ROLL NO…………………………………..
SUBJECT CODE: 030
KENDRIYA VIDYALAYA SANGATHAN, JAIPUR REGION
MARKING SCHEME (2023-24)
PRE BOARD-2
SET C
SUBJECT: ECONOMICS CLASS- XII M.M. 80 TIME: 3 HOURS
Q-1: (A) (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
Q-2: (C) (i), (ii) and (iii)
Q-3: (A) Cash Reserve Ratio
Q-4: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
Q-5: (D) i-D, ii-C, iii-B, iv-A, V-E
Q-6: (B) 700
Q-7: (A) Desired saving during the period of one year
Q-8: (A) Increase in demand of US dollar and decrease in supply of US dollar
Q-9: (C) Managed floating exchange rate
Q-10: (A) C - (iii)
Q-11: Meaning of Depreciation: depreciation of domestic currency refers to decrease in
the value of domestic currency in terms of foreign currency.
Depreciation of domestic currency for me would imply that there is an increase in the
domestic currency price to buy one unit of US currency(US dollar) for example, if price of
one dollar rises from Rs. 80 to Rs. 85, it will increase the cost of education in USA(implying
more expenditure/burden on my parents)
OR
(i) “Borrowing from abroad” will be recorded in the capital account of the balance of
payments account. It is reflected in the capital account, as impacts the asset-liability status
of a country. It does not involve movement of goods and services across the borders. Also
borrowing from abroad will be record with a + sign (credit side) in the balance of payment
account. This is because it leads to the receipt of foreign exchange from rest of the world.
(ii) As a result of borrowing from abroad, supply of foreign currency increase.
Accordingly, supply curve shifts to the right. This cause a fall in equilibrium exchange rate.
Now one US dollar is available for less Indian rupees. This is a situation of appreciation of
domestic of domestic currency.
Q-12. Yes, there are many good and services that may contribute to welfare in an economy
but may not be included in the estimation of Gross Domestic Product. These transactions
are referred to as non- market transactions. Transactions like domestic services rendered
by a home maker contribute to welfare but are not included in the estimation of GDP as
they are not paid for.
Q-13. (i) At equilibrium level of income: AD = Y
200 + 0.75 Y = Y
0.25Y = 200 ⇒ Y = 200/0.25 = 800
Thus, equilibrium level of income = 800 crore
(ii) Since equilibrium level of income (800 crore) is more than the full employment level of
income (500 crore), therefore, it is a situation of excess demand (inflation) in the
economy.
Inflationary gap = Equilibrium level of income – Full employment level of income
= 800 – 500 = 300 crore
(c) To combat inflationary gap, income must be decreased by 300 crore,
i.e. ∆Y = (–) 300 crore.
From the AD function, MPC = 0.75
Value of investment multiplier, K = 1/ (1– MPC)
= 1/(1 – 0.75) = 1/0.25 = 4
We know that K = ∆Y/∆I i.e. 4 = – 300/ ∆I ⇒ ∆I = – 75
Thus, Investment must be decreased by 75 Crore to combat the inflationary gap.
Q-14. Two measures which may be used to solve the problem of inflation are:
An increase in Cash Reserve Ratio (CRR) may reduce the credit creation capacity of the
Commercial Banks in the economy. This may lead to a fall in the borrowings from banks
causing a fall in aggregate demand in the economy, and helps to correct the inflationary
gap in the economy.
Sale of government securities in the open market by the Central Bank will adversely
affect the ability of the Commercial Banks to create credit in the economy. As a result
aggregate demand in the economy may fall and correct the inflationary gap in the
economy.
OR
(i) Reducing the government spending will lead to a decrease in inflation. This is as the
money supply in the economy will reduce, leading to the fall in the aggregate demand.
(ii) The measures that the government can take to control the deflationary situation are:
(i) Decrease the tax rates
(ii) Increase in the government spending
(iii) Infusing money in the Commercial Bank.
The measures that the Central Bank can take are:
(i) Buy securities from the market
(ii) Decrease the margin requirement
(iii) Decrease the legal reserve ratios.
Q-15: (i) Money multiplier is the process by which the commercial banks create credit,
based upon the reserve ratio and initial deposits.
(ii) Reserve deposit ratio is the minimum reserves which a commercial bank must
maintain as per the instructions of the Central Bank.
Credit Creation = 1/Reserve Ratio
Thus, credit creation is inversely related to the reserve deposit ratio.
Example: Suppose the Reserve Ratio is 0.2 and initial deposit is 1000 crores.
Total Credit Created = 1/Reserve Ratio × Initial Deposits
=1/0.2 × 1000
= 5000 crores.
Now, suppose reserve ratio is increased to 0.5 Total Credit Created
=1/Reserve Ratio × Initial Deposits
= 1/0.5 × 1,000
= 2,000 crores.
Thus, on the basis of the above illustration we can say that there exists an inverse relation
between reserve and credit creation.
Q-16. (i) Exercise duty levied on cement is an indirect tax, as the liability to pay and
incidence of this tax lies on different person. It is a tax imposed on the manufacturing
stage but its incidence is shifted to the consumer of cement.
Income tax is a direct tax as a liability to pay and the incidence of the tax lies on the same
person.
(ii) No, the objective of the government budget is not only to earn revenue for the
government but also to achieve its welfare motive.
(iii) It amps to narrow down the gap between the rich and the poor i.e., It wants to move
towards an egalitarian society to help the poor in the society. So, the proceeds from the tax
paid can be utilised for helping the poor. inequality in income will be narrow down in the
larger interest of the poor.
OR
(i) Revenue deficit= Revenue Expenditure-Revenue Receipts
6,000=20,000- Revenue Receipts
Revenue Receipts = 20,000-6,000
=14,000 crore
(ii) Non-debt creating capital receipts= Total receipts excluding borrowings
- Revenue receipts
= 40,000-14,000=26,000 crore
(iii) Fiscal deficit = Revenue deficit +(Capital expenditure- Non-debt creating
capital receipts)
= 6,000+(30,000-26,000)
=6,000 + 4,000
=10,000 crore
(iv) Primary deficit = Fiscal deficit – Interest payment
= 10,000-2,4000 =7,600 crore
Q-17:
(i) Calculation of GFCE:
GDPmp = NNPfc + Dep – NFIA + NIT
= 71000 + 3000 – 1000 + 2000
=75000
GDPmp = PFCE + GFCE + GDFC + Net export
75000 = 40000 + GFCE + 10000 + 5000
75000 = GFCE + 55000
GFCE = 75000-55000
=20000 crore
(ii) Calculation of Mixed income of self- employed
NNPfc = COE + OS + MI+NFIA
71000 = 15000 + 30000 + MI + 1000
71000 = 46000 + MI
MI = 71000-46000
= 25000 crore
ख"ड: ख (भारतीय अथ/0व2था) SECTION – B (Indian Economy)
Q-18. (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
Q-19: (D) B - (ii)
Q-20: (B) (iv), (ii), (i), (iii)
Q-21: (C) Both the countries announced their first five year plan in 1951
Q-22: (C) Both Statement 1and statement 2 are true
Q-23: (D) All of the above
Q-24: (D) 4- (d)
Q-25: (B) P,R and Q
Q-26: (D) Subsidies mainly benefits the fertilizer industry and big farmer
Q-27: (A) Restrictive policies of commodity production, trade and tariff pursued by the
colonial government adversely affected the structure, composition and volume of India’s
foreign trade.
Q-28: The measures have been able to realize some important values which are described
as follows
(i) Liberalisation aim at liberting the trade and industry from unwanted restriction
and thus provides greater autonomy to investment enhancing sprit of
competitiveness and open-mindedness.
(ii) Privatisation aim at introduction of private ownership in publicly owned and
managed enterprises and thus promotes efficiency of the private sector.
(iii) Gloablisation aims at opening up the economy to the world market and thus
motivating the developing economy like ours to face the challenge of
international discipline.
Q-29: Economic growth means the increase in real national income of a country. The skill
of an educated person is more than that of an uneducated person and generates more
income
• The enhanced productivity of human beings contributes substantially towards
increasing labour productivity
• It 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.
• It creates social awareness and develops mental abilities of people to make right
choices.
• Also the availability of educated labour force facilitates adaptation to new
technologies.
• Increase in the Productivity of Physical Capital such as machines, production plants,
tools and equipments which enhances their productivity and also leads to an
efficient utilisation of the physical capital.
• Raises life expectancy and improves standard of living
Or
Organic farming as agriculture is a whole system of farming that restores, maintains, and
enhances the ecological balance by reducing the use of chemical fertilisers and pesticides
in farming.
Benefits
• Organic agriculture offers a means to substitute costlier agricultural inputs (such as
HYV seeds, chemical fertilisers, pesticides etc.) with locally produced organic inputs
that are cheaper and generate good returns on investment.
• Organic agriculture generates income through exports as the demand for
organically grown crops is on a rise.
• Organically grown food has more nutritional value than chemical farming thus
providing us with healthy foods.
• Since organic farming requires more labour input than conventional farming, India
will find organic farming an attractive option.
• Finally, the produce is pesticide-free and produced in an environmentally
sustainable way
Q-30:
(i)As evident from the table the rate of growth of population is the highest in Pakistan
which stands at 2.1% per annum the corresponding rates for India and China are 1.2%
and 0.5% respectively the low rate of growth of population in case of China is on account
of its successful implementation of one child policy introduced in 1979 the growth rate of
population continuous to be fairly high in India 1.2% and alarmingly high in Pakistan
2.1%
(ii) China has low density of population compared with India and Pakistan it is because of
a very large geographical area of China then India and Pakistan it is estimated to be 148
persons per square kilometer in China compared to 455 and 275 persons (per square
kilometer) in India and Pakistan, respectively
Q-31:
It refers to a situation where a number of persons are not able to find job in a particular
season. It occurs in case of agriculture, ice cream factories, woollen Factories etc.
Following measures may be suggested to reduce seasonal unemployment:
(i) promotion of multiple cropping i.e., raising more than one crop on the same piece
of land in a year.
(ii) Development of activities allied to agriculture as animal husbandry, dairy
farming,horticulture etc. to provide extra employment throughout the year
(iii) Public investment in rural areas in such fields as irrigation, drainage, flood
control, land etc.
OR
Rural development means an 'action - plan' for the economic and social growth of the
rural areas. The action - plan is to focus on the lingering and emerging challenges in rural
areas.
The principal lingering challenges of rural development are:
(i) Challenges of rural credit, and
(ii) Challenges of rural marketing.
Emerging challenges of rural development include basically:
(i) Exploring options of sustainable livelihood, other than farming, and
(ii) The challenge of organic farming.
Q-32:
The given statement is correct to a considerable extent.
• In 2009, the Government of India enacted the Right to Education Act to make free
education a fundamental right of all children in the age group of 6-14 years.
• Government of India has also been started levying a 2 per cent 'education cess' on all
Union taxes. The revenues from the education cess have been earmarked for spending on
elementary education.
• The government also sanctions a large outlay for the promotion of higher education and
new loan schemes for students to pursue higher education however still government
expenditure on education is only about 4% of GDP.
Q-33:
(A)- Although, the inefficiency and low productivity in Public Sector Undertakings (PSUs)
may lead to wastage of scarce resources and result in huge losses forming a constraint on
economic resources of the country, they do have some advantages.
Public sector has been playing a very significant role in the economic development of
India. Following points can validate this:
(i) Creation of a Strong Industrial Base: Public Sector Undertakings have contributed
significantly towards the development of heavy and basic industries, thus creating a
strong industrial base.
(ii) Development of Infrastructure: PSUs have helped in the development of infrastructure
of the country. A developed infrastructure boosts the progress of private sector in the
country.
(iii) Mobilisation of Savings: Government companies formed under PSUs mobilise the
savings of individuals through the offer of shares, and use these savings for the economic
development of the country.
(iv) Help to Earn Foreign Exchange: Many PSUs produce goods which can be exported. The
export earnings of PSUs such as HMT, STC, etc have helped increase the flow of foreign
exchange in the country. Also, PSUs such as BHEL, ONGC, etc helped the country to save on
the import bill.
(v) Development of Backward Areas: PSUs are generally opened in backward areas so that
these areas are also able to progress economically and equitably.
(vi) Generation of Employment Opportunities: PSUs have generated substantial
employment opportunities and have helped to address the problem of poverty and
unemployment.
(vii) To Promote Equality: PSUs check the concentration of power in few hands and
promote equality in the country.
The above points reveal that PSUs play an important role in the economy of the country.
OR
(B)- (i) Import substitution is also known as inward looking trade strategy which implies
discouraging the import of those goods that could be produced domestically.
• Import substitution strategy not only reduced and economy’s dependence on the
foreign goods but also provides impetus to the domestic firm.
• Government provides various financial encouragements, incentives, licences to the
domestic producer to producer to produce domestically the import substituted
goods.
• This would not only allow the domestic producer to sustain but also enables them to
grow as they enjoy the protective environment.
(ii) The ban on Chinese apps is great opportunity build and promote “ Made in India” apps
Its an opportunity for indigenious firms to operate and innovate effectively. It is high time
to utilise the human resource and technology for the development of domestic product to
fulfill the domestic demand.
Q-34:
(i) Sustainable development refers to the achievement of economic development by
careful and judicial utilisation of the natural resources so that the present generations’
needs are fulfilled without compromising that of the future generations’. It becomes our
moral responsibility to hand over earth in good order to the future generation. Aligned
with the view of a leading environmental economist, Herman Daly, India has taken the
following steps to achieve the aim of sustainable development:
i. Population Control Measures-India has promoted various measures to arrest
population explosion. The various population control measures include spread of
awareness and knowledge of birth control measures and literacy.
ii. Use of Environment Supportive Fuel-As the fuels such as petrol and diesel emit huge
amount of carbon dioxide that leads to global warming, so, the Indian government has
promoted the use of CNG and LPG. These are clean, eco-friendly fuels that emit lesser
smoke.
iii. Use of Solar and Wind Energy-India being a moderate country is enriched with
sunlight and wind power. These are two free gifts of nature that is non-exhaustible. It
solves the problem of economic growth with due focus on sustainable development.
iv. Recycling and Ban on Plastic Bags-The industrial and household wastes are
accumulated on daily basis. There is a need to develop the habit of recycling of waste
products in order to sustain the environment. Household waste can be used as manure for
organic farming. A very recent step taken by the Indian government is banning the use of
plastic bags. This is a very good step as plastic bags do not get decomposed easily and
leads to pollution while recycling.
v. Pollution Tax and Fines-Indian government has taken many steps to control pollution.
Some of the measures are regular vehicle checkups, levying pollution tax on the industries
emitting smoke. These measures are coupled with huge fines and even imprisonment for
the law breakers.
vi. Use of the Input Efficient Technology-The input efficient methods have been devised
that not only increases the production and productivity but also efficiency with which the
inputs are used. The efficient use of input, on one hand, leads to lesser exploitation of the
natural resources and, on the other hand, enhances the future economic growth prospects
of India.
(ii) India is fortunate enough to have abundant natural resources. It comprises of rich and
fertile soil, plenty of rivers and tributaries, green forests, mineral deposits, mountains, etc.
The Indo-Gangetic plains are the most fertile, densely populated and cultivated plains in
the world. It stretches from the Arabian Sea to the Bay of Bengal. The black soil of the
Deccan Plateau is suitable for the cultivation of cotton in the country. India’s lush green
forests serve as a natural cover for the majority of the population. India holds more than
20 % of the world’s total iron ore reserves. There are mountain ranges that facilitate the
operation of the mini hydel plants. It also has vast variety of flora of 15,000 species of
plants. The country is also endowed with numerous minerals that are found under the
earth’s surface like coal, natural gas, copper, diamonds, etc.
