EconomicsCBSE Class 12 · Sample paper, session 2025-26

CBSE Class 12 Economics: sample paper 2025-26

The sample question paper CBSE published for the 2025-26 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.

39 of 40 questions (counting each OR alternative) have our step-by-step solution so far. We show a solution only after an independent re-solve agrees with it; the rest say "Solution being checked".

Source: official sample question paper from cbseacademic.nic.in: https://cbseacademic.nic.in/web_material/SQP/ClassXII_2025_26/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 (4).

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), 11-12 (3 marks), 13-15 (4 marks), 16-17 (6 marks)
B	18-34	Indian Economic Development: MCQ 18-27 (1 mark), 28-29 (3 marks), 30-32 (4 marks), 33-34 (6 marks)

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

Section A

Macro Economics: MCQ 1-10 (1 mark), 11-12 (3 marks), 13-15 (4 marks), 16-17 (6 marks)

Q1 · 1 mark · MCQCompetency-basedDetermination of Income and Employment
With reference to the given diagram, which of the following is true at point B? (Choose the correct option)
1. (A)Slope of Consumption Curve = 0
2. (B)Average Propensity to Consume = 0
3. (C)Slope of Saving Curve = 1
4. (D)Average Propensity to Consume = 1
Figure in the paper: Graph with Income on X-axis and Consumption on Y-axis. A 45° line from the origin and a consumption curve C starting at a positive intercept on the Y-axis with flatter slope intersect at point B. The 45° angle is marked at origin. See it in the official paper.
Try it first, then show our solutionSolution
1. Point B is where the consumption curve cuts the 45° line, so consumption equals income there (C = Y): the break-even point, where saving is zero.
2. At B, APC = C/Y = 1. (The slope of the consumption curve is the MPC, which is positive but less than 1, and the saving curve's slope is the MPS, also less than 1.) Option (D).
  1 mark
Answer: (D) Average Propensity to Consume = 1
Where the marks are
- At break-even C = Y, so APC = 1 (1 mark)
Open Q1 on its own page
Q2 · 1 mark · MCQCompetency-basedNational Income Accounting
“Real Gross Domestic Product (GDP) is estimated to attain a level of ₹ 173.82 lakh crore in the year 2023-24. The corresponding Nominal GDP is estimated to stand at ₹ 295.36 lakh crore in the same year.”
Source:https://pib.gov.in/PressReleseDetailm.aspx?PRID=2022323&reg=3&lang=1
On the basis of the given data, the value of GDP deflator would be _____. (Choose the correct option to fill up the blank)
1. (A)295.36
2. (B)58.85
3. (C)169.92
4. (D)173.82
Try it first, then show our solutionSolution
1. GDP deflator = (Nominal GDP ÷ Real GDP) × 100.
2. = (295.36 ÷ 173.82) × 100 = 169.92. Option (C).
  1 mark
Answer: (C) 169.92
Where the marks are
- Deflator = nominal ÷ real × 100 (1 mark)
Q3 · 1 mark · MCQMoney and Banking
“Money is non-perishable and is acceptable to anyone at any point of time.”
Identify, the function of money indicated in the aforesaid statement and choose the correct option.
1. (A)Store of Value
2. (B)Medium of Exchange
3. (C)Unit of Account
4. (D)Standard of Deferred Payments
Try it first, then show our solutionSolution
1. Because money does not perish and is accepted by anyone at any time, people can hold their wealth in money and use it later.
2. This is the store of value function of money. Option (A).
  1 mark
Answer: (A) Store of Value
Where the marks are
- Non-perishable and always acceptable: store of value (1 mark)
Open Q3 on its own page
Q4 · 1 mark · MCQOpen Economy Macroeconomics
Read the following statements carefully:
Statement 1: Devaluation of currency is said to occur when the exchange rate is decreased under the Fixed Exchange Rate System.
Statement 2: Under the Floating Exchange Rate System, competent authorities do not maintain foreign exchange reserves.
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 false: devaluation under a fixed exchange rate system is an official increase in the exchange rate (the domestic currency price of foreign currency rises), which lowers the value of the domestic currency.
2. Statement 2 is true: under a (pure) floating system the rate is set by market demand and supply, and the authorities do not intervene, so they need not maintain foreign exchange reserves for that purpose. Option (B).
  1 mark
Answer: (B) Statement 1 is false and Statement 2 is true.
Where the marks are
- Devaluation raises the exchange rate; no reserves needed under a free float (1 mark)
Open Q4 on its own page
Q5 · 1 mark · MCQCompetency-basedNational Income Accounting
Refer to the given diagram carefully:
The arrows C and D represent ______ Market. (Choose the correct option to fill up the blank)
1. (A)Factor
2. (B)Goods
3. (C)Stock
4. (D)Financial
Figure in the paper: Circular flow diagram between Firms and Households. Outer arrow A: Spending (Households to Firms); inner arrow B: Goods and Services (Firms to Households); inner arrow C: Factor Payments (Firms to Households); outer arrow D: Factor Services (Households to Firms). See it in the official paper.
Try it first, then show our solutionSolution
1. In the diagram, arrow C is factor payments (firms to households) and arrow D is factor services (households to firms).
2. Both are exchanges of factor services for factor payments, which take place in the factor market. Option (A).
  1 mark
Answer: (A) Factor
Where the marks are
- Factor services and factor payments flow through the factor market (1 mark)
Open Q5 on its own page
Q6 · 1 mark · MCQDetermination of Income and Employment
Deflationary Gap refers to the gap by which ___________ falls short of the Aggregate Demand required to establish full employment equilibrium. (Choose the correct option to fill up the blank)
1. (A)ex-ante Aggregate Demand
2. (B)ex-post Aggregate Demand
3. (C)ex-ante Aggregate Supply
4. (D)ex-post Aggregate Supply
Solution being checked. Our step-by-step solution is written and is waiting for an independent check before we show it.
Q7 · 1 mark · MCQNational Income Accounting
Read the following statements carefully:
Statement 1: Final Goods do not undergo any further transformation at the hands of any producer.
Statement 2: Final goods may get transformed during their consumption by the ultimate purchaser.
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: a final good is one that will not pass through any further stage of production or transformation at the hands of a producer.
2. Statement 2 is true: a final good may still change form while the ultimate buyer consumes it (for example, tea leaves brewed at home), but that is consumption, not production. Option (C).
  1 mark
Answer: (C) Both Statements 1 and 2 are true.
Where the marks are
- Final goods: no further transformation by a producer (1 mark)
Open Q7 on its own page
Q8 · 1 mark · MCQMoney and Banking
On the basis of the given information, Money Supply (M1) would be ₹ _____ crore. (Choose the correct option)
S.No. Components Amount (in ₹ crore)
(i) Currency held by the Public 320
(ii) Net Demand Deposits with Commercial Banks 260
(iii) Net Time Deposits with Commercial Banks 200
1. (A)580
2. (B)780
3. (C)675
4. (D)875
Try it first, then show our solutionSolution
1. M1 = Currency held by the public + Net demand deposits with banks (+ other deposits with RBI, not given here). Time deposits are not in M1.
2. M1 = 320 + 260 = ₹ 580 crore. Option (A).
  1 mark
Answer: (A) 580
Where the marks are
- M1 = 320 + 260; time deposits excluded (1 mark)
Open Q8 on its own page
Q9 · 1 mark · Assertion-reasonCompetency-basedOpen Economy Macroeconomics
Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below:
Assertion (A): External Assistance is recorded in the Current Account of the Balance of Payments of a nation.
Reason (R): External Assistance includes bilateral and multilateral loans received/extended by a nation.
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. External assistance (loans) creates a liability, so it is recorded in the capital account of the BoP, not the current account.
  Reason: True. External assistance covers bilateral and multilateral loans received or extended by a country.
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)
Open Q9 on its own page
Q10 · 1 mark · MCQMoney and Banking
Reserve Bank of India (RBI) was established in the year _____. (Choose the correct option to fill up the blank)
1. (A)1934
2. (B)1935
3. (C)1936
4. (D)1937
Try it first, then show our solutionSolution
1. The Reserve Bank of India was set up under the RBI Act, 1934.
2. It started operations on 1 April 1935. Option (B).
  1 mark
Answer: (B) 1935
Where the marks are
- RBI established in 1935 (1 mark)
Q11 · 3 marks · Short answerCompetency-basedNational Income Accounting
For a hypothetical economy, assuming there are only two firms (A and B) with equal Gross Value Added (GVA).
On the basis of the following data, estimate the value of Domestic Sales of Firm A:
S. No. Items Amount (in ₹ crore)
(i) Value of Output of Firm B 1,000
(ii) Purchases by Firm A from Firm B 300
(iii) Exports by Firm A 200
(iv) Purchases by Firm B from Firm A 250
(v) Additions to stock of Firm A 150
Try it first, then show our solutionSolution
1. Gross value added of Firm B = Value of output of B − Purchases by B from A (its intermediate consumption) = (i) − (iv)
  ½ mark
2. = 1,000 − 250 = ₹ 750 crore
  ½ mark
3. GVA of Firm A = GVA of Firm B = ₹ 750 crore (given equal).
  1 mark
4. GVA of A = Domestic sales + Exports + Change in stock − Intermediate consumption, so Domestic sales of A = GVA of A − (iii) − (v) + (ii)
  ½ mark
5. = 750 − 200 − 150 + 300 = ₹ 700 crore
  ½ mark
Answer: Domestic sales of Firm A = ₹ 700 crore.
Where the marks are
- GVA of B (½ + ½)
- GVA of A = GVA of B (1)
- Formula and answer for domestic sales (½ + ½)
Open Q11 on its own page
Answer one of these 2 alternatives.
Q12(A) · 3 marks · Short answerMoney and Banking
“The statutory requirement of the Reserve Ratio (RR) acts as a limit to the amount of credit that banks can create.”
Justify the given statement with the valid explanation.
Try it first, then show our solutionSolution
1. The reserve ratio is the fraction of deposits that every commercial bank must, by law, keep as reserves (for example, CRR with the central bank); only the rest can be lent.
  1 mark
2. It is fixed by the central bank to prevent over-lending and is binding on all banks.
  1 mark
3. Each time a deposit is created, part of it must be held back as reserves, so the chain of loans and new deposits gets smaller at every round. Total credit = Initial deposit × 1/RR, so a higher reserve ratio means less credit can be created. Hence the reserve ratio sets the limit to credit creation.
  1 mark
Answer: Banks must legally keep a fixed share of deposits as reserves, so only the rest can be lent; total credit = initial deposit × 1/RR, which limits credit creation.
Where the marks are
- Explanation of reserve ratio as a legal limit (marked as a whole, 3)
Open Q12(A) on its own page
OR
Q12(B) · 3 marks · Short answerMoney and Banking
“The Reserve Bank of India (RBI) provides several banking services to the Government.”
Do you agree with the given statement? Give valid explanation in support of your answer.
Try it first, then show our solutionSolution
1. Yes. The RBI acts as the banker to the Government: it keeps the government's accounts, accepts its deposits and makes payments on its behalf.
  1 mark
2. It handles exchange, remittances and other banking operations for the government.
  1 mark
3. In times of need (for example a financial crisis or a temporary shortfall), it lends to the government so that the government can meet its obligations smoothly.
  1 mark
Answer: Yes. The RBI keeps government accounts and deposits, makes payments and remittances for it, and lends to it when needed.
Where the marks are
- Agreement with explanation of RBI as government's banker (marked as a whole, 3)
Open Q12(B) on its own page
Answer one of these 2 alternatives.
Q13(A) · 4 marks · Short answerCompetency-basedNational Income Accounting
Ms. Sarika is a retired government employee. Every month, she earns rental income from a property she owns. She has also invested in fixed deposit, which provide her with interest income. Occasionally, she receives cash transfers from her family members abroad.
Classify, Ms. Sarika’s income as factor income or transfer income, giving valid reasons in support of your answer.
Try it first, then show our solutionSolution
1. Rent from her property and interest on her fixed deposit are factor incomes.
  1 mark
2. They are earned for providing factor services: land/property (rent) and capital (interest) used in production.
  1 mark
3. Cash transfers from family members abroad are transfer income.
  1 mark
4. They are received without providing any productive service in return (her pension, if any, would also be a transfer).
  1 mark
Answer: Rent and interest are factor incomes (earned for services of land and capital); cash transfers from family abroad are transfer income (no service rendered).
Where the marks are
- Factor income identified with reason (2)
- Transfer income identified with reason (2)
Open Q13(A) on its own page
OR
Q13(B) · 4 marks · Short answerNational Income Accounting
“Under the Expenditure Method, the value of Gross Domestic Product (GDP) can be estimated by adding the final expenditure incurred by all the sectors of an economy.”
In the light of the given statement, explain the expenditure incurred by any two sectors.
Try it first, then show our solutionSolution
1. Household sector – Private Final Consumption Expenditure (PFCE):
  1 mark
2. the expenditure by households and non-profit institutions serving households on final consumption of goods and services, such as food and clothing.
  1 mark
3. Rest of the world – Net Exports (X − M):
  1 mark
4. the excess of the value of exports of goods and services over the value of imports during the accounting year. (Also accepted: government final consumption expenditure, or gross domestic capital formation by firms.)
  1 mark
Answer: Any two: PFCE (households on final consumption), net exports (exports − imports), GFCE (government) or GDCF (investment by producers).
Where the marks are
- Each sector's expenditure named and explained (2 + 2)
Open Q13(B) on its own page
Q14 · 4 marks · Short answerCompetency-basedOpen Economy Macroeconomics
“Mr. Spector, a normal resident of XYZ country, took a $1 mi l l i o n l o an f r o man o v er se a s bank t oe x p an d hi s man u f a c t u r in g b u s in ess . D u r in g t h es am ey e a r, t h e G o v er nm e n t o f X Y Z co u n t r y b or r o w e d$ 5 billion from an international financial institution to cover the Balance of Payments (BoP) deficit prevailing in the country.”
Mishika, an economics student, read the above information and identified both the transactions cited, as autonomous transactions in the BoP account of XYZ country.
Do you agree with Mishka’s identification of the underlying concept? Give valid arguments in support of your answer.
Try it first, then show our solutionSolution
1. No, Mishika is not fully right. Mr. Spector's loan from an overseas bank is an autonomous transaction.
  1 mark
2. Autonomous transactions take place for an economic motive such as profit (here, expanding his business) and are independent of the state of the BoP. They are "above the line" items.
  1 mark
3. The government's borrowing from an international institution to cover the BoP deficit is an accommodating transaction.
  1 mark
4. Accommodating transactions are made by the monetary authorities to cover a deficit or surplus in the BoP and are not driven by any economic motive.
  1 mark
Answer: Disagree: Mr. Spector's loan is autonomous (economic motive), but the government's loan to cover the BoP deficit is accommodating.
Where the marks are
- Autonomous transaction identified and explained (2)
- Accommodating transaction identified and explained (2)
Open Q14 on its own page
Q15 · 4 marks · Short answerCompetency-basedMoney and Banking
Refer to the given image carefully:
Explain any two indicated measures taken by the Central Bank to control the highlighted macroeconomic issue.
Figure in the paper: Hand-drawn picture: a Central Bank building held up over a crowd of people, with coins labelled Bank Rate, Open Market Operations and Repo Rate, and a hot-air balloon labelled INFLATION. See it in the official paper.
Try it first, then show our solutionSolution
1. The highlighted problem is inflation. Measure 1: raise the repo rate.
  ½ mark
2. Banks then pay more to borrow from the central bank and raise their own lending rates. Credit becomes dearer, borrowing falls, so aggregate demand falls and inflation is controlled.
  1½ marks
3. Measure 2: open market operations – the central bank sells government securities.
  ½ mark
4. Buyers pay from their bank deposits, so banks' reserves and their capacity to lend shrink. Credit and aggregate demand fall, controlling inflation. (Raising the bank rate works like the repo rate.)
  1½ marks
Answer: To control inflation: raise the repo rate (dearer credit) and sell securities through open market operations (less bank liquidity); both cut aggregate demand.
Where the marks are
- Each measure: named (½) and explained (1½)
Open Q15 on its own page
Answer one of these 2 alternatives.
Q16(A) · 6 marks · Long answerCompetency-basedDetermination of Income and Employment
(I) Suppose in an economy, the Marginal Propensity to Consume (MPC) is 0.8. The government introduced an investment project of ₹ 1,000 crore which led to a manyfold increase in National Income (Y) and Consumption Expenditure (C). Estimate:
(a) Value of Investment Multiplier (k)
(b) Missing Values of (i) and (ii)
Rounds Change in Investment (ΔI) Change in Income (ΔY) Change in Consumption (ΔC) Change in Savings (ΔS)
I 1,000 1,000 800 200
II 800 640 160
… … … …
… … … …
(i) (ii) 1,000
(II) “Sum of the Average Propensity to Consume (APC) and Average Propensity to Save (APS) is always equal to one.”
Justify the given statement with the help of a suitable argument.
[Marks: (I) 3, (II) 3]
Try it first, then show our solutionSolution
1. (I)(a) Investment multiplier k = 1/(1 − MPC)
  ½ mark
2. = 1/(1 − 0.8) = 5
  ½ mark
3. (I)(b)(i) Total change in income ΔY = k × ΔI
  ½ mark
4. = 5 × 1,000 = ₹ 5,000 crore
  ½ mark
5. (I)(b)(ii) Total change in consumption ΔC = MPC × ΔY
  ½ mark
6. = 0.8 × 5,000 = ₹ 4,000 crore (check: ΔC + ΔS = 4,000 + 1,000 = 5,000 = ΔY).
  ½ mark
7. (II) Income is either consumed or saved: Y = C + S. Dividing both sides by Y gives Y/Y = C/Y + S/Y, that is, 1 = APC + APS. So APC + APS is always 1.
  3 marks
Answer: (I) k = 5; (i) ΔY = ₹ 5,000 crore; (ii) ΔC = ₹ 4,000 crore. (II) Y = C + S, so dividing by Y gives APC + APS = 1.
Where the marks are
- k formula and value (½ + ½)
- ΔY formula and value (½ + ½)
- ΔC formula and value (½ + ½)
- Derivation APC + APS = 1 (3)
Open Q16(A) on its own page
OR
Q16(B) · 6 marks · Long answerDetermination of Income and Employment
(I) Suppose in a hypothetical economy, people save 20% of their additional income. Ex-Ante Investments equals ₹ 100 and the equilibrium level of income stands at ₹ 700. Calculate dissavings at zero level of income. [2]
(II) Define Effective Demand. Explain the adjustment mechanism to attain the level of Effective Demand, if ex-ante Aggregate Demand is more than ex-ante Aggregate Supply. [4]
Try it first, then show our solutionSolution
1. (I) MPS = 20% = 0.2; ex-ante investment I = ₹ 100; equilibrium Y = ₹ 700. At equilibrium, S = I.
  ½ mark
2. S = −c̄ + MPS × Y, so −c̄ + 0.2 × 700 = 100
  ½ mark
3. −c̄ + 140 = 100, so c̄ = 40
  ½ mark
4. Dissaving at zero income = ₹ 40
  ½ mark
5. (II) Effective demand is the level of aggregate demand that is exactly matched by aggregate supply, that is, AD at equilibrium.
  1 mark
6. If ex-ante AD > ex-ante AS, households and firms plan to buy more than firms plan to produce. Firms meet the extra demand from stock, so inventories fall below the desired level.
  1½ marks
7. To restore inventories, producers raise output and employment. Output keeps rising until planned AD equals planned AS; this level is the effective demand.
  1½ marks
Answer: (I) Dissaving at zero income = ₹ 40. (II) Effective demand is the AD matched by AS; when AD > AS, inventories fall, firms raise output and employment until AD = AS.
Where the marks are
- Saving function and S = I (½ + ½)
- Working and answer (½ + ½)
- Meaning of effective demand (1)
- Adjustment mechanism (3)
Open Q16(B) on its own page
Q17 · 6 marks · Case-basedCompetency-basedGovernment Budget and the Economy
Refer to the given text carefully:
Revenue receipts of the Union Government of India, consisting of tax revenue and non-tax revenue increased year-on-year by 14.5% in the financial year 2023-24, with robust growth in both tax and non-tax revenues.
In spite of the global trend of widening fiscal deficit and increasing debt burden, India has remained on the course of fiscal consolidation. In the post-covid period, significant fiscal consolidation could be achieved largely due to buoyant government revenues. The favourable fiscal performance in the financial year 2022-23, emerged as the cornerstone of India’s macroeconomic stability.
The fiscal deficit of the Union Government has been brought down from 6.4% of Gross Domestic Product (GDP) in the financial year 2022-23 to 5.6% of GDP in the financial year 2023-24, according to the data released by the Office of Controller General of Accounts (CGA).
Strong growth in direct and indirect taxes on account of resilient economic activities and increased compliance meant that the tax revenues generated exceeded the budgetary estimates.
Additionally, higher-than-budgeted non-tax revenue in the form of dividends from the Reserve Bank of India (RBI) has buffeted revenue receipts. In combination with restrained revenue expenditure, these buoyant revenues ensured lower deficits.
A decomposition of the fiscal deficit over the past few years reveals that with a narrowing revenue deficit, a larger share of the fiscal deficit is being accounted for by capital outlay. This suggests that the productivity of borrowed resources has improved.
Source: Economic Survey 2023-24
On the basis of the given text and common understanding, answer the following questions:
1. (I)
  Differentiate between the two types of revenue receipts as indicated in the above text.
  3 marks
2. (II)
  Elaborate the reasons behind reduction in fiscal deficit of India for the financial year 2023-24.
  3 marks
Try it first, then show our solutionSolution
1. (I) Tax revenue is what the government receives through taxes, compulsory payments imposed on individuals, companies and other entities (direct taxes like income tax and indirect taxes like GST).
  1½ marks
2. (I) Non-tax revenue is revenue from sources other than taxes, mainly interest, dividends and profits (such as the RBI's dividend), and fees.
  1½ marks
3. (II) The fiscal deficit fell from 6.4% to 5.6% of GDP because: (a) direct and indirect tax collections grew strongly, helped by resilient economic activity and better tax compliance, so they exceeded the budget estimates; (b) non-tax revenue, especially the dividend from the RBI, was higher than budgeted; and (c) revenue expenditure was kept under control. Higher receipts with restrained spending meant less borrowing.
  3 marks
Answer: (I) Tax revenue comes from compulsory taxes; non-tax revenue from interest, dividends, fees etc. (II) Strong tax growth, higher RBI dividend and restrained revenue spending cut the fiscal deficit.
Where the marks are
- Tax and non-tax revenue distinguished (1½ + 1½)
- Reasons for the lower fiscal deficit (3)
Open Q17 on its own page

S.No.	Components	Amount (in ₹ crore)
(i)	Currency held by the Public	320
(ii)	Net Demand Deposits with Commercial Banks	260
(iii)	Net Time Deposits with Commercial Banks	200

S. No.	Items	Amount (in ₹ crore)
(i)	Value of Output of Firm B	1,000
(ii)	Purchases by Firm A from Firm B	300
(iii)	Exports by Firm A	200
(iv)	Purchases by Firm B from Firm A	250
(v)	Additions to stock of Firm A	150

Rounds	Change in Investment (ΔI)	Change in Income (ΔY)	Change in Consumption (ΔC)	Change in Savings (ΔS)
I	1,000	1,000	800	200
II		800	640	160
…		…	…	…
…		…	…	…
		(i)	(ii)	1,000

Section B

Indian Economic Development: MCQ 18-27 (1 mark), 28-29 (3 marks), 30-32 (4 marks), 33-34 (6 marks)

Q18 · 1 mark · MCQCompetency-basedLiberalisation, Privatisation and Globalisation: An Appraisal
Read the given text carefully:
“The Government has now decided to further promote the development of mutual funds by throwing the field open to the private sector and joint sector mutual funds. In order to safeguard the interests of the investing public, and to encourage a healthy growth of the capital markets, a comprehensive set of guidelines is being evolved for the operation of all mutual funds.”
Source: https://www.indiabudget.gov.in/doc/bspeech/bs199192.pdf (Budget 1991-92 Speech of Shri Manmohan Singh Minister of Finance)
Identify the sector under which the aforesaid reform was introduced and choose the correct option.
1. (A)Industrial
2. (B)Financial
3. (C)Tax
4. (D)Foreign Trade
Try it first, then show our solutionSolution
1. Opening mutual funds to the private and joint sectors and framing guidelines to protect investors and develop capital markets are reforms of the financial system.
2. So the reform belongs to the financial sector reforms of 1991. Option (B).
  1 mark
Answer: (B) Financial
Where the marks are
- Mutual funds and capital markets: financial sector (1 mark)
Open Q18 on its own page
Q19 · 1 mark · MCQIndian Economy on the Eve of Independence
_________ maintained a monopoly control over India’s exports and imports, while the rest was allowed with a few other countries. (Choose the correct option to fill up the blank)
1. (A)China
2. (B)Ceylon (Sri Lanka)
3. (C)Britain
4. (D)Persia (Iran)
Try it first, then show our solutionSolution
1. Under colonial rule, Britain kept a monopoly over India's exports and imports; the rest of the trade was allowed with a few countries such as China, Ceylon and Persia.
2. The blank is Britain. Option (C).
  1 mark
Answer: (C) Britain
Where the marks are
- British monopoly over India's foreign trade (1 mark)
Open Q19 on its own page
Q20 · 1 mark · MCQHuman Capital Formation in India
Human capital is _________.
(i) intangible in nature
(ii) imperfectly mobile
(iii) inseparable from its owner
(Choose the correct option to fill up the blank)
1. (A)(i) and (ii)
2. (B)(i) and (iii)
3. (C)(ii) and (iii)
4. (D)(i), (ii) and (iii)
Try it first, then show our solutionSolution
1. Human capital (skills, knowledge, health) is intangible, is built into its owner and cannot be separated from him or her, and is not perfectly mobile across countries because of nationality and culture.
2. All three features hold. Option (D).
  1 mark
Answer: (D) (i), (ii) and (iii)
Where the marks are
- Human capital: intangible, inseparable, imperfectly mobile (1 mark)
Open Q20 on its own page
Q21 · 1 mark · Assertion-reasonCompetency-basedRural Development
Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below:
Assertion (A): Indian rural credit system was significantly transformed with the implementation of technological reforms in agriculture sector.
Reason (R): Green Revolution led to the diversification of the portfolio of rural credit towards production-oriented lending.
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: True. The rural credit system changed greatly when new agricultural technology came in.
  Reason: True. The Green Revolution brought major changes in rural credit, shifting the portfolio towards production-oriented lending.
2. R explains why the credit system was transformed. A and R 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).
Where the marks are
- Truth of A and R and the link between them (1 mark)
Open Q21 on its own page
Q22 · 1 mark · MCQEmployment: Growth, Informalisation and Other Issues
Owing to the efforts of the _____________, the Indian government initiated modernisation of informal sector enterprises. (Choose the correct option to fill up the blank)
1. (A)World Trade Organisation
2. (B)International Labour Organisation
3. (C)Central Statistical Office
4. (D)International Monetary Fund
Try it first, then show our solutionSolution
1. The International Labour Organisation (ILO) pressed for improving the condition of informal sector workers and enterprises.
2. Owing to its efforts, the Indian government started modernising informal sector enterprises. Option (B).
  1 mark
Answer: (B) International Labour Organisation
Where the marks are
- ILO and the informal sector (1 mark)
Open Q22 on its own page
Q23 · 1 mark · MCQCompetency-basedEmployment: Growth, Informalisation and Other Issues
Read the following text carefully:
All economic activities can be categorized into eight different industrial divisions as:
For simplicity, all the working persons engaged in these divisions can be clubbed into three major sectors primary, secondary and tertiary sector.
In the light of the given text, primary sector includes ________. (Choose the correct option to fill up the blank)
1. (A)Only (i)
2. (B)(i) and (ii)
3. (C)(iii), (iv) and (v)
4. (D)(vi), (vii) and (viii)
Figure in the paper: Tree chart titled 'Classification of economic activities into eight industrial divisions' with eight boxes: (i) Agriculture, (ii) Mining and Quarrying, (iii) Manufacturing, (iv) Electricity, Gas and Water Supply, (v) Construction, (vi) Trade, (vii) Transport and Storage, (viii) Services. See it in the official paper.
Try it first, then show our solutionSolution
1. The primary sector covers activities that directly use natural resources: agriculture (with forestry and fishing) and mining and quarrying.
2. So it includes divisions (i) Agriculture and (ii) Mining and Quarrying. Option (B).
  1 mark
Answer: (B) (i) and (ii)
Where the marks are
- Primary sector: agriculture and mining (1 mark)
Open Q23 on its own page
Q24 · 1 mark · MCQEnvironment and Sustainable Development
The population explosion and advent of Industrial Revolution led to the ____. (Choose the correct option to fill up the blank)
1. (A)reversal of supply-demand relationship of environmental resources
2. (B)decrease in demand for environmental resources
3. (C)decrease in the average temperature of the earth’s lower atmosphere
4. (D)increase in the environmental quality
Try it first, then show our solutionSolution
1. Before industrialisation, the supply of environmental resources was greater than the demand for them.
2. Population explosion and the Industrial Revolution raised demand beyond supply, causing a reversal of the supply-demand relationship of environmental resources. Option (A).
  1 mark
Answer: (A) reversal of supply-demand relationship of environmental resources
Where the marks are
- Demand for environmental resources now exceeds supply (1 mark)
Open Q24 on its own page

Q25 · 1 mark · MCQRural Development

From the set of terms given in Column I and corresponding facts given in Column II, choose the correct pair of statements:

Column I		Column II
(a) Animal Husbandry	i	Instability in income
(b) Fisheries	ii	Mixed crop-livestock farming system
(c) Horticulture	iii	India is the second-largest producer of fruits and vegetables in the world
(d) Agro-processing industry	iv	Iron and steel industry

(A)(a)-i
(B)(b)-ii
(C)(c)-iii
(D)(d)-iv

Try it first, then show our solutionSolution

Animal husbandry gives stability of income (not instability) and fisheries is not the mixed crop-livestock system; agro-processing has nothing to do with iron and steel.
India is the second-largest producer of fruits and vegetables in the world, which is a fact about horticulture: (c)-iii is the correct pair. Option (C).
1 mark

Answer: (C) (c)-iii

Where the marks are

Horticulture: India second-largest producer of fruits and vegetables (1 mark)

Open Q25 on its own page

Q26 · 1 mark · MCQRural Development
_______ is the measure being taken to create orderly and transparent marketing conditions. (Choose the correct option to fill up the blank)
1. (A)Cooperative marketing
2. (B)Assurance of Minimum Support Price (MSP)
3. (C)Provision of infrastructural development
4. (D)Regulation of markets
Try it first, then show our solutionSolution
1. Regulated markets are set up by the government to create orderly and transparent marketing conditions for farmers.
2. So the measure is regulation of markets. Option (D).
  1 mark
Answer: (D) Regulation of markets
Where the marks are
- Regulated markets ensure orderly and transparent conditions (1 mark)
Open Q26 on its own page
Q27 · 1 mark · MCQComparative Development Experiences of India and its Neighbours
Read the following statements carefully:
Statement 1: Great Leap Forward (GLF) campaign met with many problems like severe drought, conflict with Russia etc.
Statement 2: Under agricultural reforms, commune lands were allocated to individual households for ownership, who were allowed to keep all post-tax 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: the Great Leap Forward met problems such as a severe drought (about 30 million deaths) and the withdrawal of Russian professionals after a conflict with China.
2. Statement 2 is false: commune lands were divided into small plots and allocated to households for use, not ownership; households could keep all income after paying stipulated taxes. Option (A).
  1 mark
Answer: (A) Statement 1 is true and Statement 2 is false.
Where the marks are
- GLF problems; land given for use, not ownership (1 mark)
Open Q27 on its own page
Q28 · 3 marks · Short answerCompetency-basedComparative Development Experiences of India and its Neighbours
“Pakistan was maintaining a healthy economic growth momentum of 6.3% till 1990s, however it lost its track of economic growth falling to 5.3% between 2015-17.”
Do you agree with the given statement? Justify your answer with valid arguments.
Try it first, then show our solutionSolution
1. Yes, I agree. Pakistan grew fast till the 1990s (about 6.3%) helped by the Green Revolution, mechanisation, public investment in infrastructure and import-substitution industrialisation.
  1 mark
2. Growth later slowed (5.3% in 2015-17) because agricultural growth and food supply depended on good harvests rather than a systematic process of technological change.
  1 mark
3. Political instability, heavy reliance on remittances and foreign aid, and a weak industrial base also held back its economic progress.
  1 mark
Answer: Agree: early growth came from the Green Revolution and import substitution, but dependence on harvests, remittances and foreign aid, and political instability slowed it.
Where the marks are
- Agreement with reasons (marked as a whole, 3)
Open Q28 on its own page
Answer one of these 2 alternatives.
Q29(A) · 3 marks · Short answerEnvironment and Sustainable Development
“Edward Barbier defined Sustainable Development as a strategy which is directly concerned with increasing the material standard of living of the poor at the grass root level.”
Elaborate the given statement.
Try it first, then show our solutionSolution
1. Sustainable development meets the needs of the present generation without compromising the ability of future generations to meet theirs.
  1 mark
2. Edward Barbier links it directly to the poor: it should raise their material standard of living through measurable increases in income, education, health care, sanitation and water supply.
  1 mark
3. Its aim is to reduce absolute poverty by creating lasting livelihoods while minimising resource depletion, environmental harm, cultural disruption and social instability.
  1 mark
Answer: Barbier: sustainable development should raise the living standard of the poor (income, health, education, sanitation) and cut absolute poverty while limiting damage to resources and environment.
Where the marks are
- Meaning and Barbier's view elaborated (marked as a whole, 3)
Open Q29(A) on its own page
OR
Q29(B) · 3 marks · Short answerEmployment: Growth, Informalisation and Other Issues
Distinguish between self-employed and hired workers with the help of a suitable example.
Try it first, then show our solutionSolution
1. Self-employed workers own and operate an enterprise to earn their livelihood.
  1 mark
2. Example: the owner of a cement shop.
  ½ mark
3. Hired workers are employed by others and are paid a wage or salary for their services.
  1 mark
4. Example: a graphic designer working for a marketing agency.
  ½ mark
Answer: Self-employed workers run their own enterprise (a cement shop owner); hired workers work for others for a wage or salary (a designer at an agency).
Where the marks are
- Each type defined (1) with an example (½)
Open Q29(B) on its own page

Answer one of these 2 alternatives.

Q30(A) · 4 marks · Short answerIndian Economy on the Eve of Independence

“The introduction of Railways affected the structure of the Indian economy in two important ways.”
Justify the given statement, with valid explanation.

Try it first, then show our solutionSolution

Breaking barriers: railways let people travel long distances, which broke geographical and cultural barriers.
2 marks
Commercialisation of agriculture: railways carried crops to ports and markets, encouraging commercial crops for sale; this hurt the self-sufficiency of village economies.
2 marks

Answer: Railways enabled long-distance travel (breaking geographical and cultural barriers) and fostered commercialisation of agriculture, which hurt village self-sufficiency.

Where the marks are

Each effect explained (2 + 2)

Open Q30(A) on its own page

Q30(B) · 4 marks · Case-basedCompetency-basedIndian Economy on the Eve of Independence

Refer to the given information carefully:

	1921-30	1941-50	Increase in expectation of life during 20 years
Expectation of life at birth	26 years and 11 months	32 years and 5 months	5 years and 6 months
Expectation of life at age 10	36 years and 5 months	39 years	2 years and 7 months

Source: Census of India 1951
Answer the following questions on the basis of the given information and common understanding:

(I)
Identify and define the demographic indicator given in the above table.
2 marks
(II)
List any two such demographic indicators.
1 mark
(III)
State the stage of demographic transition India entered in 1921.
1 mark

Try it first, then show our solutionSolution

(I) The indicator is life expectancy.
1 mark
(I) Life expectancy is the average number of years a person is expected to live (here, at birth and at age 10).
1 mark
(II) Two other demographic indicators: infant mortality rate and literacy rate (also birth rate, death rate).
1 mark
(III) India entered the second stage of demographic transition in 1921 (after 1921, the "year of the great divide").
1 mark

Answer: (I) Life expectancy: average years a person is expected to live. (II) Infant mortality rate, literacy rate. (III) Second stage.

Where the marks are

Indicator identified (1) and defined (1)
Two indicators (½ + ½)
Stage (1)

Open Q30(B) on its own page

Q31 · 4 marks · Short answerComparative Development Experiences of India and its Neighbours
Answer the following.
1. (I)
  “India has been a part of many regional and global economic groupings such as G20, SAARC, BRICS etc.”
  In the light of the given statement, briefly explain the importance of regional and global economic groupings.
  3 marks
2. (II)
  Define ‘Special Economic Zone’.
  1 mark
Try it first, then show our solutionSolution
1. (I) Groupings such as G20, SAARC and BRICS help developing countries like India understand the development strategies of their neighbours and other nations, so they can see their own strengths and weaknesses in comparison.
  1½ marks
2. (I) With globalisation, developing countries compete with developed nations and with each other; these groupings let them cooperate, share markets and grow together in a shared environment.
  1½ marks
3. (II) A Special Economic Zone is a geographical region where economic laws are different from the country's usual laws, to attract foreign investment.
  1 mark
Answer: (I) Groupings help nations learn from neighbours' strategies and compete and cooperate under globalisation. (II) SEZ: a region with economic laws different from the rest of the country.
Where the marks are
- Importance of groupings (3)
- Meaning of SEZ (1)
Open Q31 on its own page
Q32 · 4 marks · Case-basedCompetency-basedRural Development
Refer to the given image carefully:
Answer the following questions on the basis of the given image:
1. (I)
  Identify the type of farming in Panel A and Panel B.
  1 mark
2. (II)
  Explain any one advantage and disadvantage of the type of farming in Panel B over Panel A.
  3 marks
Figure in the paper: Split image. Panel A (left): conventional farming with factories with smoking chimneys in the background, tractors and workers spraying crops in neat rows of green crops. Panel B (right): lush organic-style farm with diverse vegetables, trees, a hut, a tractor and farmers working. See it in the official paper.
Try it first, then show our solutionSolution
1. (I) Panel A: conventional (chemical-based) farming. Panel B: organic farming.
  1 mark
2. (II) Advantage: organic farming uses organic inputs such as manure and compost instead of chemicals; being chemical-free, it conserves the soil (and gives healthier food).
  1½ marks
3. (II) Disadvantage: yields from organic farming are lower than from conventional farming, so small and marginal farmers may find it hard to adapt for large-scale production.
  1½ marks
Answer: (I) A: conventional farming; B: organic farming. (II) Advantage: chemical-free, conserves soil; disadvantage: lower yields.
Where the marks are
- Two types identified (½ + ½)
- One advantage (1½) and one disadvantage (1½)
Open Q32 on its own page
Answer one of these 2 alternatives.
Q33(A) · 6 marks · Long answerIndian Economy 1950-1990
Answer the following.
1. (I)
  “Government made a fresh statement of policy on the 30th April, 1956 which will help speeding up industrialisation and, in particular, to develop heavy industries and machine making industries, to expand the public sector, and to build up a large and growing co-operative sector”.
  Source: http://164.100.161.239/plans/planrel/fiveyr/index2.html (Planning Commission)
  In the light of the given text and common understanding, comment upon the classification of industries under the revised policy.
  3 marks
2. (II)
  “The implementation of land ceiling legislation in India encountered several challenges that hindered its effectiveness.”
  Do you agree with the given statement? Give valid reasons in support of your answer.
  3 marks
Try it first, then show our solutionSolution
1. (I) The Industrial Policy Resolution 1956 classified industries into three categories. First: industries to be exclusively owned by the State.
  1 mark
2. (I) Second: industries in which the private sector could supplement the public sector, with the State solely responsible for starting new units.
  1 mark
3. (I) Third: the remaining industries, left to the private sector.
  1 mark
4. (II) Yes. Some former zamindars used loopholes in the law to keep large areas of land; tenants were evicted and landowners claimed to be self-cultivators. Big landlords challenged the law in courts to delay it and used the delay to register land in the names of close relatives, escaping the ceiling. So land ceiling was poorly implemented.
  3 marks
Answer: (I) IPR 1956: Schedule A (state only), Schedule B (state starts new units, private may supplement), rest private. (II) Agree: loopholes, evictions, court delays and benami transfers hindered land ceilings.
Where the marks are
- Three categories (1 + 1 + 1)
- Challenges of land ceiling (3)
Open Q33(A) on its own page
OR
Q33(B) · 6 marks · Long answerLiberalisation, Privatisation and Globalisation: An Appraisal
Answer the following.
1. (I)
  “The process of globalisation through liberalisation and privatisation has produced positive, as well as, negative results for India.”
  Do you agree with the given statement? Give valid explanation in support of your answer.
  4 marks
2. (II)
  “The Government of India was compelled to introduce the economic reforms of 1991.”
  State any two reasons behind the introduction of Economic Reforms of 1991.
  2 marks
Try it first, then show our solutionSolution
1. (I) Yes. Globalisation has positive results: it gives developing countries like India access to global capital, technology and markets.
  2 marks
2. (I) It has negative results too: critics argue it mainly benefits developed countries and widens disparities; in India, the reforms of the 1990s mostly benefited high-income groups and some service sectors rather than agriculture and industry.
  2 marks
3. (II) Reason 1: a high rate of inflation.
  1 mark
4. (II) Reason 2: a huge balance of payments deficit (also fiscal deficit / foreign exchange crisis).
  1 mark
Answer: (I) Agree: access to capital and technology, but benefits concentrated in rich groups and services. (II) High inflation and a huge BoP deficit.
Where the marks are
- Positive and negative results (4)
- Two reasons (1 + 1)
Open Q33(B) on its own page
Q34 · 6 marks · Case-basedCompetency-basedHuman Capital Formation in India
Read the following text carefully:
The National Education Policy (NEP) 2020, asserts that education is fundamental for achieving full human potential, providing universal access to quality education and leadership on the global stage in terms of economic growth, social justice and equality. Thus, it presents the best way forward for developing and optimising India’s resources.
To attain the goals of education, NEP 2020 unequivocally endorses a substantial increase in public investment in education by both the Central government and all State governments. This is considered extremely critical for achieving the high-quality and equitable public education system that is truly needed for India's future progress and growth. To achieve this, they need to increase the public investment in Education sector to reach 6% of GDP at the earliest.
One of the primary goals of the schooling system must be to ensure that children are enrolled in and are attending school. As per the 75th round household survey by NSSO in 2017-18, the number of out of school children in the age group of 6 to 17 years is 3.22 crore. With a goal to achieve 100% Gross Enrolment Ratio in preschool to secondary level by 2030, it will be a top priority to bring these children back into the educational fold as early as possible, and to prevent further students from dropping out. For the same, two initiatives that will be undertaken are to provide:
• effective and sufficient infrastructure, so that all students have access to safe and engaging school education at all levels from pre-primary school to Grade 12.
• regular trained teachers at each stage, special care shall be taken to ensure that no school remains deficient on infrastructure support.
Source: https://www.education.gov.in/sites/upload_files/mhrd/files/NEP_Final_English.pdf (adapted and modified)
On the basis of the given text and common understanding, answer the following questions:
1. (I)
  “Education is considered fundamental for achieving full human potential”.
  Justify the given statement with valid arguments.
  2 marks
2. (II)
  Discuss the importance of increasing public expenditure in education.
  2 marks
3. (III)
  State any two main initiatives that may be implemented to tackle school dropouts and avert additional students from leaving school.
  2 marks
Try it first, then show our solutionSolution
1. (I) Education develops a person's skills and abilities so that he or she can reach full potential. Universal access to quality education leads to economic growth, social justice and equality, and helps the country lead globally, so it is the best way to develop and use India's resources.
  2 marks
2. (II) More public spending is essential to build a high-quality, equitable public education system needed for India's future growth; NEP 2020 asks for public investment in education to reach 6% of GDP at the earliest.
  2 marks
3. (III) Initiative 1: effective and sufficient infrastructure so that all students have access to safe and engaging schooling from pre-primary to Grade 12.
  1 mark
4. (III) Initiative 2: regular trained teachers at every stage, with care that no school lacks infrastructure support.
  1 mark
Answer: (I) Education builds human potential, growth, justice and equality. (II) Public investment of 6% of GDP for a quality, equitable system. (III) Adequate infrastructure and trained teachers.
Where the marks are
- Justification (2)
- Importance of public expenditure (2)
- Two initiatives (1 + 1)
Open Q34 on its own page

Source: official sample paper, cbseacademic.nic.in. Chapter tags and solutions are ours. Spotted a transcription error? Write tosupport@questionbuddy.in.