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Class 12 - Economics
Sample paper - 01 (2024-25)

Maximum Marks: 80
Time Allowed: : 3 hours

General Instructions:

1. This question paper contains two sections:

Section A – Macro Economics
Section B – Indian Economic Development
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.

SECTION A – MACRO ECONOMICS

1. Statement I: Balance of Payment is an accounting statement which records all the economic transactions that take place
between the residents of a country during a given period of time.
Statement II: Current account of Balance of Payment records all the transactions that relate to assets or liabilities.
a) Both the statements are false.
b) Both the statements are true.
c) Statement I is true, but statement II is false.
d) Statement II is true, but statement I is false.
2. Which of the following is not a problem of barter system of exchange?
a) Double Coincidence of Wants
b) Unit of Account
c) Unemployment
d) Store of Value
3. Suppose in a hypothetical economy, the income rises from ₹ 5,000 crores to ₹ 6,000 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) 0.8
b) 0.4
c) 0.2
d) 0.6
4. In a ________ the central banks do not intervene in the foreign exchange market.
a. Completely flexible exchange rate system, i.e. clean floating
b. Fixed exchange rate system
c. Both (a) and (b)
d. Managed floating exchange
a) Option (a)
b) Option (d)
c) Option (b)
d) Option (c)

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5. If the value of Average Propensity to Consume (APC) is 0.8 and National Income is ₹4,000 crore, the value of savings
will be ________.
a) ₹ 500 crores
b) ₹ 100 crores
c) ₹ 800 crores
d) ₹ 200 crores
6. Which of the following statements is not the correct regarding Excess Demand?
a) Excess Demand is the result of decline in exports.
b) Excess Demand means Aggregate Demand is more than Aggregate Supply.
c) Excess Demand is caused due to reduction in the public expenditure.
d) Excess Demand raises the market value of output.
7. When aggregate demand is greater than the aggregate supply, inventories ________.
a) first fall than rise
b) rise
c) fall
d) do not change
8. Money flow is the flow of
a) Goods only
b) Factor payments
c) Services only
d) Goods and services only
9. Supply of money refers to quantity of money ________.
a) as on 31st March
b) as on any point of time
c) during a fiscal year
d) during any specified period of time
10. The upward-sloping supply curve for foreign exchange reflects:

a) Direct relationship
b) Inverse relationship
c) Exponential relationship
d) Indirect relationship
11. Suppose in an imaginary economy, Gross Domestic Product (GDP) at market price in 2019-20 was ₹ 5,000 crore,
National Income was ₹ 3,500 crore, Net Factor Income paid by the economy to rest of the world was ₹ 450 crore and the
Net Indirect Taxes was ₹ 400 crore.
Estimate the value of consumption of fixed capital for the economy from the information given above.
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12. Differentiate between Surplus in Balance of Trade and Current Account Surplus.

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OR

Devaluation and Depreciation of currency are one and the same thing. Do you agree? How do they affect the exports
of a country?
13. In an economy ex-ante Aggregate Demand is more than ex-ante Aggregate Supply.
Explain its impact on the level of output, income and employment.
14. From the following data about an economy, calculate its equilibrium level of income:
Marginal propensity to consume = 0.75
Autonomous consumption = 200
Investment = 6000

OR

An economy is in equilibrium. Find ‘autonomous consumption’ from the following

National Income = Rs 1,000
Marginal Propensity to Consume =0.8
Investment Expenditure = Rs 100
15. Elaborate, how does a Central Bank stabilize money supply through Bank Rate.
16. (i) How will you treat the following while estimating the national income of India? Give reasons
a. Payment of interest on borrowings by the general government.
b. Increase in prices of the shares of a company.
c. Government expenditure on sanitation.
d. Growing vegetable in a kitchen garden of the house

(ii) From the following about firm Y, calculate Net Value Added at Market Price by it:
Items In Thousands
(i) Sales 300
(ii) Depreciation 20

(iii) Net indirect taxes 30

(iv) Purchase of intermediate products 150
(v) Closing Stock 200

(vi) Purchase of machinery 100

(vii) Opening Stock 210

OR

Estimate the missing values (?), if the value of Gross Domestic Product at factor cost (GDPfc) by Expenditure Method
and Income Method is ₹ 920 crore:
S.No. Items Amount (in ₹ crore)

(i) Consumption of Fixed Capital 170

(ii) Change in Stock 140

(iii) Mixed-Income of Self-employed 180

(iv) Operating Surplus ?

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(v) Gross Domestic Fixed Capital Formation 140
(vi) Government Final Consumption Expenditure ?

(vii) Net Exports (-)50

(viii) Net Indirect Taxes 60

(ix) Private Final Consumption Expenditure 470

(x) Compensation of Employees 375

(xi) Employers' Contribution to Social Security Schemes 150

17. Categorise the following into revenue expenditure and capital expenditure. Give reasons.
i. Investment in shares
ii. Subsidies
iii. Construction of school building
iv. Defence services expenditure
v. Repayment of loan with interest
vi. Grants to state governments for creation of assets

OR

From the following data, you are required to calculate:

i. Revenue Deficit
ii. Fiscal Deficit
iii. Primary Deficit
(₹ in crores)

(a) Revenue Receipts 2,000

(b) Revenue Expenditure 2,800

(c) Capital Receipts 1,300

(d) Capital Expenditure 600

(e) Recovery of Loans 200

(f) Borrowings and other Liabilities 1,100

(g) Interest Payment 1,000

SECTION B – INDIAN ECONOMIC DEVELOPMENT
18. Opening of ________ Canal significantly reduced the cost of transportation of goods between Britain and India.
(Fill in the blank with the correct answer)
a) Agra
b) Conolly
c) Suez
d) Munak
19. ________ acts as a measure of the extent of democratic participation in social and political decision-making.
(Fill up the blank with correct alternative)
a) Poverty Index
b) Human Development Index
c) Liberty Indicator
d) Economic Growth

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20. ________ was known as Architect of Indian Economic Planning.
a) Dr. Manmohan Singh
b) Pandit Jawaharlal Nehru
c) PC Mahalanobis
d) Dr. BR Ambedkar
21. Which scheme provides adequate and timely support from the banking system to the farmers for their cultivation needs
in a flexible manner

a) KBC
b) KCC
c) KMM
d) KMC
22. Assertion (A): The industrial sector reforms implemented under liberalisation policies in a country led to an increase in
Foreign Direct Investment in the manufacturing sector.
Reason (R): Liberalisation policies aimed to toughen trade barriers, regulate industries, and provide a conducive
environment for indigenous investors, making the manufacturing sector more attractive for FDI.
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
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23. Expenditure regarding ________ training is a source of human capital formation.
a) Both Off-the-job and On-the-job
b) Off-the-job
c) Hybrid
d) On-the-job
24. China is emerging ____ largest economy in the world in terms of its GDP size
a) 6th
b) 5th
c) 3th
d) 8th
25. The per capita forestland in the country is only _______.
a) 0.82 hectare
b) 8.0 hectare
c) 0.08 hectare
d) 0.80 hectare
26. Statement I: Under the colonial regime, the motive behind infrastructure development was to provide basic amenities to
the people.

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Statement II: The real motive behind infrastructure development was to subserve various colonial interests.
a) Statement I is true, but statement II is false.
b) Both the statements are false.
c) Statement II is true, but statement I is false.
d) Both the statements are true.
27. Which of the following are not matched correctly?
Column I Column II

(A) Marketed Surplus (I) Large increase in production of food grains resulting from use of HYV seeds

(B) Green Revolution (II) Portion of agricultural produce which is sold in the market by the farmers
(C) HYV Seeds (III) Raised agricultural yield per acre to incredible heights

(D) Land Reforms (IV) Change in the ownership of landholdings

a) (I) and (II)
b) (I), (II) and (IV)
c) (III) and (IV)
d) (II) and (IV)
28. State any two advantages of sustainable development.

OR

State any two harmful effects of using chemical fertilizers.

29. Some social scientists argue that housewives working at home without getting paid for that work must also be regarded
as contributing to the gross national product and therefore as workers. Do you agree? Justify your answer.·
30. Does modernisation as a planning objective create contradiction in the light of employment generation? Explain.
31. Many economists believe that the economic reforms process of 1991 had adversely affected the agricultural sector. Do
you agree with the given statement? Quote valid arguments in favour of your answer.

OR

State and discuss any two major Tax Reforms taken under the New Economic Policy of 1991.
32. a. Human capital formation gives birth to innovation, invention and technological improvements. Do you agree with the
given statement? Support your answer with valid arguments.
b. Critically evaluate the role of rural banking system in the process of rural development in India.
33. State some measures to be taken relating to finance, so that the objective of rural development is achieved.

OR

a. Distinguish between Green Revolution & Golden Revolution.

b. How has women’s health become a matter of great concern in India? Explain.
34. Briefly discuss the various development strategies pursued by China.

OR

Compare and contrast India and China’s sectoral contribution towards GDP.
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Class 12 - Economics
Sample paper - 01 (2024-25)

Solution

SECTION A – MACRO ECONOMICS

1. (a) Both the statements are false.
Explanation: Both the statements are false.
2. (c) Unemployment
Explanation: Unemployment
3. (d) 0.6
Explanation: 0.6
MPC=Change in Consumption to Change in Income
4. (a) Option (a)
Explanation: Completely flexible exchange rate system, i.e. clean floating
5. (c) ₹ 800 crores
Explanation: ₹ 800 crores Y=C+S (Consumption is 3200 cr. so Savings is 800 cr.)
6. (a) Excess Demand is the result of decline in exports.
Explanation: Excess demand arises when demand for exports increases due to comparatively lower prices of domestic
goods or due to decrease in the exchange rate for domestic currency.
7. (c) fall
Explanation: If AD > AS then inventory fall.
8. (b) Factor payments
Explanation: Money flow refers to payment for factor services.
9. (b) as on any point of time
Explanation: The money supply is a stock concept and it is estimated as a point of time.
10. (a) Direct relationship
Explanation: As the price of foreign currency increases, it's supply increases and as it's price decreases it's supply
decreases, other factors remaining the same.
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11. National Income (NNPfc) = GDPmp - Consumption of Fixed Capital - Net factor income paid by the economy to the rest
of the world - Net Indirect Taxes
3,500 = 5,000 - Consumption of Fixed Capital - 450 - 400
Consumption of Fixed Capital = 5,000 - 3,500 - 450 - 400
Consumption of Fixed Capital = ₹ 650 crore
12. Surplus in the Balance of trade arises when the value of exports of visibles is more than the value of imports of visibles.
The current account surplus arises when receipts from exports of visibles, invisibles and unilateral transfers are more
than payments for imports of visible, invisibles and unilateral transfers.

OR

Devaluation and Depreciation of currency are one and the same thing. Depreciation and Devaluation both imply a
fall in external value of a currency; however the term depreciation is used under the floating exchange rate system that is
when the exchange rate system is determined by the combined market forces of demand and supply. A currency loses or

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gains value because of fluctuations in demand and supply.
The term devaluation is used in system of fixed exchange rates. In this system, the exchange value of a currency is
decided by the government. Devaluation of currency is the deliberate value of currency decided by the government.
Devaluation of currency is the deliberate action of the government.
Depreciation and devaluation of a currency normally encourages exports from a country, as exports become cheaper for
the foreign nationals and foreign currency can now buy more of domestic goods, i.e., the international competitiveness of
the goods and services of such a nation gets better.
13. When ex-ante Aggregate Demand is more than ex-ante Aggregate Supply, it means that households are planning to
consume more than what the firms expect them to. This will lead to unintended fall in inventories. To restore the desired
/intended level of inventories, producers may expand production. As a result, there may be an increase in the level of
output, employment and income in the economy.
14. c = 200
¯¯

MPC(b) = 0.75
I = 6,000
C = c + b(Y)
¯¯

But Y = C + I
Y = c + b(Y) + 1
¯¯

Y = 200 + 0.75Y + 6000

Y - 0.75 Y = 6200
0.25 Y = 6200
Y=
6200

0.25

Y = Rs.24800

OR

GIVEN:
1. National Income (Y) = Rs 1,000
2. Investment Expenditure (I) = Rs 100
3. Marginal Propensity to Consume (MPC/b) =0.8

An economy is in equilibrium,
∴ Saving = Investment
∵ Y = C +1

¯
¯¯¯
or Y = C + bY + I ....... (i)
¯
¯¯¯
∴ C = C + bY

On substituting the given variables in equation (i), we get

¯
¯¯¯
1, 000 = C + 0.8(1, 000) + 100

¯
¯¯¯
1, 000 = C + 800 + 100

¯
¯¯¯
C = Rs100

Autonomous Consumption’ = Rs. 100 in an equilibrium economy.

15. Bank rate is the rate of interest at which central bank lends money to commercial banks. It relates to the instant loan
requirement of the commercial banks. An increase in bank rate may force commercial banks to increase their lending
rate. It will make borrowings costlier to the general public. This leads to discouraging people to borrow and will thus
restrict money supply in the economy and accordingly inflation is corrected.
On the other hand, when the bank rate is decreased, the market rate of interest is also decreased. Accordingly the cost of
capital decreases. This increases the demand for credit and therefore, the supply of money tends to rise. Accordingly,
deflation is corrected.

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16. (i) Treatment of the following items while estimating the national income of India:
a. It will not be included in national income because it is the non-factor payment as it is considered that the general
government borrows only for consumption purposes.
b. Not included, because it is capital gain and has nothing to do with production.
c. It will be included because it is the final consumption expenditure by the government.
d. It is included in the national income because it adds to the production of goods though it is used for self-
consumption.

(ii) Net Value Added at Market Price by Firm Y

= Sales + Change in stock (Closing Stock - Opening Stock) – Purchase of intermediate products – Consumption of fixed
capital
= 300 thousand + (–) 10 thousand (200 thousand - 210 thousand) – 150 thousand – 20 thousand
= 120 thousand Rupees.

OR

GDPfc = 920 crores

As per income method
NDPfc = GDPfc - Dep
NDPfc = 920 - 170
NDPfc = 750 crores
NDPfc = compensation of employees + operating surplus + mixed income
750 = 375 + OS + 180
Operating surplus = 750 - 555
= ₹ 195 crores
GDPmp = GDPfc + NIT
= 920 + 60
GDPmp = ₹ 980 crores
As per expenditure method,
GDPmp = private final consumption expenditure + Govt final consumption expenditure + Gross domestic fixed capital
formation + change in stock + Net exports
980 = 470 + G + 140 + 140 - 50
G = 980 - 700
G = ₹ 280 crores
Government final consumption expenditure = ₹ 280 crores
17. i. Investment in shares is a capital expenditure because it creates asset of the government.
ii. Subsidies is a revenue expenditure because it neither creates any asset nor reduces any liability of the government.
iii. Construction of school building is a capital expenditure because it creates asset of the government.
iv. Defence services expenditure is a revenue expenditure because it neither creates any asset nor reduces any liability of
the government.
v. Repayment of the principal amount of loan is a capital expenditure because it reduces liability of the government. But
interest amount will be a revenue expenditure because it neither creates any asset nor reduces any liability of the
government.
vi. Grants to state governments for creation of assets is a revenue expenditure because it neither creates any asset nor
reduces liability of the Central Government (since grants are given for creation of assets of state governments).

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OR

i. Revenue Deficit
= Revenue Expenditure - Revenue Receipts
= 2,800 - 2,000 = ₹ 800 crores
ii. Fiscal Deficit (Borrowings) = total expenditure- total receipts (other than borrowings)
= Revenue Expenditure + Capital Expenditure - Revenue Receipts - Recoveries of Loans
= 2,800 + 600 - 2,000 - 200
= 3,400 - 2,200 = ₹ 1,200 crores
iii. Primary Deficit
= Fiscal Deficit - Interest Payment
= 1,200 - 1,000 = ₹ 200 crores
SECTION B – INDIAN ECONOMIC DEVELOPMENT
18. (c) Suez
Explanation: Suez
19. (c) Liberty Indicator
Explanation: Liberty Indicator
20. (c) PC Mahalanobis
Explanation: PC Mahalanobis
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21. (b) KCC
Explanation: KCC stands for Kisan Credit Card scheme in which this card is issued to the farmers who otherwise
eligible for short term credit.
22. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
23. (d) On-the-job
Explanation: On-the-job
24. (b) 5th
Explanation: China today cut its GDP growth target to 6.5 per cent in 2017, a 25-year low, as the world's second largest
economy braced for further slowdown with Premier Li Keqiang warning of a far more complicated global picture in the
year ahead.The size of a nation's economy is commonly expressed as its gross domestic product, or GDP, which
measures the value of the output of all goods and services
25. (c) 0.08 hectare
Explanation: The per capita forest land in the country is only 0.08 hectare against the requirement of 0.47 hectare to
meet basic needs, resulting in an excess felling of about 15 million cubic metre forests over the permissible limit.
26. (c) Statement II is true, but statement I is false.
Explanation: Statement II is true, but statement I is false.
27. (a) (I) and (II)
Explanation: (I) and (II)
28. Sustainable development is the process of growth that fulfills the needs of the present generation without challenging the
ability of future generations to fulfill their needs. Its advantages are:
a. It protects natural resources by recycling waste materials like paper or plastic instead of disposing them in landfills.
b. It ensures a better life for present and future generations.

OR

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Harmful effects of using chemical fertilizers are:
a. Excessive use of fertilizers causes severe land degradation.
b. Fertilizers flow in to the river and causes water pollution.
29. Yes, I agree. It is the real flow of goods and services which is considered important in estimation of national income and
not money flow. Therefore, even if housewives are not paid for their services, they must be considered as workers.
According to a non government survey, if we find the opportunity cost of services of a housewife, will be Rs. 12,000 on
an average. It can be explained with the help of a funny story. A man fell in love with the maid of his house. They
married each other. What will be the impact on national income? Answer is national income will decrease by the amount
of maid's salary. She still does all domestic chores but is not compensated for it anymore and the work which was
productive before they married became unproductive after their marriage. It sounds senseless. Therefore, we must
consider services of a housewife as productive as we consider of a paid employee. Calculation may be a problem but
opportunity principle can be used.
30. No, modernisation as a planning objective does not contradict employment generation. In fact, both modernisation and
employment generation are positively correlated in the long-run. Modernisation refers to the use of new and modern
technology in the production process. For example, a farmer can increase the output on the farm by using new seed
varieties instead of using the old ones. Similarly, a factory can increase output by using a new type of machine. This does
not cut down the employment generation opportunity rather this facilitate the manpower in their works. However, this
may make some people lose their jobs in the initial stages, as machines take place of men.
But gradually, the use of modern technology and input will raise productivity and consequently the income of the people,
that will further raise the demand for goods and services. In order to fulfil this increased demand, more production output
will be required and there will be more job opportunities, that will lead to higher employment in the economy. Even in
the short-run, modernisation leads to the creation of employment opportunities for skilled workers. If proper training and
vocational education are provided, it will lead to better employment in terms of quality of work and earnings. The
concept of modernisation is never contradictory to the employment generation activities, rather it has always worked
towards changing the thinking of the people and society at large.
Hence, both modernisation and employment generation are not contradictory but are complementary to each other.
31. Yes. The agricultural sector was adversely affected by the reform process as public investment in agriculture sector
especially in infrastructure had fallen. Further, the partial removal of fertiliser subsidy had led to increase in the cost of
production, which had severely affected the small and marginal farmers.
Moreover, there had been a shift from production for the domestic market towards production for the export market
focusing on cash crops putting pressure on prices of food grains.

OR

Two major tax reforms implemented under the New Economic Policy of 1991 in India were the removal of tariff on
export and the reduction of tax rates. The reduction of tax rates aimed to incentivize investment, spur economic growth,
and attract foreign investment by making the tax regime more competitive.
32. a. The given statement is correct. Human Capital Formation not only increases the productivity of available human
resources but also stimulates innovation and creates ability to adopt new technologies. makes changes according to
changes needed in the field of production.
Investment in education creates ability to adopt newer technologies, facilitates invention and innovation since
educated workforce generally adapts to modern technologies and innovation and reduces the labour turnover rate in
the economy.
b. Rapid expansion of the banking system had positive effect on rural farm and non farm output, income and
employment. In spite of it, following problems have been faced in the rural banking such as-
The volume of rural credit in the country is still insufficient in comparison to its demand and institutional
sources have failed to cover the entire rural farmers of the country.

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Less attention has been given on the credit requirements of needy (small and marginal farmers) and the
problem of overdue in agricultural credit continues.
33. To achieve the objective of rural development, following measures related to finance can be taken:
i. The supply of finance should be fully institutionalised and dependence on private sources for credit should be
eliminated. Credit facilities should be extended to Indian farmers by the commercial banks on easy terms.
ii. The general interest rate should be low. The banks should charge different rates for different uses. Cooperative credit
societies in rural areas should be strengthened and their working should be made more efficient.
iii. The basis of credit should not be the mortgage of any security. Production or productivity of land should be the basis
for the approval of loans.
iv. The conditions of repayment of loans should be different so as to suit different circumstances. An effective
mechanism for the recovery of agricultural loans should be evolved at the earliest.
v. It should be ensured that finance is used for production. Loans can also be given in the form of goods like seeds,
fertilisers, etc.
vi. There should be adequately trained and devoted personnel to manage financial institutions. The persons should have
full knowledge of agriculture and interest of farmers.

OR

a. Green Revolution refers to the large increase in production of food grain resulting from the use of high yield variety
(HYV) seeds of food crops (like wheat and rice) and supportive technology during mid 1960s to mid 70s. Whereas,
Golden Revolution refers to the process where India has emerged as a leader in producing a variety of horticulture
crops. golden revolution includes various types of fruits, vegetables and flowers. it is treated as agriculture
diversification.
b. Women constitute approximately half of Indian’s total population, but they suffer from many disadvantages in health
care. Traditionally, women health care had been on the back burner in India due to social considerations prevailing in
the country. Gender ratio in the country is declining. The growing rate of female foeticide in the country is also a
cause of concern. Most of the married women suffer from anaemia and nutritional anaemia leading to maternal
deaths.
34. After the establishment of People’s Republic of China under one party rule, all the critical sectors of the economy,
enterprises and lands owned and operated by individuals were brought under government control.
Certain development strategies of China are discussed below:
Great Leap Forward (GLF) This campaign initiated in 1958 aimed at industrialising the country on a massive
scale. People were encouraged to set up industries in their backyards. In rural areas, communes were started.
Under the commune system, people collectively cultivated lands.
Great Proletarian Cultural Revolution (1966-76) In 1965, Mao Tse Tung started a cultural revolution on a large
scale. In this revolution, students and professionals were sent to work and learn from the country side. Unlike
GLF, the cultural revolution did not have an explicit economic rationale.
1978 Reforms Since 1978, China began to introduce many reforms in phases. The reforms were initiated in
agriculture, foreign trade and investment sector. In agriculture, lands were divided into small plots which were
allocated to individual households. They were allowed to keep all income from the land after paying taxes.
In later phase, reforms were initiated in industrial sector. All enterprises which were owned and operated by local
collectives in particular, were allowed to produce goods.

OR

Sectoral Share of Employment GYA and GDP (%) in 2018-2019

Sector Contribution to GVA

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India China Pakistan
Agriculture 16 7 24

Industry 30 41 19

Services 54 52 57
Total 100 100 100

Share of Agricultural Sector is as follows: In China, due to topographic and climatic conditions, the area suitable for
cultivation is relatively small - only about 10 per cent of its total land area. The total cultivable area in China accounts
for 40 per cent of the cultivable area in India. In 2018-19, its contribution to the GDP in China is 7 per cent. In India, the
contribution of agriculture to GDP was 16%.
Share of Manufacturing and Service Sectors is as follows: In China, manufacturing and service sectors contribute the
highest to GDP at 41 and 52%, respectively whereas in India, it is the service sector which contributes the highest by
more than 54% of GDP.
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