EconomicsCBSE Class 12 · Sample paper, session 2024-25

CBSE Class 12 Economics: sample paper 2024-25

The sample question paper CBSE published for the 2024-25 session, as printed: 34 questions for 80 marks, in sections, with each OR choice shown as an alternative. Try each question first, then open our solution.

Every question here has our step-by-step solution, split into the steps that earn marks. Each one was checked by an independent re-solve from the question paper.

Source: official sample question paper from cbseacademic.nic.in: https://cbseacademic.nic.in/web_material/SQP/ClassXII_2024_25/Economics-SQP.pdf. Questions are transcribed from that PDF; figures are described in words, so check the official paper for them. Questions printed only for visually impaired candidates are left out (3).

Practise a paper like this, timedMy board paper sets a full paper in this exact format from real board questions, with a timer.Get your written answers markedThe Answer Coach marks a photo of your handwritten answer step by step, like the examiner.

How the paper is set

Section	Questions	What it has
A	1-17	Macro Economics: MCQ 1-10 (1 mark), 11-13 (3 marks), 14-15 (4 marks), 16-17 (6 marks)
B	18-34	Indian Economic Development: MCQ 18-27 (1 mark), 28-29 (3 marks), 30-31 (4 marks), 32-34 (6 marks)

Instructions in brief: 20 MCQs of 1 mark, 4 short answers of 3 marks (60-80 words), 6 of 4 marks (80-100 words), 4 long answers of 6 marks (100-150 words); internal choices given.

Section A

Macro Economics: MCQ 1-10 (1 mark), 11-13 (3 marks), 14-15 (4 marks), 16-17 (6 marks)

Q1 · 1 mark · Assertion-reasonCompetency-basedMoney and Banking
Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below:
Assertion (A): The government can reduce the deflationary gap by purchasing government securities in the open market.
Reason (R): The Central Bank purchases government securities in the open market to increase the lending capacity of commercial banks.
1. (A)Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
2. (B)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
3. (C)Assertion (A) is true, but Reason (R) is false.
4. (D)Assertion (A) is false, but Reason (R) is true.
Try it first, then show our solutionSolution
1. Assertion: False. Open market operations are a tool of the central bank (RBI), not the government. (Buying securities does help reduce a deflationary gap, but it is the central bank that does it.)
  Reason: True. When the central bank buys government securities it pays money to banks and the public, which raises banks' reserves and their capacity to lend.
2. A is false (wrong authority) and R is true. Option (D).
  1 mark
Answer: (D) Assertion (A) is false, but Reason (R) is true.
Where the marks are
- Truth of A and R and the link between them (1 mark)
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Q2 · 1 mark · MCQCompetency-basedGovernment Budget and the Economy
“The Cabinet led by Prime Minister has decided that the Central Government will provide free food grains to 81.35 crore (approx.) beneficiaries under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for a period of five years with effect from 1st January, 2024.”
Source: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1980689
Based on the aforesaid statement, identify the budgetary objective the government is trying to achieve and choose the correct option:
1. (A)Reallocation of resources
2. (B)Economic stability
3. (C)Redistribution of income
4. (D)Economic instability
Try it first, then show our solutionSolution
1. Free food grains for about 81 crore poor beneficiaries transfer purchasing power to the poorer sections.
2. The budget objective is redistribution of income (reducing inequality). Option (C).
  1 mark
Answer: (C) Redistribution of income
Where the marks are
- Free food grains to the poor: redistribution (1 mark)
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Q3 · 1 mark · MCQNational Income Accounting
To arrive at the value of Gross Value Added at Market Price (GVA $_{M P}$ ) ______ must be added to Gross Value Added (GVA) at Basic Prices.
(Choose the correct option to fill up the blank)
1. (A)Product Taxes
2. (B)Net Product Taxes
3. (C)Production Taxes
4. (D)Net Production Taxes
Try it first, then show our solutionSolution
1. GVA at basic prices + product taxes − product subsidies = GVA at market prices.
2. So net product taxes must be added. Option (B).
  1 mark
Answer: (B) Net Product Taxes
Where the marks are
- GVA at MP = GVA at basic prices + net product taxes (1 mark)
Q4 · 1 mark · MCQOpen Economy Macroeconomics
Under the _______ exchange rate system, market forces automatically adjust the surplus and deficit in the Balance of Payments account.
(Choose the correct option to fill up the blank)
1. (A)fixed
2. (B)flexible
3. (C)managed floating
4. (D)dirty floating
Try it first, then show our solutionSolution
1. Under a flexible exchange rate, the rate moves with demand and supply of foreign exchange.
2. A deficit raises the price of foreign currency (making exports cheaper and imports dearer) and a surplus lowers it, so market forces automatically correct BoP imbalances. Option (B).
  1 mark
Answer: (B) flexible
Where the marks are
- Market forces adjust the BoP under a flexible rate (1 mark)
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Q5(a) · 1 mark · MCQCompetency-basedDetermination of Income and Employment
From the given diagrams, identify the correct option that indicates the ‘Reference Line’ passing through the origin drawn at a particular angle.
1. (A)(i)
2. (B)(ii)
3. (C)(iii)
4. (D)(iv)
Figure in the paper: Four graphs (i)-(iv), each with Income on x-axis and Aggregate Expenditure on y-axis, showing a straight line from the origin at angles: (i) 45°, (ii) 60°, (iii) 75°, (iv) 30°. See it in the official paper.
Try it first, then show our solutionSolution
1. The reference line in Keynesian analysis is the 45° line from the origin: every point on it has equal values on both axes (AE = Y).
2. Diagram (i) shows the line at 45°. Option (A).
  1 mark
Answer: (A) (i)
Where the marks are
- Reference line = 45° line (1 mark)
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Q6 · 1 mark · MCQCompetency-basedGovernment Budget and the Economy
As per the data presented in the Union Budget 2023-24, the total receipts of the government other than borrowings and the total expenditure are estimated at ₹ 27.2 lakh crore and ₹ 45 lakh crore respectively.
The value of the ________ deficit would be ₹ 17.8 lakh crore.
(Choose the correct option to fill up the blank)
1. (A)revenue
2. (B)fiscal
3. (C)budgetary
4. (D)primary
Try it first, then show our solutionSolution
1. Fiscal deficit = Total expenditure − Total receipts other than borrowings.
2. = 45 − 27.2 = ₹ 17.8 lakh crore, so the blank is fiscal deficit. Option (B).
  1 mark
Answer: (B) fiscal
Where the marks are
- Fiscal deficit = 45 − 27.2 = 17.8 (1 mark)
Q7 · 1 mark · MCQDetermination of Income and Employment
Read the following statements carefully:
Statement 1: The maximum value of Marginal Propensity to Consume (MPC) can be unity.
Statement 2: As the income of an economy increases, the proportionate increase in the level of consumption is always more than the increase in the level of income.
In light of the given statements, choose the correct option from the following:
1. (A)Statement 1 is true and Statement 2 is false.
2. (B)Statement 1 is false and Statement 2 is true.
3. (C)Both Statements 1 and 2 are true.
4. (D)Both Statements 1 and 2 are false.
Try it first, then show our solutionSolution
1. Statement 1 is true: MPC lies between 0 and 1, so its maximum value can be 1 (the whole of extra income consumed).
2. Statement 2 is false: consumption rises by less than income (MPC < 1), so it does not rise more than proportionately. Option (A).
  1 mark
Answer: (A) Statement 1 is true and Statement 2 is false.
Where the marks are
- MPC ≤ 1; consumption rises by less than income (1 mark)
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Q8 · 1 mark · MCQDetermination of Income and Employment
In a two-sector economy, Aggregate Demand can be determined by adding ______. (Choose the correct option to fill up the blank)
1. (A)Autonomous Consumption, Induced Consumption and Induced Investment
2. (B)Autonomous Consumption, Autonomous Investment and Induced Investment
3. (C)Autonomous Consumption and Autonomous Investment
4. (D)Autonomous Consumption, Induced Consumption and Autonomous Investment
Try it first, then show our solutionSolution
1. In a two-sector economy AD = C + I, where C = c̄ + bY (autonomous plus induced consumption).
2. Investment is taken as autonomous, so AD = autonomous consumption + induced consumption + autonomous investment. Option (D).
  1 mark
Answer: (D) Autonomous Consumption, Induced Consumption and Autonomous Investment
Where the marks are
- AD = c̄ + bY + Ī (1 mark)
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Q9 · 1 mark · MCQGovernment Budget and the Economy
Read the following statements carefully:
Statement 1: Foreign grants-in-aid receipts do not lead to any claim on the government.
Statement 2: Disposal of equity by the Public Sector Undertakings in the market may lead to a decrease in the assets of the government.
In light of the given statements, choose the correct option from the following:
1. (A)Statement 1 is true and Statement 2 is false.
2. (B)Statement 1 is false and Statement 2 is true.
3. (C)Both Statements 1 and 2 are true.
4. (D)Both Statements 1 and 2 are false.
Try it first, then show our solutionSolution
1. Statement 1 is true: grants are gifts; they create no liability or future claim on the government.
2. Statement 2 is true: selling PSU equity (disinvestment) brings in cash but reduces the government's assets (its ownership in the enterprises). Option (C).
  1 mark
Answer: (C) Both Statements 1 and 2 are true.
Where the marks are
- Grants create no claim; disinvestment reduces assets (1 mark)
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Q10(a) · 1 mark · MCQCompetency-basedOpen Economy Macroeconomics
Based on the given diagram:
The trade under current account during January 2024 reflects a _________ of USD _____ billion. (Choose the correct option to fill up the blank)
Source: https://commerce.gov.in/wp-content/uploads/2024/02/PIB-Press-Release-January-2024-1.pdf
1. (A)surplus, 0.74
2. (B)surplus, 3.85
3. (C)deficit, 0.74
4. (D)deficit, 3.85
Figure in the paper: Bar chart titled 'Overall Trade (Merchandise + Services)', y-axis USD Billion (60 to 72). January-2023: Exports 63.80, Imports 67.65. January-2024: Exports 69.72, Imports 70.46. See it in the official paper.
Try it first, then show our solutionSolution
1. In January 2024, exports were USD 69.72 billion and imports USD 70.46 billion.
2. Imports exceed exports by 70.46 − 69.72 = USD 0.74 billion, a deficit. (3.85 is the January 2023 gap.) Option (C).
  1 mark
Answer: (C) deficit, 0.74
Where the marks are
- Imports − exports = 0.74 deficit (1 mark)
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Answer one of these 2 alternatives.

Q11(A) · 3 marks · Short answerCompetency-basedNational Income Accounting

On the basis of the given data, estimate the value of Domestic Income (NDP $_{F C}$ ):

S. No.	Items	Amount (₹ in crore)
i.	Household Consumption Expenditure	800
ii.	Gross Business Fixed Capital Formation	150
iii.	Gross Residential Construction Investment	120
iv.	Government Final Consumption Expenditure	170
v.	Excess of Imports over Exports	20
vi.	Inventory Investment	140
vii.	Gross Public Investment	500
viii.	Net Indirect Taxes	70
ix.	Net Factor Income From Abroad	(-) 50
x.	Consumption of Fixed Capital	40

Try it first, then show our solutionSolution

Domestic income (NDPfc) = Household consumption + Government final consumption + Gross business fixed capital formation + Gross residential construction + Gross public investment + Inventory investment − Excess of imports over exports − Consumption of fixed capital − Net indirect taxes = (i) + (iv) + (ii) + (iii) + (vii) + (vi) − (v) − (x) − (viii)
1½ marks
= 800 + 170 + 150 + 120 + 500 + 140 − 20 − 40 − 70
1 mark
= ₹ 1,750 crore. (NFIA is not used: domestic income excludes it.)
½ mark

Answer: Domestic income (NDPfc) = ₹ 1,750 crore.

Where the marks are

Correct formula (1½)
Substitution (1)
Answer (½)

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Q11(B) · 3 marks · Short answerNational Income Accounting

State the steps pertaining to the estimation of National Income under the income method.

Try it first, then show our solutionSolution

Step 1: Identify the producing units and classify them into the primary, secondary and tertiary sectors.
1 mark
Step 2: Estimate the factor payments made by each sector: compensation of employees, operating surplus (rent, interest, profit) and mixed income. Their sum is each sector's contribution to domestic income (NDPfc), and adding across sectors gives domestic income.
1 mark
Step 3: Estimate net factor income from abroad (NFIA) and add it to domestic income to get national income (NNPfc).
1 mark

Answer: Classify producers into sectors; add factor payments (CE + OS + MI) to get NDPfc; add NFIA to get national income.

Where the marks are

Each step (1 + 1 + 1)

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Q12 · 3 marks · Short answerGovernment Budget and the Economy
“Tax revenue collection of the government may be categorized under two heads.”
State and explain the two heads of tax revenue.
Try it first, then show our solutionSolution
1. Direct taxes:
  ½ mark
2. the impact (who pays first) and incidence (who finally bears it) are on the same person, so the burden cannot be shifted. Example: income tax, corporation tax.
  1 mark
3. Indirect taxes:
  ½ mark
4. the impact and incidence can fall on different persons, so the burden can be shifted (for example, from the seller to the buyer). Example: GST, customs duty.
  1 mark
Answer: Direct taxes (burden cannot be shifted, e.g. income tax) and indirect taxes (burden can be shifted, e.g. GST).
Where the marks are
- Each head named (½) and explained (1)
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Q13 · 4 marks · Short answerCompetency-basedOpen Economy Macroeconomics
Answer the following.
1. (I)
  ‘Foreign Portfolio Investment (FPI) witnessed a sharp turnaround during 2023-24 with net FPI inflows of US$ 32.4 billion.’
  In which sub-account and on which side of the Balance of Payments account the above transaction will be recorded? Give reasons in support of your answer.
  3 marks
2. (II)
  State the meaning of ‘Balance of Payments Deficit’.
  1 mark
Try it first, then show our solutionSolution
1. (I) Net FPI inflow is recorded on the credit side of the capital account of the BoP.
  1 mark
2. Credit side: it brings foreign exchange into the country.
  1 mark
3. Capital account: it changes the ownership of financial assets (shares and bonds) between residents and the rest of the world, creating a liability for the country.
  1 mark
4. (II) A BoP deficit occurs when autonomous receipts fall short of autonomous payments during the year.
  1 mark
Answer: (I) Credit side of the capital account (foreign exchange inflow, change in ownership of assets). (II) BoP deficit: autonomous receipts < autonomous payments.
Where the marks are
- Sub-account and side with reasons (3)
- Meaning of BoP deficit (1)
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Answer one of these 2 alternatives.
Q14(A) · 4 marks · Short answerDetermination of Income and Employment
“Saving curve can be derived from the consumption curve”
Justify the statement, citing valid steps with the help of a well-labelled diagram.
Try it first, then show our solutionSolution
1. Diagram: income on the X-axis; consumption and saving on the Y-axis. Draw the 45° line and the consumption curve C starting at C (OC = autonomous consumption) on the Y-axis; C cuts the 45° line at B, the break-even point.
  1 mark
2. Step 1: Mark point A on the negative Y-axis with OA = OC. At zero income, saving = −c̄, so A is the starting point of the saving curve.
  1 mark
3. Step 2: From B (where C = Y), drop a perpendicular to the X-axis meeting it at B'. At this income, saving = 0, so B' is a second point on the saving curve.
  1 mark
4. Step 3: Join A and B' and extend the line to S. AS is the saving curve. Since S = Y − C, the saving curve can always be drawn from the consumption curve.
  1 mark
Answer: Start at −OC on the Y-axis, mark the break-even income on the X-axis (S = 0), and join the two points to get the saving curve.
Where the marks are
- Well-labelled diagram (1)
- Three steps (1 + 1 + 1)
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OR
Q14(B) · 4 marks · Short answerDetermination of Income and Employment
For two hypothetical economies A and B, the value of Marginal Propensity to Consume (MPC) stands at 0.6 and 0.8 respectively. Assuming for both the economies, Autonomous Consumption ( $\overset{c}{ˉ}$ ) to be ₹ 40 crore and Investment Expenditure (I) to be ₹ 100 crore.
Calculate:
1. (I)
  Break-even level of income for Economy A
  2 marks
2. (II)
  Equilibrium level of income for Economy B
  2 marks
Try it first, then show our solutionSolution
1. (I) Economy A: at break-even, Y = C, so Y = 40 + 0.6Y
  ½ mark
2. Y − 0.6Y = 40, so 0.4Y = 40
  ½ mark
3. Y = 40 ÷ 0.4
  ½ mark
4. Break-even income = ₹ 100 crore
  ½ mark
5. (II) Economy B: at equilibrium, Y = C + I = c̄ + MPC·Y + I
  ½ mark
6. Y = 40 + 0.8Y + 100
  ½ mark
7. 0.2Y = 140
  ½ mark
8. Equilibrium income = ₹ 700 crore
  ½ mark
Answer: (I) Break-even income of A = ₹ 100 crore. (II) Equilibrium income of B = ₹ 700 crore.
Where the marks are
- Each part: condition, substitution, working, answer (½ each)
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Q15 · 4 marks · Short answerCompetency-basedDetermination of Income and Employment
Read the following text carefully:
“Union Finance Minister stated, that investments in infrastructure and productive capacity have a large multiplier impact on growth and employment and in view of this, capital investment outlay is being proposed to increase steeply in the Budget 2023-24 by 1,000 crore.”
Based on the given text and common understanding, explain the working process of the increase in investment on the National Income, assuming the Marginal Propensity to Save (MPS) as 20%.
Try it first, then show our solutionSolution
1. The multiplier works because one person's expenditure is another's income. MPS = 0.2, so MPC = 0.8.
  1 mark
2. Round 1: the extra ₹ 1,000 crore of investment becomes ₹ 1,000 crore of income for those who supply the goods and labour. They spend 80% (₹ 800 crore) and save ₹ 200 crore.
  1 mark
3. Round 2: the ₹ 800 crore spent becomes new income; ₹ 640 crore of it is spent and ₹ 160 crore saved. Round 3: income ₹ 640 crore, spending ₹ 512 crore, saving ₹ 128 crore, and so on. The process stops when total extra saving equals the extra investment (₹ 1,000 crore).
  1 mark
4. Multiplier k = 1/(1 − MPC) = 1/0.2 = 5, so total ΔY = 5 × 1,000 = ₹ 5,000 crore (ΔC = ₹ 4,000 crore, ΔS = ₹ 1,000 crore): income rises 5 times the investment.
  1 mark
Answer: With MPC = 0.8, k = 5: ₹ 1,000 crore of investment raises income in successive rounds (1,000, 800, 640, ...) by ₹ 5,000 crore in total.
Where the marks are
- Working of the multiplier with schedule and k = 5 (marked as a whole, 4)
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Q16 · 6 marks · Case-basedCompetency-basedMoney and Banking
Read the following text carefully:
As societies developed from hunters and gatherers, the material needs of human beings increased – to build a house, wear clothes, make weapons and implements etc. Since these needs could not be produced individually, people had to purchase them from others. These purchases, for example, were paid initially by barter – a leather skin cloak for a spear. As barter had its limits – how many cloaks for a spear – barter got standardized in terms of metals or cowrie shells. Now people knew the value of both the cloak and the spear in terms of bronze or cowrie shells. This was still barter, as both bronze and shells had intrinsic value (shells were desired for their beauty). This system evolved over time into metal currencies. Gold and silver coinage were the offshoot of this system where they had features of barter (both gold and silver had intrinsic value) as well as money (they were standardized representation of value).
In respect of money two facts emerge historically:
• Money has taken the form of either commodities (which have intrinsic value) or in terms of debt instruments.
• Money is usually issued by a sovereign (or a Central Bank as its representative).
In modern economies, currency is a form of money that is issued exclusively by some competent authority (Central Bank). It is a liability of the issuing Central Bank and an asset of the holding public. Currency is usually issued in paper (or polymer) form, but the form of currency is not its defining characteristic.
In the recent past, the Reserve Bank of India, issued Central Bank Digital Currency (CBDC). A CBDC is the currency issued by a central bank in a digital form. It serves all the purposes of a paper currency in a different form.
The introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, lower transaction costs, reduced settlement risk. Introduction of CBDC would possibly lead to a more robust, efficient, trusted, regulated payments option. There are associated risks such as cyber-attacks and technology preparedness, but they need to be carefully evaluated against the potential benefits.
Source: https://website.rbi.org.in/web/rbi/-/speeches-interview/central-bank-digital-currency-is-this-the-future-of-money-1111 (adapted and modified)
On the basis of the given text and common understanding, answer the following questions:
1. (I)
  “Over the centuries, money has evolved in various forms.”
  In the light of the given statement, state and discuss briefly any two forms of money.
  3 marks
2. (II)
  “Various economists have formed a strong opinion that, in the modern times digital currency (like CBDC) is quite essential. However, it comes with its own benefits and potential risks.”
  Do you agree with the given statement, giving valid arguments in support of your answer.
  3 marks
Try it first, then show our solutionSolution
1. (I) Metallic money:
  ½ mark
2. gold and silver coins, which had intrinsic value and were also a standardised representation of value, so they were used for transactions.
  1 mark
3. (I) Paper currency:
  ½ mark
4. notes issued in paper (or polymer) form by the central bank; they are a liability of the central bank and an asset of the public. (Also: commodity money, digital currency such as CBDC.)
  1 mark
5. (II) Yes. A CBDC reduces dependence on cash, lowers transaction costs and settlement risk, and offers a more robust, efficient, trusted and regulated way to pay. But it carries risks such as cyber-attacks and the need for technological preparedness; these must be carefully weighed against the benefits.
  3 marks
Answer: (I) Metallic coins (intrinsic value) and paper currency (central bank liability). (II) Agree: CBDC cuts costs and risks but brings cyber and technology risks.
Where the marks are
- Two forms named (½ each) and discussed (1 each)
- Benefits and risks of CBDC (3)
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Answer one of these 2 alternatives.
Q17(A) · 6 marks · Long answerCompetency-basedNational Income Accounting
Answer the following.
1. (I)
  On the basis of the following hypothetical data:
  (all figures in ₹ crore)
  Year Nominal GDP Nominal GDP adjusted to base year prices
  2020 3,000 4,000
  2023 4,000 4,500
  Calculate the percentage change in Real Gross Domestic Product in the year 2023 using 2020 as the base year.
  3 marks
2. (II)
  “The public investment on the construction of a multi-lane flyover may reduce traffic congestion.”
  On the basis of the above statement, discuss its likely impact on Gross Domestic Product (GDP) and welfare in an economy.
  3 marks
Try it first, then show our solutionSolution
1. (I) Real GDP is nominal GDP at base-year prices: 2020 = ₹ 4,000 crore, 2023 = ₹ 4,500 crore (as given in the third column). % change in real GDP = (Change in real GDP ÷ Real GDP of 2020) × 100
  1½ marks
2. = (4,500 − 4,000) ÷ 4,000 × 100
  1 mark
3. = 12.5%
  ½ mark
4. (II) The flyover is public investment, so it adds to GDP directly. Better infrastructure (faster transport) attracts more investment and creates jobs, raising GDP further. Less congestion saves travel time and lowers transport costs and pollution, so the well-being (welfare) of citizens rises too.
  3 marks
Answer: (I) Real GDP rose by 12.5%. (II) The flyover raises GDP (investment, jobs) and welfare (less congestion, time and cost saved).
Where the marks are
- Formula (1½), substitution (1), answer (½)
- Impact on GDP and welfare (3)
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OR
Q17(B) · 6 marks · Long answerCompetency-basedNational Income Accounting
Answer the following.
1. (I)
  “Basis of classification of final goods into consumption and capital goods depend on the economic nature of its use.”
  Defend or refute the statement, with the help of a suitable example.
  4 marks
2. (II)
  ‘Natural calamities in the hill states of India have led to massive destruction of capital assets.’
  Identify the type of loss (depreciation or capital loss) indicated in the aforesaid statement. Give valid reasons in support of your answer.
  2 marks
Try it first, then show our solutionSolution
1. (I) Defended. Consumption goods satisfy consumers' wants directly; capital goods are final goods used for further production over many years.
  1½ marks
2. Whether a good is a consumption or capital good depends on the economic nature of its use, not on the good itself.
  1 mark
3. Example: a machine (say, a sewing machine or a car) bought by a household for its own use is a consumption good, but the same machine bought by a firm for production is a capital good.
  1½ marks
4. (II) It is a capital loss. Capital loss is the loss in value of fixed assets due to unforeseen events such as natural disasters, fire or theft. The destruction in the hill states (for example Himachal Pradesh, Uttarakhand) was sudden and unexpected, not normal wear and tear, so it is not depreciation.
  2 marks
Answer: (I) Defended: the same good is a consumption good for a household and a capital good for a firm. (II) Capital loss: unforeseen destruction by natural calamities.
Where the marks are
- Defence with explanation and example (4)
- Capital loss identified with reason (2)
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Year	Nominal GDP	Nominal GDP adjusted to base year prices
2020	3,000	4,000
2023	4,000	4,500

Section B

Indian Economic Development: MCQ 18-27 (1 mark), 28-29 (3 marks), 30-31 (4 marks), 32-34 (6 marks)

Q18(a) · 1 mark · MCQCompetency-basedEnvironment and Sustainable Development
Read the given image carefully:
Choose the correct option which indicates the combination of vital functions performed by the environment.
i. Sustains life
ii. Provides aesthetic services
iii. Generates waste
iv. Provides only renewable resources
1. (A)(i) and (ii)
2. (B)(ii) and (iii)
3. (C)(i) and (iv)
4. (D)(i) and (iii)
Figure in the paper: Central oval 'FUNCTIONS OF ENVIRONMENT' with arrows to four ovals: 'Provides Resources' (top), 'Assimilates Waste' (left), and two unlabeled ovals marked '?' (right and bottom). See it in the official paper.
Try it first, then show our solutionSolution
1. The figure shows the environment's functions: providing resources and assimilating waste, with two blanks. The other two vital functions are sustaining life (genetic and bio-diversity) and providing aesthetic services (scenery).
2. "Generates waste" is not a function, and the environment provides both renewable and non-renewable resources, so (iii) and (iv) are wrong. Option (A).
  1 mark
Answer: (A) (i) and (ii)
Where the marks are
- Four functions: resources, assimilation, sustaining life, aesthetic services (1 mark)
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Q19 · 1 mark · MCQIndian Economy on the Eve of Independence
Read the following statements carefully:
Statement 1: The British policies led to the collapse of India’s world-famous handicraft industries.
Statement 2: During the colonial rule in India, the contribution of the industrial sector to Gross Value Added (GVA) increased significantly.
In light of the given statements, choose the correct option from the following:
1. (A)Statement 1 is true and Statement 2 is false.
2. (B)Statement 1 is false and Statement 2 is true.
3. (C)Both Statements 1 and 2 are true.
4. (D)Both Statements 1 and 2 are false.
Try it first, then show our solutionSolution
1. Statement 1 is true: British policies (discriminatory tariffs, competition from machine-made goods) led to the collapse of India's handicraft industries.
2. Statement 2 is false: modern industry grew slowly and the industrial sector's contribution to output stayed small during colonial rule. Option (A).
  1 mark
Answer: (A) Statement 1 is true and Statement 2 is false.
Where the marks are
- Handicrafts collapsed; industry's share stayed small (1 mark)
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Q20 · 1 mark · Assertion-reasonCompetency-basedHuman Capital Formation in India
Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below:
Assertion (A): The Education Commission (1964–66) had recommended that at least 4 % of Gross Domestic Product (GDP) be spent on education.
Reason (R): The Union and State Governments, have been stepping up expenditures in the education sector over the years to fulfil the objective of attaining cent per cent literacy.
1. (A)Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
2. (B)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
3. (C)Assertion (A) is true, but Reason (R) is false.
4. (D)Assertion (A) is false, but Reason (R) is true.
Try it first, then show our solutionSolution
1. Assertion: False. The Education Commission (1964–66) recommended that at least 6% of GDP be spent on education, not 4%.
  Reason: True. The Union and State governments have been raising spending on education over the years to achieve 100% literacy.
2. A is false and R is true. Option (D).
  1 mark
Answer: (D) Assertion (A) is false, but Reason (R) is true.
Where the marks are
- Truth of A and R and the link between them (1 mark)
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Q21 · 1 mark · MCQIndian Economy 1950-1990
In the post-independence era, the policymakers of India adopted an economic system that fundamentally implies the coexistence of ______ and ________.
(Choose the correct option to fill up the blank)
1. (A)small and large-scale industries
2. (B)small and medium-scale industries
3. (C)public and private sector
4. (D)private and foreign sector
Try it first, then show our solutionSolution
1. After independence, India chose a mixed economy, combining the features of capitalism and socialism.
2. A mixed economy means the coexistence of the public and private sectors. Option (C).
  1 mark
Answer: (C) public and private sector
Where the marks are
- Mixed economy: public and private sectors (1 mark)
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Q22 · 1 mark · MCQRural Development
The institutional structure of rural banking in contemporary India consists of a set of multi-agency institutions, namely, _________________.
(Choose the correct option to fill up the blank)
(i) Regional Rural Banks (ii) Cooperative Banks
(iii) Land Development Banks (iv) Commercial Banks
1. (A)(i) and (iv)
2. (B)(i), (iii) and (iv)
3. (C)(i), (ii) and (iii)
4. (D)(i), (ii), (iii), and (iv)
Try it first, then show our solutionSolution
1. The rural banking structure in India is a multi-agency system.
2. It includes commercial banks, regional rural banks, cooperative banks and land development banks: all four. Option (D).
  1 mark
Answer: (D) (i), (ii), (iii), and (iv)
Where the marks are
- All four institutions form rural banking (1 mark)
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Q23 · 1 mark · MCQLiberalisation, Privatisation and Globalisation: An Appraisal
Identify, which of the following statement is incorrect about the financial sector reform introduced in 1991? (Choose the correct option)
1. (A)Enabled the establishment of private sector banks, Indian as well as foreign
2. (B)Foreign investment limit in banks was raised to around 74%
3. (C)Foreign Institutional Investors were allowed to invest in Indian financial markets
4. (D)Change in the role of the Reserve Bank of India from facilitator to regulator
Try it first, then show our solutionSolution
1. Options A, B and C are correct features of the 1991 financial sector reforms: private (Indian and foreign) banks were allowed, the foreign investment limit in banks was raised to about 74%, and FIIs could invest in Indian markets.
2. D is incorrect: the RBI's role changed from regulator to facilitator of the financial sector, not the other way round. Option (D).
  1 mark
Answer: (D) Change in the role of the Reserve Bank of India from facilitator to regulator
Where the marks are
- RBI moved from regulator to facilitator (1 mark)
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Q24 · 1 mark · MCQComparative Development Experiences of India and its Neighbours
China's demographic problem of 4-2-1, resulted in a higher proportion of elderly individuals compared to the younger population. This was primarily due to the implementation of ______.
1. (A)Great Leap Forward Campaign
2. (B)Great Proletarian Cultural Revolution
3. (C)One Child Norm
4. (D)Special Economic Zones
Try it first, then show our solutionSolution
1. The 4-2-1 problem (four grandparents, two parents, one child) and an ageing population came from China's strict population control.
2. It was caused by the one-child norm introduced in the late 1970s. Option (C).
  1 mark
Answer: (C) One Child Norm
Where the marks are
- One-child norm led to 4-2-1 and ageing (1 mark)
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Q25 · 1 mark · MCQEnvironment and Sustainable Development
______ was setup in 1974 by the Indian government to address two major environmental concerns viz. water and air pollution.
(Choose the correct option to fill up the blank)
1. (A)State Pollution Control Board
2. (B)Central Pollution Control Board
3. (C)Brundtland Commission
4. (D)Montreal Protocol
Try it first, then show our solutionSolution
1. The Central Pollution Control Board (CPCB) was set up in 1974 to deal with water and air pollution.
2. State boards came later under it; the Brundtland Commission and Montreal Protocol are international. Option (B).
  1 mark
Answer: (B) Central Pollution Control Board
Where the marks are
- CPCB set up in 1974 (1 mark)
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Q26 · 1 mark · MCQCompetency-basedEmployment: Growth, Informalisation and Other Issues
“Assuming in a hypothetical economy, Real Gross Domestic Product recorded a growth rate of 9% during a fiscal year. However, the economy faced a significant challenge in terms of creating an adequate number of employment opportunities.”
Identify the situation indicated in the given statement and choose the correct option.
1. (A)Casualisation of workforce
2. (B)Informalisation of workforce
3. (C)Formalisation of workforce
4. (D)Jobless growth
Try it first, then show our solutionSolution
1. Real GDP grows fast (9%) but employment does not grow enough.
2. Growth of output without matching growth in jobs is jobless growth. Option (D).
  1 mark
Answer: (D) Jobless growth
Where the marks are
- High GDP growth without jobs (1 mark)
Q27 · 1 mark · MCQRural Development
During the period 1951-2016, __________ led to an increase in the milk production in India by about ten times.
(Choose the correct option to fill up the blank)
1. (A)Green Revolution
2. (B)Golden Revolution
3. (C)Operation Flood
4. (D)Industrial Revolution
Try it first, then show our solutionSolution
1. Operation Flood (the White Revolution), through dairy cooperatives, raised milk production in India about ten times between 1951 and 2016.
2. The answer is Operation Flood. Option (C).
  1 mark
Answer: (C) Operation Flood
Where the marks are
- Operation Flood raised milk output tenfold (1 mark)
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Answer one of these 2 alternatives.
Q28(A) · 3 marks · Short answerLiberalisation, Privatisation and Globalisation: An Appraisal
Critically appraise the disinvestment policy initiated by the government during the reforms of 1991.
Try it first, then show our solutionSolution
1. Disinvestment (selling part of the government's equity in PSEs) aimed to improve financial discipline and help modernise these enterprises.
  1 mark
2. The government exceeded its targets for raising money, but critics point out that PSE assets were undervalued, causing a significant loss to the government.
  1 mark
3. Also, the proceeds were mostly used to cover shortfalls in government revenue rather than to develop PSEs or build social infrastructure.
  1 mark
Answer: Disinvestment aimed at efficiency and modernisation and met its targets, but assets were undervalued and proceeds were used to fill revenue gaps.
Where the marks are
- Critical appraisal (marked as a whole, 3)
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Q28(B) · 3 marks · Short answerLiberalisation, Privatisation and Globalisation: An Appraisal
‘Globalisation is an essential outcome of liberalisation of an economy’.
Justify the given statement with a valid explanation.
Try it first, then show our solutionSolution
1. Liberalisation removed or reduced restrictions on industry, finance, trade and foreign investment.
  1 mark
2. This opened the Indian economy to the rest of the world: imports and exports rose, and foreign investment and technology came in.
  1 mark
3. So liberalisation acted as a catalyst for globalisation, integrating the Indian economy with the global economy.
  1 mark
Answer: Liberalisation removed trade and investment barriers, which opened India to the world and led to its integration with the global economy.
Where the marks are
- Justification (marked as a whole, 3)
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Q29 · 3 marks · Short answerComparative Development Experiences of India and its Neighbours
‘To measure the extent of development in an economy, liberty indicators should be considered along with other socio-economic parameters.’
Do you agree with the given statement? Give valid reasons in support of your answer.
Try it first, then show our solutionSolution
1. Yes. Development is more than income, health and education; a complete measure must also consider liberty indicators along with socio-economic parameters.
  1 mark
2. Liberty indicators measure democratic participation in social and political decision-making: civil liberties, political rights and economic freedom (for example, the extent of constitutional protection of rights, independence of the judiciary and rule of law).
  1 mark
3. Including them gives policymakers a more holistic picture of an economy's development status.
  1 mark
Answer: Agree: liberty indicators (civil liberties, political rights, economic freedom) give a fuller picture of development than socio-economic data alone.
Where the marks are
- Agreement with reasons (marked as a whole, 3)
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Q30 · 4 marks · Short answerComparative Development Experiences of India and its Neighbours
‘The reform process implemented in the late 1970s, commonly known as China’s open door policy, encompassed a wide range of reforms across sectors like agriculture, investment, industry etc. These reforms played a pivotal role in driving the rapid growth of the Chinese economy over subsequent decades.’
In the light of the given text, discuss any two reforms responsible for the rapid economic growth of China.
Try it first, then show our solutionSolution
1. Agricultural reforms (first phase, 1978): commune lands were divided into small plots and allocated to individual households for use. They could keep all income from the land after paying stipulated taxes, which raised farm output and incomes. (Reforms also began in foreign trade and investment.)
  2 marks
2. Industrial reforms (later phase): private firms, especially township and village enterprises, were allowed to produce goods, and state-owned enterprises were made to face competition, raising efficiency and growth.
  2 marks
Answer: Agricultural reform (land to households, income kept after tax) and industrial reform (private firms and TVEs allowed, SOEs face competition).
Where the marks are
- Two reforms explained (2 + 2)
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Answer one of these 2 alternatives.
Q31(A) · 4 marks · Short answerCompetency-basedEnvironment and Sustainable Development
‘Under the Delhi Declaration, the G-20 nations pledged to reach global net zero emissions approximately by mid-century and to triple global renewable energy capacity by 2030.’
Discuss briefly the rationale behind the commitment by G-20 nations in the direction of achieving sustainable development.
Try it first, then show our solutionSolution
1. Under the Delhi Declaration, G-20 countries agreed to step up efforts to limit global warming, which threatens sustainable development.
  1 mark
2. To do this they will cut greenhouse gas emissions (net zero by about mid-century).
  1 mark
3. They plan to shift from conventional (fossil fuel) energy to non-conventional sources, tripling renewable capacity by 2030.
  1 mark
4. Wind and solar energy are examples of eco-friendly sources that meet present needs without harming future generations, helping achieve sustainable development.
  1 mark
Answer: G-20 aims to limit global warming by cutting emissions and shifting to renewables like wind and solar, so that development is sustainable.
Where the marks are
- Rationale explained (marked as a whole, 4)
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OR
Q31(B) · 4 marks · Short answerHuman Capital Formation in India
‘It would be unclear to say that, the growth of human capital lays the ground for economic growth of a nation.’
Do you agree with the given statement? Support your answer with valid illustrations.
Try it first, then show our solutionSolution
1. Yes, I agree. It is hard to establish that more human capital causes economic growth because the relation between the two is difficult to measure.
  1 mark
2. Educational yardsticks such as years of schooling, teacher-pupil ratio and enrolment rates may not reflect the quality of education.
  1 mark
3. Human capital measures show convergence between developing and developed countries, but there is no evidence of convergence in per capita income.
  1 mark
4. So education may improve without a matching rise in real income across countries; the link between human capital and growth is unclear.
  1 mark
Answer: Agree: causality is hard to measure, schooling measures miss quality, and human-capital convergence has not brought income convergence.
Where the marks are
- Agreement with illustrations (marked as a whole, 4)
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Q32 · 4 marks · Long answerCompetency-basedRural Development
Answer the following.
1. (I)
  Interpret the given picture based on the Saansad Adarsh Gram Yojana (SAGY) initiated by the Government of India.
  3 marks
2. (II)
  State any two examples of allied activities.
  1 mark
Figure in the paper: Hand-drawn picture: a hexagonal Parliament-like building surrounded by trees on the left; on the right, a thatched hut under a large tree; in the middle three gear icons labelled 'Member of Parliament', 'Villagers' and 'Health and Education'. See it in the official paper.
Try it first, then show our solutionSolution
1. (I) The picture links Parliament, villages, and health and education. Under the Saansad Adarsh Gram Yojana, each Member of Parliament identifies a village in his or her constituency and develops it as a model (adarsh) village.
  1 mark
2. MPs were to develop three villages as model villages, covering more than 2,500 villages in all.
  1 mark
3. MPs prepare a village development plan, motivate villagers to take up activities and build infrastructure in health, nutrition and education.
  1 mark
4. (II) Allied activities: livestock (animal husbandry)
  ½ mark
5. and fisheries (also horticulture, poultry).
  ½ mark
Answer: (I) Under SAGY, MPs adopt and develop villages as model villages with plans and infrastructure in health, nutrition and education. (II) Livestock and fisheries.
Where the marks are
- Interpretation of SAGY (3)
- Two allied activities (½ + ½)
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Q33 · 6 marks · Case-basedCompetency-basedEmployment: Growth, Informalisation and Other Issues
Read the following text carefully:
Employment generation has remained one of the top challenges of Indian policymakers, and over the years, this has only become more complex. India has experienced more or less consistent growth in the structure of the output of the economy, especially after the economic reforms which is measured by gross value added. However, the trend in employment did not reveal a consistent and clear pattern.
These complexities have led to a wide variation in the conclusions drawn by experts and various studies on workforce and employment.
Two major sources of data on the workforce and employment have been the
(i) decennial population census and
(ii) nationwide quinquennial surveys on employment and unemployment by the erstwhile NSSO under the Ministry of Statistics and Programme Implementation (MoSPI), Government of India.
The nationwide Employment and Unemployment (E&U) surveys have been replaced by the Periodic Labour Force Survey (PLFS) conducted by the National Statistical Office (NSO) of MoSPI, which started in the year 2017–18.
According to NSO, the PLFS data measure the dynamics in labour force participation, workers to population ratio and the employment status along with related, important parameters for both rural and urban areas.
Labour force includes persons who were either working (or employed) or those available for work (or unemployed). Some persons in the labour force are abstained from work for various reasons. Deducting that number from the labour force gives the number of actual workers. These workers are further categorised as persons who are engaged in any economic activity as self-employed or regular wage/salaried and casual labour. The difference between the labour force and the workforce gives the number of unemployed persons.
The size of the labour force in the country has increased from 485.3 million in the year 2017–18 to 497.4 million in the year 2018–19. The next year, the labour force increased by 8 per cent and reached 537.9 million. This increase was witnessed across male and female populations as well as rural and urban households.
Source: https://www.niti.gov.in/sites/default/files/2022-04/Discussion_Paper_on_Workforce_05042022.pdf (adapted and modified)
On the basis of the given text and common understanding, answer the following questions:
1. (I)
  State any two major sources of data on the workforce and employment.
  2 marks
2. (II)
  ‘The labour force encompasses a broader category than the workforce.’
  Defend or refute the statement, giving valid reasons in support of your answer.
  3 marks
3. (III)
  ‘Workers can be categorized into different types depending on their status.’
  In the light of the given statement, state any one type of employment.
  1 mark
Try it first, then show our solutionSolution
1. (I) Source 1: the decennial population census.
  1 mark
2. (I) Source 2: the nationwide quinquennial employment-unemployment surveys of the NSSO (now replaced by the PLFS of the NSO).
  1 mark
3. (II) Defended. The labour force includes everyone who is working or is available for work (employed + unemployed).
  1 mark
4. (II) The workforce includes only those actually working, that is, engaged in economic activity.
  1 mark
5. (II) Labour force − workforce = unemployed, so the labour force is the broader category.
  1 mark
6. (III) One type: self-employed workers, who own and operate an enterprise to earn their livelihood (also regular wage/salaried employees and casual workers).
  1 mark
Answer: (I) Census and NSSO surveys. (II) Defended: labour force = workforce + unemployed. (III) Self-employed (or regular salaried, casual).
Where the marks are
- Two sources (1 + 1)
- Labour force versus workforce (3)
- One type (1)
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Answer one of these 2 alternatives.
Q34(A) · 6 marks · Long answerIndian Economy 1950-1990
Answer the following.
1. (I)
  ‘Under the Industrial Policy Resolution (IPR) 1956 in India, the system of industrial licensing was introduced to promote regional equality.’
  Justify the given statement with valid arguments.
  4 marks
2. (II)
  Discuss briefly the estimates made by notable scholars regarding the national income and per capita income during the colonial rule in India.
  2 marks
Try it first, then show our solutionSolution
1. (I) Under IPR 1956, some industries were left for the private sector, but the private sector was kept under state control through licences: no new industry could be set up (or expanded) without a government licence.
  2 marks
2. (I) Licences were easier to obtain if the unit was set up in an economically backward area, and such units got benefits like tax holidays and electricity at lower tariffs. This spread industries to backward regions, promoting regional equality.
  2 marks
3. (II) Scholars such as Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V. Rao and R.C. Desai estimated national and per capita income in colonial times; V.K.R.V. Rao's estimates were the most significant.
  1 mark
4. (II) Most studies found that real output grew by less than 2% a year in the first half of the 20th century and per capita output by only about 0.5% a year.
  1 mark
Answer: (I) Licensing kept private industry under control and favoured backward areas (tax holidays, cheaper power), promoting regional equality. (II) Naoroji, Digby, Shirras, Rao, Desai: output growth < 2%, per capita about 0.5%.
Where the marks are
- Licensing and regional equality (4)
- Scholars and estimates (2)
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Q34(B) · 6 marks · Long answerIndian Economy on the Eve of Independence
Answer the following.
1. (I)
  ‘During the colonial period, India’s foreign trade was characterized by a large export surplus, however, this did not result in any flow of gold or silver into India.’
  Justify the given statement with valid arguments.
  3 marks
2. (II)
  Explain the rationale behind choosing 'Self-reliance' as a central planning objective in India's development strategy.
  3 marks
Try it first, then show our solutionSolution
1. (I) India had a large export surplus in colonial times, but it did not bring gold or silver into India.
  1 mark
2. The surplus was used to pay for the expenses of the office set up by the colonial government in Britain, for wars fought by the British government, and for imports of invisible items.
  1 mark
3. This was a drain of India's wealth to Britain.
  1 mark
4. (II) Self-reliance was chosen to reduce dependence on foreign countries, especially for food, by mobilising domestic resources.
  1½ marks
5. It was feared that dependence on imported food, foreign technology and foreign capital would increase foreign interference in India's policies and threaten its sovereignty.
  1½ marks
Answer: (I) The surplus paid for British administration, wars and invisible imports: a drain of wealth. (II) Self-reliance cut dependence on foreign food, technology and capital to avoid foreign interference.
Where the marks are
- Drain of the export surplus (3)
- Two reasons for self-reliance (1½ + 1½)
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Source: official sample paper, cbseacademic.nic.in. Chapter tags and solutions are ours. Spotted a transcription error? Write tosupport@questionbuddy.in.