CBSE

ADDITIONAL PRACTICE QUESTIONS

Economics (030)
Class XII | 2023–24
Time allowed: 3 Hours Maximum marks: 80

General Instructions:
1. This question paper contains two sections:
Section A – Macro Economics Section
Section B – Indian Economic Development
2. This paper contains 20 Multiple Choice Questions of 1 mark each.
3. This paper contains 4 Short Answer Questions of 3 marks each to be answered in 60 to 80
words.
4. This paper contains 6 Short Answer Questions of 4 marks each to be answered in 80 to 100
words.
5. This paper contains 4 Long Answer Questions of 6 marks each to be answered in 100 to 150
words.
Section A
Serial
No. Question Marks
1 Read the following statements carefully: 1
Statement 1: The level of consumption has a direct impact on the amount of
savings individuals can accumulate over time.

Statement 2: Higher consumption rates often lead to lower savings, while

lower consumption rates tend to facilitate higher levels of savings.

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.
2 What is the potential outcome of implementing social policies that improve 1
areas like healthcare, education, or environmental regulations, but do not
directly affect industrial production or economic activities?
3 As an economic analyst studying the investment patterns in an economy, you 1
observe a consistent correlation between changes in the economy's income
level and the corresponding changes in investment. Which type of
investment is most likely to be represented in such a scenario?

(a) Fixed investment

(b) Induced investment
(c) Independent investment
(d) Autonomous investment
4 1
Sarah, a foreign investor, decides to invest in a company located in India.
She purchases shares of the company and also buys some real estate
properties in India. At the same time, a local company from India invests in
a foreign country by acquiring a factory and machinery there. Which of the
following components of the Capital Account of the Balance of Payments
are being demonstrated here?

a) Foreign Direct Investment inflow and outflow

b) Portfolio Investment inflow and outflow

c) Foreign Aid received by India

d) Import and export of goods and services

Choose the correct options from the following:

(a) Option A and B

(b) Option A and C
(c) Option B and D
(d) Option A and D
5 1
Tim went to the supermarket with Rs,5,000 in his wallet to buy groceries for
his family. He purchased vegetables, fruits, and other household items,
paying the respective prices at the counter. Which functions of money were
being demonstrated in this real-life scenario?

a) Unit of Labor
 b) Store of Value
c) Medium of Exchange

d) Measure of Creditworthiness

Choose the correct options from the following:

(a) Option A and B

(b) Option B and C
(c) Option A, B and D
(d) Option A, C and D
6 1
As a banking expert analyzing the potential effects of a change in the reserve
requirement on credit creation by commercial banks, which option do you
believe is the most appropriate?

(a) It will decrease as banks will have to hold more reserves

(b) It will increase as banks will have more excess reserves to lend out
(c) It will remain unaffected as it depends on other factors
(d) It will become entirely dependent on the central bank's actions
7 Suppose an economy experiences an increase in consumer confidence, 1
leading to a surge in consumer spending on goods and services. At the same
time, the government implements an infrastructure development plan,
boosting public investments. How will these factors impact the equilibrium
in the economy's AD and AS?

(a) AD will increase, and AS will decrease, resulting in inflationary

pressures.
(b) AD will decrease, and AS will increase, causing deflationary pressures.
(c) AD will remain unchanged, and AS will decrease, leading to stagflation.
(d) AD will increase, and AS will increase, promoting economic growth with
stable prices.
8 A country's currency exchange rate against another currency can undergo 1
changes over time, affecting international trade and investment. China's
currency has depreciated significantly against Japan's currency over the past
year. As a result of this depreciation, which of the following statements is
most likely to be true?

(a) Both China’s exports to Japan and imports from Japan will become
cheaper.
(b) Both China’s exports to Japan and imports from Japan will become more
expensive.
 (c) China's exports to Japan will become more expensive, and imports from
Japan will become cheaper.
(d)
China's exports to Japan will become cheaper, and imports from Japan will
become more expensive.

9 1
What is the level of consumer spending (C) in the country when the
disposable income (Y) is Rs. 1,200, given that the consumption function is
represented as C = 0.75Y + 100? The consumption function consists of an
autonomous consumption (a) of Rs. 100 and a marginal propensity to
consume (b) of 0.75.

(a) 400
(b) 600
(c) 1,000
(d) 1,200
10 Imagine you're studying the Balance of Payments (BOP), which keeps track 1
of a country's transactions with the rest of the world. In this record, there's a
category called "Invisible items." These are transactions that don't involve
physical goods but are still important for the economy.

Which of the following is a good example of an "invisible item" in the BOP?

(a) People working in other countries sending money home to help their
families.

(b) Buying machines from another country to improve how we make

products here.

(c) Foreign investors using money to build a factory in our country.

(d) Providing computer software to a company in another country.

11 Explain the pivotal concepts of autonomous and accommodating items 3

within the domain of Balance of Payments for India, providing three
concrete and India-specific examples of both, along with a brief explanation
of why each example fits the category.

12 The following data represents the components of expenditure (all values are 3
in crores):

Consumption Expenditure by households (C) = Rs. 1,200 crores

Investment Expenditure by businesses (I) = Rs. 800 crores

Government Expenditure (G) = Rs. 500 crores

 Net Exports (Exports - Imports) = Rs. 100 crores
Net Indirect Taxes = Rs. 150 crores

Change in Stock = Rs. (–) 50 crores

Private Final Consumption Expenditure = Rs. 1,100 crores

Fixed Capital Consumption (Depreciation) = Rs. 200 crores

Government Final Consumption Expenditure = Rs. 400 crores

Net Factor Income from Abroad (Income from abroad - Income sent abroad)
= Rs. 80 crores

Imports (Net) = Rs. (–) 60 crores

Additionally, consider the following information:

1. Income earned by residents working abroad = Rs. 70 crores

2. Income earned by foreign residents working in Economy = Rs. 20
crores
3. Net Transfer Payments from the Government to Households = Rs. 30
crores
Calculate the National Income using the Expenditure Method.

13 As an economic consultant, you are analysing the National Income of a 3

country. During your research, you come across a significant problem of
Double Counting in the National Income data, which can lead to distorted
economic measurements. Explain the concept of Double Counting in the
context of calculating National Income and provide three practical ways to
avoid it.

14 In an economy the total consumption expenditure of households is Rs. 1,500 4

crore, and the total disposable income is Rs. 2,000 crore. Additionally, there
is a government tax policy change that reduces the disposable income by
10% of the original value. However, this change does not affect the
consumption expenditure. Calculate the new Average Propensity to
Consume after the tax policy change.

OR
Imagine you are an economist studying the current economic conditions of a
country. After conducting a comprehensive analysis, you discover that, the
ex-post Aggregate Demand (AD) exceeds the ex-post Aggregate Supply
(AS). Elaborate on the potential real-life impact of this situation on the level
of output, income, and employment in the country.
15 Demonstrate your understanding of how the Reserve Bank of India can 4
apply monetary policy tools to tackle a scenario of Deficient Demand in the
economy. Identify and discuss four specific measures that the RBI can
employ to effectively correct the situation.

OR
As an economic advisor to the government, you are tasked with explaining
the four main functions of the Reserve Bank of India and how each of these
functions contributes to the overall stability and growth of the Indian
economy.

16 A) The government of a country recorded the following data for the fiscal 6
year 2023:

Total Government Revenue: Rs.500 crore

Total Government Expenditure: Rs. 600 crore

Transfer Payments: Rs.50 crore

Interest Payments on Debt: Rs.40 crore

Calculate the Fiscal Deficit for the fiscal year 2023.

B). In the fiscal year 2023, a country's government recorded the following
data:

Total Government Revenue: Rs. 800 crore

Total Government Expenditure: Rs. 900 crore

Transfer Payments: Rs. 70 crore

Interest Payments on Debt: Rs. 50 crore

Calculate the Primary Deficit for the fiscal year 2023.

17 a) Imagine you are a financial advisor working with a government's finance 6

ministry. One of your responsibilities is to educate the public about the
government's budget and its various sources of revenue. Provide three real-
life examples of non-tax revenue receipts that a government might have in
its fiscal year, and briefly describe each of them.

b) As a concerned citizen, you are attending a town hall meeting where

government officials are discussing the key objectives of the government in
your country. During the meeting, they highlight three main objectives that
guide their policies and decisions. Explain these three objectives of a
government in a real-life context.
 OR
a) In the estimation of a country's National Income, are the following items
included? Provide reasons for each.

(i) Rent-free house to an employee by an employer.

(ii) Purchases by foreign tourists.

(iii) Purchase of a truck to carry goods by a production unit.

b) As a financial analyst working for a government economic research

institute, you have been invited to speak at a public seminar on economic
indicators. During the seminar, you are asked to define and elaborate on the
concepts of Nominal Gross National Product (GNP) and Real Gross
National Product (GNP). Additionally, you are requested to provide real-life
examples to illustrate the significance of these measures in economic
analysis and decision-making.

SECTION B

18 Which of the following is the overarching objective of equitable distribution 1

goals in planning?

(a) enhance economic growth through targeted investments in specific

sectors
(b) foster competition by reducing government intervention in markets
(c) focus on short-term gains rather than long-term societal benefits
(d) ensure a fair and just society for all citizens

19 In recent years, what major change has been made to the One Child Policy in 1
China?
(a) It was replaced with a "Two Child Policy."
(b) The policy was expanded to restrict immigration.
(c) The policy was strengthened to allow no exceptions.
(d) It was abolished and families can have as many children as they wish.

20 In response to rising energy costs and environmental concerns, a nation 1

decided to invest heavily in renewable energy technologies domestically
instead of importing traditional energy sources.

What positive impact is expected from this import substitution approach?

I: lower energy costs for consumers due to subsidised imports

II: promotion of domestic green energy sector through targeted investments
III: enhanced self-sufficiency in energy production and greater sustainability
IV: increased dependence on foreign technology for renewable energy
implementation
 (a) I and II
(b) II and III
(c) III and IV
(d) IV and I

21 A farmer Chandu practices organic farming and uses crop rotation and 1
natural predators to control pests. What advantage does this approach
provide compared to conventional pesticide use?
(a) faster and predictable pest eradication
(b) lower labor costs for pest management
(c) increased risk of crop failure and reduced yields
(d) reduced harm to beneficial insects and pollinators

22 Assertion: The industrial sector reforms implemented under liberalisation 1

policies in a country led to an increase in Foreign Direct Investment in the
manufacturing sector.

Reason: Liberalisation policies aimed to toughen trade barriers, regulate

industries, and provide a conducive environment for indigenous investors,
making the manufacturing sector more attractive for FDI.

(a) The assertion is true, but the reason is false.

(b) The assertion is false, but the reason is true.
(c) Both the assertion and reason are true, but the reason is not the correct
explanation of the assertion.
(d) Both the assertion and reason are true, and the reason is the correct
explanation of the assertion.

23 Which of the following statements correctly describes demographic 1

transition?

(a) a sudden decline in the population growth rate due to migration

(b) a change in the population density across different states in India
(c) a significant increase in the birth rate and death rate simultaneously
(d) a shift from high birth and death rates to low birth and death rates over
time
24 What is a potential challenge in the promotion of sustainable aquaculture 1
practices in the context of rural development?

(a) difficulty in reducing dependence on wild-caught fish without putting

pressure on fish stocks
(b) balancing aquaculture development with environmental and social
considerations
(c) limited opportunities for economic diversification and livelihood
enhancement
(d) difficulty in increasing fishery exports and foreign exchange earnings
25 In urban areas with high population density, what challenge is often 1
associated with housing and living conditions?

(a) difficulty in accessing essential services due to congested living

conditions
(b) inadequate housing and overcrowding, leading to slum settlements
(c) limited open spaces and recreational areas, affecting quality of life
(d) high home ownership rates, leading to limited rental options

26 Assertion: Jobless growth has been a significant challenge in the Indian 1

economy in recent years.

Reason: Despite witnessing economic growth, the Indian economy has been
struggling to create sufficient employment opportunities to absorb the
growing workforce.
(a) The assertion is true, but the reason is false.
(b) The assertion is false, but the reason is true.
(c) Both the assertion and reason are true, and the reason is the correct
explanation of the assertion.
(d) Both the assertion and reason are true, but the reason is not the correct
explanation of the assertion.

27 From the set of statements given in Column I and Column II, choose the 1
correct pair of statements:

Column I Column II

A. Medium Term Development I China model of growth

Plan

B. NITI Aayog II Reforms in India

C. Command Economy III Pakistan’s Five Year Plans

D. Economic Reform 1991 IV Planning commission is

replaced

(a) A-II, B-I, C-III, D-IV

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

28 Identify and briefly explain three key features of the Indian economy on the 3
eve of independence that contributed to its predominantly stagnant structure.

OR
 Describe the state of foreign trade in India on the eve of independence.
Mention three key features of India's foreign trade during that period with
examples to illustrate the country's trading patterns with other nations.

29 Imagine you are an economic advisor to a developing country's government. 3

Explain three sources of human capital formation in the context of economic
development. Give examples of how your recommended investments in
human capital can positively impact the country's economic growth and
overall prosperity.

30 As a policy analyst studying China's economic development, describe the 4

strategy pursued by the country after gaining independence. Identify four
key policy initiatives implemented by the Chinese government to achieve
economic growth and industrialisation. Demonstrate the impact of these
strategies on China's economic development and transformation into a major
global economic power.

31 As a financial analyst, critically evaluate four key challenges faced by rural 4

banking institutions in fostering financial inclusion and economic
development in a developing country.

OR

As a marketing analyst, evaluate four key measures initiated by the

government in a developing country to enhance the efficiency and
effectiveness of the agricultural marketing system.

32 As a socio-economic researcher, you are conducting a study on 4

unemployment in India. Based on your research, identify and categorize the
four main causes of unemployment in the country.

33 A). Consider the concept of Agricultural Subsidies, which are financial aids 6
provided by governments to support farmers and agricultural production. As
a policymaker, evaluate the virtues and analyze the vices of agricultural
subsidies on the agricultural sector, the economy, and society as a whole.

B) As a researcher specializing in economic analysis, critically examine the

concept of Import Substitution as an economic strategy in developing
countries and thoroughly assess its potential three adverse effects on their
economies.

OR

C) Describe a real-life example of 'Systematic De-industrialization' in a

specific developing country during British rule. Identify three main factors
reasons that led to the decline of industrial activities in that country.

D) Provide a case study of infrastructure development during British

 colonial rule in a specific region of India. Highlight three key infrastructural
projects initiated by the British administration and analyze their impact on
the region's economy, transportation, and communication systems.

34 6
Read the following passage on the causes of the environmental crisis and
answer the questions that follow:
The world is facing an unprecedented environmental crisis characterized by
various interconnected challenges. Several factors have contributed to this
alarming situation, threatening the delicate balance of ecosystems and the
well-being of both humans and wildlife. One of the primary causes of the
environmental crisis is the rapid growth of human population. The increasing
demand for resources, food, and energy has led to extensive deforestation,
habitat destruction, and overconsumption of natural resources.

Industrialization and modernization have played a significant role in

exacerbating the environmental crisis. The reliance on fossil fuels and the
emission of greenhouse gases have resulted in global warming and climate
change, leading to extreme weather events, rising sea levels, and disruptions
in natural cycles. The unchecked discharge of pollutants and waste from
industries has further contaminated air, water, and soil, endangering human
health and biodiversity.

Another critical factor contributing to the environmental crisis is the

expansion of agriculture and urbanization. The conversion of forests and
natural habitats into agricultural lands and urban areas has led to the loss of
biodiversity and fragmentation of ecosystems. This has disrupted the natural
habitats of numerous species, leading to the extinction of many plants and
animal species.
Moreover, human activities such as irresponsible waste management and
improper disposal of plastics have resulted in the accumulation of plastic
waste in oceans and landfills, causing harm to marine life and contaminating
the environment. The excessive use of chemical fertilizers and pesticides in
agriculture has also led to soil degradation, water pollution, and loss of
biodiversity.

In summary, the environmental crisis is a complex issue with various

interconnected causes. The rapid growth of human population,
industrialization, urbanization, and irresponsible waste management
practices are some of the major contributors to this crisis. Addressing these
causes requires a collective effort from governments, industries, and
individuals to adopt sustainable practices and promote environmental
conservation.

On the basis of the given text and common understanding, answer the
following question:

A) What are the primary causes of the environmental crisis described in the
passage? (2 marks)
B) How has industrialization contributed to the environmental crisis? (2
marks)
C) Explain the impact of agriculture and urbanization on the environment. (2
marks)