CBSE Class 12 Economics Question Paper 2022 (Term-II) with Solutions

Students can use CBSE Previous Year Question Papers Class 12 Economics with Solutions and CBSE Class 12 Physics Question Paper 2022 (Term-II) to familiarize themselves with the exam format and marking scheme.

CBSE Class 12 Economics Question Paper 2022 (Term-II) with Solutions

Time Allowed: 2 hours
Maximum Marks: 40

General Instructions:

1. This question paper contains 13 questions.
2. All questions are compulsory. Marks are indicated against each question.
3. This question paper contains 5 questions of 2 marks each, 5 questions of 3 marks each and 3 questions of 5 marks each.
4. 2 marks questions are Short Answer Type questions and are to be answered in 30-50 words.
5. 3 marks questions are Short Answer Type questions and are to be answered in 50-80 words.
6. 5 marks questions are Long Answer Type questions and are to be answered in 80-120 words.
7. There is no overall choice in the question paper. However, internal choice has been provided in few questions. The candidates need to attempt only one question from such questions.
8. This question paper contains Case/Source Based Question also.

Question 1.
When does Net Factor Income from Abroad (NFIA) show Negative Value? [2]
Or
State the meaning of retained earnings.
Answer:
Net Factor Income from Abroad (NFIA) refers to the difference between Factor income received from the rest of the world and Factor income paid to the rest of the world. It is negative when income earned from abroad is less than income paid to abroad.
Or
Retained earnings refer to that part of profits which is kept as reserve after paying the Corporate tax and dividends.

Question 2.
On the basis of the following schedule, answer the given questions : [2]

(a) Calculate Marginal Propensity to Save (MPS) at f 150 crores level of income. [1]
(b) What is the value Autonomous Consumption? [1]
Or
In an economy 75 percent of thie increase in income is spent on consumption. Investment increased by ?1,000 crores.
Calculate the total increase in income on the basis of given information.
Answer:
(a) As we know, MPS = \(\frac{\text { Change in Savings }(\Delta \mathrm{S})}{\text { Change in Income }(\Delta \mathrm{Y})}\) = \(\frac{30-0}{150-100}\) = \(\frac{30}{50}\) = 0.6

(b) At zero level of income, the consumption is called autonomous consumption.
∴ Autonomous consumption = Income – Savings = 0 – (-20) = 20
Or

Given: MPC = 75% or 0.75; Chance in investment (∆I) = 1000
As we know, Multiplier (k) = \(\frac{1}{1-MPC}\) = \(\frac{1}{1-0.75}\) = \(\frac{1}{0.25}\) = \(\frac{100}{25}\) = 4

We also know that, k = \(\frac{\Delta y}{\Delta I}\)
= 4 = \(\frac{\Delta y}{\Delta I}\)
∴ ∆y (Increase in Income) = ₹4,000 croes

Question 3.
‘Excess demand creates greater opportunities of employment in the economy.’ Defend or refute the given statement with valid explanation. [2]
Answer:
The statement stands refuted. Excess Demand refers to the situation when Aggregate Demand is more than the Aggregate Supply corresponding to full employment level of output in the economy. It is the excess of anticipated expenditure over the value of full employment output. It is not a desired situation because it does not lead to any increase in the level of aggregate supply as the economy is already at full employment level .Their will be no change in the level of employment as the economy is already operating at full employment equilibrium and there is no involuntary unemployment.

Question 4.
“In India women participation rate is lower in urban areas than in the rural areas.” Explain with valid arguments. 2
Or
“Infrastructure contributes directly to the economic development of a country.” Do you agree with the given statement? Explain.
Answer:
Women in general and urban women in particular do not participate much in work. The reasons for this are as follows:

• Women education in India is still lagging behind implying less job opportunities for them.
• The decision to work for women in urban areas is still taken by their families who do not wish them to work even though opportunities may be available.
• Higher work participation in rural areas by women is due to poverty in rural areas. However, women workers in rural areas are generally engaged in low paid and less productive jobs.
• Many activities performed by women like cooking, looking after the household, etc. are not considered productive activities and hence are not recognised as economic activities.
• The ratio of women workers in rural areas is more than the women workers in urban areas because people in rural areas need to work due to their poor economic condition.

Or

Yes, I agree with the statement. Infrastructure development in an economy increases productivity of the factors of production, induces higher investment, facilitates employment and generates more income thereby improving the quality of life of the people. Infrastructure provides supporting services in the main areas of industrial and agricultural production, domestic and foreign trade and commerce. Some of the services have a direct impact on production of goods and services while others give indirect support by building the social sector of the economy. Infrastructure is of great significance for an economy. It contributes to economic development both by increasing the productivity of factors of production and by improving the quality of life of the people.

Question 5.
‘Stimulating public mode of transportation may lead to promote sustainable development.’
Explain with valid arguments. [2]
Answer:
In India, Air pollution is widespread in urban areas due to concentration of industries, thermal power plants and vehicular congestion. Due to unplanned urbanization, the total number of registered vehicles has also increased contributing significantly to total air pollution. It has resulted in ozone depletion which is leading to climate changes. Therefore, the need of the hour is sustainable transport, that is transport which provides mobility to people and goods, supports economic and social development and benefits today’s and future generations in a manner that is safe, affordable, accessible, efficient and resilient while minimizing carbon and other emissions and environmental impacts. Thus, promoting the use of public transportation such as Delhi Metro and Trains and BRTS system instead of more of private vehicles will help in promoting sustainable development.

Question 6.
Giving valid reasons, explain how the following would be treated while estimating National income: V-h+V-h
(a) Payment of indirect taxes by a firm.
(b) Purchase of goods by foreign tourists.
Answer:
(a) Payment of indirect taxes by a firm is not included while estimating National income because such payments are transfer payments as there are no services provided in return by the government.
(b) Purchases by foreign tourists. Such expenditure by foreign tourists on domestic product is treated as export of goods and services. Therefore, it is included while calculating National income.

Or

Using the following information, calculate and analyse the value of Gross Domestic Product (GDP) deflator:

Explain how Bio-composing can be helpful in achieving the objectives of sustainable development. [3]
Answer:
For 2014-15:
∴ GDP Deflator = \(\frac{\text { Nominal GDP }}{\text { Real GDP }}\) × 100 = \(\frac{6.5}{6.5}\) × 100 = 100%

For 2016-17:
∴ GDP Deflator = \(\frac{\text { Nominal GDP }}{\text { Real GDP }}\) × 100 = \(\frac{9}{7.2}\) × 100 = 125%
This implies that there has been an increase in the general price level by 25%.

Question 7.
Explain how Bio-composing can be helpful in achieving the objects of sustainable development
Answer:
With the advent of Green Revolution, farmers started using more and more chemical fertilisers and pesticides for higher yield. But the adverse impact of using these chemical based products has started to show with agricultural products, dairy products and fishes being contaminated along with productive land, water bodies including ground water. Therefore, farmers have again started using compost made from organic wastes of different types. Cow dung, an important fertilizer and soil conditioner, is now being widely used by farmers and other people. Earthworms can also convert organic matter into Compost faster than the normal composting process which has made this process popular again.

Question 8.
Explain briefly the problem faced by Great leap forward campaign. [3]
Answer:
The Great Leap Forward (GLF) campaign was initiated in 1958 in China aimed at industrialising the country on a massive scale. People were encouraged to set up industries in the backyards. However, the GLF campaign met with many problems. A severe drought caused mass starvation in China killing about 30 million people. The policies of the Great Leap Forward, the failure of the government to respond quickly and effectively to famine conditions, were responsible for this havoc. Moreover, Russia withdrew its professionals, who had, earlier been sent to China to help in the industrialisation process, when it had conflicts with China.

Question 9.
Compare and analyse the Annual Growth rate of population of India and China.

Answer:
Though China is the most populated’country in the world, its annual growth rate of population (0.5%) is lower than that of India (1.2%). The reason being China’s One child policy introduced in the late 1970s. This measure also led to a decline in the child sex ratio. It had other implications also. For instance, after a few decades in China, there will be more elderly people in proportion to young people. This has led China to allow couples to have two children.

Question 10.
If in an economy Bank rate is increased, how will it affect the demand for credit? Explain. [3]
Answer:
Bank Rate is the rate of interest at which the Central Bank lends money to the commercial banks in emergency, acting as “Lender of the last resort”. The purpose of change in bank rate is to change the cost of borrowings from the Central Bank.

(i) An increase in the bank rate increases the cost of borrowings from the Central Bank. Therefore, if the Central Bank increases the bank’rate, the commercial banks also increase the rates at which they lend to the public and business firms. It makes the borrowings costly. This will discourage the people to take loans. This also reduces the ability of commercial banks to create credit. Thus volume of credit and money supply will decrease in the economy.

Question 11.
(a) (i) From the following data, calculate Net Value Added at Factor Cost (NVA_FC):

(ii) Why there is a need to make distinction between final and intermediate good?
Answer:
NVA_FC
= Price per unit of output × Output sold (units) + Change in stock – Single use producer goods – Consumption of fixed capital – Excise duty
= (20 × 1,250) + (-500) – 6,000 – 1,000 – 5,000
= 25,000 – 500 – 6,000 – 1,000 – 5,000
= ₹12,500 crores

(ii) Final goods refer to those goods which are used either for consumption or for investment. Intermediate goods refer to those goods which are used either for resale or for further production within the same year.
It is important to make this distinction because only final goods are included in National Income. Intermediate goods are not included in National Income as they are already included in final goods. If their value is added again, it will lead to the problem of double counting.

Or

(b) (i) Discuss briefly the concept of ‘Externalities’, with suitable example. [3]
(ii) Export are not a part of ‘Net Factor Income from abroad.’ [2]
Elaborate the reason behind the given statement.
Answer:
(i) Externalities refer to the benefits or harms of an activity caused by a firm or an individual for which they are not paid or penalised. Activities resulting in harm to others are called negative externalities.
For example, factories produce goods but at the same time pollute environment which harms people. Production of goods increases welfare but creating pollution reduces welfare, which is not indicated by GDP.

(ii) Exports are not included in Net Factor Income from Abroad because of two reasons:

1. Export refers to the purchase of domestically produced goods by the rest of the . world. Goods produced within the domestic territory of a country are to be treated as a part of GDP.
2. Export receipts refer to revenue of the firm from the sale of its output. These are not the receipts of factor income from abroad which are to be in the form of rent, interest, profit and wages. Also, export is a domestic concept whereas NFIA is a national concept.

Question 12.
Explain the role of legal reserve ratio and Bank rate in correcting inflationary gap in an economy. [5]
Answer:
The situation of inflationary gap arises when equilibrium is established after the stage of full employment. The excess of aggregate demand over aggregate supply at the full employment level is inflationary.gap. For bringing equality between AD and AS at the full employment level AD has to be reduced because AS cannot be increased since all the resources are fully-employed.

(i) Legal reserves Ratio. Legal reserves refer to a minimum percentage of deposits commercial banks have to keep as cash either with themselves or with the central bank. The central bank has the power to change it. When there is inflationary gap the central bank can raise the minimum limit of these reserves so that less funds are available to the banks for lending. This will reduce Aggregate Demand.

(ii) Bank rate. Bank rate is the rate of interest which central bank charges from commercial banks for giving them loans. If bank rate is increased, the rate of interest charged by commercial banks for general public also goes up and this reduces the demand for credit by the public for investment and consumption. Therefore, for controlling the situation of inflationary gap, bank rate is increased.-This ultimately will lead to the decline in the demand for credit. Decline in the volume of credit as a component of money supply will have controlling pressure on inflationary forces.

Question 13.
Case Study
Read the following text carefully and answer question numbers 13(a) and 13 (b) given below: [5]
The centre’s PM Gati Shakti Scheme will give much needed push to infrastructure development and logistic across India. This scheme will drive the economic growth by giving boost to industries such as steel and cement.
Greater connectivity is expected to improve economic opportunities for small farmers and small and medium enterprises through new roads, cargo terminals etc.
The Gati Shakti Scheme features at the centre stage of Budget 2022-23, highlighting the importance of quality multi-modal transport in achieving overall cost competitiveness. Under Gati Shakti Scheme, the railways will develop new products and services targeted at small farmers and businesses to help them become a part of layer supply chain.
Source: The Economic Times, Feb. 2,2022 (Modified)
(a) State the meaning of infrastructure. [2]
(b) Explain any two objectives of PM Gati Shakti Scheme. [3]
Answer:
(a) Infrastructure refers to all such activities, services and facilities which are needed to provide different kinds of services in an economy. Infrastructure provides supporting services in the main areas of industrial and agricultural production, domestic and foreign trade, and commerce. These include the education system, the health system, the monetary system, roads, railways, telecommunication, oil and gas pipelines etc.

(b) Two objectives of Prime Minister’s Gati Shakti Scheme:

1. The Gati Shakti scheme is expected to improve infrastructure development and logistics across India, thereby, driving economic growth by giving a boost to industries such as steel and cement.
2. This scheme is also expected to improve economic opportunities for small farmers and small and medium enterprises (SMEs) through new roads, cargo terminals etc. Therefore, the Railways will develop new products and services targeted at small farmers and businesses to help them become a part of multi-layer chain.