CBSE Class 12 Economics: sample paper 2023-24

1. GNP = GDP + Net factor income from abroad. A closed economy has no transactions with the rest of the world, so NFIA = 0.

2. Hence GDP = GNP. Option (A).

   1 mark

Answer: (A) GDP = GNP

1. MPC, MPS and APS cannot exceed 1 (APS can even be negative).

2. APC = C/Y exceeds 1 below the break-even income, when consumption is greater than income (dissaving). So APC can be greater than one. Option (B).

   1 mark

Answer: (B) Average Propensity to Consume

1. External commercial borrowings are loans, so they belong to the capital account.

2. A net outflow means more was repaid or lent out than received, so foreign exchange goes out: a debit entry. Option (D).

   1 mark

Answer: (D) capital, debit

1. Expressing the value of every good and service in money terms makes money a common measure of value.

2. This is the unit of account function. Option (C).

   1 mark

Answer: (C) Unit of account

1. Each round: loans = 80% of deposits, reserves = 20%. (i) Round II loans = 0.8 × 800 = 640.

2. Totals: deposits = 1,000 × 1/0.2 = 5,000 (ii); loans = 5,000 − 1,000 = 4,000 (iii); reserves = 0.2 × 5,000 = 1,000 (iv) (equal to the initial deposit). So 640, 5,000, 4,000, 1,000. Option (D).

   1 mark

Answer: (D) 640,5000,4000,1000

1. In a two-sector economy AD = C + I.

2. So the AD curve is drawn by vertically adding the consumption and investment curves. Option (B).

   1 mark

Answer: (B) consumption, investment

1. Demand for foreign exchange comes from payments to the rest of the world: imports of visibles (I) and purchase of assets abroad (IV).

2. Exports of invisibles (II) and remittances received from residents working abroad (III) bring foreign exchange in, so they add to its supply. Answer: I and IV. Option (D).

   1 mark

Answer: (D) I and IV

1. At equilibrium, S = I: −60 + 0.1Y = 4,000.

2. 0.1Y = 4,060, so Y = ₹ 40,600 crore. Option (C).

   1 mark

Answer: (C) 40,600

1. The chart splits the capital account into investments, external borrowings and external assistance, and splits investments into direct investment and a blank.

2. Foreign investment is either direct or portfolio investment. (Interest received is a current account item; multilateral loans and government aid fall under borrowings and assistance.) Option (C).

   1 mark

Answer: (C) Portfolio Investment

1. Yes, I agree. In an accounting sense, the BoP always balances: Current account balance + Capital account balance (including changes in reserves) = 0.

   1 mark

2. So if the current account is in deficit (payments > receipts for goods, services and transfers), the gap must be met by an equal net inflow in the capital account.

   1 mark

3. The deficit is financed by net capital inflows such as borrowing from abroad, selling assets to foreigners, foreign investment or drawing down foreign exchange reserves.

   1 mark

Answer: Agree: since current account + capital account = 0, a current account deficit must be financed by net capital inflows (borrowing, sale of assets, reserves).

1. Domestic income (NDPfc) = Household consumption + Government final consumption + Gross fixed capital formation + Change in stock + Net exports − Consumption of fixed capital − Net indirect taxes = (i) + (iv) + (ii) + (iii) + (v) − (viii) − (vi)

   1½ marks

2. = 600 + 200 + 200 + 40 + (−40) − 40 − 120

   1 mark

3. = ₹ 840 crore. (NFIA is not used: domestic income excludes it.)

   ½ mark

Answer: Domestic income (NDPfc) = ₹ 840 crore.

1. (i) Externalities are the benefits (positive externalities) or harms (negative externalities) that one person or firm causes to others without being paid or penalised for them.

   1 mark

2. (ii) Operating surplus is the sum of rent, royalty, interest and profit: the income from property and entrepreneurship (non-wage income).

   1 mark

3. (iii) Consumption goods are goods (and services) bought by final consumers to satisfy their wants directly.

   1 mark

Answer: (i) Unpaid-for benefits or harms to others; (ii) rent + royalty + interest + profit; (iii) goods that directly satisfy consumers' wants.

1. When MPS = 0.25: k = 1/MPS = 1/0.25 = 4, so ΔY = k × ΔI = 4 × 1,000 = ₹ 4,000 crore.

   1½ marks

2. When MPS = 0.10: k = 1/0.10 = 10, so ΔY = 10 × 1,000 = ₹ 10,000 crore.

   1½ marks

3. Increase in income due to the fall in MPS = 10,000 − 4,000 = ₹ 6,000 crore.

   1 mark

Answer: Income rises by ₹ 6,000 crore more (₹ 10,000 crore instead of ₹ 4,000 crore).

1. If ex-ante AD > ex-ante AS, households and firms plan to buy more than producers plan to supply.

   1 mark

2. The extra demand is met from existing stocks, so inventories fall below the desired (planned) level: an unintended fall in inventories.

   1 mark

3. To restore the desired level of inventories, producers expand production.

   1 mark

4. As a result, output, employment and income rise, until AD equals AS (up to full employment; beyond it, prices rise instead).

   1 mark

Answer: Inventories fall below the desired level, so firms raise production: output, income and employment rise until AD = AS.

1. The step refers to the reverse repo rate: the rate at which commercial banks can park their surplus funds with the central bank.

   1 mark

2. To reduce inflation, the RBI raises the reverse repo rate.

   1 mark

3. A higher return makes it more attractive for banks to park surplus funds with the RBI instead of lending them, so their lending capacity falls.

   1 mark

4. Less credit reduces aggregate demand, which curbs inflation.

   1 mark

Answer: The RBI raises the reverse repo rate, so banks park more funds with it and lend less; lower credit cuts AD and inflation.

1. Banker's bank: the RBI accepts deposits from commercial banks and lends to them when needed. It holds part of their reserves and uses them to settle inter-bank claims (clearing).

   1½ marks

2. As the supreme authority of the banking system, it is the lender of last resort: it gives short-term credit to commercial banks against approved securities when they face a crisis.

   1 mark

3. Supervisor: the RBI supervises, regulates and controls commercial banks.

   ½ mark

4. This covers their licensing, branch expansion, liquidity of assets, management, and mergers (amalgamation) and liquidation, which protects depositors and keeps the system sound.

   1 mark

Answer: As banker's bank, the RBI keeps banks' reserves, settles claims and is lender of last resort; as supervisor, it regulates licensing, branches, liquidity, management and mergers.

1. (A)(i) Revenue deficit = Revenue expenditure − Revenue receipts, so revenue expenditure = 10 + 20 = 30 and total expenditure = 30 + 15 = 45. Fiscal deficit = Total expenditure − Revenue receipts − Non-debt capital receipts, which works out to Revenue deficit + Capital expenditure − Non-debt capital receipts = (iii) + (ii) − (iv).

   1 mark

2. = 10 + 15 − (50% of 20 = 10)

   1½ marks

3. = ₹ 15 crore

   ½ mark

4. (A)(ii) Primary deficit = Fiscal deficit − Interest payments

   1 mark

5. = 15 − 4 = ₹ 11 crore

   1 mark

6. (B) Public goods are non-excludable (no one can be kept from using them) and non-rivalrous (one person's use does not reduce what others get).

   1 mark

Answer: (A) Fiscal deficit = ₹ 15 crore; primary deficit = ₹ 11 crore. (B) Non-excludable and non-rivalrous.

1. (C) An economy faces fluctuations in income, employment and prices. These depend on the level of aggregate demand, which depends on the spending of households and firms.

   1½ marks

2. (C) To stabilise the economy, the government uses the budget: in inflation it cuts its spending and/or raises taxes to reduce AD; in deflation it raises spending and/or cuts taxes to raise AD.

   1½ marks

3. (D) Spending on free medicines under Ayushmaan Bharat is revenue expenditure.

   1 mark

4. (D) It neither creates an asset nor reduces a liability of the government; it is a recurring welfare (transfer-type) expenditure.

   2 marks

Answer: (C) The budget adjusts taxes and spending to smooth fluctuations in income, employment and prices. (D) Revenue expenditure: no asset created, no liability reduced.

1. (a)(i) Included in India's domestic income: the American tourist's spending on goods bought in India is treated as an export of India (production within the domestic territory sold to a non-resident).

   1½ marks

2. (a)(ii) Not included, as treated in the scheme: the market value of tomatoes grown in a kitchen garden is hard to estimate, and they are not grown for any monetary consideration.

   1½ marks

3. (b) No, I do not agree. Capital goods are final goods that help produce other goods and services over many years.

   1 mark

4. (b) A machine bought by a firm is a capital good only if it is used in production. If a firm buys it for resale within the year (say, a machinery dealer), it is an intermediate good, not a capital good.

   2 marks

Answer: (a)(i) Included as exports; (ii) not included (market value hard to estimate, no monetary transaction). (b) Disagree: a machine bought for resale is an intermediate good.

1. The goals of India's five year plans were growth, modernisation, self-reliance and equity.

2. Option D lists all four correctly ("equity", not "equality"; "growth", not "development"). Option (D).

   1 mark

Answer: (D) Growth, Equity, Modernisation, Self-Reliance

1. Infant mortality rate, life expectancy and maternal mortality rate all measure health.

2. The percentage of people below the poverty line measures income poverty, not health. Option (C).

   1 mark

Answer: (C) Percentage of people below poverty line (National)

1. The Green Revolution came from the use of high-yielding variety seeds (I), with adequate chemical fertilisers and pesticides (III) and mechanisation such as tractors and tube wells (II).

2. Organic fertilisers and pesticides (IV) were not part of it. Answer: I, II, III. Option (B).

   1 mark

Answer: (B) I, II, III

1. Bee-keeping (apiculture) supports fruit and flower crops through pollination and is promoted under horticulture programmes.

2. Such women-led activity is a diversification activity under horticulture. Option (C).

   1 mark

Answer: (C) Horticulture

1. Assertion: True. Faced with the 1991 BoP crisis, the government devalued the rupee against foreign currencies as an immediate measure.

   Reason: True. Devaluation was essential ("imminent") because foreign exchange reserves had fallen very low; it made exports cheaper and helped increase the inflow of foreign exchange.

2. R gives the reason for A. Both are true and R explains A. Option (A).

   1 mark

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

1. Under dual pricing in China, farmers and industrial units sold a fixed quantity of inputs and outputs at prices fixed by the government and the rest at market prices.

2. The blank is dual pricing. Option (C).

   1 mark

Answer: (C) Dual Pricing

1. Micro-credit (for example through self-help groups) gives financial support to the poor (i), empowers women who form most SHGs (ii), and extends the reach of the formal credit system to people who had none (iii).

2. All three are correct. Option (D).

   1 mark

Answer: (D) (i), (ii) and (iii)

1. Liberty indicators measure the extent of democratic participation in social and political decision-making (the paper prints "demographic").

2. The blank is liberty indicator. Option (B).

   1 mark

Answer: (B) Liberty indicator

1. Statement 1 is false: unemployment in India is multi-faceted (open, disguised, seasonal, educated unemployment).

2. Statement 2 is true: the worker-population ratio is an indicator used to analyse the employment situation. Option (B).

   1 mark

Answer: (B) Statement 1 is false and Statement 2 is true.

1. A-I is wrong (China followed a command economy, not a mixed one); B-II is wrong (China's reforms were its own, while Pakistan's were imposed by the World Bank/IMF); D-IV is wrong (Pakistan's first plan came in 1956; China's was 1953).

2. C-III is correct: the Great Leap Forward campaign focused on massive industrialisation. Option (C).

   1 mark

Answer: (C) C-III

1. Literacy: the overall literacy rate was below 16% (female literacy only about 7%).

   1 mark

2. Life expectancy: very low, about 32 years.

   1 mark

3. Infant mortality: very high, about 218 per 1,000 live births.

   1 mark

Answer: Low literacy (below 16%), low life expectancy (32 years), high infant mortality (218 per 1,000).

1. The occupational structure (share of workforce in agriculture, industry and services) changed differently in different regions.

   1 mark

2. In parts of the Madras Presidency, Bombay and Bengal, dependence on agriculture fell, with a matching rise in the share of manufacturing and services.

   1 mark

3. In states such as Orissa, Rajasthan and Punjab, the share of the workforce in agriculture rose. So regional variation grew.

   1 mark

Answer: Dependence on agriculture fell in Madras, Bombay and Bengal but rose in Orissa, Rajasthan and Punjab: growing regional variation.

1. On-the-job training raises the productive capacity of employees by building new skills and expertise.

   1 mark

2. Firms encourage it because its benefits (higher productivity) outweigh its costs, and it helps workers adapt to modern technologies and ideas.

   1 mark

3. Ravya's training improves her skills, productivity and earnings, so it has a positive impact on human capital formation.

   1 mark

Answer: On-the-job training raises Ravya's skills and productivity, adding to human capital formation.

1. China is the most populous country and its population growth rate was very high.

   1 mark

2. The one-child norm introduced in the late 1970s is the main reason the population growth rate fell sharply (the "arrest" in population).

   1 mark

3. But it also led to a fall in the sex ratio (fewer females per 1,000 males, about 949 as cited in the scheme).

   1 mark

4. The one-child policy combined with a strong preference for sons is the main reason for the skewed sex ratio.

   1 mark

Answer: The one-child norm cut China's population growth, but with son preference it lowered the sex ratio.

1. (i) False. Agricultural marketing is not just transport.

   1 mark

2. It covers assembling, storage, processing, transportation, packaging, grading and distribution of agricultural produce across the country.

   1 mark

3. (ii) True. Jan-Dhan Yojana opened bank accounts for millions, especially in rural areas.

   1 mark

4. It promoted the habit of saving and better allocation of financial resources, and the formal banking system mobilised a substantial amount of deposits through it.

   1 mark

Answer: (i) False: marketing covers assembling, storage, processing, transport, packaging, grading, distribution. (ii) True: Jan-Dhan accounts mobilised savings.

1. Direct employment: government departments and public enterprises employ people to produce goods and services.

   2 marks

2. Indirect employment: when government enterprises raise output, private firms that supply them or use their output also expand, creating more jobs indirectly (for example, more steel from a public steel plant leads to more private firms using steel).

   2 marks

Answer: The government creates jobs directly (in departments and PSUs) and indirectly (private firms linked to government output expand).

1. The image shows most workers in the informal sector and few in the formal sector: informalisation of the workforce (a drift of workers from formal to informal employment).

   1 mark

2. The informal sector includes millions of farmers, agricultural labourers, non-farm casual labourers, owners of small enterprises and self-employed people.

   1 mark

3. These workers get no regular income and no protection or regulation from the government; they can be dismissed without notice or compensation. This keeps incomes low and insecure, which hurts the economy, so the government is taking steps to protect informal workers.

   2 marks

Answer: Informalisation of the workforce: most workers lack regular income, social security and job protection, which weakens the economy.

1. (A) Before the Green Revolution, farmers consumed most of their produce themselves; little was sold in the market.

   1 mark

2. (A) The Green Revolution (HYV seeds, fertilisers, irrigation) raised agricultural output, especially of wheat and rice.

   1 mark

3. (A) Farmers then sold a large part of their output in the market (marketed surplus), which turned India from a food-scarce into a food-surplus economy.

   1 mark

4. (B) Under import substitution, imports were replaced by domestic production and domestic industries were protected from foreign competition.

   1 mark

5. (B) Tariffs: taxes on imported goods made them dearer and discouraged their use.

   1 mark

6. (B) Quotas: limits on the quantity of goods that could be imported.

   1 mark

Answer: (A) Higher output and marketed surplus made India food-surplus. (B) Import substitution through tariffs and quotas.

1. (C) After independence, land reforms such as abolition of intermediaries and land ceilings were introduced.

   1 mark

2. (C) Land ceiling means fixing the maximum size of land an individual can own.

   1 mark

3. (C) It aimed to promote equity in agriculture by reducing the concentration of land ownership in a few hands (surplus land was to be given to the landless).

   1 mark

4. (D) Yes. To improve efficiency, bring in professionalism and help them compete globally, the government identified profit-making PSUs and declared them Maharatnas, Navratnas and Miniratnas.

   1½ marks

5. (D) They were given greater managerial and operational autonomy in decisions; many have done very well and become market leaders.

   1½ marks

Answer: (C) Land ceiling: a maximum limit on landholding to reduce concentration of ownership. (D) Agree: profit-making PSUs became Maharatnas/Navratnas/Miniratnas with more autonomy.

1. (i) Sustainable development is development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs.

   2 marks

2. (ii) Reason 1: India faces depleting natural resources and limited supplies of water, minerals and fossil fuels, which have created environmental problems. Green growth uses resources more efficiently and sustainably.

   2 marks

3. (ii) Reason 2: to counter the climate threat, India has committed to net zero by 2070. Green growth will decarbonise industry, reduce dependence on imported fossil fuels and make India a market leader in sunrise sectors such as green hydrogen.

   2 marks

Answer: (i) Development that meets present needs without compromising future generations. (ii) Depleting resources, and the net-zero-by-2070 commitment (decarbonisation, less fuel import dependence).