for their expanding industries.

(iii) India was also developed as a market for the finished goods of the British industries.
(iv) The most important characteristic of India's foreign trade throughout the colonial period, was
the generation of a large export surplus. But this surplus came at a huge cost to the country's
economy. Thus, India was reduced to being a source of food for the British, a supplier of raw
materials for the British industries and a market for their finished products.

Ans29. The need for diversification arises from the fact that there is a greater risk in depending
exclusively on farming for livelihood. Expansion into other related sectors is desirable to provide
supplementary gainful employment and in realising higher levels of income for rural people. Hence,
there is a need to diversify through focus on allied.

Ans30. India, with democratic institutions, performed moderately, but the majority of its people still
depend upon agriculture. Infrastructure is lacking in many parts of the country. It is yet to raise the
standard of living of more than one-fourth of its population that lives below the poverty line. On the
other hand, the lack of political freedom and its implication in China are the major concern in the
last two decades. The country used the market system without losing political commitment and
succeeded in raising the level of growth along with poverty alleviation. China used the market
mechanism to create additional social and economic opportunities. The country has also ensured
social security in the rural areas by retaining collective farming known as Commune System. Public
intervention in social infrastructure prior to the introduction of the economic reforms has brought
positive results in the human development indicators of China.

Ans.31 (A) In rural India, horticulture plays a vital role in providing food and nutrition to the rural
population. It also addresses the problem of unemployment (particularly disguised and seasonal
unemployment) in the villages. Various horticultural activities in Indian villages have improved the
economic conditions of many farmers. Such activities have become a lucrative source of livelihood
for many women in the rural India.

OR

(B) The following features help to recognise a worker working in the informal sector:

(i) A worker working in an enterprise (other than the public sector establishments and the private
sector establishment) hiring 10 or less than 10 workers).

(ii) This sector includes millions of farmers, Agricultural labourers, owner of small enterprises and
self-employed. These sections of people are not hired worker.

(iii) A worker working in informal sector does not enjoy social security benefits such as provident
fund, gratuity, pension, etc.

(iv) The economic interest of the workers working in the informal sector is not protected by any
labour laws other than Minimum Wages Act. Therefore, workers in the informal sector are highly
exposed to the uncertainties of the market and have low bargaining power.

Ans.32 The pie charts show the trend of change in the workforce participation change in various
sectors in India during the period of 1999-2000 to 2004-05:
(i) The three major sectors of the economy i.e. primary, secondary and tertiary collectively are
known as occupational structure of an economy. The primary sector is denoted by the agricultural
sector, the secondary sector is denoted by the industry are tertiary sector is shown by services.

(ii) Primary sector is still the prime source of employment for the majority of the workers in India.
The share of employment has decreased from 60% in 1999-2000 to 57% in 2004-05 making it still the
largest employment generating sector.

(iii) There has been a very less change in the employment rate in the secondary sector from 12% in
1999-2000 to just 13% in 2004-05. As this sector related to more export capacity and leads to
economic growth and employment generation, we can say that there is a huge prospect of growth in
the economy.

(iv) Though the GDP contribution of the service sector has increased manifold, there is not much of
huge pump in the employment contribution of this sector.

Ans.33 (A) The new agricultural strategy implied use of better and improved inputs of agricultural
which required more capital. Green Revolution would have benefitted only the rich farmers if the
government had not played an important role in ensuring that the small farmers could also have
gained from the new technology. The government provided loans at low rates of interests. The
fertilisers and High Yielding Varieties (HYV's) of seeds were subsidised.

B) India needed the policy of Import Substitution due to the following reasons:

(i) Scarcity of foreign exchange: Post- independence India suffered from the shortage of foreign
exchange reserves as majority of the products were imported from the foreign market. Thus,
to make the country self-reliant and to be able to earn foreign exchange, the government
had to inculcate the policy of Import Substitution.

ii) Un-favourable balance of trade: As majority of the products were imported in India, this created
the problem of deficit Balance of Trade. In order to boost the Balance of Trade, the government had
to launch the policy of import substitution, so that the needs of the domestic consumers can be
satisfied with the products manufactured in India.

(iii) Scarcity of foreign aid: The foreign aid that the country got was insufficient to cater to the needs
of the country. In order to develop the country, the government needed to introduce the policy of
import substitution so that the country can fulfil her own demand from domestic goods. Plus,
increase in the domestic demand will lead to it being produced in the country.

(iv) Need for industrial development: The major sector that can boost the economy is the industrial
sector. With the policy of import substitution, Indian government could help the domestic
companies to manufacture goods and be competitive in the market.

OR
(C) Restrictive trade policy has imposed restrictions on the imports of goods with the help of tariff
and non-tariff barriers.

This was done to reduce the competition and giving protection to the domestic industries. But, this
policy was not a success as:

(i) Indian consumers had to purchase whatever Indian producers produced.

(ii) Producers had no incentive to improve the quality of their product, when they could sell low
quality items at higher prices. [3]

(D) The given statement is appropriate.

Modernisation implies use of advanced technology to enhance productivity at a faster pace.

With the application of modern technology, higher output is obtained at a relatively lower cost.

However, in a labour abundant country like India modernization may lead to an increase in
unemployment as modern technology requires lesser labour per unit of output.

Ans.34 (i) Two reasons exhibiting the slowdown in Chinese economy are

(a) Investment in China is expected to fall due to fall in demand from commodity exporters such as
Australia, South Africa, Chile, Peru and Brazil.

(b) Electricity shortages crimped industrial production; it will make it harder to cushion growth by
boosting investment in infrastructure.

(ii) Two measures to curb the situation may be quoted as:

(a) Suggesting banks to pick up the pace of mortgage lending as a short-term stimulus.

(b) Planning to cut dependence on real estates and regulate sectors from education to technology.