PRE- BOARD-2 –TERM-2(2021-22)
Marking Scheme
Grade: 12
Subject: Economics
Q.No
Q1
Set-1
Value Points
“India’s GDP is expected to expand 7.5 % in 2019-2020:
World Bank.”
Does the given statement mean that welfare of people in India
increase at the same rate? Comment with reason.
Points
wise
marks
2
Total
Marks
2
It does not necessarily mean that welfare of people in India
increase at the same rate.
*If distribution of GDP turns to be unequal, then GDP as an index 1
of welfare loses its significance.
*If luxuries are produced for richer sections of the society and the
1
poor suffer deprivation, then such GDP growth becomes
meaningless.
* In case the growth rate of population is very high, then
availability of good per person may not increase. GDP will fail to
reflect the welfare of people in India.
(Any two reasons can be written)
OR
Explain with the help of an example, the basis of classifying
goods into final goods and intermediate goods.
The basis of classifying goods into final goods and intermediate
goods is the end use of the goods. (Refer page 18)
Example.
Set-2
2
1
1
In the determination of social welfare, what matters is the
quantum of output rather than the composition of output. Is
it true? Give reasons.
It is false. The quantum of output determines the GDP of an
economy. Social welfare depends on both quantum of output as
well as its composition.
If luxuries are produced for richer sections of the society and the
poor suffer deprivation, then such GDP growth becomes
meaningless. Social welfare remains low even when quantum of
output increases.
OR
Distinguish between real GDP and nominal GDP.
Refer page-62 (two points to be well)
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2
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Q2
Set-1
Ans.
What happens to income in an economy in which ex-ante
savings exceeds ex-ante investments?
When ex-ante savings exceeds ex-ante investments, it means that
expenditure in the economy is less than what producers had
expected. It implies AD falls short of AS. This would result in
undesired build-up of unsold stock. Due to excess supply
resulting from be stock piling of unsold goods, i.e., unintended
inventories, the producers will cut down employment and will
produce less. National income will fall.
2
1
1
OR
Giving reasons, state whether the following statements are
true or false:
a) The value of average propensity to save can never be
greater than 1.
b) In a two-sector economy if income is zero, average
propensity to consume will also be zero.
a) True.
APS refers to ratio of aggregate saving to aggregate income. This
can never be greater than one as savings can never be more than
or equal to income because there is always a part of income
that is utilized for consumption.
b) False.
APC = Total consumption/ total income. APC can never be equal
to zero even if the income is zero. This is because of the presence
of autonomous consumption which implies that there will always
be minimum consumption.
Set-2
2
½
½
½
½
What happens to income in an economy in which ex-ante
savings are less than ex-ante investments?
2
OR
Giving reasons, state whether the following statements are
true or false:
a) Value of average propensity to save can never be less than
zero.
b) MPC or MPS can be negative.
Ans.
When ex-ante savings are less than ex-ante investments, it means
that expenditure in the economy is more than what producers
had expected. It implies AD is greater than AS. Production has
to be increased to meet the excess demand. This will lead to
increase in income in the economy.
OR
a) False
As saving can be negative, when consumption is more than
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½
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income at lower levels of income, APS can be less than zero.
b) False
MPC or MPS cannot be negative because MPS is ratio between
additional saving (∆S) and additional income (∆Y) and similarly
MPC is ratio between additional consumption (∆C) and
additional Income (∆Y).
MPC or MPS is the slopes of consumption or saving curve which
cannot be negative as these curves are positively sloped.
Q3
Set-1
Ans:
Q3
Set-2
Ans:
Q4
Set-1
½
½
2
Using the consumption function: C= 50 + 0.5Y and planned
investment is Rs 100 crores.
a) Determine the equilibrium level of income.
b) Value of savings at equilibrium level of income.
C= 50 + 0.5Y, I = 100
To find Y and S at equilibrium level of income.
At equilibrium,
Y=C+I
Y = 50 + 0.5Y+ 100
Y (1-0.5) = 150
0.5Y = 150
Y= 150/ 0.5 = 1500/5 = 300
C = 50 + 0.5 x 300 = 50 + 150 =200
S = 100
The saving function of an economy is S = -250 + 0.25Y. If the
planned investment is Rs 2000 crore, calculate
a) Equilibrium level of income in the economy.
b) Aggregate demand of income of Rs 5000 crore.
S = -250 + 0.25Y
I = 2000
To find Y and AD at equilibrium level of income.
a) At equilibrium,
S=I
-250 + 0.25Y = 2000
0.25 Y = 2250
Y = 2250/0.25 = 225000/25 = 9000
Y = 9000cr
b) When Y = 5000 cr
C = 250 + 0.75 Y
= 250 + 0.75 x 5000
= 250 + 3750= 4000
AD = C + I = 4000 + 2000 = 6000
AD = 6000cr
How can we increase the effectiveness of health care
programs in India?
OR
‘Some infrastructural facilities have a direct impact on
production of goods and services while others give indirect
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2
support by building the social sector of the economy’. Using
the above information, differentiate between social and
economic infrastructure and their interdependence.
Ans
We can increase the effectiveness of healthcare programs in the
following manner
(i) Rural- Urban divide and Rich- poor divide: The wide gap
between rural and urban areas, poor and rich in utilizing
1
healthcare facilities must be addressed through more investment
in health facilities in rural and backward areas by the government
as private investment is not forthcoming in these areas.
Accessibility and affordability need to be integrated in our basic
health infrastructure.
(ii) Women's health across the country should be taken into
greater focus as a healthy mother gives birth to a healthy
1
offspring and health status of the population can be improved.
iii) Regulated private sector health services, 1400s and
community participation can improve the effectiveness of
healthcare facilities and play an important role in spreading health
awareness.
(iv) Indian system of medicine including Ayurveda and
Naturopathy should be explored and used to support public health
as they are based on natural healing and are of preventive nature.
(Any two points can be written)
OR
Economic
Infrastructure
1. It directly supports
economic system from
inside.
Example: Energy,
transport and
communication
2. It improves the
quality of economic
resources and
thus, raises the
production.
3. Expenditure on it will
raise the stock of
physical capital of a
nation.
Social Infrastructure
1.It indirectly supports
economic system from
outside.
Example: Health, education
and housing.
2.It improves the quality of
human resources and
thus,
improves the efficiency of
manpower.
3. Expenditure on it will
raise the stock of human
capital of a nation.
4. It will raise the
4.It will raise the process of
process of
human development.
economic growth.
(Any two points can be written)
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½+½
=1
Both of these infrastructures are complementary to each other
and are interdependent. These are essential for the efficient
working of the economy.
Better infrastructure
Greater productivity and
improvement in quality-of-life
Higher rate of
economic development.
Q4
Set-2
1
“In spite of the increase in public health expenditure, Indian
Health System is an ailing system in itself”. Defend the
statement citing any two major problems of Health sector in
India
OR
‘Both economic and social infrastructure are crucial for
economic development of a country’. Using the above
information, differentiate between social and economic
infrastructure and their interdependence.
Ans
In spite of increase in health expenditure, there are many
problems in Indian health system they are.
*People living in rural areas do not have sufficient medical
infrastructure. About 70% of the Indian population reside at rural
areas which have only 20% of hospitals in the country. There are
only 0.36% hospitals for one lakh people in rural areas whereas
there are 3.6% hospitals per one lakh population in urban areas,
i.e., number of hospitals in urban areas is 10 times the number of
hospitals in rural areas
*Low public expenditure, though there is an increase in health
expenditure it is still nowhere compared to developing countries.
Expenditure on health sector by government is only 4.7% of the
total GDP.
1
1
*More than 50% of married women suffer from iron deficiency,
which is a cause of maternal deaths and malnutrition among
children.
(Minimum Data is required)
OR
Common question for both set-1 and set-2
Q5
Set-1
and
Set-2
Economic development, which aimed at increasing the
production of goods and services to meet the needs of a rising
population, puts greater pressure on the resources and
environment. Discuss the given statement.
Ans
Before this phenomenal increase in population, the
demand for environmental resources and services was much less
than their supply. This meant that pollution was within the
absorptive capacity of the environment and the rate of resource
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extraction was less than the rate of regeneration of these
resources. Hence environmental problems did not arise.
But with population explosion and with the advent of industrial
revolution to meet the growing needs of the expanding
population, things changed. The result was that the demand for
resources for both production and consumption went beyond the
rate of regeneration of the resources; the pressure on the
absorptive capacity of the environment increased tremendously.
Thus, what has happened is a reversal of supply-demand
relationship for environmental quality. Hence the
environmental issues of waste generation and pollution have
become critical today.
1
(Key words: supply -demand reversal, absorptive and
carrying capacity)
Q6.
Set-1
Ans)
What is meant by the problem of double counting? Discuss
briefly the two approaches to avoid this problem.
OR
Define the following:
a) Externalities
b) Income from property and entrepreneurship.
The counting of the value of the commodity more than once is
called double counting. This leads to overestimation of the
value of goods and services produced in the economy.
For example, a farmer produces one ton of wheat and sells it for
₹400 in the market to the flourmill. The flourmill sells it for ₹600
to the baker. The baker sells the bread to the
shopkeeper for ₹800. The shopkeeper sells the entire bread to the
final consumer for ₹900.Thus,
Value of output = ₹400 + ₹600 + ₹800 + ₹900 = ₹2700
Two approaches to avoid this problem
i) Final Output Method: According to this method, the value of
the intermediate good is not considered. Only the value of the
final good and services is considered. In the above
example, the value of final good i.e. bread is ₹900.
ii) Value Added Method: In this method, we estimate the total
value added at each stage of production by all the producing units
in the domestic territory. In the above example, the
value added at each stage of production is ₹400 + ₹200 + ₹200
+ ₹100 = ₹900.
OR
1
a) Externality: It refers to good or bad impact of an economic
activity without paying the price or penalty for that.
The costs and benefits can be both private—to an individual or an
organization—or social, meaning it can affect society as a whole.
Most externalities are negative. Pollution is a well-known
negative externality because social costs outweigh the private
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benefits.
Some externalities are positive. Positive externalities occur when
there is a positive gain on both the private level and social
level. Research and development (R&D) conducted by a
company can be a positive externality.
b) Income from property and entrepreneurship: It refers to
operating surplus in Income method while calculating National
Income. Rent refers to the income earned from property and
profit refers to the income generated from the
entrepreneurship. Profit can be further categorized into the
following three categories as dividends, corporate profit tax,
undistributed profits.
Q6.
Set-2
What is meant by the problem of double counting? Discuss
briefly the two approaches to avoid this problem.
OR
Define the following:
a) Mixed income of the self-employed with an example.
b) Externalities
Ans)
Refer Q6 of Set-1
OR
a) Mixed income of the self-employed refers to the income of
the self-employed persons using their own labor, land, capital and
entrepreneurship in their own enterprises.
(Refer page- 90)
b) Refer Ans a of Set-1
Q7
Set-1
1½
3
1½
1½
3
Workforce Participation Rate in India (2017-2018)
Sex
Rural
Urban
Total
Men
51.7
53.0
52.1
Women
17.5
14.2
16.5
Total
35.0
33.9
34.7
Define worker- population ratio. Compare and analyze the given
data of worker-population ratio in India during 2017-18.
Ans)
Worker-population ratio refers to proportion of population that is
actively contributing to the production of goods and services of a
country. (Formula)
It is an indicator which is used for analyzing the employment
situation in the country.
• Overall rate of participation is 34.7% which is low
implying that not many people are engaged in production
activity. This results in high dependency ratio in the
country
• In urban areas, the proportion is about 34% whereas it is
35% in rural areas. Rate of participation is more in rural
areas as compared to urban because
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*People in rural areas have limited resources to earn a
higher income and participate more in the employment
market. Many do not go to schools, colleges and other
training institutions.
* In rural areas, people cannot stay at home as their
economic condition may not allow them to do so.
*Urban people have a variety of employment opportunities.
They look for the appropriate job to suit their qualifications
and skills.
• Women participation rate (16.5) is much lower as
compared to men (52.1). This is because men are
able to earn high incomes, families discourage female
members from taking up jobs
Q7
Set-2
3
½ (for
reasons)
½
Trends in employment Pattern (Sector wise) 1993-2012(in %)
3
What is meant by casualization of workforce? Analyze the recent
trends in sectoral distribution of workforce in India.
Ans)
The process of moving from self-employment and regular
salaried employment to casual wage work as casualization of
workforce. This makes the workers highly vulnerable as they are
not be able to reap any social benefits provided by the
government.
The above trends in sectoral distribution of workforce in India
shows:
• 64% of workforce engaged in primary sector has been
reduced to 49% in 2011-12 showing a substantial
shift from farm work to non-farm work.
• Secondary and service sectors are showing promising
future for the Indian workforce. The shares of these
sectors have increased from 16 to 24 per cent
and 20 to 27 per cent, respectively.
• Primary sector is the main source of employment for
majority of workers in India implying that secondary
and service failed to absorb workforce from the
primary sector. Indian economy continues to be
viewed as an agricultural economy rather than
industrial economy.
• The shift of workforce in India has happened directly
from primary to service sector implying lesser
emphasis has been given to the industrial
expansion.
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½
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REASONS
ARE VERY
IMPORTANT
FOR
ANALYZING
Q8
Set1 &2
Case Study Passage:
Ans)
Unlike India, China is a global player in the FDI market. Whereas
India’s FDI has been generally sluggish till the early 1990s but
1
later in the 21st century improved. In 2000, China was the
world’s fifth largest recipient of FDI. But for 2004, China was the
second largest FDI inflow of USD 620 billion―next only to the
United States which makes this FDI inflows the most critical as
also most visible indicator of its sustained and rapid economic
development. The possible reasons for this difference are:
3
Discuss the reason for India's FDI being sluggish compared to
that of China.
a. The Chinese reform process began more strongly and
comprehensively during the 1980s when India was in a midstream of a rather slow growth process.
2
b. The global exposure of the Chinese economy had been far
wider than the Indian economy
Q9
Set1 &2
Q10
Set1&2
1
China had been introducing economic reforms in phases. In the
initial phase, reforms were initiated in the agriculture, foreign
trade, and investment sectors. In the later phase, reforms were
initiated in the industrial sector. To attract foreign investors,
special economic zones (SEZs) were set up.
These SEZs were judiciously set up in coastal regions for its
1
advantage of geographical proximity to Hong Kong—
the hub of capital investment in Asia.
China also has an upper hand in its political system, cheap
labor, and special incentives for foreign investors. Besides, the
1
overseas Chinese contribute over two thirds of the inflows of FDI
into the Chinese economy.
The value of the nominal GDP of an economy was Rs. 2,500
crores in a particular year. The value of GNP of that country
during the same year, evaluated at the base year price was Rs.
3,000 crores. Calculate the value of the GNP deflator of the
year in percentage terms. Has the price level risen between
the base year and the current year?
GNP Deflator = Real GNP/ Nominal GNP X 100
= 3,000/ 2500 X 100 = 0.83
GNP deflator of 0.83 or 83% indicated that the price level has
reduced by 17% between the base year and the current year.
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1
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3
Q11.
Set-1
Ans)
3
a) What is meant by deflationary gap? Explain with the help
of a diagram.
b) ‘Monetary measures offer a valid solution to the problems
of deflationary gap in the economy.’ Explain any two
monetary measures to justify the given statement.
a) Deficient Demand is a situation, where aggregate demand is
less than aggregate supply at the level required to maintain full
employment in the economy. It creates deflationary gap. At the
full employment level of output AD <AS.
2
1
2
b) Monetary measures: These increases or decrease money
supply in the economy. These are taken by Central bank.
1. Cash Reserve Ratio (CRR)-It refers to the minimum
percentage of total deposits of commercial banks which has to be
kept with the Central bank (RBI) in the form of cash. If RBI
decreases CRR, banks have to keep smaller percentage of their
deposits with RBI. Their credit giving ability increases and
money supply increases. So, purchasing power of people
increases, they demand more. Accordingly, aggregate demand
increases.
2. Statutory Liquidity Ratio (SLR): -It refers to the liquid
assets that the commercial banks must hold (on daily basis)
as a percentage of their total deposits. The liquid assets
include cash, gold and other encumbered securities. If RBI
decreases SLR, then credit giving ability of bank increases and
money supply increases. Purchasing power of people increases,
they demand more. So, aggregate demand increases.
3. Open Market Operations (OMO):-It refers to the buying
and selling of government securities by the Central Bank in
the open market. When RBI buys securities from banks, it
increases reserves of the bank by the particular amount. This
directly increases the bank’s ability to give credit. Thus, money
supply increases. Purchasing power of people increases, they
demand more. So aggregate demand increases.
(Any two to be written)
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1
Q11.
Set-2
Ans)
Q12.
Set-1
3
What is meant by deflationary gap? Explain with the help of
a diagram.
‘Fiscal measures offer a valid solution to the problems of
inflationary gap in the economy.’ Explain any two fiscal
measures to justify the given statement.
See Answer from Set-1
The problem of inflationary gap can be corrected through
the following fiscal measures
(i) Public expenditure on public works, public welfare and
public investment should be reduced. Reduction in expenditure
will lead to a fall in aggregate demand.
(ii) The direct and indirect taxes should be increased. It will lead
to decrease in disposable income and thereby, decrease in
demand. Overall aggregate demand decreases and inflationary
gap reduces.
2
1
1
a. Compared to urban women more rural women are found
working. Why?
2
b. What is meant by sustainable development? Discuss briefly
any two strategies of sustainable development.
3
a) The percentage of female workforce in the rural areas is
nearly 30 % while it is only 14 % in the urban areas. This
depicts that as compared to the urban women more rural women
accounts for higher share in the female workforce.
1. As in the agricultural and allied activities, high degree of skills
and specializations is not required, so rural women engage
themselves to support their family on farms.
2. As poverty in the rural areas is more widespread than in the
urban areas, so, the rural women engage themselves in low
productive jobs just to support the livelihood of their families.
3. As the urban families usually earn comparatively higher
income than the rural families, the decision to take up jobs by the
female members rests on the family's decision rather than her
individual decision.
b) The concept of sustainable development was described by the
1987 Brundtland Commission Report as “development that meets
the needs of the present without compromising the ability of
future generations to meet their own needs.”
The strategies for sustainable development are:
*The use of non-conventional sources of energy to minimize
the adverse environmental impacts. Wind power and solar rays
are good examples of cleaner and greener non-conventional
energy sources but are not yet been explored on a large scale due
to lack of technological devices.
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* Bio composting: In our quest to increase agricultural
production we almost totally neglected the use of compost and
completely switched over to chemical fertilizers. The result is that
large tracts of productive land have been adversely affected,
water bodies including ground water system. Farmers, in large
numbers all over the country, have again started using
compost made from organic wastes of different types. In certain
parts of the country, cattle are maintained only because they
produce dung which is an important fertilizer and soil conditioner.
Earthworms can convert organic matter into compost faster than
the normal composting process. This process is now being widely
used.
13.
Set-1
2
i) . Gross domestic capital formation is always greater than
gross fixed capital formation.
ii) Profits earned by a company in India, which is owned by a
non-resident is included in national income of India.
Ans
i) False: Gross domestic capital formation includes gross fixed
capital formation plus change in stock. GDCF can be less than
gross fixed capital formation if change in stock is negative.
1
Note: As per CBSE guidelines, no marks will be given if
reason to the answer is not explained.
ii) False. Profits earned by a company in India, which is owned
by a non-resident is not included in national income of India as
national income takes into consideration of income earned only
by the residents.
1
3
b) Find National Income by Expenditure Method
Gross domestic capital formation= Net Domestic Fixed capital
formation +CFC + Change in stock (Cl. Stock – opening stock)
1
= 50 + 40 + (10 -20) = 90 -10 =80
13.
Set-2
GDPMP = PFCE + GFCE + GDCF + Net Exports
= 400 + 100 + 80 + (-30)
GDPMP = ₹ 550cr
NDPMP = GDPMP – CFC
= ₹ 550 - 40 = ₹ 510cr
NNPMP = GDPMP + NFIFA = ₹ 510 + (-10) =₹ 500
NNPFC = NNPMP – NIT =₹ 500 – (55-5) = ₹ 450 cr
National Income = ₹ 450 cr
Unit writing is mandatory.
a) Find Gross Value Added at factor cost from the following
data:
GVAMP = Sales + ∆ stock – IC
1
1
3
1
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= P X Q +∆ stock – IC
= 1000 X 30 + (3000 – 2000) – 12000
= 30000 + 1000 – 12000
= 19, 000
GVAFC = GVAMP – NIT = 19,000 – (2500 +3500)
= 19,000 – 6000 =13,000
1
1
b) State whether the following statements are true or false.
Give reasons for your answer:
i) Domestic services performed by a woman are not considered as
an economic activity.
ii) Interest on public debt is included while calculating national
income of India.
i) True. Such activities are performed out of love and affection
and hence their valuation is not possible. They do not add to the
flow of goods and services in the economy.
ii) False. It is not included in the national income as it is the
interest paid on loans taken by government to meet its
consumption purposes.
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