CHENNAI SAHODAYA SCHOOLS COMPLEX

General Instruction:
1. This question paper contains two sections:
Section - A – Macro Economics (40 Marks)
Section – B – Indian Economic Development (40 Marks)
2. This paper contains 20 Multiple Choice Questions type questions of 1 mark each.
3. This paper contains 4 short Answer Questions type questions of 3 marks each to be
answered in 60 to 80 words.
4. This paper contains 6 short Answer questions type questions of 4 marks each to be
answered in 80 to 100 words.
5. This paper contains 4 long Answer Questions type questions of 6 marks each to be
answered in 100 to 150 words.
COMMON EXAMINATION
ECONOMICS (030)
Time Allowed: 3 hours Maximum Marks:80
Roll No.: Date:
SECTION – A –MACRO ECONOMICS
1. “CRR cut will improve bottom line “, says Karnataka Bank CEO Private Mahabaleshwara MS on
Friday said the Reserve bank of India (RBI) slashing the Cash Reserve Ratio (CRR) by 100 basis
points (BPS) from 4% to 3% will improve the bottom line of banks.
Identify the quantitative function of Central bank among the given options. 1
a) Repo rate
b) Margin requirement
c) Cash reserve ratio
d) Option a) and c)
2. If the value of Average Propensity to Save (APS) is 0.2 and National Income is ₹4,000 crore, then
consumption will be ----- 1
a) ₹4,000 crores
b) ₹3,200 crores
c) ₹3,800 crores
d) ₹2,600 crores
3. Balance of Payments account records: 1
a) A country’s inflow & outflow of foreign exchange during a fiscal year.
b) International transactions in goods, services and assets during a fiscal year.
c) Transactions affecting foreign exchange assets & liabilities during a fiscal year.
d) Transactions relating to exports & import of goods & services, and transfers during a fiscal year.

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 OR

From the following given sets of statements in column I and II, chose the correct pair of statements.

Column I Column II
A Exports of goods and services (i) Excess of Exports of goods over the imports
of goods
B Trade Surplus (ii) An element of invisible items
C Current Transfers to rest of the world (iii) Recorded as a positive item in the BOP
account
D Portfolio Investments (iv) Foreign Institutional investors
Alternatives:
a) A-(i)
b) B-(ii)
c) C-(iii)
d) D-(iv)

4. On the basis of following schedule, what is the value of MPS? 1

Income 0 50 100 150 200
(in ₹crores)
Saving -20 -10 0 10 20
(in ₹crores)

OR
In case of an underemployment equilibrium, which of the following alternative is not true?
a) Aggregate demand is equal to Aggregate supply.
b) There exist excess production capacity in the economy.
c) Resources are not fully and efficiently utilized.
d) Resources are fully and efficiently utilized.

5. Read the following statement – Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: 1
Assertion (A): Demand Deposits are considered as a convenient mode of payment for execution
of even the high value transactions.
Reason (R): Demand Deposits are non-withdrawable in nature and cannot be withdrawn against
issue of cheques and other similar instruments of payment.
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 and 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.

6. Read the following statement – Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: 1
Assertion (A): Trade of invisible items between two nations is a part of capital account of
Balance of Payment.
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 Reason (R): transactions that affect the asset liability status of a country in relation to the rest of
the world are known as capital account transaction.
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 and 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.

7. Read the following statements carefully and choose the correct alternatives given below:1
Statement 1: Subsidies do not add any burden on the financial health of a nation
Statement 2: Complete removal of subsidies may violate the aim of equitable distribution of
income
Alternatives:
a) Both the statements are true.
b) Both the statements are false.
c) Statement 1 is true and Statement 2 is false
d) Statement 2 is true and Statement 1 is false

8. Two friends Riya and Surendra were discussing about aggregate demand. “The components of
aggregate demand in an open economy are household consumption expenditure, private
investment expenditure and government expenditure.”
Identify the one of the components that is missing in the above statement. 1
a) Household investment expenditure
b) Net exports
c) Factor payments
d) Transfer payments

9. Read the following statements carefully and choose the correct alternatives given below: 1
Statement 1: Demonetization was the step taken by the government of India in order to tackle
the problems of corruption, black money, terrorism and circulation of fake currency in the
Indian economy.
Statement 2: demonetization has ensured improved tax compliance in India over a period of
time.
Alternatives:
a. Both the statements are true.
b. Both the statements are false.
c. Statement 1 is true and Statement 2 is false
d. Statement 2 is true and Statement 1 is false
10. Inventory is a ---concept whereas the change in inventory is a --- concept
a) Stock, Flow
b) Flow, Stock
c) Stock, Stock
d) Flow, Flow
OR

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 If in an economy the value of Net factor Income from Abroad is ₹200 crores and the value of
Factor Income to Abroad is ₹40 crores, Identify the value of factor Income from Abroad ---- 1

11. “GDP only measures goods and services produced in an economy and ignores those
transactions that do not come under monetary terms”. In view of the above statement, discuss
the limitations of GDP as an index of welfare of a country. 3

12. The ratio of MPC and MPS is 4:1. The consumption at zero level of income is ₹40 crores. 3
A. Frame a consumption equation
B. Find the value of investment multiplier
C. Find the breakeven level of income
OR
What is investment multiplier? If change in investment of ₹100 crores is required to bring a
change in income by ₹1000 crores calculate MPC and MPS 3
13. “Loans are children of deposits and deposits are children of loan” Explain
OR
“The Central Bank acts as a banker, adviser and agent to the government.” Explain 4
14. A country with trade deficit cannot have current account surplus in its balance of payments.
Do you agree with the given statement? Give reasons. 4
15. Define inflationary gap. Show inflationary gap with a well labelled diagram. Give one monetary
measure to control it. 4
16. A. “Government uses the fiscal policy to stabilize economic fluctuations in an economy”.
Discuss.
B. “Government across nations are worried about the term fiscal deficit”. Do you think fiscal
deficit is necessarily inflationary in nature? Support your answer with reasons. 6
17. Calculate Gross Domestic Product at factor cost and Factor Income to Abroad
Particular ₹
(in crores)
I Compensation of employees 800
Ii Profits 200
Iii Dividends 50
Iv GNP at MP 1400
V Rent 150
Vi Interest 100
Vii Gross Domestic Capital Formation 300
Viii Net fixed Capital Formation 200
Ix Change in stocks 50
X Factor income from abroad 60
xi NIT 120
OR
A. Elaborate the objective of “Allocation of resources” in the government budget
B. Discuss briefly how the government budget can be used as an effective tool in the process of
employment generation. 6

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 SECTION – B-INDIAN ECONOMIC DEVELOPMENT
18. Match the situations given in Column I with their respective implications given in Column ii : 1
Column I Column II
A Migration (i) Reduced per capita economic growth
B Low level of academic standards (ii) Imbalance between demand and supply of human
resource
C Population: High growth rate (iii) Brain drain
D Lack of proper manpower planning (iv) Mismatch between required skill and academic
standards
a) A-(ii);B-(iii);C-(iv);D-(i)
b) A-(ii);B-(iv);C-(i);D-(ii)
c) A-(i);B-(ii);C-(iii);D-(iv)
d) A-(ii);B-(iv);C-(i);D-(iii)

19. Just as a country can turn physical resources like land into physical capital like factories,
similarly, it can also turn human resources like nurses, farmers, teachers, students into human
capital like engineers and doctors. Which of these justifies the need for human capital? 1
a) It leads to efficient use of resources
b) It leads to economic growth
c) It helps in creating a society free of discrimination
d) It allows individual freedom
Or
Which of the following is working in the informal sector? 1
a) A private school teacher in a leading school in a big city.
b) The owner of a textile shop employing 9 workers.
c) Driver of a bus company which has more than 10 buses with 20 drivers, conductors & other
workers.
d) Civil engineer working in a construction company which has 10 workers.

20. Arrange the following events of China and Pakistan in chronological order and choose the
correct alternative: 1
i. Great Leap Forward
ii. Nationalization of capital goods in Pakistan
iii. Introduction of reforms in China
iv. Pakistan’s First five year plan
Alternatives:
a) i, ii, iii, iv
b) ii, iii, iv, i
c) iv, I, ii, iii
d) iv, iii, ii, i
OR
Which of the following countries has the highest infant mortality rate per 1000 live births? 1
a) India
b) China
c) Pakistan
d) None of these
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21. ----adopted “One Child Policy" as a measure to control population 1
a) India
b) China
c) Pakistan
d) Russia

22. Read the following statement – Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: 1
Assertion (A): Basic education and basic health are important in themselves, irrespective of their
contribution to labour productivity.
Reason (R): human welfare should be increased through investment in education and health
even if such investments do not result in higher labour productivity.
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 and 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. Read the following statement – Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: 1
Assertion (A): NABARD do not provide direct loan to farmers
Reason (R): National Bank for Agriculture and Rural Development is an apex regulatory body for
overall regulation and licensing of regional rural banks and apex cooperative banks in India.
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 and 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.
24 -------- is not the reason for the stagnation in the agriculture sector? 1
a) Use of fertilizers.
b) Lack of irrigation facilities
c) Low levels of technology
d) Various systems of land settlement.
Or
_____________ have been removed to increase the competitive position of Indian goods in the
international markets. 1
a) Import licensing c) Quantitative restrictions
b) Export duties d) Tariffs

25. In the year……………… the Indian Government made education free & compulsory for all children between
6 to 14 years. 1
a) 2001 c) 2003
b) 2009 d) 2007

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26. Read the following statements carefully and choose the correct alternatives given below: 1
Statement 1: India announced the New Economic Policy in 1991 consisting of wide range of
economic reforms
Statement 2: World Bank and International Monetary Fund granted ₴ 7 billion to manage the
Economic crisis in late 1990, with conditions.
Alternatives:
a) Both the statements are true.
b) Both the statements are false.
c) Statement 1 is true and Statement 2 is false
d) Statement 2 is true and Statement 1 is false
27 --------- is regarded as architect of Indian Planning, responsible for formulating Five Years Plans. 1
a) Prashant Chandra Mahalanobis
b) J.C. Kumarappa
c) DadbhaiNaaroji
d) Amiya kumarBagchi
28. The given picture shows the main causes of India’s agricultural stagnation during the colonial
period, explain the cause shown in the picture 3

29. Give two instances of :

A. Overuse of environmental resources
B. Misuse of environmental resources 3
OR
Explain the function of the environment. 3
30. “The rural areas in India suffer from lack of adequate financing facilities”. State the reason for
the requirement and sources available to meet out this problem. 3
OR
“Agricultural marketing has come a long way with the intervention of
the government”. Discuss
31. With reference to the table below, list points stating a comparison of the demographic features
of India, China and Pakistan. 4
Country India China Pakistan
Est. population 1311 1371 188
(in millions)
Annual Growth of 1.2 0.5 2.1
population
2015
Density (per sq.km) 441 146 245
Sex Ratio 929 941 947
2015

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 Fertility Rate 2.3 1.6 3.7
2015
Urbanization 33 56 39
2015

32. Do you think that in the last 50-60 years, employment generated in the country is
commensurate with the growth of GDP in India? How? 4
33. Discuss in brief the goals of five year plans 6
OR
”Though public sector is very essential for industries, many public sector undertakings
incur huge losses and are a drain on the country’s resources”. Discuss the usefulness
of public sector undertakings in the light of this fact. 6

34. Read the following text carefully and answer questions given below
NEW DELHI: India and Pakistan – two of the biggest south Asian nations- started their economic
journey around the same time after gaining independence. Not many know that there was a point in
the 1960s when Pakistan’s per capita GDP used to be higher than that of India’s. However, over the
years, India has not only surpassed Pakistan’s per capita GDP but taken a commanding lead on
almost every economic front.
Pakistan today is facing global criticism for failing to rein in homegrown terror groups even as it
grapples with an ailing economy and mounting global debt. India, on the other hand, has become a
global front runner which recently surpassed the UK to become the fifth largest economy in the
world. The stark economic contrast between the two neighbors shows that Pakistan’s unstable
government, conflicting power centers, convert support to terror groups and involvement in global
terror strikes such as the 26/11 Mumbai attacks, have bled its economy. From a higher per capita
GDP of ₴83.33 in 1960. Pakistan’s today lags much behind India which witnessed multi-fold rise its
per capita GDP over the years. From 2007, India’s per capita GDP has consistently stayed higher than
that of Pakistan’s.
India is today the fastest growing trillion-dollar economy in the world and the fifth largest overall,
according to data compiled by IMF’s World Economic Outlook. It jumped from 9th spot in 2010 to the
5th spot in a span of just 9 years. The GDP of India’s is almost 10 times that of Pakistan, which is
placed at the 45th position.
India’s rise has been even more dramatic across the past couple of years. Since 2008, India’s GDP
has risen almost 140 per cent as against an increase of about 63 per cent for Pakistan
Questions:
A. “India and Pakistan started their economic journey at the same time but now India is far
ahead of Pakistan’ in the light of above statement, give any two reasons. 2
B. Compare and analyses India and Pakistan economy in the term of GDP growth. 4

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 ECONOMICS (030)

3 marks should be answered in 60 to 80 words

4 marks should be answered in 80 to 100 words
6 marks should be answered in 100 to 150 words

Q.No. Answer Split up Total

SECTION – A- MACRO ECONOMICS

1 d) Option a) and c) 1 1

2 b) ₹3,200 crores 1 1

3 a) 1 1

OR

d) Resources are fully and efficiently utilized.

4 0.2 1 1

OR

d) D-(iv)

5 c) Assertion (A) is true but Reason (R) is false. 1 1

6 d) Assertion (A) is false but Reason (R) is true. 1 1

7 d) Statement 2 is true and Statement 1 is false 1 1

8 b) Net exports 1 1

9 a) Both the statements are true. 1 1

10 a) Stock, Flow 1 1

OR

₹240 crores

11 Limitation of using GDP as an indicator of welfare of a country are as

follows

1. Inflation
2. GDP ignores externalities 1
3. GDP disregards income pattern 1
(or any three limitation)
1 3

12 A) 40 + 0.8Y 1
B) 5
C) ₹200 crores 1
OR 1 3
Investment multiplier refers to the concept that any increase in investment 1
spending has a more than proportionate positive impact on income
1
MPC = 0.1
 MPS = 0.9 1

13 Loans are children of deposit and deposits are children of loans. It means
deposits are the results of loan activities of a bank and loans are given
after the deposit in the bank. This is the most important function of
commercial bank , credit creation 4 4
OR

It is the important function of Central Bank

As a banker to the government: as a banker, the central bank performs

banking functions for the government by accepting the government
deposits and granting loans to the government.

As an advisor to the government : as an advisor , the central bank gives 2

advice to the government regarding economic policy matters, money
market , capital market and government loans.
2 4

14 The central bank needs to intervene in this system 2

In order to restrict the fluctuations in the exchange rate within certain 2 4

limits

15
No, trade deficit occurs when value of goods/ visibles imported is more than
the value of goods / visibles exported.

Trade deficit = Value of imports – Value of exports.

Trade deficit is only one of the four components of current account. So even
though there is a trade deficit there can be a surplus in other 3 components
which will ultimately lead to surplus in current account.

16 A. 1.Stabilization policy is a strategy enacted by the government to 1

maintain a healthy level of economic growth
2. Fiscal policy can do this by increasing or decreasing aggregate
demand 1
3. To smooth out the business cycle

(0r any relevant three answers ) 1 3

B. 1.It shows fiscal policy of the government 1
2. Government approach to allocation of resources in the country
1
3. Correct the situation of inflationary / deflationary gap
1 3
(0r any relevant three answers )
6
17 Formula 1
Calculation
1
GDPfc = ₹1.300 crores
Formula 1 3
Calculation
Factor income to abroad = ₹80 crores 1
OR 1
A. It helps to distribute resources, keeping in view the social and
economic advantages of the country. The factors that influence the 1 3
allocation of resources are:
Allowance or Tax concessions 6
Direct production of goods and services
Minimize inequalities in income and wealth
Economic stability
Manage public enterprises
Economic growth.
Decrease regional differences
( Or any relevant answer) 3
B. Government expenditure on various heads such as defense,
administration, infrastructure, education, and health care, etc. affects
the lives of the citizens and overall economy. Also, the budget is
important because Governments use it as a medium for implementing
economic policies in the country. 3 6
( Or any relevant answer)

SECTION – B – INDIAN ECONOMIC DEVELOPMENT

18 b) A-(ii);B-(iv);C-(i);D-(ii) 1 1

19 b) It leads to economic growth 1 1

or
c)
20 c) iv, I, ii, iii 1 1

OR

c)Pakistan

21 b)China 1 1

22 b)Both Assertion (A) and Reason (R) are true and Reason (R) is not the 1 1
correct explanation of Assertion (A).

23 b)Both Assertion (A) and Reason (R) are true and Reason (R) is not the 1 1
correct explanation of Assertion (A).

24 d)Various systems of land settlement 1 1

25 c) I, ii, iii 1 1

26 a)Both the statements are true. 1 1

27 a)Prashant Chandra Mahalanobis 1 1

28 Cause – Zamindari system 1

Explanation - 2 3
29 A. Overuse of environmental resources 1.5
1. Excess use of electricity leads to depletion of resources like coal
and water
2. Excess use of petrol and diesel in vehicles.
(or any two relevant instances of overuse )

B. Misuse of environmental resources

1. Soil degradation due to improper use of fertilizers
2. Drying up of rivers due to supply of water from them to dams
and reservoirs. 1.5
( or any two relevant instances of misuse) 3
OR
Environment performs four functions: supplies resources,
3
assimilates wastes, sustains life by providing genetic and
bio diversity and provides aesthetic services. 3

30 Growth of rural economy depends on timely infusion of capital. Credit in 2

rural areas is required:

1. To meet certain expenses because the gestation period between

crop sowing and realization of income after production is too long.
2. To invest in seeds, manure and fertilizers. Non-farm sectors such as
cottage and small scale industries also require capital.
3. For rural people for self-employment.

The sources of credit in rural system are:

1. Non institutional sources: Money lenders, friends, relatives and

land owners.
2. Institutional sources: National Bank for Agriculture and Rural
Development (NABARD), Self Help Groups (SHGs), Regional Rural
Banks, Commercial Banks, Co-operative Banks, Co-operative
Financing societies. 2
OR
Both growth and equity are the two important aspects of India’s five year
plans. While growth refers to the increase in GDP over a long period of time
equity refers to an equitable distribution of GDP so that the benefits due to
higher economic growth are shared by all sections of population. Equity
implies social justice. Growth itself is desirable but growth in itself does not
guarantee the welfare of people. Growth is assessed by the market value of
goods and services (GDP) and it may be possible that the goods and
services that are produced may not benefit the majority of population. In 4
other words, only a few with high level of living and money income may get
the share of GDP. Hence, growth with equity is a rational and desirable
objective of planning. This objective ensures that the benefits of high
growth are shared by all the people equally and, hence, this not only leads
to reduction of inequality of income, poverty promotion of egalitarian
society but also enables everyone to be self-reliant. Therefore, to conclude,
it can be said that growth with equity is the most important objective of an
economic planning.

4 4
31 Comparison should be done on 1x4

Population

Density of population

Growth of population

Sex ratio

Fertility rate 4

Urbanization

(Any four)

32 No, employment generated in the country does not commensurate with 1

the growth of GDP in India because India has experienced Jobless growth in
1
the last 50-60 years.
2 4
Causes of jobless growth -

33 The goals of Five Years Plan

1. Growth
2. Modernization
3. Self-reliance 1x6
4. Equity
5. Full employment
6. Rising investment income ratio 6
OR

Meaning of Agricultural marketing

Marketing Prior to independence

Steps –
1
Transparent marketing conditions
1
Physical infrastructure facilities
4
Cooperative marketing

MSP

Buffer stock
6
PDS

34 A. 1. Unstable government, 2. Homegrown Terror Groups or Ailing 2

Economy
B. 1.India GDP has consistently stayed higher
2. India is today the fastest growing Trillian-dollar economy in the world 4
3. It jumped from 9th spot in 2010 to the 5th spot in a spam of just 9
years

4. India’s GDP has risen almost 140 percent

5. the GDP of India is almost 10 times that of Pakistan

6
 CHENNAI SAHODAYA SCHOOLS COMPLEX

COMMON EXAMINATION
Class-12
ECONOMICS (030)
Time Allowed: 3 hours Maximum Marks: 80
Roll No.: Date:
SECTION – A
MACRO ECONOMICS
1. Read the following statements carefully. (1)
Statement 1: Car purchased by a hotel for the purpose of tourism facilitation is
capital good.
Statement 2: Refrigerator used at home is considered as non-durable consumer
good.
In the light of the given statements, choose the correct alternative:
(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. Read the following statements carefully. (1)

Statement 1: 𝑀1 is the most liquid measure of money supply.
Statement 2: Government of India regulates and directs the entire monetary structure
(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
3. is the primary function of money. (1)
a) a store of value b) a unit of value
c) Standard of deferred payments d) Transfer of value
(OR)
1 of 8
 Which of the following statement is correct:
a) ₹1 note is issued by the RBI
b) Coins are issued by the Government of India.
c) Both statements are true
d) Both statements are false

4. An economy is at full employment and AD is greater than AS, what will be the impact on price
level in such an economy? (1)
a) Rise b) Fall
c) No change d) both rise and fall

5. Domestic Currency appreciation takes place when: (1)

(a) Domestic currency loses its value in relation to a foreign currency.
(b) There is an increase in the price of a foreign currency in terms of the
domestic currency.
(c) There is a decrease in the price of a foreign currency in terms of the
domestic currency.
(d) There is no change in the exchange rate.
(OR)
Foreign Exchange Transactions which are independent of other transactions in the Balance of
Payments Accounts are called:
a) Current transactions b) Capital transactions
c) Accommodating transactions d) Autonomous transactions

6. Suppose in a hypothetical economy, the income rises from ₹6,000 crores to ₹7,000 crores.
As a result, the consumption expenditure rises by 600 crores. Marginal Propensity to
Consume in such a casewould be (1)
a) 0.8 b) 1.6 c) 0.2 d) 0.6
(OR)
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
a) ₹100 crores b) ₹200 crores c) ₹800 crores d) ₹500 crores

2 of 8
7. Read the following statement – Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: (1)
Assertion (A): There is an inverse relationship between the value of marginal
propensity to save and investment multiplier.
Reason (R): Saving is a leakage in the circular flow of income. Greater the
saving, greater the leakage and lower the value of investment multiplier.
(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.

8. Identify which of the following statement is true? (1)

a) The flexible exchange rate system gives the government more flexibility to
maintain large stocks of foreign exchange reserves.
b) In the Managed floating exchange rate system, the government intervenes to
buy and sell foreign currencies.
c) In the Managed floating exchange rate system, the central bank intervenes to
moderate exchange rate fluctuations.
d) In the Fixed exchange rate system, market forces fix the exchange rate.

9. Read the following statements – Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: (1)
Assertion (A): When income is zero, consumption is also zero.
Reason (R) :There is always some minimum level of consumption in the economy even when
income is zero.
(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.

10. How will the devaluation of Indian Rupee affect the exports? (1)
a) Exports will fall. b) Exports will rise
c) Exports will remain same d) Exports will fall first and then rise

11. Calculate GVA fc from the following data. (3)

i) Intermediate cost - ₹ 12,000
ii) Closing stock - ₹ 12,000
iii) Output sold (units) - ₹ 600
iv) Opening stock - ₹ 2000
v) Price per unit - ₹ 20
vi) Corporate tax - ₹ 3000
vii) Consumption of fixed capital - ₹ 2000
viii) Subsidy - ₹ 160

12. What are official reserve transactions? Explain their importance in the Balance of (3)
Payments.
(OR)
Are the following entered; (i) On the credit side or debit side; and (ii) In the Current Account or
Capital Account in the Balance of Payments Account? Give reasons for your answer. (3)
(i) Investments from Abroad
(ii) Transfer of funds to relatives Abroad
(iii) Sale of machinery to abroad
13. Given consumption function is C = 80 + 0.75 Y(where C = consumption function,
Y = National income) and investment expenditure ₹ 200 crores. (4)
a) What will be equilibrium level of income?
b) What will be the new equilibrium level of income if investment increases by ₹50
crores?

14. 'Central Bank acts as the banker and as an agent to the government'. Elaborate the
given statement. (4)

15. What is deflationary gap? Represent with a neat diagram. Discuss any one fiscal measure to
correct the situation of deflationary gap. (4)
(OR)

Describe the adjustment mechanism if in an economy, the ex-ante savings are lesser than ex-
ante investments. (4)
16. a) The Government has different slabs of tax rate for different income group.
What is the objective behind this? (3)
b) Explain the components of capital Receipts. (3)

17. (a) Given the following data, find the missing value of 'Private Final Consumption Expenditure'.
(3)

S. No. Particulars Amount (in crores)

(i) National Income 50,000
(ii) Net Indirect Taxes 1,000
(iii) Private Final Consumption Expenditure ?
(iv) Gross Domestic Capital Formation 17,000
(v) Profits 1,000
(vi) Government Final Consumption Expenditure 12,500
(vii) Wages & salaries 20,000
(viii) Consumption of Fixed Capital 700
(ix) Mixed Income of Self-employed 13,000
(x) Net Factor Income from Abroad 500
(xi) Net Exports 2,000

(b) Explain how 'externalities' are a limitation of taking Gross Domestic Product as an index of
welfare. (3)
(OR)

a) Find out Net National Product at Market Price. (3)

S No Particulars ₹
(i) Net current transfers from abroad (-) 10
(ii) Wages and Salaries 1,000
(iii) Net factor income to abroad (-)20
(iv) Social security contributions by employers 100
(v) Net Indirect tax 80
(vi) Rent 300
(vii) Consumption of fixed capital 120
(viii) Corporate Tax 50
(ix) Dividend 200
(x) Undistributed Profits 60
(xi) Interest 400
(xii) Social security contributions by employees 600

b) State and discuss any three precautions to be considered while estimating

national income by Expenditure method. (3)
 SECTION – B
INDIAN ECONOMIC DEVELOPMENT

18. Which was not the objective of demonetisation 2016: (1)

(a) To curb corruption
(b) To curb counterfeit currency
(c) To stop the use of low denomination notes for terrorists activities
(d) To discourage the accumulation of "black money"
(OR)

Read the following statements carefully:

Statement 1 - Navaratna Policy of the government helped in improving the performance of
public sector undertakings in India.
Statement 2 - Navaratna Policy boosted the public sector industries and helped them to produce
more efficiently and also made them competitive in the market

In the 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

19. From the set of statements given in Column A and Column B, choose the correct pair of
statement: (1)
Column A Column B
i). Railway services in India (a) 1897
ii). First Indian Census (b) 1880
iii). Second stage of Demographic Transition (c) 1883
iv). Planning Commission in India (d) 1950
(a) i. (a) (b) ii. (b) (c) iii. (c) (d) iv. (d)

20 Identify the correctly matched pair of Column A to that of Column B: (1)

Column A Column B
i) Open Unemployment (a) Arises due to change in demand pattern
and supply structure
ii) Disguised Unemployment (b) Not working by choice
iii) Frictional Unemployment (c) It arises due to movement from one
industry to another
iv) Seasonal Unemployment (d) It is invisible in nature

(a) i-(a) (b) ii - (b) (c) iii - (c) (d) iv - (d)

21. Which Five Year Plan recognised the importance of human capital? (1)
(a) Tenth (b)Seventh (c) Ninth (d) Sixth

(OR)
Which of the following is not used as a strategy for Sustainable Development?
a) Use of bio-gas b) Use of thermal power
c) Use of solar power d) Use of hydel power

22. Read the following statements carefully and choose the correct alternative from the following:
(1)

Statement 1: Both education and health increase the income generating capacity
of an individual.
 Statement 2: Spread of education plays no role in controlling the population
growth rate:
Alternatives:
a) Statement 1 is true and Statement 2 is false.
b) Statement 2 is true and Statement 1 is false
c) Both the statements are true
d) Both the statements are false

23. Read the following statements - Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: (1)
Assertion (A) : Absorptive capacity means the ability of the environment to
absorb degradation.
Reason (R) : Many resources have become extinct and the wastes generated
are beyond the absorptive capacity of the environment.
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.

24. Identify the correctly matched pair in Column A and Column B from the following. (1)

Column A Column B
i. India a) Economic reforms in 1997
ii. Pakistan b) Economic reforms in 1991
iii. China c) Economic Reforms in 1978
iv. India d) GST rolled out in 1999

a) i – a b) ii – b c) iii – c d) iv - d

25. Read the following statements carefully and choose the correct alternative from the following:
Statement 1: India and Pakistan adopted the mixed economy model. (1)
Statement 2: All the countries in the world were adopting mixed economy model.
Alternatives:
(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

26. Special Economic Zones were set upby China to:

a) Attract foreign investors c) To develop the backward regions
b) To maintain economic equality d) To promote private sector

27. The Great Proletarian Cultural Revolution led to (1)

a) collective cultivation of land.
b) growth of students and professionals.
c) increase in small scale industries.
d) massive industrialization.
(OR)
India is not a member of which of the following regional/global economic grouping:
a) SAARC b)BRICS c) G – 7 d) G - 20

28. 'The present generation should bequeath a better environment to the future generation'.
According to Herman Daly, a leading environmental economist, how can we achieve
sustainable development? (any three) (3)
29. At the time of independence, moneylenders and traders exploited small and marginal farmers
and landless labourers by lending to them on high interest rates and by manipulating the
accounts to keep them in a debt-trap. A major change occurred after 1969 when India adopted
social banking and multi-agency approach to adequately meet the needs of rural credit. Can you
highlight and explain the major institutional sources of rural credit? (3)
(OR)

"Agricultural marketing plays an important role not only in stimulating production and (3)
consumption, but in accelerating the pace of economic development". Discuss some of the
measures initiated by the government to improve agricultural marketing. (any three points)

30. Discuss briefly the rationale behind choosing 'self - reliance' and modernization as planning
objectives. (4)

31. ‘Globalization is turning the world into one whole or creating a borderless world’ Justify the
rationale of the given statement. (4)
(OR)
‘Membership of WTO is optional or required in the context of Indian Economy’. Explain. (4)

32. Compare the development of countries India, China and Pakistan giving emphasis to
demographic indicators. (4)

33. a) ‘Education and Health care service create both private and social benefits’. (2)
State the institutions that come under the Education and Health sector in India.
b) Mention the various forms of health expenditures. (2)
c) What initiatives have been taken by the government to provide equal access to education for
all? (any 2) (2)
(OR)
a) When does jobless growth take place? (2)
b) What is casualisation of workforce? (2)
c) Mention the sources that provide data on unemployment. (2)

34. Read the following hypothetical text and answer the questions that follow:
The performance of Indian economy during the period of first seven five-year plans (1950 –
1990) was satisfactory if not very impressive. On the eve of independence, India was an
industrially backward country, but during this period of first seven plans our industries became
far more diversified, with the stress being laid on the public investments in the industrial sector.
The policy of import substitution led to protection of the domestic industries against the foreign
producers, but we failed to promote a strong export surplus. Although public sector expanded to
a large extent but it could not bring desired level of improvement in the secondary sector.
Excessive government regulations prevented the natural trajectory of growth of
entrepreneurship as there was no competition, no innovation and no modernization on the front
of the industrial sector. Many Public Sector Undertakings (PSUs) incurred huge losses due to
operational inefficiencies, red-tapism, poor technology and other similar reasons. These PSUs
continued to function because it was difficult to close a government undertaking even it is a
drain on country’s limited resources. Government aimed at social welfare. On the Agricultural
front, due to the measures taken under the Green Revolution, India more or less became self-
sufficient in the production of good grains.

7 of 8
 So the needs for reform of economic policy was widely felt in the context of changing global
economic scenario to achieve desired growth in the country.

1. ‘The policy of import substitution led to protection of the domestic industries against the foreign
producers’ (3)
Explain the two forms by which imports were protected.

2. ‘Many public sector undertakings incur huge losses and are a drain on the economy’s
resources’. However public sector is very essential. Discuss the reasons for the public sector to
play a major role in the initial phase of Indian Economic Planning. (3)

***All the Best***

8 of 8 (End of the page)

 MARKING SCHEME - 2022 - 2023
ECONOMICS (030)
SECTION – A
MACRO ECONOMICS

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

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

3. (b) a unit of value (1)

(OR)

(b) Coins are issued by the Government of India. (1)

4. (b) Sells securities in the open market. (1)

5. (c) There is a decrease in the price of a foreign currency in terms of the

domestic currency. (1)
(OR)

(d) Autonomous transaction (1)

6. (d) 0.6
(OR)
(c) ₹800 crores

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

8. (c) In the Managed floating exchange rate system, the central bank intervenes to
moderate exchange rate fluctuations.

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

10. (b) Exports will rise

11. GVA fc = (output × price) + (closing stock – opening stock) –

Intermediate cost + subsidy (1)
= (600 × 20) + (12,000 – 2000) – 12000 + 160
= (12,000) +10,000 – 12,000 + 160 (1)
= 22160 – 12,000
= 10,160 crores (1)
12. The transactions carried on by monetary authorities of a country, which causes
changes in official reserves are termed as official reserve transactions. (3)
Autonomous receipts and autonomous payments give rise to either deficit or
surplus on balance of payments. The central bank may finance a deficit by:
i) reducing reserves of foreign currency
ii) by narrowing from the IMF or monetary authorities.
This will be shown as decrease in reserves. The central bank may use surplus to
purchase foreign securities, foreign currency, gold etc, which may result in
increase in reserves of the nation.
A withdrawal from this reserve leads to decrease in foreign financial assets, and is
recorded on the credit side. Any addition to these reserves is increase in foreign
financial assets, and is recorded on the debit side.
(OR)

i) Investment from abroad: It is entered in the credit side of capital account as

it increases liabilities by inflow of foreign exchange. (1)
ii) Transfer of funds to relatives abroad: It is entered in the debit side of current
account as it is outflow of domestic currency without getting anything in return,
i.e., unilateral transfer. (1)
iii) Sale of machinery to abroad is export of goods and thus recorded in the Current
Account. (1)
Sale of machinery to abroad brings in foreign exchange and thus recorded on the
credit side.

13. (a) Given C = 80 + 0.75Y

And I = ₹200 crores
To calculate Y = 80 + 0.75Y + 200 (1)
Y – 0.75Y = 80 + 200
280 28000
Y = 0.25 = 25

= 1120 crores (1)

(b) New equilibrium level of income, if investment increases by ₹50 crores

Y = 80+0.75 Y +250
Y – 0.75Y = 80 + 250 (1)
330
Y= = 1320 crores (1)
0.25

14. The Central Bank acts as a banker and as an agent to the government in various
respects: (4)
a) The Central Bank accepts receipts and makes payment for the government
and carries out exchange, remittance and other banking operations.
b) It provides short-term credit to the government.
c) It provides foreign exchange to the government to repay external debt.
d) It advises the government on banking and financial matters.
15. (1 ½ )

The situation of deficient demand arises when planned aggregate expenditure falls
short of aggregate supply at the full employment level. It gives rise to deflationary
gap. Deflationary gap is the gap by which actual aggregate demand falls short of
aggregate demand required to establish full employment equilibrium. (1 ½ )

Measures to correct Deflationary Gap (any one) (1)

Government incurs expenditure on administrative and welfare activities.
An increase in expenditure will directly increase AD and help in correcting the
deflationary gap.
Lowering taxes raises disposable income of the people. Rise in disposable income
raises consumption expenditure. This will raise aggregate demand and thus help in
deficient demand.
(OR)

(4)

16. a) The Government’s objective of reducing the inequalities in income and wealth is
fulfilled. Government can impose higher rate of tax on income of the rich and on
the goods consumed by the rich. This will bring down disposable income of the
rich. The amount so collected can be spent on providing free services, like
education, subsidized food to the poor people. This will increase the disposable
income of the poor reducing the gap between rich and poor. (3)

b) Capital receipts: It refers to those monetary receipts which either create liability
for the government or cause reduction in the assets of the government. Sources of
capital receipts are: (3)
 * Borrowings: Government borrows from the market, i.e., from the public. It
also borrows from the central bank, i.e., Reserve Bank of India in India, and
from foreign governments and bodies. Raising of funds through borrowing
leads to increase in the liabilities of the government.
* Recovery of loans: Government grants various loans to state governments
or union territories. Recovery of such loans is a capital receipt as it reduces
the assets of the government.
* Disinvestment: It refers to the act of selling a part or the whole of shares of
selected public sector undertakings held by the government. They are
termed as capital receipts as they reduce the assets of the government.

17. a) Private Final Consumption Expenditure (PFCE):

PFCE = (i) – (iv) – (vi) – (xi) + (viii) +(ii) – (x)
NN𝑃𝑓𝑐 – GDCF – GFCE – NX + Consumption of fixed capital
+ Net Indirect Tax – Net factor Income from abroad (1)
= 50,000 -17,000 – 12,500 – 2000 + 700 + 1,000 – 500 (1)
= ₹19700 crores. (1)

b) Externalities also have impact on welfare but are not taken into account in
GDP. Some of the activities bring positive benefits and negative harm to
mass of people without any monetary exchange. (3)

(E. g) Construction of a flyover or a highway reduces transport cost and

journey time of its users who have not contributed anything towards its
cost. Expenditure on construction is included in GDP and positive
externalities flowing from it.

Similarly, GDP also does not take into account negative externalities.

Factories produce goods but at the same time create pollution of water and
air. The pollution harms people. The factories are not required to pay
anything for harming people. Producing goods increases welfare but
creating pollution reduces welfare.

(OR)

a) Net National Product at Market Price (NN𝑷𝒎𝒑)

= (Wages and salaries + Social security contributions by employers) +
(Rent + interest +Dividend + Undistributed profits + Corporate Tax) +
Net indirect tax – Net factor income to abroad (1)
= 1,000 + 100 +300 + 400 + 200 + 60 +50 +80 + (-) 20 (1)
= ₹2,170 crores. (1)
b) Do not include intermediate expenditure, as it is already included in the final
expenditure. In case intermediate expenditure, which may result in overestimation
of national income. (3)

Do not include expenditure on second hand goods, as it has already been included
in the national income of the year, they were bought/sold for the first time

Imputed expenditure on own-account production should be included, e.g.

production for Self-consumption, self-consumed services of owner-occupied
house.

Exclude the Expenditure on transfer payments as they are unilateral transfers

against which no good / service is provided in return. E.g. old age pension,
donations, scholarships, taxes etc.

SECTION – B
IED
18. (c) To stop the use of low denomination notes for terrorists activities. (1)
(OR)
(c) Both statements 1 and 2 are true

19. (d) iv. (d) (1)

20. (c) iii - (c) (1)

21. (b)Seventh (1)

(OR)
b) Use of thermal power

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

23. (b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the (1)
correct explanation of Assertion (A).

24. c) iii – c (1)

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

26. (c) Both statements 1 and 2 are true (1)

27. b) growth of students and professionals. (1)

(OR)
c) G – 7
28. i) Limiting the human population to a level within the carrying capacity of the
Environment. (3)
ii) Technological progress should be input efficient and not input consuming.
iii) Renewable resources should be extracted on a sustainable basis.
iv) For non-renewable resources rate of depletion should not exceed the rate of
creation of renewable substitutes.
c) Inefficiencies arising from pollution should be corrected.

29. Co-operative Credit Societies – This source of credit is the most economical and
important source of rural credit. It was set up with the aim of facilitating the
complete credit needs for small and medium farmers. (3)
Commercial Banks - Earlier, these banks were only received deposits from the
urban population and issued loans only for trade and industry. They generally
neglected agriculture and rural industries because by nature agriculture is a high-
risk venture. However, today these banks give both direct and indirect finance to
agriculture.
Regional Rural Banks – Government initiated Regional Rural Bank was set up
to examine the specific needs of landless workers, small and marginal farmers and
rural poor.
Land Development Bank – It essentially gives farmers a long-term loan option
upon the mortgage of their land at low-interest rates, over a period of 15 to 20
years. These type of loans are usually taken if the farmers have some land
developments work or digging of wells.
(OR)
i) Regulation of markets was the first step to create orderly and transparent (3)
marketing conditions. This policy benefits farmers as well as consumers.
ii) Provision of physical infrastructure facilities like roads, railways, warehouses,
godowns, cold storages and processing units.
iii) Cooperative marketing, in realizing fair prices for farmers’ products, is the third
aspect of government initiative. The success of milk cooperatives in transforming
the social and economic landscape of Gujarat and some other parts of the country
is testimony to the role of cooperatives.
iv) Assurance of minimum support prices (MSP for agricultural products).
v) Maintenance of buffer stocks of wheat and rice by Food Corporation of India.

30. Self-reliance refers to avoiding imports of those commodities which could be

domestically produced, in India itself. In the first seven five year plans, self-
reliance was considered a necessity in order to reduce our dependence on
imported food supplies, foreign technology and foreign capital. It was presumed it
may make India vulnerable to foreign interference in our policies. (2)

‘Modernization’ as aim of Five Year Plans refers to the adoption of new

technology by the producers to increase the output of goods and service.
It does not refer only to use of new technology but also to the change in social
outlook such as recognition of the rights of women to be equal as men. This is to
enable the use of the talents of women in the modern society. (2)
31. i) With the introduction of globalisation, foreign investors can now directly
invest in India. To promote this a Foreign Investment Promotion Board
(FIPB) has been set up. (4)
ii) New technology and management expertise is also brought along with
Foreign Direct Investment (FDI) Indian industries can make technology
agreements with the foreign suppliers of technology.
iii) There is unrestricted flow of goods and services, technology and expertise
between India and the rest of the world.
iv) It leads to improvement in the allocative efficiency of resources and
increases the average growth rate of the economy.
(OR)
In the context of Indian economy, it is very much required to be a member
of WTO (World Trade Organisation) after the introduction of economic
policies of liberalization, privatization and globalization.

i) WTO helps integration of the international states with equal opportunities

to trade in the international market.
ii) Developed country like India does get the chance to stand up against the
developed economies of the world.
iii) Growth of fair, transparent and healthy competition takes place due to
removal of tariff and non-tariff barriers.
iv) As an important member of WTO India has been in the forefront of framing
fair global rules and regulations. (4)

32. i) The population of Pakistan is very small and account for roughly about one-
tenth of China or India. China geographically occupies the largest area
among the three nations and its density is the lowest.
ii) One child norm was introduced in China in late 1970’s to check population
growth. This measure led to a decline in the sex ratio.
Due to one child norm, after few decades there will he more elderly people
in proportion to young people.
iii) The fertility rate is low in China and very high in Pakistan.
iv) Urbanisation is high in China. (4)

33. (a)Education Sector (2)

i) National Council of Educational Research and Training (NCERT):
ii) University Grants Commission (UGC):
iii) All India Council for Technical Education (AICTE):
Health Sector
i) Indian Council of Medical Research (ICMR)
(b) Expenditure on (2)
* Preventive medicine such as vaccination.
* Curative medicine such as interventions during illness.
* Social medicine such as spread of health literacy.
* Provision of clean drinking water.
* Good sanitation.
(c) i) The Government of India enacted the ‘Right of Education Act’ in 2009 to (2)
make free education a fundamental right of all children in the age group of
6 – 14 years.
ii) Government of India has started levying a 2 percent ‘education cess’ on all
Union taxes. The revenue earned from education cess is spent on elementary
education.
iii) The government sanctions a large outlay for the promotion of higher education
and new loan schemes for students to pursue higher education.
(OR)

a) Jobless growth takes place when a country produces more goods and services
without generating employment. (2)

b) Casualisation of workforce means movement from self-employment and

regular salaried employment to casual wage work. (2)

c) Sources of Data on Unemployment

Reports of Census of India. (2)
National sample Survey Organisation’s Reports of Employment and
Unemployment situation Directorate General of Employment and Training Data
of Registration with Employment Exchanges.

34. a) Protection from imports took two forms: tariffs and quotas. Tariffs are a tax on
imported goods; they make imported goods more expensive and discourage
their use. Quotas specify the quantity of goods which can be imported. Tariffs
and quotas restrict imports and protect the domestic firms from foreign
competition. (3)

b) Private entrepreneurs lacked sufficient capital for investment.

Government aimed at social welfare.
The government wanted to protect the indigenous producers from the foreign
competition. (3)
 CHENNAI SAHODAYA SCHOOL COMPLEX

(General Instructions)
❖ This question paper contains 10 printed pages.
❖ This question paper contains 34 questions.
❖ Write down the question number before attempting.
❖ Reading time 15 minutes.
❖ This question paper contains two sections:
Section A – Macro Economics
Section B – Indian Economic Development
❖ This paper contains 20 Multiple Choice Questions type questions of 1 mark each.
❖ This paper contains 4 Short Answer Questions type questions of 3 marks each to be
answered in 60 to 80 words.
❖ This paper contains 6 Short Answer Questions type questions of 4 marks each to be
answered in 80 to 100 words.
❖ This paper contains 4 Long Answer Questions type questions of 6 marks each to be
answered in 100 to 150 words.

COMMON EXAMINATION

CLASS-12 (ECONMICS -030)

Time Allowed: 3 hours Maximum Marks: 80

Roll No.: Date: / /

SECTION A – MACRO ECONOMICS

1) Read the following statements carefully and choose the correct alternative: (1)
Statement 1: The value of MPS ranges from 0 to 1
Statement 2: If in an economy, the consumption and savings curves are parallel to each other
the value of investment multiplier will be 2.
a) Both the statements are true.
b) Both the statements are false.
c) Statement 1 is true, Statement 2 is false.
d) Statement 2 is true, Statement 1 is false.

2) "Government of India is giving incentives for exports." (1)

State the likely effect of the given statement on foreign exchange rate with reference to the
Indian Economy.
a) New equilibrium rate of foreign exchange will be determined which will be higher
than the prevailing foreign exchange rate, leading to depreciation of domestic
currency.

Page 1 of 10
 b) New equilibrium rate of foreign exchange will be determined which will be lower
than the prevailing foreign exchange rate, leading to Appreciation of domestic
currency.
c) New equilibrium rate of foreign exchange will be determined which will be lower
than the prevailing foreign exchange rate, leading to revaluation of domestic currency.
d) New equilibrium rate of foreign exchange will be determined which will be higher
than the prevailing foreign exchange rate, leading to devaluation of domestic
currency.

3) The value of credit multiplier will be high when (1)

a) Cash reserve ratio is high b) Cash reserve ratio is low
c) Cash reserve ratio is zero d) Cash reserve ratio is infinity

4) Read the following statements carefully and choose the correct alternative: (1)
Statement 1: Balance of Payment is an accounting statement which records all the economic
transaction that takes place between the residents of a country during a given period of time.
Statement 2: Current account of Balance of Payment records all the transactions that relate
to assets or liabilities.
a) Both the statements are true.
b) Both the statements are false.
c) Statement 1 is true, but statement 2 is false.
d) Statement 2 is true, but statement 1 is false

5) Read the following statement carefully and choose the correct alternative: (1)
Statement 1: Industrial waste driven into rivers is an example of positive externality.
Statement 2: Change in Inventory is a stock variable.
a) Both the statements are true.
b) Both the statements are false.
c) Statement 1 is true, Statement 2 is false.
d) Statement 2 is true, Statement 1 is false.
OR
Examine the following figure carefully and choose the correct option from the alternatives
given below

a) Nominal b) Circular c) Real d) Both (a) and (b)

Page 2 of 10
6) If C = 100 + 0.75Y, then the corresponding Saving Function will be expressed as: (1)
a) S = 100 + 0.25Y b) S = -100 + 0.75Y
c) S = -100 + 0.25Y c) S = 75 + 0.25Y

OR

At zero level of income, consumption is

a) Zero b) positive
c) Negative d) All of these

7) Which out of the following is not included in the money supply of the country. (1)
a) Stock of gold held with the Central bank b) Coins and currency
c) Demand deposits d) Time deposits

8) The Reserve Bank of India is said to have intervened lately to arrest the rupee's slide by
selling Dollars on a large scale. (1)
-Source: The Economic Times, March 03, 2021
Which of the following statements regarding the above news is FALSE?
a) The transaction above will be termed as an accommodating transaction.
d) The transaction will be categorised as a below-the-line item in the balance of
payments.
c) The value of the rupee against one dollar must be rising before the intervention.
b) The foreign exchange rate for one rupee must be rising before intervention

OR

Look at the following data of a given country:

No. Particulars Value (in Million

US Dollars)
1 Exports (of goods) 150
2 Imports (of goods) 200
3 Net Invisibles 20

Which of the following is INCORRECT?

a) Balance of trade is unfavorable to the country
b) Balance of payment cannot be determined by the data.
c) There is Current account deficit of 30 million US Dollars.
d) There is Capital account Surplus of 50 million US Dollars

9) Read the following statement -Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: (1)
Assertion (A): Rich people have a lower propensity to consume as compared to poor people.
Reason (R): Consumption can never be zero even if the national income is zero

Page 3 of 10
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 and 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

10) Read the following statement -Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: (1)
Assertion (A): According to Keynesian theory, equilibrium level is always achieved at full
employment level.
Reason (R): At full-employment equilibrium, there is no involuntary unemployment.
Alternatives:
a) Both Assertion and Reason are true and Reason (R) is the correct
explanation of Assertion (A)
b) Both Assertion and Reason are true and 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

11) Calculate Compensation of employees from the following data. (3)

S.No. Particulars Amount (in ₹ Crores)

i Profit after tax 20
ii Interest 45
iii Gross Domestic Product at market price 200
iv Goods and Service Tax 10
v Compensation of fixed Capital 50
vi Rent 25
vii Corporate tax 5

12) State the effect of the following on the balance of payments situation. (3)
i) Increase in import duty of gold.
ii) Rise in the price of foreign currency.

OR
Distinguish between Balance of Trade and Balance of Payment.

13) The Saving function of an economy is given as: (4)

S = (-) 10 + 0.20Y
If the ex-ante investments are ₹240 crores, calculate the following
a) Equilibrium level of income in the economy
b) Additional investments which will be needed to double the present level of
equilibrium income.

Page 4 of 10
14) Read the following text carefully and discuss briefly any two tools of correcting the
situation of deflation/recession in the economy. (4)
The Reserve Bank of India (RBI) cuts Repo Rate to 4.4%, the lowest in at least 15 years.
Also, it reduced the Cash Reserve Ratio (CRR) maintained by the banks for the first time in
over seven years. CRR for all banks was cut by 100 basis points to release ₹1.37 lakh crores
across the banking system. RBI governor Dr. Shaktikanta Das predicted a big global
recession and said India will not be immune. It all depends how India responds to the
situation. Aggregate demand may weaken and ease core inflation.
The Economic Times; March 27th, 2020
15)Read the following paragraph and answer the questions: (4)
Reserve Bank of India (RBI) is the central bank of the country. RBI is a statutory body. It is
responsible for the printing of currency notes and managing the supply of money in the
Indian economy. It plays multifaceted role by executing multiple functions such as
overseeing monetary policy, issuing currency, managing foreign exchange, working as a bank
of government and as banker of scheduled commercial banks, among others. It also works for
overall economic growth of the country.
a) Define a central bank.
b) Who issues the one-rupee notes and coins in the country?
c) RBI acts as the banker to the central government and commercial banks act as
banker to the state governments. (True/False)
d)When commercial banks fail to meet their financial requirements from other
sources; the central bank provides them funds through discounting of approved
securities and due to this central bank is said to be the .

OR

Using a hypothetical numerical example, explain the process of credit creation by a

commercial bank.

16) a)How will you treat the following while estimating domestic product of India? Give
reasons. (3)
i) Rent received by a resident Indian from his property in Singapore.
ii) Profits earned by a branch of an American Bank in India.
iii) Salaries paid to Koreans working in Indian embassy in Korea.

b) Calculate GNPfc from the given data: (3)

S.No. Particulars ₹ in crores

i Indirect tax 50
ii Consumption of fixed capital 60
iii Net factor income received from abroad (-)10
iv Net domestic product at factor cost 120
v Net current transfers paid to the rest of the world 30
vi Subsidies 25

Page 5 of 10
17) a) Classify the following statements into revenue receipts and capital receipts give valid
reasons in support of your answer. (3)
i) Financial help from a multinational corporation for victims in a flood affected area
ii)Sale of shares of a public sector undertaking to a private company
iii) Dividend paid to the government by the state bank of India

b) State any three objectives of a government budget. (3)

OR

a) How can budgetary policy be used to reduce inequalities of income? (3)

b) On what basis is government expenditure classified into capital expenditure and revenue
expenditure? Give an example of each.

SECTION B – INDIAN ECONOMIC DEVELOPMENT

18) Identify the correct sequence of alternatives given in Column II by matching them with
respective terms in Column I. (1)

Column – I Column - II
i) Motive of the British de-industrialization a) To serve various colonial interests, like
mobilizing the army shifting raw materials
ii) Motive of British behind infrastructural b) To use export surplus to make payments
development for expenses incurred by an office set up by
the colonial government in Britain, to meet
expenses on war fought by the British
government and to import invisible items.
iii) Motive of the British behind monopoly c) To get raw materials from India at cheap
control over India's exports and imports rates and to sell finished British products in
India at higher prices.

a) i) – a), ii) – b), iii) – c) b) i) – b , ii) – a) , iii) – c)

c) i) – a) , ii) – c) , iii) – b) d) i) – c) , ii) – a) , iii) – b)

19) Inward looking trade policy aimed at : (1)

a) Substituting imports with domestic production
b) Substituting exports of consumer goods with capital goods
c) Follow an open economy model
d) Restrictions on movement of currency flows
OR

implies setting up an upper limit of the land that could be owned by a land
owner.
a) Land ceiling b) Land fragmentation
c) Land quota d) Land restriction

Page 6 of 10
20) One child norm was a feature of (1)
a) France b) India c) Pakistan d) China

OR
Arrange the following events of China in chronological order & choose the correct alternative.
a) Great Proletarian Cultural Movement b) Great Leap Forward Campaign
c) Introduction of Economic Reforms d) First Five Year Plan
Choose the correct alternative:
a) (ii), (iv), (iii), (i) b) (iv), (ii), (i), (iii)
c) (ii), (iv), (i), (iii) d) (iv), (i), (ii), (iii)
21) Three tier system of rural co-operative credit societies is……… (1)
a) Primary agricultural credit societies (PACS) b) Central co-operative banks
c) State co-operative banks d) All of these

22) For the purpose of development, which type of economic system is followed
in China? (1)
a) Mixed economy b) Socialist economy
c) Capitalist economy d) None of these

23) In the following question, two statements are given. Read the statements carefully and
choose the correct alternative among those given below. (1)
Statement 1: Seasonal employment is not associated with the seasonal nature of crop
production.
Statement 2: Disguised unemployment and seasonal employment is most prominent in rural
India.
Alternatives:
a) Both the statements are true
b) Both the statements are false
c) Statement 1 is true and Statement 2 is false
d) Statement 2 is true and Statement 1 is false
24) Read the following statements carefully and choose the correct alternative.
Statement-1: After the establishment of Peoples Republic of China under one party rule, all
critical sectors of the economy, enterprises and lands owned and operated by individuals were
brought under government control.
Statement-2: The Great Leap Forward (GLF) campaign initiated in 1958 in Pakistan aimed
at inducing the country on a massive scale.
a) Both the statements are true.
b) Both the statements are false
c) Statement-1 is true, Statement-2 is false.
d) Statement-ll is true, Statement-l is false

Page 7 of 10
[

25) Sustainable development refers to

a) Long-term increase in real per capita income
b) Long-term increase in economic welfare
c) Increase in real per capita income along with equitable distribution both for the
present and future generations
d) all of these (1)
OR
Environmental crisis occurs when:
a) Absorptive capacity of environment exceeds the generation of wastes
b) Generation of wastes exceeds the absorptive capacity of environment
c) Wastes occur due to production and consumption activities in the economy
d) None of these

26) Read the following statement -Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: (1)
Assertion (A): A huge percentage of female workforce is engaged in primary sector.
Reason (R) : Mobility of women in rural areas is extremely low
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) in the correct
explanation of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and 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.
27) Read the following statement -Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: (1)
Assertion (A): Pakistan has experienced a phenomenal rise in its growth rate.
Reason (R): Domestic investment and FDI has been shrinking in Pakistan.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) in the correct
explanation of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and 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.
28) Analyse the given picture and answer the question. (3)

"Recently Indians have drifted away from the traditional knowledge and practices and caused
large scale damage to environment".
Explain how, adopting the traditional practices can be helpful in achieving the objective of
sustainable development?.
Page 8 of 10
29) Discuss the importance of credit in rural development. (3)

OR

State any three challenges facing rural development in India.

30) Compare the position of India with China and Pakistan on the basis of sectoral
development. (4)
Sectoral comparison of India, China and Pakistan is shown in the table below:

Contribution to GDP (2015-17)

Sector India China Pakistan
Agriculture 17 9 25
Industry 30 43 21
Service 53 48 54
Total 100 100 100

31) Mention the objectives or goals of planning in India. Briefly explain it. (4)

OR

What is marketed Surplus? Mention the development of Agriculture sector between 1950 –
1990.

32) a) Differentiate between human development and human capital. (2)

b) “Human capital formation give birth to innovation, invention and technological

improvement” Do you agree with the given statement? Support your answer with valid
argument. (2)

33) a) Write a short note on the role and performance of SHGs as a source of credit. ; (3)

b) Explain the policy instruments introduced by the government to safeguard the interests of
farmers. (3)
OR
a) Workers are exploited in the unorganised sector. Do you agree with this view? Give
reasons in support of your answer.

b) Disguised unemployment is not prevalent in agriculture alone. Comment.

34) Read the news report given below and answer the questions that follow:
In a 40 minutes long speech Prime Minister Mr.Narendra Modi announced the
demonetization of existing notes of ₹500 and ₹1000 during a televised address on Tuesday
evening.
Modi announced that the notes of ₹500 and ₹1000 "will not be legal tender from midnight
tonight" and these will be "just worthless pieces of paper. PM also urged people to ‘join this
mahayajna against the ills of corruption.
Here is a guide for you explaining everything about the move.
Demonetization for us means that Reserve Bank of India has withdrawn the old 500 and 1000
Page 9 of 10
notes as a official mode of payment. According to Investopedia, demonetization is the act of
stripping a currency unit of its status as legal tender.
The reason given by PM Modi was:
• To tackle black money in the economy.
• To lower the cash circulation in the country which "is directly related to corruption in
our country," according to PM Modi.
• To eliminate fake currency and dodgy funds which have been used by terror groups to
fund terrorism in India.
• The move is estimated to scoop out more than 5 lakhs crore black money from the
economy.
-The Economic Times-November 09, 2020

i) Why is demonetisation termed as the Mahayajna by the Prime Minister? (1)

a) It is to curb the ills of corruption. b) It is to tackle the black money.
c) It is to digitalise the economy. d) All of the above.

ii) What is not the benefit of demonetisation? (1)

a) To lower the cash circulation
b) To tackle black money in the economy
c) To eliminate fake currency
d) Growth of Revenue in States and Union Territories
.
iii) Demonetisation is an act of (stripping/ covering/clothing/removing) a currency unit of its
status as legal tender. (1)

iv) How much black money is the move estimated to Scoop out? (1)

v) Prime Minister Mr.Narendra Modi announced that the notes of ₹500 and ₹1000 "will not
be legal tender from midnight tonight"- What do you infer from this? (2)

“End of the paper”

Page 10 of 10
 CHENNAI SAHODAYA SCHOOL COMPLEX
COMMON EXAMINATION- PRE BOARD EXAMINATION : (2022-23)
CLASS -12 (ECONOMICS -030)
MARKING SCHEME

Q.NO. ANSWERS MARKS

1 a) Both the statements are true 1
2 b) New equilibrium rate of foreign exchange will be determined which 1
will be lower than the prevailing foreign exchange rate, leading to
Appreciation of domestic currency.

3 b) Cash reserve ratio is low 1

4 b) Both the statements are false. 1

5 b) Both the statements are false. OR c) Real 1

6 c) S = -100 + 0.25Y OR b) positive 1

7 a) Stock of gold held with the Central bank 1
8 c) The value of the rupee against one dollar must be rising before the 1
intervention.
OR

d) There is Capital account Surplus of 50 million US Dollars

9 b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the 1
correct explanation of Assertion (A).

10 d) Assertion (A) is False but Reason (R) is True 1

11 Compensation of employees = GDPmp – Consumption of fixed capital - 3
GST – (Rent + Interest + profit after tax
+ Corporate tax)
= 200-50-10-(25+45+20+5)
= ₹45 crores
12 i) This will reduce import of gold and thus will have a favourable effect 3
on BOP situation, as demand for foreign exchange will fall.
ii) Rise in price of foreign currency will make imports costlier, so import
will fall and it will be favourable for BOP, as demand for foreign
exchange will fall.

OR

Page 1 of 8
13 a) We know that the equilibrium level of income in an economy is 4
determined when : S = I
S=I
That is, (-) 10 + 0.20Y = 240
 0.20Y = 250
 Y = 250/0.20 = 1250
 Y = ₹1,250 crores

b) To double the present level of equilibrium income

i.e., ΔY = ₹2,500 crores
ΔY 1
k = ΔI = 𝑀𝑃𝑆
2,500 1
=
ΔI 0.20
 ΔI = ₹500 crores

14 a) Repo rate refers to the rate at which central bank lends to commercial 4
banks for a short period. When the central bank reduce the repo rate, the
borrowings by commercial banks become cheaper. This, in turn,
compels the commercial banks to reduce their lending rate. As a result,
borrowing becomes cheaper and people will thereby borrow more and,
thus, spend more. This, in turn, helps in reducing deflation.

b) For controlling deflation gap, the Central Bank can reduce CRR to
ease the flow of credit. When the Central Bank reduced CRR, the
amount of deposits with the commercial banks gets increased. This
increases the capacity of the commercial banks to create credit. Lending
rises and as a result investment also rises. Thus, aggregate demand rises
and the problem of deflation/recession can be solved. (Or any other
relevant tool)

15 a) Central bank is an apex body that controls, operates, regulates and 1+1+1+1
directs the entire banking and monetary structure of the country.
b) Ministry of Finance.
c) False
d) lender of last resort
OR

Page 2 of 8
 Credit multiplier measures the amount of money that the banks are able
to create in the form of deposits with every initial deposit. The credit
creation is inversely related to LRR. Higher the credit multiplier, higher
will be the total credit created and vice-versa.

The credit creation by commercial banks is determined by:

1. The amount of the initial deposit.

2. The Legal Reserve Ratio (LRR).
Suppose the initial deposits are ₹1,000 and LRR is 10%, the banks will
keep 10% of the deposits i.e. ₹100 as reserves and will lend the
remaining amount of ₹900. Those who borrow will spend the money for
making payments. It is assumed that the entire ₹900 comes back as
secondary deposits to the banking system. Now the banks will again
keep 10% of ₹900 i.e. ₹90 as reserve and lend out ₹810. This process
continues till total reserves become equal to initial reserves.
1
Total money creation= Initial Deposit ×
𝐿𝑅𝑅
1
= 1000 ×
10%

= ₹10,000.
Hence, the initial deposit of ₹1,000 has led to the total money supply of
₹10,000.
16 a) i) It will not be included in domestic product of India as this income 3+3
is earned outside the domestic (economic) territory of India.
ii) It will be included in domestic product of India as the branch of
American bank is located within the domestic territory of India.
iii) It will be a part of domestic product of India because this income is
earned within the domestic territory of India. Indian embassy in Korea is
treated as located within the domestic territory of India.

b) GNPfc = NDPfc + (ii) + (iii)

= 120 + 60 + (-10)
= 120 + 50 = ₹170 crores

Page 3 of 8
17 a) i)Revenue receipts as it does not create any assets for the government 3+3
ii) Capital receipts as it reduces assets of a government
iii) Revenue receipts as it does not create any asset for the government

b) Objectives of a government budget are as follows:

i) Re-distribution of income and wealth, with a view to increase equality.
ii) Re-distribution of resources with a view to maintain balance between
the goods of profit maximization and social welfare.
iii) Achieving economic stability.
OR

a) Even distribution of wealth and social welfare remains one of the

main objective of budgetary policy. The government uses progressive
taxation policy to reduce the inequalities of income and wealth in the
country. People with higher incomes are levied higher rate of tax and
people with lower income are levied lower rate of tax. People with
income below a certain level are not levied any direct tax altogether.
On the other hand, the government spent these tax receipts on granting
subsidies and providing other public services such as health and
education free of cost, to people with lower income groups. Thus, the
wealth gets redistributed and reduction in inequalities is achieved.

b) Government expenditures are aimed at providing benefits to the

people and enhancing the development of the country. On such basis
expenditure is classified into :
i) Capital expenditure The expenditure by the government which leads
to an increase in government assets and reduction in government
liabilities, is termed as capital expenditure, e.g. expenses on the
construction of national highways, dams and repayment of loans, etc.
ii) Revenue expenditure The expenditure of the government which
neither cause any increase in the government assets nor cause any
reduction in government liabilities, are termed as revenue expenditures,
e.g. expenditure on old age pensions, salaries, etc.

18 d) i) – c) , ii) – a) , iii) – b)
19 a) Substituting imports with domestic production 1
OR
a) Land ceiling
20 d) China OR b) 1
21 d) All of these 1
22 b) 1
23 d) Statement 2 is true and Statement 1 is false 1

24 c) Statement-1 is true, Statement-2 is false 1

25 c) Increase in real per capita income along with equitable distribution 1
both for the present and future generations
OR
b) Generation of wastes exceeds the absorptive capacity of environment

Page 4 of 8
26 a) Both Assertion (A) and Reason (R) are true and Reason (R) in the 1
correct explanation of Assertion (A).

27 d) Assertion (A) is false but Reason (R) is true. 1

28 The given statement is quite appropriate. Indian traditional practices 3
were environment-friendly and worked as complementary to the system
and not its controller. The traditional agriculture system, healthcare
system, housing, transport etc. were intrinsically environment-friendly.
The traditional practices used natural products and processes which are
more or less free from side effects. For example, by adopting medicinal
plants/ products we can conserve the resources and achieve the objective
of sustainable development
29 i) Most rural people are poor and most farmers are small and marginal 3
holders. As the small and the marginal farmers produce only for their
subsistence, they fail to generate sufficient surplus to reinvest on their
lands leading to degradation of the land. Thus, credit helps the small and
marginal farmers to carrying out permanent improvements on their land
and commercialise their farming.
ii) Owing total on g gestation lag between sowing and harvesting of the
crops, short-term credit is required for the purchase of inputs (seeds,
fertilizers, etc.).
iii) Rural artisans and farmers require funds for meeting their general
and specific needs. Agriculture continues to depend on uncertain
monsoon. In order to save them from natural calamities, farm credit
becomes essential. (Any other relevant pint is applicable)
OR
Some of the prime areas for the development of the rural India may be
quoted as follows:
(i) Infrastructure development: Basic infrastructure requirement like
electricity, irrigation, credit availability, transport facilities, construction
of village roads and feeder roads to nearby highways, etc. are the area
which still need attention of the government so as to gain commanding
heights.
(ii) Alleviation of poverty: Poverty in rural India is a major challenge
that should be taken up as a mission for improvement in the living
conditions of particularly those living at the bottom of pyramid. The
problem of poverty may be tackled by emphasizing on greater access to
productive employment opportunities.
(iii) Development of Human Capital: Human Capital Formation is also a
key issue due to lack of basic health and education facilities. Rural
human capital must be developed by taking sincere steps in the direction
of education and health.
30 Sectoral contribution of India and Pakistan stands on the same ground.
Service sector contributes significantly towards India’s and Pakistan’s
GDP, followed by industrial sector. On the contrary, the industrial and
services sectors contribute nearly equally in China’s GDP.
The process of economic growth has led to a tremendous shift in the
sectoral share of output and employment. All three nations have
undergone structural transformation from primary to industrial and

Page 5 of 8
 service sectors.
31 The Goals or objectives of planning in India are as follows 4
Growth:- It refers to increase in the country’s capacity to produce the
output of goods and serviced within the country. In other words, it
means steady increase in the gross domestic product (GDP).
Equity:- It means equal distribution of income and wealth among the
societies. It is important to ensure that the benefits of economic
development should reach the poor sections of the society as well
instead of being enjoyed by the rich.
Modernization:- It is necessary to adopt new technology in order to
increase production of goods & services. Adoption of new technology is
called modernization. A modern society makes use of the talents of
women in the work place so that the society will be more civilized and
prosperous.
Self reliance:- It refers to utilization of country’s resources in order to
promote economic growth and modernization without using the
resources imported from other countries. It means avoiding imports of
those goods which could be produced in India itself.
OR
The excess porting of agriculture produce which is sold into the market
by the farmers is called marketed surplus
Land reforms:- Land reforms were initiated in order to bring equity in
ownership of landholdings. It was decided to establish intermediaries
and to make the tillers of the owners of land. It gives the tillers the
incentives to invest in making improvement in land provided sufficient
capital was made available to them.
Land Ceiling:- If refers to fixing the maximum size of land which could
be owned by an individual. The purpose of land ceiling was to reduce
the concentration of land ownership in a few hands and to promote
equality in the agricultural sector.
Green Revolution:- It refers to large increase in reduction of food
grains resulting form the use of High yielding variety (HYY) seeds. The
use of fertilizers, pesticides, irrigation facilities is important along with
HYY seeds in order to increase agricultural productivity & production.
The farmers should be provided adequate financial resources in order to
purchase agricultural inputs.
32 a) Human capital is a means to an end. Human development is an end 2+2
itself It refers to development of the individual as valuable personalities
by acquiring good education and attaining good health. Human
development occurs when more and more individual in a society are
educated, healthy and skill-oriented.
b) The given statement is correct.
Human capital formation not only increase the productivity of available
human resources but also stimulates innovation and creates ability to
adopt new technology. Investment in education creates ability to adopt
newer technology, facilitates invention and innovation since educated
workforce generally adapts to modern technologies and innovation.
33 a) The formal credit delivery mechanism has not only proven inadequate 3+3
but has also not been fully integrated into the overall rural social and

Page 6 of 8
community development. A vast proportion of poor rural households
tend to remain out of the credit network as some kind of collateral is
required to take loan from banks.
Self-Help Groups (SHGs) have emerged to fill the gap in the formal
credit system. A typical SHG consists of 15-20 members. These
members usually belong to one neighbourhood, who meet and save
regularly. Saving per member depends on the ability of the people to
save.
The SHG can extend these savings as small loans or micro credit to the
needy members from the group I itself. Although the group charges
interest on these loans, it is still less than what the moneylenders charge.
Total SHG savings with banks increased from ₹ 23.9 billions as on 31st
March, 2006 to around ₹ 70 billion as on 31 st March, 2011

b) Government has developed certain policy instruments to safeguard

the interests of farmers. These instruments are:
i) Fixation of Minimum Support Price (MSP): MSP is announced before
the sowing season and assures agricultural producers against any sharp
fall in farm prices. It provides long-term guarantee to the farmer.
ii) Buffer Stock: The Food Corporation of India purchases wheat and
rice from the farmers in states where there is surplus production and
maintain it as buffer stock. Buffer stock is maintained by the
government to stabilise prices. It helps in making the foodgrains
available in the deficit areas and hence, resolves the problem of food
shortage during adverse weather conditions or during the periods of
calamity.
iii) Public Distribution System (PDS): The PDS operates through fair
price shops, also known as ration shops. The government offers essential
commodities like wheat, rice, sugar, kerosene, edible oils, coal, cloth,
etc. at a price below the market price to poor section of the society.

OR
a) Unorganised sector comprises of small and scattered units, which are
largely outside the control of the government. Workers in the
unorganised sector are often exploited because of the following reasons:

• No rules and regulations

• Irregular and low-paid jobs
• No provision for overtime, leaves, etc.
• No job security
• Social discrimination

b) Disguised unemployment is the characteristic feature of the Indian

agriculture. It is almost rampant for owing to heavy pressure of
population, joint family system and the lack of vocational avenues
outside agriculture. However, it is a phenomenon not confined in
agriculture alone.
A deeper look into the functioning of public sector enterprises shows
lots of people sitting idle all the time. It is a point to the fact the more

Page 7 of 8
 people are employed than actually needed. Surely, it is a sign of
disguised unemployment.

34 i) a) It is to curb the ills of corruption 1+1+1+1

ii) d) Growth of Revenue in States and Union Territories +2
iii) stripping
iv) 5 lakhs
v) Is not recognized by law as a means to settle a public or private debt
or meet a financial obligation, including tax payments, contracts, and
legal fines or damages/ any other transactions.

Page 8 of 8
 SYLLABUS
ECONOMICS (030)
2022-23

PART A: INTRODUCTORY MACRO ECONOMICS

Unit 1: National Income and Related Aggregates

What is Macroeconomics?

Basic concepts in macroeconomics: consumption goods, capital goods, final

goods, intermediate goods; stocks and flows; gross investment and depreciation.
Circular flow of income (two sector model); Methods of calculating National
Income - Value Added or Product method, Expenditure method, Income
method. Aggregates related to National Income: Gross National Product (GNP),
Net National Product (NNP), Gross Domestic Product (GDP) and Net Domestic
Product (NDP) - at market price, at factor cost; Real and Nominal GDP, GDP
Deflator. GDP and Welfare

Unit 2: Money and Banking

Money - meaning and functions, supply of money - Currency held by the

public and net demand deposits held by commercial banks, Money creation by
the commercial banking system. Central bank and its functions (example of the
Reserve Bank of India): Bank of issue, Govt. Bank, Banker's Bank, Control of
Credit through Bank Rate, CRR, SLR, Repo Rate and Reverse Repo Rate, Open
Market Operations, Margin requirement.

Unit 3: Determination of Income and Employment

Aggregate demand and its components.

Propensity to consume and propensity to save (average and marginal).

Short-run equilibrium output; investment multiplier and its mechanism.

Meaning of full employment and involuntary unemployment.

Problems of excess demand and deficient demand; measures to correct them -

changes in government spending, taxes and money supply.

Unit 4: Government Budget and the Economy

Government budget - meaning, objectives and components.

3
Classification of receipts - revenue receipts and capital receipts; classification of
expenditure – revenue expenditure and capital expenditure, balance, deficit and
surplus budget.

Measures of government deficit - revenue deficit, fiscal deficit, primary deficit.

Unit 5: Balance of Payments

Balance of payments account - meaning and components; balance of payments

surplus and deficit. Foreign exchange rate - meaning of fixed and flexible rates
and managed floating.

Determination of exchange rate in a free market. Merits and demerits of fixed

and flexible exchange rate.

PART B: INDIAN ECONOMIC DEVELOPMENT

Unit 6: Development Experience (1947-90) and Economic Reforms since
1991

A brief introduction of the state of Indian economy on the eve of independence.

Indian economic system and common goals of Five Year Plans.

Main features, problems and policies of agriculture (institutional aspects and

new agricultural strategy), industry (IPR 1956; SSI – role & importance) and
foreign trade.

Economic Reforms since 1991

Features and appraisals of liberalisation, globalisation and privatisation (LPG

policy);

Concepts of demonetization and GST.(Meaning only)

Unit 7: Current challenges facing Indian Economy

Human Capital Formation: How people become resource; Role of human

capital in economic development; Growth of Education Sector in India .

Rural development: Key issues - credit and marketing - role of cooperatives;

agricultural diversification; alternative farming - organic farming.

Employment: Growth and changes in work force participation rate in formal

and informal sectors; problems and policies.

4
Sustainable Economic Development: Meaning, Effects of Economic
Development on Resources and Environment, including global warming .

Unit 8: Development Experience of India

A comparison with neighbors

India and Pakistan

India and China

Issues: economic growth, population, sectoral development and other Human

Development Indicators.

TYPOLOGY OF QUESTIONS

SL. Typology of Questions Total Approximate

Marks Percentage

1. Remembering, Understanding 44 55.0 %

2. Applying 18 22.5 %

3. Analysing, Evaluating, Creating 18 22.5 %

Total Marks 80 100

Part-A: Introductory Macro Economics

Chapter 1 – National Income and Related Aggregates

Q.N Question Mark
1 Market value of a Motor Vehicle at the time of purchase was 7,50,000. 1
After two years, its market value is estimated to be 4, 50,000. The reason
for fall in the value is:
(a) Normal Wear and Tear (b) Passage of Time
(c) Expected Obsolescence (d) All of these
2 Which of the following statements is true? 1
(a) Bread is always a consumer good
(b) All producer goods are not capital goods
(c) Transfer income is received for providing a good or service in return
(d) Interest paid by a household on car loan from a bank is a factor
payment
3 Which of the following is not factor payment? Choose the correct 1
alternative)
(a) Free uniform to defense personnel
(b) Salaries to the members of Parliament
(c) Rent paid to the owner of a building

5
 (d) Scholarship given to the students

4 Read the following figure carefully and choose the correct pair from the 1
alternatives given below:
GNP at MP

+
Depreciation GNP at FC
NNPat FC
NNP at FC
-Depreciation
+NFIA

NNP at MP
+ N.I.Tax

Alternatives:
a) GNP at MP , +Depreciation
b) NNP at FC,+ NFIA
c) GNP at FC, - Depreciation
d) NNP At MP, + Net Indirect Tax
5 From the set of statements given in Column I and Column Il, choose the 1
correct pair of statements

Column I Column II
(A) Net Indirect tax (i)Subsidies – Indirect Tax
(B)Factor Income (ii)Scholarship
(C) Transfer income (iii)Profit
(D)Depreciation (iv)Consumption of fixed capital
Alternatives:
a) A-I b) B-ii
c) C-iii d) D-iv

6 1

What does the above diagram represents

a) Real flow b) Money flow
c) Nominal flow d) Both (b) and (c)

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

Assertion (A): Depreciation is also termed as consumption of fixed capital.

Reason (R): Depreciation refers to that value of fixed capital which is used
up in the process of production.

6
 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 and 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.
8.. Read the following statements-Assertion (A) and Reason (R). Choose one 1
of the correct alternatives given below:

Assertion (A): Intermediate goods have direct demand.

Reason (R): The demand for intermediate goods depend on demand for
final goods.

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 and 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.
9. Read the following statements carefully and choose the correct alternative 1
from the following :
Statement 1: Domestic Income considers all producers who are normal
residents of the country.
Statement 2: Domestic Income does not include NFIA
Alternatives
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 2 is false and Statement 1 is true.
(d) Statement 2 is true and Statement 1 is false.
10. If net national product is given at Market Prices, we _____ indirect taxes 1
and ------- subsidies to get National income of the economy
(a) Add, Subtract
(b) Add, Divide
(c) Subtract, Add
(d) Subtract, Divide
11. 3

Interpret the picture on the basis of circular flow of income.

12. “ It is only the value of employers contribution to SSS which is added in 3
the estimation of national income aggregates” Defend or refute the given

7
 statement with valid reason.
13. "Real GDP is better indicator of economic growth than nominal GDP,"Do 3
you agree with the given statement? support your answer with a suitable
numerical example
14. “ India’s GDP is expected to expand 7.5%in 2019-20: World Bank” Does 3
the given statement mean that welfare of people of India increase at the
same rate? Comment with reason.
15. The supreme court recently said the value of a woman's work at home 4
must be placed at per with that of her office going husband. The debate
was reignited last month when actor turned politician Kamal Hassan set
the state should recognise this officially and pay home makers a salary.
a) "The activities performed by homemakers were not included in the
estimation of national income " comment on the following.
16. Year 2018-19(Base Year) 2019-20 4
Nation Rs Rs

C 4,000crores 8,000rores
D 2.40,000crores 4,00,000crores
Compare the rate of change of GDP of nations C and D taking 2018-19 as
the base year.
17. The value of the nominal GNP of an economy was Rs 2500 crores in a 4
particular year. The value of GNP of that country during the same year
evaluated at the price of base year was Rs 3000 crores .Calculate the value
of GNP deflator of the year in percentage between the base year and the
year under consideration.

MARKING SCHEME

Q.NO. Answers Marks

1. (a) Normal Wear and Tear 1

2. (b) All producer goods are not capital goods 1

3. (d) Scholarship given to the students 1

4. c) GNP at FC, - Depreciation 1

5. d) D-iv 1

6. d) Both (b) and (c) 1

7. (a) Both Assertion (A) and Reason (R) are True and Reason (R) is the 1
correct explanation of Assertion (A)
8. d) Assertion (A) is false but Reason (R) is true.

9. (d) Statement 2 is true and Statement 1 is false--- 1

10. (c) Subtract, Add 1

11. Explanation of Real Flow and Money flow 3

8
12. Yes, this is because the employees contribution to SSS has already been 3
accounted for the wages and salaries in cash component. Therefore it is
only the employers contribution which is considered as a part of COE
because these are the benefits provided to the employees over an above
their salaries component.
13. Yes , real GDP is a better indicator of growth the nominal GDP because 3
of the following reasons:
a) indicates actual increase in GDP due to increase in physical quantity
of goods.
b) it allows year wise comparison within the country and sectors.
c) it allows international comparisons.
14. No it is not necessary that welfare of the nation will also increase at the 3
same rate rise in GDP cannot be taken as an index of welfare because of
the following reasons
a. Distribution of income. b. Externalities
c. Rate of population growth. d. Non monetary exchanges
15. a) activities performed by homemakers are done out of love and 4
affection. Since, the monetary value of such activities cannot be
estimated, therefore they are not included in the calculation of national
income.
16. Nation C has registered a GDP growth of 100% dear by has performed 4
better than nation D on the GDP growth rate front. This is so because
nation D has register GDP growth rate of 67%.(growth rate of GDP=(
change in GDP /base year GDP)x100
17. GNP at current price=2500 at base year price=3000 4
GNP deflator=(GNP at current price/GNP at base year)x100
=83.3
This indicate that over the years they are has been a decline in general
price level in the economy.
Chapter 2: MEASUREMENT OF NATIONAL INCOME
1. Value added is equal to ___________ . (Choose the correct option) (1)

(a) Value of output (b) Value of output –intermediate consumption

(c) Sales + change in stock (d) Value of intermediate consumption

2. Identify the correct sequence of alternatives given in column II by matching

them with respective terms in column I (1)

Column I Column II

a) Identifying the producing sectors and i) sales + change in stock – Intermediate

classifying it. consumption

b) Calculation of sector’s value added ii) 3 sectors and 14 sub sectors

c) Calculation of GDP mp iii) GDP mp – NIT- Depreciation+ NFIA

d) Calculation of NNP fc iv)Add Value added of 3 sectors

9
Choose the correct alternative

a) iv, ii, i, iii

b) ii, i, iv, iii

c) ii, iv, i, iii

d) i, ii, iv, iii

3. Construction of school building by the Government will be part of_______. (1)

(Choose the correct option)

(a) Domestic fixed capital formation

(b) Change in stock

(c) Own account production

(d) Government final consumption expenditure.

4. Read the following statement -Assertion (A) and Reason (R). Choose one of the

correct alternatives given below: (1)

Assertion (A): GDP is the correct measure of the improvement of the welfare of

the people.

Reason (R): Many activities in an Economy are not evaluated in monetary terms,

they are not included in GDP due to non availability of data.

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 and 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.

5. Read the following statement -Assertion (A) and Reason (R). Choose one of the

correct alternatives given below: (1)

Assertion (A): Income from illegal activities like smuggling, theft, gambling, etc,

should not be included.

10
 Reason (R): Including illegal activities will cause the problem of double

counting.

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 and 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.

6. National Income is the sum of factor incomes accruing to------------------ (1)

(choose correct Alternatives )
(a) Nationals
(b) Economic territory
(c) Residents
(d) Both residents & non residents

7. Subsidy is considered as a ____________ in national income accounting. (1)

(factor income/ transfer payment/ deferred payment) .(Fill up the blank with the correct
option)

8. Calculate Net value added at factor cost from the following data. (1)

(Choose the correct option)

Sl No Items Rs. In Lakhs

I Purchases of raw materials 300

II Import duty 20

III Excise duty 30

IV Net addition to stock 50

V Value of output 500

VI Depreciation 10

(a) Rs. 130 lakhs (b) Rs. 140 lakhs

(c) Rs. 150 lakhs (d) Rs.160 lakhs

11
9. Fill up the blanks with correct options. (1)
Problem of double counting arises by_______________.
(a)Finding final output (b) Finding value of total production
(c)Calculating value added (d) Calculating total factor income

10. From the set of statements given in Column I and Column II, choose the
correct pair of statements: (1)

Column I Column II

a. Purchase of a new house i) Private final consumption

expenditure
b. Government spending on defence ii) Government final consumption
equipments expenditure
c. Purchasing second hand machinery iii) Net import
from abroad
d. Purchasing raw material and fuel iv) Gross domestic capital
by a firm formation

11. Explain the precautions that should be taken while estimating national income
by value added method. (3)
12. What is meant by problem of double counting? How this problem can be
avoided? (3)
13. Explain how ‘non-monetary exchanges’ are a limitation in taking domestic
product as an index of welfare? (3)
14. Calculate value added by firm A and firm B (3)

Particulars ₹ in crores

(i) Domestic sales by firm A 4,000

(ii) Exports by firm A 1,000

(iii) Purchases by firm A 1,200

(iv) Sales by firm B 2,940

(v) Purchases by firm B 1,800

15. Giving reasons, state whether the following statements are true or false. (3)

a) In a closed economy, gross national product is always equal to gross

domestic product.

b) Measurement of national income at current prices provides a reliable base of

comparison.

c) Brokerage paid on sale of shares and income from shares purchased is not a

part of national income.

12
16. Interpret the picture given below. (4)

Which of these is a better index of welfare of the people and why?

17. Calculate sales from the following: (4)

Particulars Rs. In Crores
i) Subsidies 200
ii) Opening stock 100
iii) Closing Stock 600
iv) Intermediate consumption 3000
v) Consumption of fixed capital 700
vi) Profit 750
vii) NVA fc 2000

18. Which of the following items will be included/not included while estimating
Gross Domestic Product? Give valid reasons in support of your answer. (6)

(a) Wages received by an Indian working in the British Embassy in India.

(b) Financial aids received from abroad after ‘Fani cyclone’.
(c) Purchase of second hand machinery from abroad.

19. Calculate GNP at Factor Cost by income method and expenditure method. (6)

Sl No Items Rupees in crores

1 Private final consumption expenditure 1000

2 Net domestic capital formation 200

3 Profit 400

4 Compensation of Employers 800

5 Rent 250

6 Govt. final consumption expenditure 500

7 Consumption of fixed capital 60

8 Interest 150

13
9 Net current transfer from row (-) 80

10 Net factor income from abroad (-) 10

11 Net Export (-) 20

12 Net Indirect Tax 80

MARKING SCHEME

CH-2: MEASUREMENT OF NATIONAL INCOME

1. ( b) Value of output –intermediate consumption 1

2. (b) Calculation of sector’s value added ii) 3 sectors and 14 sub sectors 1

3. (d) Government final consumption expenditure. 1

4. (d) Assertion (A) is false but Reason (R) is true. 1

5. (c) Assertion (A) is true but Reason (R) is false. 1

6. (c) Residents 1
7. Transfer Payment 1
8. Net value added at factor cost = Value of output - Purchases of raw materials – 1
Depreciation - Import duty - Excise duty
= Rs. 500 – 300 - 10 – 20 – 30 lakhs =
Rs. 140 Lakhs
Net value added at factor cost = Rs. 140 Lakhs
9. (b) Finding value of total production 1
10. b, ii) 1
11. Second hand goods, intermediate goods, domestic services are not included in 3
national income.
12. Counting an output of goods more than once. Final output method and Value 3
added method.
13. Domestic services, kitchen gardening etc promote Welfare of people but these 3
are not included in the calculation of GDP as these can’t be calculated in
market price.
14. Value added by A = 3,800 Value added by B = 1,140 3
15. a. True, as NFIA is zero b. False, it is affected by price change c. False, it is
income from productive service. 3

16. GDP calculated at the base year prices is real GDP where as GDP calculated at 4
the current year prices is nominal GDP. Real GDP is an index of welfare. 4
17.GVA mp = NVA fc + Dep + NIT = 2000 +700 + (0 – 200) = 2500
GVA mp = Sales + change in stock – IC
2500 = Sales + (600 – 100) – 3000
2500 = Sales – 2500,
Sales = 5000
18. a) Wages received by an Indian working in British embassy in India is not a 2

14
 part of economic territory of India, as British Embassy is a part of Economic
territory of Britain.
b) Financial aid is a transfer income as no factor service is provided in return.
Hence, it is not included while estimating the value of GDP. 2
c) Purchase of second hand machinery from abroad is not included as the value of
imports are deducted while estimation GDP of a country. 2
19. GNP FC by Income method: 3
GNP FC = 4 + 3 + 5 + 8 + 10 + 7
800 + 400 +250 + 150 + (-10) + 60
GNP FC = 1650 crores
GNP FC by Expenditure Method: 3
GNP FC = 1 + 2 + 6 + 10 + 11 -12 + 7
= 1000 + 200 + 500 + (-10) + (-20) -80 + 60
= 1700 -110 + 60
GNP FC = 1650 crores

CHAPTER 3 – MONEY AND BANKING

MULTIPLE CHOICE QUESTIONS
1. Maximum credit that the commercial banks can legally depends on their:
a) Gold reserves
b) Cash reserves with the central bank
c) Statutory liquid ratio
d) Term deposits
2. According to a report forwarded by the RBI, there was a fall in rate of inflation as
measured by Consumer Price Index (CPI) on year – on – year basis to 5%from 8%in
the previous year. Identify the statement that represents the situation:
a) CPI has fallen
b) CPI is constant
c) CPI has risen at a rate lower than the preceding
d) None of the above
3. Read the following statement carefully and choose the correct alternative among those
given below:
Statement 1: Total demand deposits of commercial banks include both primary and
secondary deposits.
Statement 2: Profit maximization is not a feature of commercial bank.
Alternatives:
a) Both statements are true
b) Both statements are false
c) Statement 1 is true and Statement 2 is false
d) Statement 2 is true and Statement 1 is false
4. Mr. A. K. Khanna has purchased a villa in Bangalore for his grandson Amrit. While
valuing the villa he valued it in terms of horses and antiques. But Amrit is unable to
understand the valuation of the villa as he is facing the problem of: (Identify the
correct alternative that explain the problem faced during valuation process)
a) Lack of double coincidence of wants
b) Lack of store of value

15
 c) Lack of standard for deferred payment
d) Absence of common unit of value

5. From the set of statement given in column I and column II, choose the correct pair of
statement
Column I Column II

A Fiat money i Money issued by order/ authority of

government

B Plastic money ii Coins and currency notes

C Supply of money iii A flow concept

D Gross demand deposits iv Fixed deposits for a specific period of time

Options:
a) A-i (b) B- ii (c) C-iii (d)D-iv
6. The policy initiated by Central bank is called________. ( Fill up the blanks with
correct alternative)
a) Fiscal policy
b) Currency policy
c) Bank policy
d) Monetary policy
7. Margin requirement = ______________ ( choose the correct alternative)
a) Current value of the security offered for loan – Value of loan granted
b) Current value of the security offered for loan + Value of loan granted
c) Current value of the security offered for loan x Value of loan granted
d) Current value of the security offered for loan ÷ Value of loan granted
8. In order to correct the situation of deflation : ________( Choose the correct
alternative)
Alternatives:
I securities are purchased by the central bank
II Bank rate will be increased by central bank
III Repo rate will be decreased by central bank
IV SLR will be decreased by central bank
Options:
a) I, II and IV
b) I and II
c) II and III
d) I, III and IV

16
 e)

ASSERTION – REASON BASED QUESTIONS

1. Readthefollowingstatement-Assertion(A)andReason(R).Chooseoneofthecorrect
alternativesgiven below:
Assertion ( A): T he Central bank issues currency on the basis of CRR
Reason(R):The ratio CRR impacts credit creation capacity of the commercial banks.
Alternatives:
a) BothAssertion(A)andReason(R)aretrueandReason(R)isthecorrectexplanation
of Assertion(A).
b) BothAssertion(A)andReason(R)aretrueandReason(R)isnotthecorrect
explanation ofAssertion (A).
c) Assertion (A) is truebutReason (R) is false.
d) Assertion (A) is false but Reason (R) is true.
2. Readthefollowingstatement-Assertion (A) and Reason (R). Choose one of the
correct alternatives given below:
Assertion (A): Commercial banks are a significant source of money supply in the
economy
Reason (R): Commercial banks cannot issue notes and coins
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) aretrueandReason(R)isnotthecorrect
explanation ofAssertion (A).
c) Assertion (A) is truebutReason (R) is false.
d) Assertion (A) is false but Reason (R) is true.

CASE STUDY BASED QUESTION

Read the following extract and answer the questions based on the same:
The Indian Banking sector has witnessed a series of scam, including about Rs 14000
crore frauds in Punjab National Bank and the recent PMC bank Crisis that affected
lakhs of depositors. Besides, several large NBFCs have failed on their commitments
to service their debt.
“The Reserve Bank of India today (Friday) reorganized its regulatory and supervisory
departments,” the RBI said in the statement.
“It has been decided to integrate the supervision function into unified Department of
Supervision, and regulatory function into a unified Department of Regulation with
effect from November 1, 2019,” the Central bank said.
Currently, the supervision of financial sector entities is undertaken through three
separate departments -Department of Banking Supervision, Department of Non-
Banking Supervision and Department of Cooperative Bank Supervision.

17
 1. "RBI acts as a bankers' bank and performs a supervisory role as well." Comment.
2. Distinguish between Central Bank and Commercial Bank

PICTURE/ GRAPH/ TABLE BASED QUESTION

A.
Sale of
securities by
RBI

Soaks liquidity &

____?__ is leads to fall in cash
controlled reserves of
commercial banks

Fall in credit
creation
Fall in money capacity of the
supply commercial
banks

On the basis of the above flow chart answer the following question:
1. Analyze the chart and fill in the blank space with the best suited alternative:
(a) Inflation (b) Deflation (c) Recession (d)Growth
2. Identify the head under which sale of securities by RBI is included:
(a) Repo Rate (b) Open Market Operations
(c) Moral Suasion (d) Selective Credit Control
B. Read the following hypothetical information carefully and answer the given questions
based on it:

Rounds Primary Deposit (in Crores) Loans (in Crores) Demand Deposits (in Crores)

1st 3000 2400 600

2nd 2400 __ 480

3rd __ 1536 384

(and so on till all excess reserves are exhausted)

Total 15000 12000 3000

1. The value of loans that can be sanctioned in the second round is Rs.______ crores.
(Fill up the blank with correct alternative)
(a) 1830 (b) 1860 (c) 1890 (d)1920

18
 2. The value of cash reserve ratio for the given figures is_______ percent. (Fill up
the blank with correct alternative)
(a) 20 (b)15 (c) 10 (d) 5

STATEMENT BASED QUESTION

1. Read the following statement carefully and choose the correct alternative among
those given below:
Statement 1: The cash deposit that banks receive from public are called primary
deposits.
Statement 2: Demand deposits held by the people in commercial banks is equal to
Primary deposits + Secondary deposits
Alternatives:
a) Both statements are true
b) Both statements are false
c) Statement 1 is true and Statement 2 is false
d) Statement 2 is true and Statement 1 is false

MARKING SCHEME

MULTIPLE CHOICE QUESTIONS

Q.No Answer Mark

1 Ans: (b) Cash reserves with the central bank 1

2 Ans: (c) CPI has risen at a rate lower than the preceding 1

3 1
Ans: (c) Statement 1 is true and Statement 2 is false
4 1
Ans: (d) Absence of common unit of value
5 1
Ans: A- i
6 1
Ans: (d) Monetary policy
7 1
Ans: (a) Current value of the security offered for loan – Value of loan
granted
8 1
Ans: (d) I, III and IV
ASSERTION – REASON BASED QUESTIONS

1 1
Ans: (d) Assertion (A) is false but Reason (R) is true.
2 Ans: (b) 1
BothAssertion(A)andReason(R)aretrueandReason(R)isnotthecorrect

19
 explanation ofAssertion (A).
CASE STUDY BASED QUESTION

1 As a bankers' bank, it has almost the same relation with other 3

banks in the country as a commercial bank has with its
customers. Three observations need to be noted in this context:
 The central bank accepts deposits from the commercial banks,
and offers them loan.
 The central bank provides 'Clearing House' facility to the
commercial banks. It is a cheque clearing facility provided at one
centre to all the banks.
 In its supervisory role, the central bank ensures that the
commercial banks show compliance to its directives, particularly
relating to CRR and SLR. The central bank changes CRR, SLR
as and when required. It ensures that the commercial banks show
compliance to these changes so that the desired targets are
achieved.

2. 3

Central bank Commercial Banks

 Central bank functions as the apex  Commercial banks function according to

bank of the country. the rules and regulations stipulated by the
 The central bank designs and central bank
controls all instruments of  Commercial banks only
monetary policy of the country. executes the monetary policy
 It is the sole authority of note- as directed by the central
issuing. bank
 Central bank does not deal directly  Contributes to the flow of money only by
with the general public. It does not way of credit creation.
accept deposits or advance loans.  Commercial banks deal directly with the
general public by accepting deposits and
advancing loans.

PICTURE BASED QUESTION

1 (a) Inflation 1

2 (b) Open Market Operations 1

TABLE BASED QUESTION

1 (d) 1920 1

2 (a) 20% 1

STATEMENT QUESTION

20
 1 1
(a) Both statements are true

CHAPTER 4: AGGREGATE DEMAND AND RELATED CONCEPTS

PART A. MCQS
1 Which of the following is not a component of aggregate demand in a two sector 1
economy?

a) Net Exportsb) Government Expenditure

c) Consumptiond) Both a) and b)

2 Which of the following is not true about AD in a two sector economy? 1

a) AD = Consumption + saving
b) AD curve starts from some point above the origin
c) AD = Consumption + Investment
d) AD curve has a positive slope

3 Which of the following fact is incorrect about MPC? 1

a) Value of MPC varies between 0 and 1

b) MPC of poor is more than that of rich

c) MPC falls with successive increase in income

d) MPC can be more than 1

4 Suppose in a hypothetical economy, hte income rises from ₹5,000 crores to ₹6,000 1
crores. As a result,the consumption expenditure rises from ₹4,000 crores to ₹4,600
crores. Marginal propensity to consume in such a case would be __ .

a) 0.8b) 0.4c) 0.2d) 0.6

5 The level of induced consumption in an economy depends on: 1

a) Level of National Income b) MPC

c) Both a and b d) Autonomous Consumption

6 Which of the following statements is false? 1

a) At break even point, the value of APC is one

21
 b) The value of marginal propensity to consume is always positive

c) APC can never be greater than one

d) Full employment implies absence of involuntary unemployment

7 If Consumption at zero level of National Income is ₹50 crores, MPC is 0.6 and 1
National Income is

₹1,000 crores, then value of savings will be:

a) ₹650 croreb) ₹450 crorec) ₹350 crored) None of these

8 Suppose in a hypothetical economy, the income rises from ₹500 crores to ₹600 crores. 1
As a result,

the consumption expenditure rises from ₹400 crores to ₹500 crores. Marginal
Propensity

to consume in such a case would be _ .

a) 0.8 b) 0.4 c) 1.0 d) 0.6

PART B. ASSERTION-REASON QUESTIONS

1 Assertion (A): Consumption curve makes an intercept on the 1

Y-axis, some point above the origin.

Reason (R): People need certain basic goods and services to

sustain themselves, even if income is zero.

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 and 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.

2 Assertion (A): During the pandemic, income of the people have fallen and as a 1
result there has been a reduction in aggregate demand.

Reason (R): According to the Keynesian economics, government should follow

expansionary fiscal policy implying a higher level of government expenditure and
lower level of taxes.

22
 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 and 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.

C. CASE-STUDY BASED QUESTION

Read the following text carefully and answer the given questions on the basis of
the same and common understanding:

Exports are products produced domestically and sold abroad, and imports are products
produced abroad but purchased domestically. Since aggregate demand is defined as
spending on domestic goods and services, export expenditures add to aggregate
demand, while import expenditures subtract from aggregate demand.

Two sets of factors can cause shifts in export and import demand: changes in relative
growth rates between countries and changes in relative prices between countries.

The level of demand for a nation’s exports tends to be most heavily affected by what is
happening in the economies of the countries that would be purchasing those exports.
For example, if major importers of US-made products like Canada, Japan, and
Germany have recessions, exports of US products to those countries are likely to
decline since quantity of a nation’s imports is directly affected by the amount of
income in the domestic economy. More income will bring a higher level of imports.

Exports and imports can also be affected by relative prices of goods in domestic and
international markets. If US goods are relatively cheaper compared with goods made in
other places—perhaps because a group of US producers has mastered certain
productivity breakthroughs—then US exports are likely to rise. If US goods become
relatively more expensive—perhaps because a change in the exchange rate between the
US dollar and other currencies has pushed up the price of inputs to production in the
United States—then exports from US producers are likely to decline.

1 Briefly explain how export affects Aggregate demand in an economy? 3

2 “Exports are regarded as the engine of growth.” Justify the statement with valid 3
arguments

D. STATEMENT-BASED QUESTIONS

1 Read the following statements carefully and choose the correct alternative from the 1
following:

Statement 1 – In the context of equilibrium, desired investment expenditure is

23
 assumed to be autonomous.

Statement 2 – Autonomous investment is income inelastic.

Alternatives:

a. Both the statements are true.

b. Both the statements are false.
c. Statement 1 is true and Statement 2 is false
d. Statement 2 is true and Statement 1 is false

2 Read the following statements carefully and choose the correct alternative from the 1
following:

Statement 1 – At the time of full employment there is absence of voluntary

unemployment.

Statement 2 – Voluntary unemployment is not counted while estimating the size of

unemployment.

Alternatives:

a. Both the statements are true.

b. Both the statements are false.
c. Statement 1 is true and Statement 2 is false
d. Statement 2 is true and Statement 1 is false

E. GRAPH-BASED QUESTIONS

1 Point out the significance of 45degree line in the above graph. 2

24
2 Can the consumption curve start from zero? Give reason 2

MARKING SCHEME

Q. NO ANSWERS MARKS

A.MCQS

1 d) Both a) and b) 1

2 a) AD = Consumption + saving 1

3 d) MPC can be more than 1 1

4 d) 0.6 1

5 c) Both a) and b) 1

6 c) APC can never be greater than one 1

7 c) ₹350 crore 1

8 c) 1.0 1

B. ASSERTION-REASON QUESTIONS

1 a. Both Assertion (A) and Reason (R) are true and Reason (R) is the 1
correct explanation of Assertion (A).

2 b. Both Assertion (A) and Reason (R) are true and Reason (R) is not 1
the correct explanation of Assertion (A).

C. CASE-STUDY BASED QUESTIONS

1  Export is one of the important components of AD 3

 It represents demand for domestically produced goods in the
ROW
 Increase in exports leads to increase in AD in the economy

2  Export refers to a product or service produced in one country but 3

sold to a buyer abroad.
 Exports are one of the oldest forms of economic transfer and
occur on a large scale between nations.
 Exporting can increase sales and profits if they reach new
markets, and they may even present an opportunity to capture
significant global market share.

25
 D. STATEMENT-BASED QUESTIONS

1 a .Both the statements are true. 1

2 d.Statement 2 is true and Statement 1 is false 1

E. GRAPH-BASED QUESTIONS

1  The 45degree line is equi-distant from both the axes. 2

 At all points of the line income = consumption

2  C curve always starts from a point on Y-axis. 2

 Autonomous consumption is always positive.

CHAPTER 5 DETERMINATION OF INCOME AND MULTIPLIER

A.MCQS
1 Slope of consumption function is known as ____________. 1

a. APC
b. MPC
c. MPS
d. APS
2 Match the terms in column I with their descriptions in column II: 1

Column I Column II

(a) Contractionary fiscal policy (i) Decrease in SLR

(b) Expansionary monetary (ii) Increase in govt spending

policy

(c) Expansionary fiscal policy (iii) Sale of securities

(d)Contractionary monetary (iv) Increase in taxes

policy

Choose the correct alternative:

a. a-iv, b-i, c-ii, d-iii

b. a-ii, b-i, c-ii, d-iv
c. a-i, b-ii, c-iv, d-iii
d. a-iv, b-iii, c-ii, d-i
3 The saving curve makes an intercept of rupees 40 crores on the negative X- 1
axis. If consumer spends 60% of the additional income, then the

26
 consumption function will be _________________.

a. C=-60+0.6Y
b. S=-50+0.6Y
c. C=-40+0.6Y
d. C=-40+0.4Y
4 When the autonomous investment and consumption expenditure is rupees 1
50 cr, and MPS is 0.2 and the level of income is rupees 4,000 cr. Given the
situation choose which of the following statement holds well.

a. AD=AS
b. AD>AS
c. AD<AS
d. Both (i) and (ii)
5 Which of the following is not a possible value of APC? 1

a. 1
b. 0
c. < 1
d. > 1
6 Which of the following is not a fiscal policy? 1

a. Increase in bank rate

b. Increase in repo rate
c. Decrease in taxes
d. Decrease in marginal requirement
7 Post-covid economic scenario is rife with businesses falling apart due to 1
shortage of finance, RBI can help these businesses by adopting
expansionary monetary policy. The goal can be achieved
by_________________.

Identify the correct alternative from below:

a. Increase in repo rate, selling securities in open market

b. Decrease in repo rate but increasing bank rate, reverse repo rate
c. Increase in repo rate, margin requirement, reverse repo rate
d. Decrease in repo rate, bank rate, reverse repo rate
8 “Covid has created various operational a functional challenges for India 1
businesses. During lockdown, approximately 71.31% of the businesses
dealt with reduced cash flow with the manufacturing sectors being worst
hit.”

The Economic Times, 29th September 2020

__________ and __________ are fiscal measures that may be taken by the
Government of India to correct the situation indicated in the above news
report.

27
 i. Taxation
ii. Open market operation
iii. Public spending
iv. Margin requirement

Choose the correct alternative:

a. i and ii
b. ii and iv
c. iii and iv
d. i and iii
B. ASSERTION-REASON QUESTIONS

1 Assertion (A): Contraction of credit has a deflationary impact on the 1

economy.

Reason (R): The credit availability is restricted and credit made costlier by
RBI.

Alternatives:

e. Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion (A).
f. Both Assertion (A) and Reason (R) are true and Reason (R) is not
the correct explanation of Assertion (A).
g. Assertion (A) is true but Reason (R) is false.
h. Assertion (A) is false but Reason (R) is true.
2 Assertion (A): Below full employment equilibrium level leads to fall in 1
output level.

Reason (R): Presence of inflationary forces in the economy is the

representative of scarcity of supply of goods and services.

Alternatives:

e. Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion (A).
f. Both Assertion (A) and Reason (R) are true and Reason (R) is not
the correct explanation of Assertion (A).
g. Assertion (A) is true but Reason (R) is false.
h. Assertion (A) is false but Reason (R) is true.
C. CASE-STUDY BASED QUESTION

Read the following text carefully and answer the given questions on the
basis of the same and common understanding:

The economy has been facing slouch due to Covid situation. Overall
economic growth has hit all-time low as the contributions from all
three sectors have been falling consistently due to nation-wide
lockdown. After shrinking a record 23.9% in the April-June quarter,
28
 the Indian economy was forecast to contract 10.4% and 5.0% in the
third and fourth quarter, respectively and merely stabilize in the first
three months of 2021.
That compares with contractions of 8.1% and 1.0%, respectively, and
3.0% growth forecast in August. For the current fiscal year ending
March 31, Asia's third-largest economy was predicted to shrink 9.8%,
more than the RBI's latest 9.5% projection. The govt has been taking
policy initiative for to keep the economy afloat and ensure stability in
the economy. RBI has reduced its repo rate by 115 basis points to 4%
since March 2020 to ease open market operation with the aim to ensure
absorbing of shocks generated by the global pandemic which has taken
toll on the markets of India.

1 Briefly explain the policy used by the RBI to stabilise economic situation 3
here.

2 Describe use of any other two monetary measures those can be taken up by 3
the RBI to tackle a deflationary situation.

D. STATEMENT-BASED QUESTIONS

1 Read the following statements carefully and choose the correct alternative 1
from the following:

Statement 1 – In the context of equilibrium, desired investment

expenditure is assumed to be autonomous.

Statement 2 – Autonomous investment is income inelastic.

Alternatives:

e. Both the statements are true.

f. Both the statements are false.
g. Statement 1 is true and Statement 2 is false
h. Statement 2 is true and Statement 1 is false
2 Read the following statements carefully and choose the correct alternative 1
from the following:

Statement 1 – At the time of full employment there is absence of voluntary

unemployment.

Statement 2 – Voluntary unemployment is not counted while estimating

the size of unemployment.

29
 Alternatives:

e. Both the statements are true.

f. Both the statements are false.
g. Statement 1 is true and Statement 2 is false
h. Statement 2 is true and Statement 1 is false
E. GRAPH-BASED QUESTIONS

1 Point out effective demand on the given diagram above. Define effective 2
demand.

2 Explain the chain of events to bring the economy back to E when the 2
economy is operating on the right side of the equilibrium.

MARKING SCHEME

Q. NO ANSWERS MARKS

A.MCQS

1 b 1

2 a 1

3 c 1

4 c 1

5 b 1

6 c 1

7 d 1

8 d 1

B. ASSERTION-REASON QUESTIONS

30
 1 a 1

2 b 1

C. CASE-STUDY BASED QUESTIONS

1 RBI is using contractionary monetary policy. Repo rate as a 3

measure of controlling inflow of money supply into the economy.
Slashing repo rates will lead to increase in the volume of credit into
the economy thereby making sure that more loans are available in
the economy at a lesser interest rate. This will lead to more
borrowings and more investment in productive activities.

2 Two measures: 3

i. Bank rates are ideally increased in case to deflationary

situation to restrict flow of money into the economy.
ii. More securities are sold by the RBI to stop money flow into
the economy in case of a deflationary situation.
D. STATEMENT-BASED QUESTIONS

1 a 1

2 d 1

E. GRAPH-BASED QUESTIONS

1 E is the point of effective demand. 3

Effective demand is the point where aggregate demand is exactly

equal to aggregate supply.

2 To the right of point E, the economy is experiences excess of 3

aggregate supply over aggregate demand. To bring the economy
back to equilibrium, the production needs to stopped

Chapter 6 : EXCESS DEMAND & DEFICIENT DEMAND

MCQs:-
1. Excess demand in an economy may give birth to:
a) deflationary gap b) excess capacity
c) inflationary demand d) low level of employment.
2. Desired AD less than its full employment level to sustain such demand is called:
a) inflationary gap b) excess demand
c) deficient demand d) effective demand
3. Problem of unemployment is the problem of:
a) voluntary unemployment b) involuntary employment
c) involuntary unemployment d) none of the above
4. AD in an economy may rise due to

31
 a) increase in exports b) decrease in consumption expenditure
c) increase in imports d) increase in taxes
5. Fiscal policy is maintained by:
a) NITI Aayog b) Supreme Court of India
c) Government of India d) RBI
6. To reduce credit availability in the economy, the Central Bank may _______. (CBQ)
a) Buy securities in the open market b) Sell securities in the open market
c) Reduce reserve ratio d) Reduce repo rate
7. __________ is exercised through discussions, letters and speeches to banks: (CBQ)
a) Moral suasion b) Selective Credit Controls
c) Margin Requirements d)Open Market Operation
8. Which of the following can be used to correct inflationary gap under Monetary Policy?
(CBQ)
a) Increase in Taxation b) Reduce availability of credit
c) Cut in Government Expenditure d) None of these

ASSERTION-REASON BASED QUESTIONS:

1. Assertion (A): During excess demand, there is no change in the level of employment.
Reason (R): At the time of excess demand, there is no involuntary unemployment.
Alternatives (Choose the correct one):
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 and 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.
2. Assertion (A): Excess demand does not lead to any increase in the level of output.
Reason (R): Excess demand gives rise to an inflationary gap.
Alternatives (Choose the correct one):
a) Both A & R are ture and R is the correct explanation of A.
b) Both A & R are true and R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.

CASE BASED QUESTIONS:-

Read the following information carefully and answer the mention questions on the basis of
the same:
Full employment level of income is that level of income where all the factors of production
are fully employed in the production process. Equilibrium is attained at the point of equality
of Y and AD by itself does not signify full employment of resources. Equilibrium only
means that if left to itself the level of income in the economy will not change even when
there is unemployment in the economy. The equilibrium level of output may be more or less
than the full employment level of output. If it is less than the full employment of output, it is
32
due to the fact that demand is not enough to employ all factors of production. This situation
is called the situation of deficient demand. It leads to decline in prices in the long run. On
the other hand, if the equilibrium level of output is more than the full employment level, it is
due to the fact that demand is more than the level of output produced at full employment
level. This situation is called the situation of excess demand. It leads to rise in prices in the
long run.
–NCERT-2022-23

Answer the following questions:

1. What is full employment of resources? 3
2. Give one major difference between excess demand & deficient demand. 3

PICTURE/GRAPH/TABLE-BASED QUESTIONS:-

1. On the basis of the below flow chart answer the following questions:
Low Low
Low AD ---------- Low AD
Investment Income

Choose the correct alternative to be filled in given blank.

a) Low Saving b)Low Inducement to Invest c)Low Output d)Low
Profit
2. On the basis of the given diagram, answer the following question:
What does EF indicate in the below diagram?

a)Excess Demand b)Deficient Demand c)Inflationary Gap d)Both (a) and (c)

ANSWER KEY

8 MCQs:-

33
1. c) inflationary demand
2. c) deficient demand
3. c) involuntary unemployment
4. a) increase in exports
5. c) Government of India
6. b) Sell securities in the open market
7. a) Moral suasion
8. b) Reduce availability of credit

ASSERTION-REASON BASED QUESTIONS:

1. a)Both Assertion(A) and Reason(R) are true and Reason (R) is the correct explanation of
Assertion(A).
2. b)Both A & R are true and R is not the correct explanation of A.
CASE BASED QUESTIONS:-
1. Answer: i) Full employment is the situation where all people are available and searching
for work can find a job at the prevailing remuneration rates & conditions.
ii) It does not mean zero unemployment.
iii) There are always some who may be temporarily unemployed, as they move from one job
to the other.
2. Three differences between excess demand and deficient demand.

Excess Demand:
i) It raises the general price level (inflation)
ii) Inflationary Gap is created.
iii) AD > AS Corresponding to full employment equilibrium.

Deficient Demand:
i) It reduces the general price level (deflation)
ii) Deflationary Gap is created.
iii) AD < AS corresponding to full employment equilibrium.
PICTURE/GRAPH/TABLE-BASED QUESTIONS:-
1. c)Low Output
2. d)Both (a) and (c)

CHAPTER 7 GOVERNMENT BUDGET AND THE ECONOMY

MCQs
1. Capital receipts include:

(a) Tax revenue (b) Grants from IMF

(c) Borrowings (d) Profit
2. Borrowings are equivalent to _______
(a) Revenue Deficit (b) Fiscal Deficit
(c)Primary Deficit (d) None of these
3. The Govt budget has a Revenue Deficit. This gets financed by ___

34
 a) Borrowings b) Disinvestment c)Tax Revenue d)Indirect Tax
4. The government budget is an
(a)Half yearly statement (b) Weekly statement
(c)Five yearly statement (d) Annual statement
5. Identify the missing item in the following expression :
________ = Fiscal Deficit – Interest Payment
(a) Revenue Deficit (b) Primary Deficit (c) Both (a) & (b) (d) None of these
Competency based questions 1
6. The government budget of a hypothetical economy presents the following
information which of the following value represents budgetary deficit? ( all
figures are in rupee crore) a. Capital receipts= 30000.(Analysis)
Capital expenditure= 35000
Revenue receipts = 20000
Interest payments= 10,000
Borrowings= 20000
i) 12000 ii) 10,000 iii) 20000 iv) none of the above
7. Identify which of the following statements is true. (UNDERSTANDING)
a) Fiscal deficit is the difference between plant revenue expenditure and plant
revenue receipt
b) Fiscal deficit is difference between total planned expenditure and total
planned receipts
c) Primary deficit is the difference between total planned receipts and interest
payments
d) Fiscal deficit is the sum of primary deficit and interest payment
8. Primary deficit in a government budget will be zero when ……….
(APPLICATION)
a. Revenue deficit is zero
b. Net interest payment are zero
c. Fiscal deficit is zero
d. Fiscal deficit is equal to interest payment
ASSERTION AND REASONING
Read the following statements- Assertion (A) and Reason (R). Choose one of the correct
alternatives given below and each question carries 1 mark:

9. Assertion (A) : Salary paid to Army officers is revenue expenditure.

Reason (R) : It neither creates any asset nor reduces any liability of the
government.
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 and 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.

10. Assertion (A) : Direct taxes have limited reach as compared to indirect taxes.
Reason (R) : Indirect taxes have a wide coverage as they reach all sections of the
society.
35
 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 and 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.
CASE STUDY
11. Observe the image and form a definition on the meaning of Government Budget.

12. Look at the image and Identify which Government Budget objective is fulfilled.

13. Read the extract from economic survey 2020- 21 and answer the questions
that follow on the basis of the same.
The government will continue on its path of fiscal consolidation and intends to reach
a fiscal deficit of below 4.5 % of gross domestic product by 2025- 2026, finance
Minister Nirmala Sitharaman said in her budget speech.
The government expects a fairly steady decline over the years. “ We hope to achieve
the consolidation first by increasing the buoyancy of tax revenue through improved
compliance and secondly by increased receipts from monetization of assets
including public sector enterprises and land.” Sitaraman said as she pegged the
physical deficit for the current fiscal year at 89.5 percent of GDP in the revised
estimate. The centre has estimated the deficit to be at 6.8 % if the GDP next year
and the gross borrowing from the market next year would be around rupee 12 lakh
crore.

36
 a) Explain the meaning of Government budget and discuss types of deficits.
3marks
b) Give any three implications of fiscal deficit. 3marks

MARKING SCHEME

NO ANSWER MARK

1 (c) Borrowings 1

2 (b) Fiscal Deficit 1

3 a) Borrowings 1

4 (d)Annual statement 1

5 (b) Primary Deficit 1

Competency based questions 1

6 ii) 10,000 1

7 d.Fiscal deficit is the sum of primary deficit and interest payment 1

8 a.Fiscal deficit is equal to interest payment 1

9 a) Both Assertion (A) and Reason (R) are true and Reason (R) is the 1
correct explanation of Assertion (A).

10 a) Both Assertion (A) and Reason (R) are true and Reason (R) is the 1
correct explanation of Assertion (A).

11 An annual statement showing estimated governments revenue and expenditure 1

for a fiscal year.

12 Reallocation of Resources: 3

Through the budgetary policy, Government aims to reallocate resources in

accordance with the economic (profit maximisation) and social (public
welfare) priorities of the country. Government can influence allocation of
resources through:
(i) Tax concessions or subsidies:
To encourage investment, government can give tax concession, subsidies etc.
to the producers. For example, Government discourages the production of
harmful consumption goods (like liquor, cigarettes etc.) through heavy taxes
and encourages the use of ‘Khaki products’ by providing subsidies.
(ii) Directly producing goods and services:
If private sector does not take interest, government can directly undertake the

37
 production.

13 a) Revenue Deficit: Revenue expenditure when gets reduced by revenue 3

receipts. Fiscal Deficit: Total expenditure when gets reduced by the total
receipts except for the borrowing part. Primary Deficit: The fiscal deficit
when get reduced by the payment of interest.

b) The implications of fiscal deficit are as follows:

1. Debt Trap:

2. Inflation:

3. Foreign Dependence:

CHAPTER 8-BALANCE OF PAYMENT

1. Read the following statements: Assertion (A) and Reason (R). Choose one of the
correct alternatives given below: 1
Assertion (A): Rent received by an Indian real estate company from Google in New
York would be recorded on the credit side of the capital account.
Reason (R): Capital account of BoP records all those transactions, between residents
of a country and the rest of the world, which causes a change in the Financial and real
assets or liabilities of the residents of the country or its government.
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 and 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.

2. Read the following statements: Assertion (A) and Reason (R). Choose one of the
correct alternatives given below: 1
Assertion (A): External assistance is recorded in the capital account of the Balance of
Payments.
Reason (R): External assistance is recorded in the current account of the Balance of
Payments.

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 and Reason (R) is not the correct
38
 explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is true.

3. Import of machinery and equipment is recorded under __________ of the ______

account. 1

a. Credit side, capital

b. Debit side, capital
c. Debit side, current
d. Credit side, current

4. Foreign exchange transactions that are independent of other activities in the Balance
of Payments account are ________ transactions.
1

a. Capital account
b. Current account
c. Accommodating
d. Autonomous

5. In a government budget, revenue receipts = 14,200, revenue expenditure 15,700,

capital receipts net of borrowings=Rs.5,000, capital expenditure= 18,300, and interest
payments 3,350, fiscal deficit will be: 1

a. 1,500
b. 11,450
c. 14,800
d. 10. 18,150

6. If capital receipts=727 lakh, revenue expenditure=763 lakh, revenue receipts = 50

lakh, borrowings=20 lakh and interest payments=13 lakh, then fiscal deficit will be:
1
a. 7 lakh
b. 13 lakh
c. 14 lakh
d. 20 lakh
7. The government budget of a hypothetical economy presents the following
information: 1

I. Revenue expenditure = 25,000

II. Capital receipts=30,000
III. Capital expenditure = 35,000
IV. Revenue receipts = 20,000
V. Interest payments = 10,000
VI. Borrowings=20,000
Which of the following value represents Budgetary Deficit?1
a. 12.000
b. 10,000
c. 20,000
d. None of these
39
 8. India's trade deficit was downwardly revised to USD 25.71 billion in September of
2022, compared to a preliminary estimate of USD 28.72 billion and USD 22.47
billion a year earlier. Imports surged 8.7 percent year-on-year to USD 61.16 billion
amid higher commodity prices, while exports rose at a slower 4.9 percent to USD
35.45 billion. source: Ministry of Commerce and Industry, India.

Observe the above data and analyse it. 4

9. Read the following news report carefully and answer the following questions on the
basis of the same:
Venezuelan President Nicolas Maduro carried out one of the greatest currency
devaluations in history over the weekend-a 95 per cent plunge that will test the
capacity of an already beleaguered population to stomach even more pain. The
official rate for the currency will go from about 285,000 per dollar to 6 million, a
shock that officials tried to partly offset by raising the minimum wage 3,500 per cent
to the equivalent of just $30 a month. While Maduro boasted in Friday night's
announcement that the International Monetary Fund wasn't involved in the policies,
aspects of the moves bore a resemblance to a classic orthodox economic adjustment
albeit with some confusing twists. Source: The Economic Times, August 20, 2018

1. Define Venezuelan’s trade balance. 3

2. What do you mean by devaluation? In which exchange rate is it applicable? 3

MARKING SCHEME

1.d)Assertion(A) is false but Reason(R) is true.

2.d) Assertion(A) is false but Reason(R) is true.

3.c) Debit side, current

4.d) Autonomous
40
5.c) 14,800

6.d)20 lakh

7.b)10,000

8.The data shows the downwardly trade deficit of India .In october 2021 Indian's trade deficit
was -19.73 then it gradually increased to -22.91 then to -21.68 due to increasing
imports.Injanuary 2022 trade deficit was low to -17.42 then to -20.88 and -18.51 as export
was also reduced.Due to covid-19 production was low and most of the people were doing
work from home.Inapril 2022 trade deficit started increasing from -20.11 to -24.29.In july
2022 balance of trade was unfavourable for India as import of goods exceeded the export of
goods and the trade deficit was -30 . then it started decreasing to -26.72 due to little increase
in exports.

9.1.Balance of trade refers to difference between the amounts of exports and imports of
visible items(goods).Due to higher prices in country Venezuelan,its imports increased and it
led to deficit in trade balance.

9.2.Devaluation refers to reduction in price of domestic currency in terms of all foreign

currencies under fixed exchange rate regime. It is applicable when the exchange rate is
increased by the government under fixed exchange rate system.

Part-B: Indian Economic Development

Chapter-1: INDIA ON THE EVE OF INDEPENDENCE

1. Assertion (A): Under the colonial regime, basic infrastructure such as railways, 1
ports, water transport, posts and telegraphs did develop.
Reason (R): The real motive behind this development was not to provide basic
amenities to the people but to sub serve various colonial interest.
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 and 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
2. Assertion (A):Indian could not develop a sound industrial base during the 1
British rule.
Reason (R): Britishers followed restrictive trade policies , which led to the rise
of Indian handicraft.
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 and 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

41
3. Assertion (A): By the time India won independence the agricultural sector was saddled 1
with surplus labour and extremely low productivity.
Reason (R): At the time of independence industrial sector was crying for modernization,
diversification , capacity building and increased public investment.
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 and 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

4. Arrange the events chronologically. 1

i. The year of great divide.
ii. Establishment of Tata Iron and Steel Company (TISCO)
iii. Introduction of Railways in India by the British.
iv. Opening of Suez Canal

5. Match the correct pair from the following items. 1

Column A Column B

a)First official census i)1881

b) Year of Great divide ii)1850

c) Introduction of Railways iii) 1907

d) TISCO was established iv) 1921

6. Match the following items given in column A with those in column B 1

Column A Column B

a) Capital goods i.Commercialisation of

agriculture
b) Infant Mortality rate
ii. Estimation of National Income
c) DadabhaiNaroji, R.C Desai and Per capita income
d) Cash Crops iii. Demographic condition

iv. Industrialisation

7. Which of the following sectors was the major contributor to the Gross Domestic
Product (GDP) during the British rule in India? 1

a. Primary sector
b. Secondary sector

42
 c. Tertiary sector
d. None of the above

8. In which year were the details about the population in British India collected for the first

time? 1

a. 1881
b. 1891
c. 1871
d. 1882

9. On the eve of Independence, India’s demographic condition was characterized

by which of the following statement? 1
a. Low level of literacy, low mortality rate and high life expectancy.
b. High level of literacy, high mortality rate and high life expectancy.
c. Low level of literacy, high mortality rate and high life expectancy.
d. Low level of literacy, high mortality rate and low life expectancy.
10. The agricultural sector continued to experience stagnation and deterioration
during the British rule in India due to : 1

a. Decline of handicraft
b. Land tenure system
c. Drain of india’s wealth
d. None of these

11. More than ½ of India’s foreign trade was restricted to--------- while the rest was
allowed with few other countries. 1

a)China
b) Britain.
c) Ceylon
d) Persia

12. Read the following statement carefully: 1

Statement 1: India’s agriculture was starved of investment in terracing, flood-control,
drainage and desalinization of soil.
Statement 2: Small farmers and sharecroppers neither has resources and technology nor had
incentive to invest in agriculture.

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.

43
Image-Based Question

13.Interpret the given picture on account of the introduction of railways by the

Britishers , and comment how it benefited the Britishers more than the Indians. [3]

14. Read the following text carefully and answer the given questions on the
basis of the same and common understanding.

British interests were of several kinds. At first the main purpose was to achieve a
monopolistic trading position. Later it was felt that a regime of free trade would make India a
major market for British goods and a source of raw materials, but British capitalists who
invested in India, or who sold banking or shipping service there, continued effectively to
enjoy monopolistic privileges. India also provided interesting and lucrative employment for a
sizeable portion of the British upper middle class, and the remittances they sent home made
an appreciable contribution to Britain's balance of payments and capacity to save. Finally,
control of India was a key element in the world power structure, in terms of geography,
logistics and military manpower. The British were not averse to Indian economic
development if it increased their markets but refused to help in areas where they felt there
was conflict with their own economic interests or political security. Hence, they refused to
give protection to the Indian textile industry until its main competitor became Japan rather
than Manchester, and they did almost nothing to further technical education. They introduced
some British concepts of property, but did not push them too far when they met vested
interests. The opening of Suez Canal further intensified British control over India’s foreign
trade.

Q. Explain the volume and direction of trade at the time of independence. 3

Q. Why is Suez Canal considered to be one of the most important waterway in the world?

Explain. 3
MARKING SCHEME

Q. No Value Points Marks

1 (a) Both Assertion (A) and Reason (R ) are true and Reason 1

( R) is the correct explanation of Assertion(A).

44
2 c) Assertion (A) is true but Reason (R ) is false 1

3 b) a) Both Assertion (A) and Reason (R ) are true and Reason 1

( R) is the correct explanation of Assertion(A).

4 iii,iv ,ii, i 1

5 a-i 1
6 iv, iii, ii, i 1

7 Primary Sector 1

8 1881 1

9 .(d)Low level of literacy, high mortality rate and low life expectancy. 1

10 (b)Land Tenure system 1

11 .(b)- Britain 1

12 c)Both the statement are true

13 Railways were introduced to protect and promote the British 3

economic interests of transforming India into supplier of raw
materials cheaply and consumer of finished industrial products from
Britain. Railways also promoted the foreign trade but it benefitted the
Britishers more than the Indians. The construction of railways led to
huge economic losses to the Indian economy.

14 12.(a)The volume and direction of trade at the time of independence. [4+2]

(i)Export of Primary product and importer of finished goods:

India became an exporter of primary products like silk, cotton ,wool

etc. and importer of finished consumer goods and capital goods like
light machinery produced in British industries.

(ii) Monopoly Control of British Rule: British Government

maintained a monopoly control over Indian exports and imports. More
than 1/2 of India's foreign trade was restricted to Britain while the rest
was allowed with few other countries like China, Ceylon (Sri Lanka)
and Persia (Iran).

(b) Suez Canal is considered to be one of the most important

waterway in the world because its opening in 1869 reduced the cost
of transportation and made access to the Indian market easier. Thus,
strategically and economically it played an important role.

45
 Chapter-2: ECONOMIC PLANNING 1950-1990
MCQ’S

1. Which of the following is not true for small scale industries? 1

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

b. SSI needs small investment and is therefore equity oriented.

c. SSI is capital intensive and therefore increases productivity.

d. SSI shows location flexibility is therefore equality oriented.

2. 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

3. When was first five year plan introduced? 1

a. 1st April 1950

b. 1st April 1951

c. 1st April 1952

d. 31st March 1950

4. The starting of land reform programmes was set up in the right direction but it could not

make much progress because of 1

a. lack of political will

b. malafide transfers

c. inadequate proof of tenants

d. all the above.

5. Diversification of growth process can be achieved through the development of 1

a. Agricultural sector.

b. Industrial sector.

c. Foreign trade

d. Service sector.
46
6. In which other name High Yielding variety of seeds is known as? 1

(A) High productive seeds

(B) Green seeds

(C) Power seeds

(D)Miracle seeds

7. Modernization means 1

a) Increase the production of goods and services by adopt new technology.

b) Avoiding imports of those goods which could be produced in India itself

c) Recognition the women should have the same rights as men.

d) Both (a) and (c)

8. Who is known as the architect of Indian Planning‟? 1

a. Jawaharlal Nehru

b. Dr.B.R.Ambedkar

c. P.C.Mahalnobis

d. Sardar Ballabh bhai Patel

9. Assertion: Industrial policy resolution of 1956 was adopted in accordance with the goal of
the state controlling the commanding height of the economy. 1

Reason: System of licenses was used for the industries after the IPR 1956.

(A) Both Assertion and reason are true and reason is correct explanation of assertion.

(B) Assertion and reason both are true but reason is not the correct explanation of

assertion.

(C) Assertion is true, reason is false.

(D) Assertion is false, reason is true.

10. Assertion (A): Equity is a very important goal for planning

Reason (R): Equity means benefit of economic prosperity must reach to poor section also. 1

(A) Both Assertion and reason are true and reason is correct explanation of

assertion.

(B) Assertion and reason both are true but reason is not the correct explanation of

assertion.

47
 (C) Assertion is true, reason is false.

(D) Assertion is false, reason is true

11. Read the following case study carefully and answer the questions that follows.

Industrial Policy is the set of standards and measures set by the Government to evaluate the
progress of the manufacturing sector that ultimately enhances economic growth and
development of the country. The government takes measures to encourage and improve the
competitiveness and capabilities of various firms. Industrial policy resolution 1956 was the
clear declaration of the government on the leading role of public sector in the process of
industrialization. This resolution laid the roadmap of second five-year plan also. In IPR-1956,
industries were classified into three categories. Public sector was given primary role in the
industrial development of the country. Industries in the private sector could be established
only through a license from the government. Main idea of industrial licensing was to
encourage industries in the backward regions of the country. Private sector was offered many
types of industrial concessions for establishing industries in backward regions like tax
holidays and subsidized power supply. Karve committee (1955) also focused on the role of
small-scale industries to achieve the goal of industrial development. As far as possible,
domestic industries were protected from the foreign competition. Protection was provided
through: heavy imports tariffs and by fixing import quotas.

1. What are the main features of IPR-1956? 3

2. In which year Karve committee was set up to develop small scale Industries. What

were the focus points of Karve committee. 3

12. Choose the correct alternative. 1

a HYV A Seeds that give large proportion of

output

b GDP B Quantity of goods that can be imported

c Quota C Chairperson of the planning

commission.

d Land reforms D The money value of all the final goods

and services produced in a country in a
year

e Land ceiling E The monetary assistance given by

government for production activities.

a—a, A

b—b, B

c—c, C

48
 d—d, D

13- Fill the blanks with appropriate alternatives. 0.5+0.5

1. Share of Agriculture in
GDP------------in 1951-
52

-----------

2.
Land reforms were
successful in ----------
and----------

1- Alternatives--39% , 49%, 59% ,75%

2 -Kerala and West Bengal

Andhra Pradesh and Maharashtra

Tamil Nadu and Kerala

Tamil Nadu and Andhra Pradesh

MARKING SCHEME

SL.NO VALUE POINTS MARKS

1 c. SSI is capital intensive and therefore increases productivity. 1

2 a. Wheat and rice 1

3 b.1st April 1951 1

4 d. all the above. 1

5 a. Agricultural sector. 1

6 (D) Miracle seeds 1

7 d) Both (a) and (c) 1

8 c. P.C.Mahalnobis 1

9 (C)Assertion is true, reason is false. 1

49
10 (A) Both Assertion and reason are true and reason is correct 1
explanation of assertion.

11 1-.Main features of IPR 1956 are: 3+3

a) Protection to cottage and small scale industries.

b) Specific and all important role assigned to public sector.

c) Cautions approach towards foreign capital

2.1955 Karve committee (1955) also focused on the role of small-scale

industries to achieve the goal of industrial development. As far as
possible, domestic industries were protected from the foreign
competition. Protection was provided through: heavy imports tariffs
and by fixing import quotas

12 a. a A 1

13 1-49% 2-Kerala and West Bengal 0.5+0.5

Chapter-3:ECONOMIC-REFORMS SINCE 1991

MULTIPLE CHOICE QUESTIONS

1. Identify the one which is not an element of fiscal reforms? 1
(a) Taxation reforms
(b) Public expenditure reforms
(c) Change in interest rate
(d) Control on public debt
2. Tax reforms are concerned with reforms in the government’s ------- and ----- 1
policies , which are collectively known as Fiscal
Choose from the alternatives given below
(a) Taxation , Public expenditure
(b) Taxation, Non- taxation
(c) Taxation Private expenditure
(d) Private earnings, Taxation
3. _______ is an example of indirect tax?(fill in the blank) 1
(a) Income tax
(b) Wealth tax
(c) Goods and services tax
(d) Corporation tax

50
 4. Identify which of the following is not true about economic crisis of India in 1990.1
(a) India was highly indebted country paying Rs 10,000 crore as interest
payment
(b) Foreign exchange reserves showed a marginal rises owing to policies between
1950 to 1919
(c) Inflation rate was very high at 16.8 per annum
(d) BOP was in deficit of Rs.30,000 crore
5. _______ is the outcome of privatisation and liberalisation 1
(Fill in the blank with correct alternative)
(a) Globalisation
(b) Reforms
(c) Fiscal policy
(d) WTO
6. Read the following statements carefully and choose the correct alternatives from the
following . 1
Statement -1: Devaluation was adopted under fiscal reforms
Statement –2: Determination of exchange value was left on free play under reforms on
1991
Alternatives
(a) Statement -1is true and Statement -2 is false
(b) Statement -1 is false and Statement -2 is true
(c) Both Statement -1 and 2 are true
(d) Both Statement -1 and 2 are false
7. Identify the correct sequence of alternatives given in column 2 by matching them with
respective items in column 1 1

Column1 Column1I

(a) WTO (i) Provides short –term loans to solve the Balance of
Payments problem
(b)RBI (ii) is a multilateral trade negotiating body

(c) IMF (iii) Facilitates lending for reconstruction and development

(d)IBRD (iv) is the Central bank of India

Choose the correct alternatives from the following :

(a) a-(ii) , b-(i), c-(iii),d -(iv)

(b) a-(ii), b-(iv) , c-(iii),d-(i)
(c) a-(ii), b-(iii), c-(iv), d-(i)
(d) a-(ii), b-(iv), c-(i),d-(iii)
8. Read the following statements carefully and choose the correct alternatives from the
following : 1
Statement -1: India is often called as the ‘out sourcing hub’ of the world
51
 Statement –2: Availability of skilled man power is one of the prime factors responsible
for the status gained by India at the international platforms
Alternatives
(a) Statement -1is true and Statement -2 is false
(b) Statement -1 is false and Statement -2 is true
(c) Both Statement -1 and 2 are true
(d) Both Statement -1 and 2 are false
Read the following statements- Assertion (A) and Reason (R). Choose one of the correct
alternatives given below and each question carries 1 mark:
9. Assertion(A):As internet spread worldwide and cost of transmitting information dropped,
many US firms discovered that off shoring database management and certain other
services to Indian firms made economic sense as it led to huge cost savings.
Reason (R): India has the right mix of educated, low-cost, English-speaking and skilled
workforce to undertake the job.
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 and 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
10. Assertion (A) Fiscal deficit leads to price spiral.
Reason (R) Often, the fiscal deficit is financed by the government by way of borrowing
from the RBI. It leads to increase in the supply of money in the economy. Other things
remaining constant, higher the supply of money, higher is the price spiral
(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 and 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.
11. Compare the trend depicted in the table below, stating the reasons. (3)

GROWTH OF GDP AND MAJOR SECTORS (in%)

Sector 1980- 1992- 2002- 2007- 2012- 2013- 2014-
91 2001 07 12 13 14 15

Agriculture 3.6 3.3 2.3 3.2 1.5 4.2 -0.2

Industry 7.1 6.5 9.4 7.4 3.6 5 5.9

Services 6.7 8.2 7.8 10 8.1 7.8 10.3

Total 5.6 6.4 7.8 8.2 5.6 6.6 7.2

SOURCE: Economic Survey 2016-17,Ministry of Finance ,Government Of India.

Ans.(i) The post 1991 witnessed rapid growth in GDP Continuously for two decade

52
 (ii) During the reforms period , growth of the agriculture has declined , while the
industrial sector reported fluctuation , where as the growth of service sector has gone
up in 2014- 2015 the service sector witnessed the highest growth rate of 10.3%
(iii) the opening of economy lad to rise in FDI and rise in IT sector that is the service
sector .
Type –Understanding questions
12. Interpret the given picture on account of NEP followed by India. (4)

13. Interpret the given picture on account of NEP followed by India. (3)

Case Study-1

14. Read the following hypothetical Case Study carefully and answer the questions

given below:

The P.V.Narasimha Rao Government at the Centre accepted the conditionality of the World
Bank and IMF in July 1991.The then Finance Minister Dr. Manmohan Singh announced a
series of economic reforms based on LPG model. These measures have been termed as New
Economic Policy (NEP). NEP marked a complete break from the past as its thrust was on
53
reducing barriers to industrial and economics activity, and opening up the economy to foreign
competition and foreign investment. The set of measures announced in NEP can be divided
into two parts (i) the macroeconomic stabilization measures (ii) the structural reform
measures. The former were short-run measures intended to introduce stability in the
economy. Their focus was on (i) control of inflation (ii) fiscal correction (iii) improving the
balance of payment position. Structural reform policies are long-term measures, aimed at
improving the efficiency of the economy and increasing its international competitiveness
by removing the rigidities in various segments of the Indian economy. The objective of NEP was
to ensure that the country was able to maintain sufficient foreign exchange reserves and keep
the rising prices under control.

(a) Explain the structural reform measures (2)

(b) Explain the stabilisation Measures of NEP (2)
(c) Mention the main objective of NEP (2)

MARKING SCHEME

1 (c)Change in interest rate 1

2 (a) Taxation , Public expenditure 1
3 c)Goods and services tax 1
4 b)Foreign exchange reserves showed a marginal rises owing to 1
policies between 1950 to 1919

5 (a) Globalisation 1
6 b)Statement -1 is false and Statement -2 is true 1

7 (d): a-(ii), b-(iv), c-(i),d-(iii) 1

8 (c)Both Statement -1 and 2 are true 1

9 (a)Both Assertion (A) and Reason (R) are true and Reason (R) is the 1
correct explanation of Assertion (A)
10 a)Both Assertion (A) and Reason(R) are true and Reason (R) is the 1
correct explanation of Assertion(A).

11 .(i) The post 1991 witnessed rapid growth in GDP Continuously for 3
two decade
(ii) During the reforms period , growth of the agriculture has
declined , while the industrial sector reported fluctuation , where as
the growth of service sector has gone up in 2014- 2015 the service
sector witnessed the highest growth rate of 10.3%
(iii) the opening of economy lad to rise in FDI and rise in IT sector
that is the service sector .

12 This picture depict the out come of globalization process that is 4

outsourcing

(i) India has became a favourable destination of out sourcing for

54
 most of the MNCs because of the following reasons
Easy availability of Cheap Labour : The wage rates in India
are comparatively lower than the develop countries As a result
.MNCs outsource their business in India.
(ii) Availability of skilled manpower .India has vast skilled
Man power , which enhance the faith of MNCs.
(iii) Favourable Government Policies : MNCs gets various types
of lucrative offers from the Indian government like tax ,
holidays .
(iv) International worthiness: India has a fair international
worthiness and credibility.

13 The concept is privatisation 3

It imples shedding of the ownership of management of government

owned enterprise.

This is done by two ways

(i) Withdrawal of the government from ownership and

management of public sector companies and
(ii) Outright sale of public sector company.
(iii) The purpose of sale of air India to data was to improve
financial discipline and managerial efficiency

14 a. This are long term measures which aims are improving 6

(i) Improving the efficiency of the economy
(ii) Increasing international competiveness by removing rigidities
in various segments of the Indian economy.

b. They are short term measures which aims are

(i) Correcting weaknesses of the BOP by maintaining

sufficient foreign exchange reserves
(ii) Controlling inflation by keeping the rising price under
control

c. Objective of NEP was

(i) To ensure that the country is able to maintain sufficient
foreign
exchange reserves
(ii) To check the rising price

Chapter-4: Human Capital Formation

55
Q.1 The stock of skill, ability, education, and knowledge of a nation at a point of time refers
to: 1

a) Human capital b) Physical Capital

c) Individual d) Household

Q.2 Which of the following provide external benefit? 1

a) Human Capital b) Physical Capital

c) Household Capital d) Individual Capital

Q.3 What is the desired level of education expenditure in order to achieve the visible growth
rate in education? 1

a) 6% b) 5%

c) 4% d) 5.5%

Q.4 What is the effect of health expenditure in the supply of healthy labour force? 1

a) Decrease in healthy labour Supply

b) Increase in healthy labour supply

c) Constant in healthy labour supply

d) Zero in healthy labour supply

Q.5 Which of the following constitutes the major Share of total education expenditure? 1

a) Elementary education

b) Tertiary education

c) Higher education

d) Advanced education

Q.6 What is the reason for rural –urban migration in India? 1

a) acquire information b) higher education

c) Technical Skills d) Unemployment

Q.7 Which of the following lead to an increase in the real national income of a county. 1

a) education b) health

56
c) On the Job training d) All of the above

Q.8 Under __________, cooked mid-day meals are provided to children in the primary and
upper primary school. 1

a) National literacy policy

b) National programme of mid-day meals

c) Sarva Shiksha Abhiyan

d) None of these

Q.9 Read the following Statements: Assertion (A) and Reason (R). Choose one of the correct
alternatives given below. 1

Assertion (A):- Both education and health increases the income generating capacity of an
individual.

Reason (R):- Contribution of an educated and healthy person to the economic growth is more
than that of an illiterate and unhealthy person.

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 Time and Reason (R) is not the correct
explanation of assertion (A)
c) Assertion (A) is the True but Reason (R) is the false
d) Assertion (A) is false but Reason (R) is true

Q. 10 Read the following Statements: Assertion (A) and Reason (R). Choose one of the
correct alternatives given below. 1

Assertion (A);- Human Capital Formation is required for effective use of Physical Capital.

Reason (R);- Formation of human capital raises life expectancy of the people.

Alternatives;-

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

57
 b) Both Assertion (A) and Reason (R) are true Time and Reason (R) is not the correct
explanation of assertion (A)
c) Assertion (A) is the True but Reason (R) is the false
d) Assertion (A) is false but Reason (R) is true

Case Study Based Questions

Q.11 Just as a country can turn physical resources like land into physical capital like
factories, similarly, it can also turn human resources like nurses, farmers, teachers, students
into human capital like engineers and doctors. Societies need sufficient human capital in the
first place — in the form of competent people who have themselves been educated and
trained as professors and other professionals.
In other words, we need good human capital to produce other human capital
(say, nurses, farmers, teachers, doctors, engineers...). This means that
we need investment in human capital to produce more human capital out of
human resources. 3

(i) What are the sources of human capital?

(ii) Discuss the relation between human capital and economic growth of a country?

Q.12 In a developing country like India, with a large section of the population living below
the poverty line, many people cannot afford to access basic education and health care
facilities. Moreover, a substantial section of India’s population cannot afford to reach super
specialty health carecand higher education. Furthermore, when basic education and health
care is considered as a right of the citizens, then it is essential that the government should
provide education and health services free of cost for the deserving citizens and those from
the socially oppressed classes. Both, the union and state governments, have been stepping up
expenditures in the education sector over the years in order to fulfil the objective of attaining
cent per cent literacy and considerably increase the average educational attainment of
Indians. 3

(i) What are the main problems of human capital formation in India?
(ii) Discuss the need for promoting women’s education in India.

Q.13 Keeping in view the continuing hardships faced by banks in terms of social distancing
of staff and consequent strains on reporting requirements, the Reserve Bank of India has
extended the relaxation of the minimum daily maintenance of the CRR of 80% for up to
September 25, 2020. Currently, CRR is 3% and SLR is 18.50%. 3

58
“As announced in the Statement of Development and Regulatory Policies of March 27, 2020,
the minimum daily maintenance of CRR was reduced from 90% of the prescribed CRR to
80% effective the fortnight beginning March 28, 2020 till June 26, 2020, that has now been
extended up to September 25, 2020,” said the RBI.

(i) Explain the Concept of Cash Reserve Ratio(CRR) and Statutory Liquidity Ratio(SLR).

(ii) Discuss how CRR and SLR act as major instruments to regulate the economy.

Q.14 The educational achievements of the country for last past two decades given in the
following table. Interpret the data and answer the following questions. 3

Educational Attainment in India

Sl.No Particulars 1990 2000 2011 2017-18

1 Adult Literacy Rate (per cent of

people aged 15+)
61.9 68.4 79 82
1.1 Male
1.2 Female 37.9 45.4 59 66

2 Primary completion rate (per cent

of relevant age group)
2.1 Male 78 85 92 93

2.2 Female 61 69 94 96

3 Youth literacy rate (per cent of

people aged 15+ to 24)3.1 Male
76.6 79.7 90 93
3.2 Female
54.2 64.8 82 90

(i) What are the indicators of educational achievement in a country?

(ii) Explain how investment in education stimulates economic growth

MARKING SCHEME

1 a) Human Capital 1

2 a) Human Capital 1
3 a) 6% 1
4 b) Increase in healthy labour supply 1

5 a) Elementary education 1

59
 6 d) Unemployment 1
7 d) All of the above 1
8 b) National Programme for mid-day meals 1
9 a) Both Assertion(A) and Reason(R) are true and Reason(R) is the 1
correct explanation of Assertion(A)
10 b) Both Assertion(A) and Reason(R) are true but Reason(R) is not the 1
correct explanation of Assertion(A)

11 (i) Investments in education, on-the-job training, health, migration

and information are the sources of human capital formation.
3
human capital contributes substantially not only towards increasing labour
productivity but also stimulates innovations and creates ability to
absorb new technologies. Education provides knowledge to understand
changes in society and scientific advancements, thus, facilitate
inventions and innovations. Similarly, the availability of educated labour
force facilitates adaptation to newtechnologies.
12 (i) with a large section of the population living below the poverty 3
line, many people cannot afford to access basic education and
health care facilities.
Moreover, a substantial section of India’s population cannot
afford to reach super specialty health careand higher education.

the need to promote education for women in India is imminent for various
reasons such as
improving economic independence and
social status of women and also because women education makes a
favourable impact on fertility rate and health care of women and children.
13 (i) Cash reserve ratio (CRR) is the percentage of a bank's total 3
deposits that it needs to maintain as liquid cash. This is an
RBI requirement, and the cash reserve is kept with the RBI.

Statutory Liquidity Ratio or SLR is the minimum percentage

of deposits that a commercial bank has to maintain in the
form of liquid cash, gold or other securities. It is basically the
reserve requirement that banks are expected to keep before
offering credit to customers.

(ii) CRR and SLR increased to reduce money supply and control
inflation.

CRR and SLR decrease to enhance the supply of money and

control deflation.

14 (i) Generally, educational achievements in a country are indicated 3

in terms of adult literacy level, primary education completion
rate and youth
60
 literacy rate.

Investments in education convert human beings into human capital; human

capital represents enhanced labour productivity, which is an acquired
ability and an outcome of deliberate investment decisions with an
expectation that
it will increase future income sources

Chapter 5 RURAL DEVELOPMENT

1 Read the following statement – Assertion (A) and Reason (R). Choose one of 1
the correct alternatives given below:
Assertion (A): SHG has emerged as the major micro finance program in the
country in the recent years.
Reason (R): SHGs have also helped in the empowerment of women.
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 and 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
2 Read the following statement – Assertion (A) and Reason(R). Choose one of 1
the correct alternatives given below:
Assertion (A): Farmers were often forced to sell at low prices due to lack of
information on prices prevailing in the market.
Reason(R): The market information system was quite undeveloped and it led
to poor economic condition of the farmers.
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 and 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

61
3 Calculate the % share of fruits and vegetables of export of total exports of 1
organic food product from India.

Alternatives:
a) 15.93%
b) 19.3%
c) 14.6%
d) 11.3%
4 Read the following statements carefully: 1
Statement 1: Short – term credit refers to credit taken for a period of less than
fifteen months.
Statement 2: Medium – term credit refers to credit taken for 15 months to 5
years.
In the light of the given statements, choose the correct alternative from the
followings:
a) Statement 1 is true and statement 2 is false
b) Statement 1 is false and statement 2 is true
c) Both the statements 1 and 2 are true
d) Both statements 1 and 2 are false
5 Agricultural marketing system can be improved if, -------(choose the correct 1
alternative)
1. There will be extension of storage facilities
2. There will be improvement of transport facilities
3. There will be provision of informal credit facilities
4. There will be prompt supply of market information

Alternatives:

a) 1,2 and 3 are correct

b) 2,3 and 4 are correct
c) 1,3 and 4 are correct
d) 1,2 and 4 are correct
6 Why is the minimum support price fixed by the government? 1
a) For the benefit of government
b) To safeguard the interest of farmers
c) To safeguard the interest of consumers
d) For the benefits of traders

62
7 Cheap and affordable credit is advocated for the farmers because it ---------. 1
(Choose the correct alternative)

a) Reduces the debt burden

b) Formal sources give loans without collateral
c) Is mainly used for social functions
d) Can be waived out if not repaid
8 Identify the incorrect pair from the followings: 1

i)Nationalisation of Banks A.1969

ii)Operation flood or white B.1970

Revolution started by National
Dairy Development Board
iii)Establishment of NABARD C.12th July,1982

iv)Period of Golden D.2000 to 2010

Revolution

Alternatives:
a) i – A
b) ii - B
c) iii – C
d) iv – D
9 The scheme of Micro-Finance is extended through------. 1
a) Regional Rural Banks
b) Self-Help Groups
c) NABARD
d) Horticulture

10 Distress sale by the farmers refers to: 1

(Choose the correct Alternative)
a) Sale of rotten crop
b) Sale of crop through commission agents
c) Sale of crop at the MSP fixed by the government
d) Sale of crop at a very low price

11 Interpret the given picture on account of emerging alternate marketing 3

channels in India.

63
12 State the limitations of Organic Farming. 3

13 “There are no benefits of diversification of agricultural activities.” Do you 4

agree? Support your arguments with valid arguments.

14 Read the following text carefully and answer the given questions on the basis 3+3
of the same and common understanding:
Dairy production in India will experience a brisk growth in the coming years.
The increase in production arises from traditional small family firms. In
addition, new companies are emerging. Mechanisation and automation are at a
low ebb in both types of farm. How rapidly this will change mainly depends
on price and the availability of labour.
There is a strong increase in the demand for milk in India, partly due to the
growing number of inhabitants. The country is expected to count 1.5 billion of
inhabitants by 2035. Population growth in India is exceeding that of China,
thus resulting in a larger population in India that in China by 2030. Dairy
consumption is also increasing per capita. This is mainly due to the growing
middle class. In 2011-12 the milk supply was 290 grams per day per capita. As
a result of better living conditions and a recovering economy the increasing
demand for dairy products in India is expected to exceed production.
Yet, it is questionable if India will emerge as a major dairy importer. The
country has an extensive range of import restrictions. The fact that regional
authorities are responsible for regional trade disputes makes it more complex,
says Bram Prins, Chairman of the Global Dairy Farmers (GDF). Prins visited
India to explore the opportunities and possibilities for the development of
dairy farming industry in India.
As the Indian dairy sector is highly fragmented, so called backward
integration by increasing the supply after the takeover of dairy companies, is
not a simple matter. A large part of the country’s dairy sector consists of small
scale farms with two or eight cows. This farm category consists of 80% of the
national milk production. These family farms are a key part of the rural social
system. Without these small farms there wouldn’t be employment for all those
who live in the countryside. The larger dairies deal with more than 300,000
suppliers. Such numbers make it difficult to sufficiently guide individual dairy
farmers to better quality of milk maintaining during milking, lack of cooling
issues and under health issues associated with antibiotic issues. So, it is
64
essential to improve animal health and milk quality with a combination of
Indian and western knowledge.

a) Why do you think that there will be increase in demand and production
of milk in India in the recent years?
b) Justify with valid reason that maintaining standards with milk
production, family farms can gain a lot in India.
MARKING SCHEME

1 Answer: b) Both Assertion(A) and Reason(R) are true and 1

reason(R) is not the correct explanation of Assertion (A).

2 Answer: a) Both Assertion(A) and Reason(R) are true and 1

reason(R)is the correct explanation of Assertion (A

3 Answer: a) 1800/ 11295 x100 = 15.93% 1

4 Answer: c) Both the statements 1 and 2 are true 1

5 Answer: d) 1,2 and 4 are correct 1

6 Answer: b) To safeguard the interest of farmers 1

7 Answer: a) Reduces the debt burden 1

8 Answer: d) iv - D 1

9 Answer: c) NABARD

10 Answer: d) Sale of crop at a very low price

11 Answer: The given image indicates that Apni Mandi is an 3

initiative to encourage farmers to directly sell their product
to the consumers without being exploited by middlemen or
traders.

12 Answer: i) shorter span of life 3

ii) low yield
iii) limited choice of crops

65
 13 Answer: No, I don’t agree with the given statement. 4
Diversification of agricultural activities into other sectors
essential due to the following reasons:
i)to provide supplementary gainful employment
ii)To enable them to earn higher incomes

14 a) With the increase in the living standards of the people 3

the demand for milk consumption in the country will
increase. The growing middle class in India is a strong
reason od increase in the demand for milk production.
Due the development of education and health
awareness among the masses the consumption of milk
will definitely increase.
b) The family farms those who supply milk to the larger
dairies, have to maintain standards like hygiene
during milking, proper cooling of milk etc. Indian
dairies should look after and help the farmers to
improve animal health and milk quality by adopting
Indian and western technology. The farmers can
produce more and expect a better price of the milk
which make them financially sound. It can solve the 3
problem of unemployment both in rural as well as in
urban areas.

Chapter 6: EMPLOYMENT, GROWTH,

INFORMALISATION AND OTHER ISSUES
1.Read the following statements carefully and choose the correct alternative from the
following. 1

Statement I : Number of unemployed people can be determined by subtracting work

force from labour force
Statement II : Children below 15 years and old persons above 60 years of age are
excluded from labour force.
A. Both the statements are true
B. Both the statements are false
C. Statement I is true and Statement II is false
D. Statement I is false and Statement II is true.
2. In a hypothetical economy, labour force is 800, work force is 400 and total population is
1000 then rate of unemployment is _________. (Choose the correct option) 1
A. 50%
B. 75%
C. 25%
D. 10%
3. The process of moving from self employment and regular salaried employment to casual
wage work is known as _____________.(Choose the correct option) 1

66
 A. Informalisation of work force
B. Casualisation of work force
C. Both (A) & (B)
D. Neither (A) nor (B)

4. Which of the following is not a feature of organized sector? 1

A. Job Security
B. Social security benefits
C. Irregular payment
D. Fixed working hours cash-lide

5. The ratio of labour force to total population is termed as ----- 1

A. Labour force participation rate

B. Work force participation rate
C. Both (A) & (B)
D. Neither (A) nor (B)

6. From the set of statements given in Column I and Column II, choose the pair of statements.

Column I Column II

(a) Regular workers (i) Daily wagers

(b) Low capital formation (ii) Cause of unemployment in India
(c) Formal workers (iii) Can form trade unions
(d) Stuctural unemployment (iv) Only found in urban areas

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

7. Which of the following is an accurate definition of a self-employed person? 1

A. A self-employed person receives a salary from their employer on a regular basis

B. A self-employed person owns as well as operate a business
C. A self-employed person is employed only for a few months in a year
D. All of the above

8. Which of the following statements is true? 1

A. An establishment that has four hired workers is known as an informal sector

establishment
B. An establishment that has four hired workers is known as a formal sector
establishment
C. Both a and b are correct
D. Both a and b are incorrect

Assertion-Reason based questions

67
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: 1
9.
Assertion (A) : Urban unemployment is a spillover of rural unemployment.
Reason (R) : Owing to the lack of opportunities of employment, people in the rural
areas are compelled to migrate to the urban areas in search of
livelihood.
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 and 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.

10. Choose one of the correct alternatives given below: 1

Assertion (A): Lack 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 has
failed to generate enough employment.

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 and 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.
Picture/Graph/Table-based questions.

11. Interpret the given picture on account of employment generation in India 3

68
12. Analyze the trends in sectoral distribution of workforce in India. Trends in
Employment pattern (sector wise) 1993- 2012(in percentage) is given below. 3

13. Read the following text carefully and answer the given questions on the basis of
the same and common understanding:

Unemployment is a very serious issue, not only in India but in the world. There are
hundreds and thousands of people who do not have employment. Besides the problem
of unemployment are very severe in India because of the growing population and
demand for jobs. Moreover, if the country neglects this problem then it will be going
to become the reason for the doom of the nation. Unemployment refers to a situation
in which skilled and talented people wanted to do a job but cannot find the proper job
due to several reasons. There are various types of unemployment in the country
including disguised unemployment, open unemployment, seasonal unemployment etc.
Worker population ratio is an indicator which is used for analyzing the employment
situation in the country. In India the proportion of work force in the formal sector to
total workforce is very high. Population growth, slow economic growth, seasonal
occupation, slow growth of economic sector and fall in the cottage industry are major
reason for unemployment in India. Largest portion of the population is engaged in
agricultural sector and the sector provides employment in harvest or plantation time
only.

(i) Define unemployment. Identify the types of unemployment observed in rural and
urban areas. 3
(ii) Find out the three reasons of unemployment in India 3

ANSWERS

1. (A) Both the statements are true

2. (A)50%
3. (B) Casualisation of work force
4. (C)Irregular payment
5. (A) Labour force participation rate
6. (C)(c),(iii)
7. (B)A self-employed person owns as well as operate a business
8. (A) An establishment that has four hired workers is known as an informal sector
establishment
9. (A)Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A).

69
10. (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A).
11.
(i) The Make in India initiative was launched in the year September 2014
primarily with the goal of transforming the country into a global
manufacturing hub. The idea was to encourage both the global as well
as the domestic companies to set up manufacturing units within India.
(ii) India is poised to be third largest economy along with US and China, and
MSME (Micro, Small & Medium Enterprises) sector is poised to play a
significant role in providing the take-off to our manufacturing and services
sector. Many global IT and technology giants have revealed their expansion
plans and how they will leverage 'Make in India'. With 'Smart Cities'
initiatives and 'Digital India' mission, technology is going to change the
way the world sees us.

(iii) In 2015 India became a prime destination for foreign direct investment.

(iv) To promote skill development among workers and employers.

(v) To create 100 million more jobs in the manufacturing sector by 2022.
12.
(i) The given data indicates that over the given period, the proportion of
workforce in primary sector has gone down significantly.
(ii) Whereas, the employment share of both secondary sector and the service
sector has increased gradually.
(iii) While the share of secondary sector has gone up by approximately 9%
recently, the corresponding figure for service sector has gone up by
approximately 7.1 %. This also shows that dependency on agriculture
remained high as secondary and service sector was not created in of
employment.
13. (a)Unemployment refers to a situation where people are having willingness and
ability to do the work but not able to get the work at existing wage rate.
Types of unemployment :
Rural Areas : Disguised and Seasonal unemployment
Urban Areas : Industrial and Educated unemployment.
(b) Reasons for unemployment :
(i) Population Explosion ,

(ii) Slow economic growth,

(iii) Seasonal occupation,
(iv) fall in the cottage industry
(v) Underutilization of resources etc.

Chapter-7: Environment and sustainable development

1. Which of the following is/are important function of environment? (1 Mark)
a) To provide resources for production
b) To assimilate waste
70
c) To provide aesthetic services
d) All of the above
2. To address water and air pollution in India, the government have set up the central
pollution control board (CPCB) in the year ________________. (1 Mark)

a) 1974 c) 1984
b) 1991 d) 1994
3. Which of the following is not used as a strategy for sustainable development?
(Competency -Logical) (1Mark)

a) Use of Biogas c) Use of Solar Power

b) Use of Thermal Power d) Use of Hydro power
4. Environmental crisis occurs when :- (1 Mark)
a) Absorptive capacity of environment exceeds the generation of waste.
b) Generation of wastes exceeds the absorptive capacity of environment.
c) Wastes occur due to production and consumption activities in the economy.
d) None of these
5. The principal concerns of environmental degradation in India does not include:-
(1 Mark)
a) Degradation of land
b) Spike in Biodiversity
c) Problem of solid waste management
d) Air population
6. The Chipko movement was launched in ______________________. (1Mark)

a) Uttarakhand c) Jharkhand
b) Karnatak d) Odisha
7. Select the option which match the following column correctly (1Mark)
(Competency Analytical):-
Column I Column II
A. Absorptive capacity of Environment i) Cause of emission of greenhouse gases
B. Ozone layer depletion ii) Environmental Friendly
C. Using more polluting vehicles iii) A reduction in protective layer of the
environment
D. Mini Hydro-electric Plants iv) Ability of the environment to Absorb waste.

a) A-ii, B-i, C-iv, D-iii c) A-iv, B-iii, C-i, D-ii

b) A-iii, B-iv, C- ii, d- I d) A- i, B-iv, C-ii, D-iii
8. Government feels that most of the poor and rural women are going to collect wood for
cooking , that’s why central government have launched Ujjwala Yojana, which promote the
use of ____________________. (Competency -Situational based) ( 1 Mark)
a) LPG c) Gobar Gas
b) CNG d) Solar Gas
Read the following statement –Assertion (A) and Reason (R). chose the correct alternative
from the following:-
i) A and R are true and R is the correct explanation of A.
71
ii) A and R are true but R is not the correct explanation of A.
iii) A is true R is false
iv) A and R both are false
9. Assertion (A):- Environmental degration occurs when carrying capacity of the
environment is challenged. (1Mark)
Reason(R) :- This happen when waste generation is below the absorptive capacity
of the environment.

a) ii c) iv
b) iii d) i

10. Assertion (A):- Affluence in living standards is causing environmental degration.

Reasons (R) :- Increase in wealth increases the demand for goods and services, means more
production is required. (1Mark)

a) iii c) i
b) iv d) ii
11. Read the following test carefully and answer the given questions on the basis of the
same and common understanding:
Solid waste management is a major problem in rural Punjab. The lack of a waste management
system is polluting the environment and adversely affecting the health of residents. While 60-
70% of the daily unsegregated waste is biodegradable, it ends up in unsanitary piles, clogging
drains, and polluting the soil and water of villages. If not addressed immediately, it could lead
to a public health crisis in Punjab.
Round Glass Foundation's Waste Management program (Over the last three years, the
Foundation has set up 116 waste management facilities, creating many jobs and impacting
21,000+ households) aims to make villages of Punjab cleaner and healthier. The program
implements a decentralized segregation model for composting and recycling for efficient,
cost-effective, and sustainable waste management. The Foundation's Waste Management
model partners with the Government of Punjab to provide a functioning solution to manage
rural waste by:
Creating awareness - Mobilize and educate the local community to adopt and maintain a solid
waste management system.
Engaging community - Identify and involve community champions in the adoption of the
program. And further to build and maintain the composting facility, and set up a street
cleaning, and garbage collection system.
Targeting zero waste - Analyze, monitor, and continuously optimize the process, outcome,
community adherence, and participation for ‘Zero Waste’ targets.
Campaign objective: Set up 5 waste management facilities across 5 villages and this requires
6.25 lacs INR.
a) How lack of solid waste management is polluting the environment in rural
Punjab ? (3 Mark)
b) The Foundation's Waste Management model partners with the Government of Punjab
to provide a functioning solution to manage solid waste? Do you agree with the statement if
yes, how? (3 Mark)

72
12. Give one word to the given picture. (1 Mark)
13. What are major problems related with the given picture? (3 Mark)

14. Just see the picture given below, write briefly about it. (3 Mark)

MARKING SCHEME

1 d. All the above 1

2 a. 1974 1

3 b. Use of Thermal Power 1

4 b. Generation of wastes exceeds the absorptive capacity of 1

environment.
5 b. Spike in Biodiversity 1

6 a. Uttarakhand 1

7 c. A-iv, B-iii, C-i, D-ii 1

8 a. LPG 1

9 b. iii A is true R is false 1

10 c. i. .A and R are true but R is not the correct explanation of A. 1

11 a) The lack of a waste management system is polluting the 3

environment and adversely affecting the health of residents in rural
punjab. While 60-70% of the daily unsegregated waste is

73
 biodegradable, it ends up in unsanitary piles, clogging drains, and
polluting the soil and water of villages. If not addressed immediately,
it could lead to a public health crisis in Punjab.
b. Yes, I agree that The Foundation's Waste Management model
partners with the Government of Punjab to provide a functioning
solution to manage waste by ;i)Creating awareness - Mobilize and
educate the local community to adopt and maintain a solid waste
management system.
ii) Engaging community - Identify and involve community
champions in the adoption of the program. And further to build and
maintain the composting facility, and set up a street cleaning, and 3
garbage collection system.
iii) Targeting zero waste - Analyze, monitor, and continuously
optimize the process, outcome, community adherence, and
participation for ‘Zero Waste’ targets.
12 Deforestation 1

13 Global Warming, Soil Erosion, Bio diversity loss, Climate change 3

(brief explaination of any three)

14 Chipko movement, also called Chipko andolan, nonviolent social and 3

ecological movement by rural villagers, particularly women, in India
in the 1970s, aimed at protecting trees and forests slated for
government-backed loggingat the Himalayan region of Uttarakhand
(then part of Uttar Pradesh)

Chapter-8: COMPARATIVE DEVELOPMENT

EXPERIENCES OF INDIA AND ITSNEIGHBOURS
CASE STUDY:
Read the following text carefully and answer the questions given below:
SINO-PAK FRIENDSHIP CORRIDOR
The China-Pakistan Economic Corridor (CPEC) has deepened the decades-long strategic
relationship between the two nations. But it has also sparked criticism for burdening Pakistan
with mountains of debt and allowing China to use its debt-trap diplomacy to gain access to
strategic assets of Pakistan.
The foundation of CPEC, part of China’s Belt and Road Initiative, were laid in May 2013. At
the time, Pakistan was reeling under weak economic growth.
China committed to play an integral role in supporting Pakistan’s economy.
Pakistan and China have a strategic relationship that goes back decades. Pakistan turned to
China at a time when it needed a rapid increase in external financing to meet critical
investments in hard infrastructure, particularly powerplants and highways. CPEC’s early
harvest projects met this need, leading to a dramatic increase in Pakistan’s power generation
capacity, bringing an end to supply-side constraints that had made rolling blackouts a regular
occurrence across the country.
74
Pakistan leaned into CPEC, leveraging Chinese financing and technical assistance in an
attempt to end power shortages that had paralyzed its country’s economy. Years later,
China’s influence in Pakistan has increased at an unimaginable pace.
China As Pakistan’s Largest Bilateral Creditor: China’s ability to exert influence on
Pakistan’s economy has grown substantially in recent years, mainly due to the fact that
Beijing is now Islamabad’s largest creditor. According to documents released by Pakistan’s
finance ministry, Pakistan’s total public and publicly guaranteed external debt stood at $44.35
billion in June 2013, just 9.3 percent of which was owed to China. By April 2021, this
external debt had ballooned to $90.12 billion, with Pakistan owing 27.4 percent--$24.7
billion—of its total external debt to China, according to the International Monetary Fund
(IMF).
Additionally, China provided financial and technical expertise to help Pakistan build its road
infrastructure, expanding north-south connectivity to improve the efficiency of moving goods
from Karachi all the way to Gilgit-Baltistan (POK).
These investments were critical in better integrating the country’s ports, especially Karachi,
with urban centers in Punjab and Khyber-Pakhtunkhwa provinces.
Despite power asymmetries between China and Pakistan, the latter still has tremendous
agency in determining its own policies, even if such policies come at the expense of the long-
term socioeconomic welfare of Pakistani citizens.
1. Outline and discuss any two economic advantages of China Pakistan Economic
Corridor (CPEC) accruing to the economy of Pakistan. (3)
2. Analyze the implication of bilateral ‘debt-trap’ situation of Pakistan vis-a-vis the
Chinese economy. (3)

ASSERTION and REASON:

1.Read the following statements: Assertion(A) and Reason(R). (1)

Choose one of the correct alternatives given below:

Assertion(A): FDI in China is higher than in India or Pakistan.
Reason(R): China is found to be more investment friendly destination.
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 and 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.
2. Read the following statements: Assertion(A) and Reason(R).
Choose one of the correct alternatives given below: (1)
Assertion(A): Pakistan followed a process of import substitution in the initial
years of independence.
Reason(R): Its main goal was to provide protection to the domestic
producers.
Alternatives:
a) Both Assertion (A) and Reason(R) are true and Reason (R) is the correct explanation
of Assertion(A).

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b) Both Assertion (A) and Reason(R) are true and 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.

PICTURE BASED QUESTION:

1. Identify the picture and explain the reasons behind the economic crisis prevailing in
this country. (3)

2. Explain the implications behind the picture. (3)

MCQs.
1. Pakistan has performed better than India in the area of: (1)
a) poverty (b) sanitation (c) HDI (d) both (a) and (b)

2. Identify the correct sequence of alternatives given in Column II by matching them

with respective items in Column I: (1)
3.
Column I Column II

A. Establishment of People’s (i) A cause of re-emergence of

Republic of China poverty in Pakistan

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 B. Economic reforms in Pakistan (ii) 1949

C. Lack of political stability (iii) Conducive to foreign direct

investment

D. SEZ (iv) 1988

Alternatives:

a) A-(ii), B-(iv), C-(i), D-(iii)

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

4. Identify the correct statement from the following: (1)

a) Life expectancy is higher in Pakistan as compared to India.

b) Pakistan’s GDP per capita is higher than India.
c) China’s performance in providing sanitation is better than India.
d) Pakistan ranks high in human development index as compared to India.

5. India is not a member of which of the following regional/global economic grouping?

a) SAARC (b) G-7

(c) BRICS (d) G-20 (1)

6. Arrange the following events of China in chronological order and choose the correct
alternative: (1)
(i) Great Proletarian Cultural Revolution
(ii) Great Leap Forward Campaign
(iii) Introduction of Economic Reforms
(iv) First Five-Year Plan
Choose the correct alternative:
a) ii, iv, iii, i
b) iv, ii, i, iii
c) ii, iv, i, iii
d) iv, i, ii, iii
7. The Great Leap Forward (GLF) campaign focused on: (1)
a) widespread industrialization
b) new agricultural strategy
c) privatization
d) economic reforms
8. In terms of the sectoral composition to GDP, economies of India and Pakistan are
now relying more on: (1)
a) primary sector (c) tertiary sector
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 b) secondary sector (d) both (a) and (b)
9. Economic reforms were introduced in Pakistan in -----------. (1)
a) 1978 (b) 1980 (c) 1988 (d) 1991

MARKING SCHEME

1. Economic advantages of (CPEC) to the economy of Pakistan are:

a) China provided financial and technical expertise to help Pakistan build its road
infrastructure, supporting employment and income in the economy.
b) CPEC has led to a massive increase in power generation capacity of Pakistan. It
has brought an end to supply-side constraints in the nation, which had made
blackouts a regular phenomenon across the country.

2. China has become famous for its ‘Debt Trap Diplomacy’ in recent times.
Under this, China provides financial and technical expertise to help various nations to
bring them under its direct or indirect influence. The first and foremost implication of
the diplomacy is that Beijing has now become Islamabad’s largest creditor.
According to documents released by Pakistan’s finance ministry, its total public
external debt stood at $44.35 billion in June 2013, just 9.3 percent of which was owed
to China. By April 2021, this external debt ballooned to $90.12 billion, with Pakistan
owing 27.4 percent--$24.7 billion—of its total external to China, according to the
IMF.
ASSERTION and REASON:
1. a) Both Assertion (A) and Reason(R) are true and Reason (R) is the correct
explanation of Assertion(A).
2. d) Assertion (A) is false but Reason (R) is true.
PICTURE INTERPRETATION:
1. a) low economic growth
b) high inflation and unemployment
c) excessive fiscal deficit and deteriorating BOP.
2. a) to restrict the growth of population
b)led to fall in fertility rate
c) slow annual growth of population
MCQs:
1. b) sanitation
2.a) A-(ii), B-(iv), C-(i), D-(iii)
3.c) China’s performance in providing sanitation is better than India.
4.b) G-7
5.b) iv, ii, i, iii 6. (a) 7. (c)

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