EconomicsCBSE Class 12 · Sample paper, session 2026-27

CBSE Class 12 Economics: sample paper 2026-27

The sample question paper CBSE published for the 2026-27 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_2026_27/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	Macroeconomics: MCQ/AR 1-10, short 3 marks 11-13, 4 marks 14-15, long 6 marks 16-17
B	18-34	Indian Economic Development: MCQ 18-27, 28-30 short, 31-32 4 marks, 33-34 6 marks

Instructions in brief: 20 MCQs of 1 mark, 4 SA of 3 marks (60-80 words), 6 SA of 4 marks (80-100 words), 4 LA of 6 marks (100-150 words); internal choices as printed.

Section A

Macroeconomics: MCQ/AR 1-10, short 3 marks 11-13, 4 marks 14-15, long 6 marks 16-17

Q1 · 1 mark · MCQGovernment Budget and the Economy
Identify, which of the following expenditure falls under the category of capital expenditure. (Choose the correct option)
(i) Payment of salaries to central government employees.
(ii) Construction of new national highways under Bharatmala Pariyojana.
(iii) Interest payment by the government on past loans from World Bank.
(iv) Expenditure on installation of the Kavach automatic train protection system.
1. (A)(i) and (ii)
2. (B)(ii) and (iv)
3. (C)(ii) and (iii)
4. (D)(i) and (iv)
Try it first, then show our solutionSolution
1. Capital expenditure creates physical or financial assets for the government (or reduces its liabilities). Salaries (i) and interest payments (iii) create no asset, so they are revenue expenditure.
2. Building national highways under Bharatmala (ii) and installing the Kavach train protection system (iv) create durable assets, so they are capital expenditure. Option (B).
  1 mark
Answer: (B) (ii) and (iv)
Where the marks are
- Asset-creating spending is capital expenditure (1 mark)
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Q2 · 1 mark · MCQMoney and Banking
Read the following statements carefully:
Statement 1: M1 measure of money supply constitutes currency and demand deposits held by the public.
Statement 2: Demand deposits are those deposits with commercial banks, that can be withdrawn on demand by the depositors.
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: M1 = currency held by the public + (net) demand deposits with banks (+ other deposits with RBI).
2. Statement 2 is true: demand deposits (current and savings accounts) can be withdrawn by the depositor on demand, for example by cheque. Option (C).
  1 mark
Answer: (C) Both Statements 1 and 2 are true.
Where the marks are
- Definitions of M1 and demand deposits (1 mark)
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Q3 · 1 mark · MCQOpen Economy Macroeconomics
Ceteris paribus, a rise in the price of foreign currency sets off a chain of effects in the foreign exchange market of an economy.
Identify, which of the following sequence explains this process.
(i) National Income will rise
(ii) Demand for foreign currency will fall
(iii) Imported goods become costlier (Choose the correct option)
1. (A)(i), (ii), (iii)
2. (B)(ii), (i), (iii)
3. (C)(iii), (i), (ii)
4. (D)(iii), (ii), (i)
Try it first, then show our solutionSolution
1. A rise in the price of foreign currency (depreciation of the domestic currency) first makes imported goods costlier (iii).
2. Costlier imports reduce the demand for imports and so the demand for foreign currency falls (ii); with spending shifting to domestic goods (and exports becoming cheaper abroad), national income rises (i). Order: (iii), (ii), (i). Option (D).
  1 mark
Answer: (D) (iii), (ii), (i)
Where the marks are
- Costlier imports, lower demand for foreign exchange, higher national income (1 mark)
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Q4 · 1 mark · MCQGovernment Budget and the Economy
Suppose, for a given year, the fiscal deficit of an economy is estimated at ₹5,000 crore. The total government expenditure is ₹18,000 crore, while non-tax revenue and capital receipts (excluding borrowings) together amount to ₹3,000 crore. (Choose the correct option to fill up the blank)
The tax revenue of the government is ₹ ________ crore.
1. (A)10,000
2. (B)12,000
3. (C)13,000
4. (D)15,000
Try it first, then show our solutionSolution
1. Fiscal deficit = Total expenditure − (Revenue receipts + Non-debt capital receipts) = Total expenditure − (Tax revenue + Non-tax revenue + Non-debt capital receipts).
2. 5,000 = 18,000 − (Tax revenue + 3,000), so Tax revenue = 18,000 − 3,000 − 5,000 = ₹ 10,000 crore. Option (A).
  1 mark
Answer: (A) 10,000
Where the marks are
- Tax revenue = 18,000 − 3,000 − 5,000 (1 mark)
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Q5 · 1 mark · MCQCompetency-basedGovernment Budget and the Economy
The Government of India in its Union Budget 2026-27 has decided to exempt fish caught by Indian fishing vessels operating in the Exclusive Economic Zone (EEZ) and on the High Seas from duty.
Identify the objective behind the initiative taken by the Government of India as stated above. (Choose the correct option)
1. (A)Allocation Function
2. (B)Distribution Function
3. (C)Stabilisation Function
4. (D)Disposition Function
Try it first, then show our solutionSolution
1. Exempting fish caught by Indian vessels in the EEZ and high seas from duty is a tax concession meant to encourage this activity.
2. Using taxes and concessions to direct resources towards particular sectors (here deep-sea fishing) is the allocation function of the budget. Option (A).
  1 mark
Answer: (A) Allocation Function
Where the marks are
- Duty exemption steers resources to a sector (1 mark)
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Q6 · 1 mark · MCQDetermination of Income and Employment
Refer to the given diagram carefully:
The slope of Consumption Curve would be ______. (Choose the correct option to fill up the blank)
1. (A)1
2. (B)0.8
3. (C)0.25
4. (D)0.75
Figure in the paper: Graph with Level of Income on X-axis and Aggregate Demand on Y-axis. A 45° line from origin, and two upward sloping lines AD = C + I and a higher parallel AD' = C + I + ΔI. The vertical gap ΔI = 20 is marked between AD and AD'; the horizontal change in income at the equilibrium points where the lines meet the 45° line is ΔY = 80. See it in the official paper.
Try it first, then show our solutionSolution
1. In the diagram, a rise in investment of ΔI = 20 raises equilibrium income by ΔY = 80, so the multiplier K = ΔY/ΔI = 80/20 = 4.
2. K = 1/(1 − MPC), so 4 = 1/(1 − MPC) and MPC = 0.75. The slope of the consumption curve is the MPC = 0.75. Option (D).
  1 mark
Answer: (D) 0.75
Where the marks are
- K = 4, so MPC (slope of C) = 0.75 (1 mark)
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Q7 · 1 mark · Assertion-reasonCompetency-basedNational Income Accounting
Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below:
Assertion (A): Goods such as cars, refrigerators etc. are non-durable in nature, regardless of whether they are used by households or firms.
Reason (R): Consumer durable goods and capital goods have a common feature of durability, even though they may have different end users.
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. Cars and refrigerators are durable goods: they last for several years, whether bought by households (consumer durables) or by firms (capital goods).
  Reason: True. Consumer durables and capital goods share the feature of durability even though their end users differ.
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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Q8 · 1 mark · MCQCompetency-basedOpen Economy Macroeconomics
An Indian art gallery sells an antique Madhubani painting to a buyer in France for 4,000 euros. This transaction will be recorded on ______ side and ______ account of the Balance of Payments Account. (Choose the correct option to fill up the blank)
1. (A)debit, current
2. (B)credit, current
3. (C)debit, capital
4. (D)credit, capital
Try it first, then show our solutionSolution
1. Selling a painting to a buyer in France is an export of goods, which brings foreign currency into India, so it is a credit entry.
2. Trade in goods is recorded in the current account of the BoP. Option (B).
  1 mark
Answer: (B) credit, current
Where the marks are
- Export of goods: credit side, current account (1 mark)
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Q9 · 1 mark · MCQCompetency-basedMoney and Banking
Shraddha Kapur initially lived in a barter-based system where exchanging goods was difficult owing to practical problems. After the introduction of money, she could easily buy goods using currency and repay her loan in fixed instalments over time. This change made transactions easier and future payments reliable.
The functions of money highlighted in the above text are ________ and _______. (Choose the correct option to fill up the blank)
1. (A)Store of value and medium of exchange
2. (B)Measure of value and standard of deferred payments
3. (C)Medium of exchange and standard of deferred payments
4. (D)Measure of value and store of value
Try it first, then show our solutionSolution
1. Using currency instead of barter to buy goods shows money as a medium of exchange.
2. Repaying a loan in fixed instalments over time shows money as a standard of deferred payments. Option (C).
  1 mark
Answer: (C) Medium of exchange and standard of deferred payments
Where the marks are
- Buying goods and repaying loans in instalments (1 mark)
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Q10 · 1 mark · MCQDetermination of Income and Employment
The value of investment multiplier ranges between ______ and ________. (Choose the correct option to fill up the blank)
1. (A)0,1
2. (B)-1, 1
3. (C)1, infinity
4. (D)0, infinity
Try it first, then show our solutionSolution
1. K = 1/(1 − MPC), and MPC lies between 0 and 1.
2. When MPC = 0, K = 1; as MPC approaches 1, K approaches infinity. So K lies between 1 and infinity. Option (C).
  1 mark
Answer: (C) 1, infinity
Where the marks are
- K = 1/(1 − MPC) with 0 ≤ MPC ≤ 1 (1 mark)
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Answer one of these 2 alternatives.

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

Using the given estimates for a hypothetical economy, show that Gross Domestic Product at Market Price by Value-Added Method and Expenditure Method yields the same result.

S. No.	Items	Amount (in ₹ crore)
(i)	Private Final Consumption Expenditure	500
(ii)	Value of Output	1900
(iii)	Government Final Consumption Expenditure	400
(iv)	Gross Domestic Capital Formation	600
(v)	Change in Stock	100
(vi)	Consumption of Fixed Capital	30
(vii)	Net Exports	70
(viii)	Intermediate Consumption	330

Try it first, then show our solutionSolution

Value-added method: GDP at MP = Value of output − Intermediate consumption = (ii) − (viii)
½ mark
= 1,900 − 330
½ mark
= ₹ 1,570 crore
½ mark
Expenditure method: GDP at MP = PFCE + GFCE + Gross domestic capital formation + Net exports = (i) + (iii) + (iv) + (vii). (Change in stock is already part of gross domestic capital formation and is not added again.)
½ mark
= 500 + 400 + 600 + 70
½ mark
= ₹ 1,570 crore. Both methods give the same GDP at market price.
½ mark

Answer: GDP at MP = ₹ 1,570 crore by both the value-added and the expenditure method.

Where the marks are

Value-added formula, substitution, answer (½ each)
Expenditure formula, substitution, answer (½ each)

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

“Each factor of production contributes a distinct service in the production process and receives a specific reward in return.”
In the light of the given statement, answer the following questions:

(I)
List any two factors of production and their respective remuneration earned.
2 marks
(II)
Define any one of the remuneration earned listed above.
1 mark

Try it first, then show our solutionSolution

(I) Land earns rent.
1 mark
(I) Capital earns interest. (Also: labour earns wages/compensation of employees; entrepreneurship earns profit.)
1 mark
(II) Rent is the income earned by the owner of land (natural resources) for allowing its use in production.
1 mark

Answer: (I) Land – rent; capital – interest (also labour – wages, entrepreneur – profit). (II) Rent is the income of the owner of land for its use.

Where the marks are

Two factors with rewards (½ + ½ each)
One reward defined (1)

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Q12 · 3 marks · Short answerCompetency-basedGovernment Budget and the Economy
Refer to the given cartoon strip carefully:
Analyse the impact of introduction of Goods and Service Tax in improving the efficiency of the taxation system and benefitting the overall economy.
Figure in the paper: Two-panel cartoon. Left panel 'Before GST...': a boy asks 'Why does the same toy cost differently in different states?' with toy prices ₹200 and ₹250; a girl says 'As India has multiple indirect taxes like VAT, Excise, Service Tax etc.' Right panel 'GST: One Nation, One Tax!': boy says 'That's why the government introduced GST – One Nation, One Tax.' with a map of India labelled GST and trucks; another says 'So GST replaced many taxes and made prices more transparent.' See it in the official paper.
Try it first, then show our solutionSolution
1. The cartoon contrasts the time before GST, when a toy cost different amounts in different states because of many indirect taxes (VAT, excise, service tax), with "One Nation, One Tax". GST simplified the tax structure by subsuming these indirect taxes into one tax across the country.
  1 mark
2. It removed the cascading (tax-on-tax) effect, reducing the cost of doing business and the burden on consumers; lower costs of production made Indian goods and services more competitive in domestic and international markets.
  1 mark
3. It made the tax system more transparent and uniform across states, improving compliance and the ease of doing business, which benefits the overall economy.
  1 mark
Answer: GST replaced many indirect taxes with one tax, removed cascading, cut costs, increased competitiveness and made taxation more transparent, benefiting the economy.
Where the marks are
- Impact of GST on efficiency of taxation and on the economy (marked as a whole, 3)
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Answer one of these 2 alternatives.
Q13(A) · 4 marks · Short answerCompetency-basedMoney and Banking
Like individual consumers, businesses and organisation of all kinds, banks need their own mechanism to transfer funds and settle inter-bank transactions, such as borrowing from and lending to other banks and customer transactions.
Source: https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RWF15012018_FCD40172EE58946BAA647A765DC942BD5.PDF
Identify and explain the function fulfilled by the Reserve Bank of India in the aforesaid statement.
Try it first, then show our solutionSolution
1. The function is RBI as the banker's bank (including its role as clearing house for inter-bank settlement).
  1 mark
2. The RBI accepts deposits from commercial banks (they keep part of their reserves with it) and lends to them when required. It uses these reserves to settle inter-bank claims, so banks can transfer funds and settle their dues with each other easily.
  2 marks
3. As the highest authority in the banking system, it also acts as the lender of last resort, supporting banks in financial distress with short-term credit against approved securities.
  1 mark
Answer: The RBI acts as banker's bank: it holds banks' reserves, settles inter-bank claims, lends to banks and is the lender of last resort.
Where the marks are
- Function identified: banker's bank (1)
- Explanation (3)
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OR
Q13(B) · 4 marks · Short answerCompetency-basedMoney and Banking
Answer the following.
1. (I)
  Define Cash Reserve Ratio.
  1 mark
2. (II)
  In the process of credit creation, the Cash Reserve Ratio (CRR) fixed by the Reserve Bank of India (RBI) plays a crucial role. On 6th June 2025, the RBI reduced the CRR by 100 basis points.
  Assuming the entire banking system functions as a single bank and all transactions are routed through banks, analyse the impact of this change on the total money creation in the banking system.
  3 marks
Try it first, then show our solutionSolution
1. (I) Cash Reserve Ratio is the minimum percentage of a bank's net demand and time liabilities (deposits) that it must keep with the central bank in the form of cash.
  1 mark
2. (II) Total credit creation depends on the initial deposits and the CRR: total deposits = initial deposits × 1/CRR.
  1 mark
3. (II) With primary deposits unchanged, a 100 basis-point cut in CRR leaves banks with more funds to lend. This raises their lending capacity and the money multiplier (1/CRR), so total money (credit) creation in the banking system increases.
  2 marks
Answer: (I) CRR is the share of deposits banks must keep with the RBI as cash. (II) A lower CRR raises lendable funds and the money multiplier, so total money creation rises.
Where the marks are
- Definition of CRR (1)
- Impact of a CRR cut on money creation (3)
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Q14 · 4 marks · Short answerCompetency-basedOpen Economy Macroeconomics
In a hypothetical economy called BoPia, the equilibrium exchange rate is 72 Bopas per US dollar determined through market forces. Over time, BoPia has made substantial investments in human capital formation. As a result, the country now has an abundant supply of skilled labour, which has made it an attractive destination for Foreign Direct Investments (FDI). Hence, multinational companies across the world are investing huge amounts of capital in BoPia.
1. (I)
  Assuming all other factors constant, explain the effect of increased FDI inflows on BoPia’s Balance of Payments Account.
  2 marks
2. (II)
  Suppose the competent authority does not intervene in the process of determination of exchange rate in BoPia. Identify the foreign exchange rate system prevailing in BoPia and mention one of its merits.
  2 marks
Try it first, then show our solutionSolution
1. (I) Higher FDI inflows increase the supply of foreign exchange (US dollars) in BoPia. These are credit entries in the capital account, so the BoP position strengthens and may move into surplus (and the Bopa tends to appreciate).
  2 marks
2. (II) As the authority does not intervene and the rate is set by market forces, BoPia has a flexible (floating) exchange rate system.
  1 mark
3. (II) Merit: the central bank or government need not hold large foreign exchange reserves (the rate adjusts on its own to correct BoP imbalances).
  1 mark
Answer: (I) More FDI increases foreign exchange supply and strengthens the BoP, possibly into surplus. (II) Flexible exchange rate; merit: no need to keep large forex reserves.
Where the marks are
- Effect of FDI on BoP (2)
- Flexible system identified (1)
- One merit (1)
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Q15 · 4 marks · Short answerDetermination of Income and Employment
Assuming for a hypothetical simplified economy,
Consumption function, $C = 150 + 0.8 Y$
Autonomous Investment ( $I_{o}$ ) = 250
Full employment level of income ( $Y_{f}$ ) = 1,600
1. (I)
  Determine the equilibrium level of income.
  2 marks
2. (II)
  Outline whether the economy is facing the situation of excess demand or deficient demand and state its impact on the level of output, employment and general price level in the economy.
  2 marks
Try it first, then show our solutionSolution
1. (I) At equilibrium, Y = C + I.
  1 mark
2. Y = 150 + 0.8Y + 250, so 0.2Y = 400.
  ½ mark
3. Y = 2,000.
  ½ mark
4. (II) Equilibrium income (2,000) is greater than full-employment income (1,600), so the economy faces excess demand (an inflationary gap).
  1 mark
5. (II) Since resources are already fully employed, output and employment cannot rise; excess demand only raises the general price level (inflation).
  1 mark
Answer: (I) Equilibrium income = 2,000. (II) Excess demand: output and employment stay unchanged while the general price level rises.
Where the marks are
- Equilibrium condition, working, Y = 2,000 (1 + ½ + ½)
- Excess demand identified (1)
- Impact on output, employment and prices (1)
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Q16 · 6 marks · Case-basedCompetency-basedNational Income Accounting
Refer to the given text carefully:
India’s economic ascent continues to capture global attention. Already the world’s fourth largest economy, the nation is charting a confident course toward becoming the third largest economy by 2030, with Gross Domestic Product (GDP) projected at USD 7.3 trillion. The current growth phase reflects the strength of decisive policymaking, structural reforms, and India’s deepening global integration. With growth accelerating, India has once again outpaced global peers, reinforcing its position as the fastest-growing major economy. This surge is supported by resilient domestic demand, moderating inflation and higher labour force participation. A revival in domestic investment and strong investor sentiment signals a stable and broad-based economy. As these reforms gather pace and consumption remains optimistic, India’s economic outlook continues to upbeat, signalling sustained momentum and growth across sectors.
Gross Domestic Product (GDP) is one of the primary indicators of overall economic performance which reflects the rate at which the country is expanding. As per the latest data, the GDP of India (adjusted for inflation) is estimated to grow by 8.2% in Q2 of FY 2025-26 against the growth rate of 5.6% during Q2 of FY 2024-25. Each sector of the economy is playing a pivotal role in the growth of the country.
Source: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2195990&reg=3&lang=1 (adapted and modified)
On the basis of the given text and common understanding, answer the following questions:
1. (I)
  Define Gross Domestic Product.
  1 mark
2. (II)
  “GDP of India, adjusted for inflation, is estimated to grow by 8.2% in Q2 of FY 2025.”
  Elucidate whether the given projection represents Nominal GDP or Real GDP. Also, explain any one benefit of using this particular measure.
  2 marks
3. (III)
  Comment upon the strong global position of India’s economy stating the major reasons for its recent growth surge.
  3 marks
Try it first, then show our solutionSolution
1. (I) GDP is the market value of all final goods and services produced within the domestic territory of a country during a given period (usually a year).
  1 mark
2. (II) GDP "adjusted for inflation" is real GDP: final output valued at constant (base-year) prices.
  1 mark
3. (II) Benefit: real GDP changes only when physical output changes, because it removes the effect of price changes, so it is a better indicator of economic growth.
  1 mark
4. (III) India is the world's fourth-largest economy and the fastest-growing major economy, heading to become the third-largest by 2030 (GDP projected at USD 7.3 trillion).
  1 mark
5. (III) Reasons for the surge: decisive policymaking and structural reforms, resilient domestic demand and optimistic consumption, moderating inflation, higher labour force participation, revival of domestic investment and strong investor sentiment, and deeper global integration, giving broad-based growth (real GDP growth 8.2% in Q2 FY 2025-26 vs 5.6% a year earlier).
  2 marks
Answer: (I) Market value of final goods and services produced in the domestic territory in a year. (II) Real GDP; it reflects only changes in physical output. (III) India is fourth-largest and fastest-growing, driven by reforms, domestic demand, low inflation, investment and global integration.
Where the marks are
- Definition of GDP (1)
- Real GDP identified (1)
- Benefit of real GDP (1)
- India's position and reasons for growth (marked as a whole, 3)
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Answer one of these 2 alternatives.
Q17(A) · 6 marks · Long answerCompetency-basedDetermination of Income and Employment
Answer the following.
1. (I)
  State and explain the two components of Consumption Function.
  3 marks
2. (II)
  After assessing prevailing liquidity and financial conditions, the Reserve Bank of India (RBI) on December 23, 2025, announced that it would conduct Open Market Operations (OMO) purchase auctions of Government of India securities totalling ₹ 2,00,000 crore (USD 22.34 billion).
  Briefly state the rationale behind the step taken by the Reserve Bank of India. Explain its implications on Aggregate Demand.
  3 marks
Try it first, then show our solutionSolution
1. (I) Autonomous consumption (c̄): the minimum consumption that takes place even at zero income; it does not depend on income.
  1½ marks
2. (I) Induced consumption (bY): the part of consumption that varies directly with income, depending on the MPC (b). So C = c̄ + bY.
  1½ marks
3. (II) Rationale: the RBI found liquidity tight and demand weak, so it bought government securities worth ₹ 2,00,000 crore to inject liquidity and correct deficient demand (deflationary conditions).
  1 mark
4. (II) Implication: when the RBI buys securities, it pays banks, so their cash reserves and lending capacity rise. Credit becomes more available and cheaper, borrowing for consumption and investment rises, and aggregate demand increases.
  2 marks
Answer: (I) Consumption = autonomous consumption + induced consumption (c̄ + bY). (II) OMO purchases inject liquidity to fight deficient demand, raising bank lending and aggregate demand.
Where the marks are
- Two components stated and explained (½ + 1 each)
- Rationale of OMO purchase (1)
- Implication for AD (2)
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OR
Q17(B) · 6 marks · Long answerDetermination of Income and Employment
Answer the following.
1. (I)
  State whether the following statements are true or false, giving valid reasons in support of your answer:
  (a) Average Propensity to Consume (APC) at break-even level of income is always equal to one.
  2 marks
2. (I)(b)
  When ex-ante savings is more than ex-ante investments, it may lead to decumulation of inventories.
  2 marks
3. (II)
  The Aggregate Demand curve becomes distant from the Investment Curve with the increase in the level of income.
  Defend or refute the given statement, giving valid reasons in support of your answer.
  2 marks
Try it first, then show our solutionSolution
1. (I)(a) True. At the break-even level of income, consumption equals income (C = Y) and saving is zero. Since APC = C/Y, APC = 1 at this point.
  2 marks
2. (I)(b) False. If ex-ante saving exceeds ex-ante investment, households plan to consume less than firms expected them to. Goods remain unsold, so there is unintended accumulation (not decumulation) of inventories.
  2 marks
3. (II) Defended. The vertical distance between the AD curve and the investment curve equals consumption (AD = C + I). Investment is autonomous and stays constant, while induced consumption rises with income, so AD moves further away from the investment curve as income increases.
  2 marks
Answer: (I)(a) True: C = Y, so APC = 1. (I)(b) False: inventories accumulate. (II) Defended: the gap between AD and I is consumption, which rises with income.
Where the marks are
- (a) True with reason (2)
- (b) False with reason (2)
- Statement defended with reason (2)
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Section B

Indian Economic Development: MCQ 18-27, 28-30 short, 31-32 4 marks, 33-34 6 marks

Q18 · 1 mark · MCQComparative Development Experiences of India and its Neighbours
Read the following statements carefully:
Statement 1: In the normal course of development, countries shift employment and output from agriculture to industry and then to services.
Statement 2: The service sector is the key driver of development for both India and Pakistan, with a direct shift from agriculture to service sector.
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: in the usual course of development, employment and output shift from agriculture to industry and then to services.
2. Statement 2 is true: in India and Pakistan the shift has been directly from agriculture to the service sector, which has become the main driver of growth. Option (C).
  1 mark
Answer: (C) Both Statements 1 and 2 are true.
Where the marks are
- Usual pattern; direct shift to services in India and Pakistan (1 mark)
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Q19 · 1 mark · MCQEmployment: Growth, Informalisation and Other Issues
Match the set of type of employment given in Column I with corresponding example given in Column II and choose the correct option:
Column I Column II
(p) Self-employed i An engineer working with ONGC
(q) Regular salaried employees ii A construction worker
(r) Casual wage labourers iii Photographer running own studio
1. (A)(p)-ii, (q)-i, (r)-iii
2. (B)(p)-iii, (q)-ii, (r)-i
3. (C)(p)-i, (q)-iii, (r)-ii
4. (D)(p)-iii, (q)-i, (r)-ii
Try it first, then show our solutionSolution
1. A photographer running his own studio uses his own resources: self-employed (p)-iii.
2. An engineer working with ONGC gets a regular salary: regular salaried (q)-i. A construction worker is hired on a daily basis: casual wage labourer (r)-ii. Option (D).
  1 mark
Answer: (D) (p)-iii, (q)-i, (r)-ii
Where the marks are
- Correct matching of the three types (1 mark)
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Q20 · 1 mark · Assertion-reasonCompetency-basedIndian Economy on the Eve of Independence
Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below:
Assertion (A): The real motive behind the infrastructural development initiated by the British was to subserve the colonial interests.
Reason (R): Commercialisation of Indian agriculture during the British rule helped to strengthen the self-sufficiency of the village economies in India.
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. Roads, railways, ports and the telegraph were developed mainly to serve colonial interests: moving troops, raw materials and British goods and maintaining control.
  Reason: False. Commercialisation of agriculture (growing cash crops for British industry) broke down the self-sufficiency of village economies; it did not strengthen it.
2. A is true and R is false. Option (C).
  1 mark
Answer: (C) Assertion (A) is true, but Reason (R) is false.
Where the marks are
- Truth of A and R and the link between them (1 mark)
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Q21 · 1 mark · MCQHuman Capital Formation in India
‘Empirical evidence regarding the impact of human capital on economic growth is often described as nebulous.’
Due to measurement problems, _________ may not reflect the actual quality/status of education/health of the people in a country.
(i) years of schooling
(ii) teacher-pupil ratio
(iii) life-expectancy (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. Years of schooling and teacher–pupil ratio measure the quantity of education, not its quality; life expectancy measures length of life, not its quality.
2. Because of these measurement problems, all three may fail to reflect the actual quality or status of education and health. Option (D).
  1 mark
Answer: (D) (i), (ii) and (iii)
Where the marks are
- All three indicators have measurement problems (1 mark)
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Q22 · 1 mark · MCQIndian Economy 1950-1990
Refer the following image:
Identify the distinguished thinker, who is considered as the Architect of Indian planning. (Choose the correct option)
1. (A)Jawaharlal Nehru
2. (B)Prasanta Chandra Mahalanobis
3. (C)Amartya Sen
4. (D)Dadabhai Naoroji
Figure in the paper: Black and white photograph of an elderly man wearing a dark cap, spectacles and a dark buttoned coat. See it in the official paper.
Try it first, then show our solutionSolution
1. The photograph shows Prasanta Chandra Mahalanobis.
2. He drafted the Second Five-Year Plan (the Mahalanobis model, with emphasis on heavy industry) and founded the Indian Statistical Institute; he is called the architect of Indian planning. Option (B).
  1 mark
Answer: (B) Prasanta Chandra Mahalanobis
Where the marks are
- Mahalanobis: architect of Indian planning (1 mark)
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Q23 · 1 mark · MCQComparative Development Experiences of India and its Neighbours
Arrange the following events in chronological order:
(i) Introduction of economic reforms in Pakistan
(ii) China’s Great Proletarian Cultural Revolution
(iii) Nationalisation of capital goods industries in Pakistan
(iv) India’s last Five-Year Plan
Choose the correct option:
1. (A)(ii) → (iii) → (i) → (iv)
2. (B)(iii) → (ii) → (i) → (iv)
3. (C)(ii) → (i) → (iii) → (iv)
4. (D)(iii) → (i) → (ii) → (iv)
Try it first, then show our solutionSolution
1. Dates: China's Great Proletarian Cultural Revolution 1966 (ii); nationalisation of capital goods industries in Pakistan in the 1970s (iii); economic reforms in Pakistan 1988 (i); India's last (Twelfth) Five-Year Plan 2012–17 (iv).
2. Order: (ii) → (iii) → (i) → (iv). Option (A).
  1 mark
Answer: (A) (ii) → (iii) → (i) → (iv)
Where the marks are
- Chronology 1966, 1970s, 1988, 2012–17 (1 mark)
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Q24 · 1 mark · MCQLiberalisation, Privatisation and Globalisation: An Appraisal
“In 1991, as an immediate measure to resolve the balance of payments crisis, the rupee was devalued against foreign currencies.”
Identify the liberalisation reform indicated in the aforesaid statement. (Choose the correct option)
1. (A)Industrial Sector
2. (B)Tax
3. (C)Foreign Exchange
4. (D)Trade and Investment Policy
Try it first, then show our solutionSolution
1. Devaluing the rupee in 1991 changed the value of the rupee against foreign currencies to resolve the BoP crisis.
2. This is a foreign exchange reform (later followed by market-determined exchange rates). Option (C).
  1 mark
Answer: (C) Foreign Exchange
Where the marks are
- Rupee devaluation is a foreign exchange reform (1 mark)
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Q25 · 1 mark · MCQRural Development
Identify which of the following is not the function of National Bank for Agriculture and Rural development (NABARD). (Choose the correct option)
1. (A)Serving as apex funding agency for institutions providing rural credit.
2. (B)Monitoring, evaluating and coordinating rural financing activities.
3. (C)Formulating and implementing monetary policy.
4. (D)Coordinating rural credit policies with the government.
Try it first, then show our solutionSolution
1. NABARD (1982) is the apex body for rural credit: it funds institutions providing rural credit, monitors and coordinates rural financing, and coordinates rural credit policy with the government.
2. Formulating and implementing monetary policy is the job of the Reserve Bank of India, not NABARD. Option (C).
  1 mark
Answer: (C) Formulating and implementing monetary policy.
Where the marks are
- Monetary policy belongs to the RBI (1 mark)
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Q26 · 1 mark · MCQIndian Economy 1950-1990
In India, land ceiling legislation faced hurdles primarily because ________. (Choose the correct option to fill up the blank)
(i) the big landlords challenged the legislation in the courts
(ii) of multiple loopholes in the legislation
(iii) the landlords registered the land under relatives’ names
(iv) of the ‘land to the tiller’ policy of the government
1. (A)(i),(ii),(iii) and (iv)
2. (B)(i),(ii) and (iii)
3. (C)(i) and (iv)
4. (D)(iv) only
Try it first, then show our solutionSolution
1. Land ceiling laws were obstructed because big landlords challenged them in courts (i), the laws had many loopholes (ii), and landlords transferred land to relatives' names to escape the ceiling (iii).
2. "Land to the tiller" was itself a land reform policy, not a hurdle to land ceiling. Option (B).
  1 mark
Answer: (B) (i), (ii) and (iii)
Where the marks are
- Court cases, loopholes and benami transfers (1 mark)
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Q27 · 1 mark · MCQIndian Economy on the Eve of Independence
Read the following statements carefully:
Statement 1: French traveller Bernier observed that pre-British agriculture in Bengal was stagnant and unable to meet local needs.
Statement 2: In the 17th century, Bengal was a prosperous exporter of cotton and silk textiles, as well as rice, sugar, and butter.
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: Bernier described 17th-century Bengal as rich in agriculture, producing enough for itself and for export.
2. Statement 2 is true: Bengal was a prosperous exporter of cotton and silk textiles, rice, sugar and butter. Option (B).
  1 mark
Answer: (B) Statement 1 is false and Statement 2 is true.
Where the marks are
- Bernier described a prosperous Bengal (1 mark)
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Q28 · 3 marks · Case-basedCompetency-basedLiberalisation, Privatisation and Globalisation: An Appraisal
Refer to the following text:
The Government of India, decided to reduce its role in Public Sector Undertakings (PSUs) to improve efficiency and reduce fiscal burden.
As per the policy decision, government companies are converted into private companies in two ways.
Answer the following questions in the light of given text and common understanding:
1. (I)
  Identify the policy highlighted in the step initiated by the government.
  1 mark
2. (II)
  Briefly explain the two ways in which government companies can be converted into private companies.
  2 marks
Try it first, then show our solutionSolution
1. (I) The policy is privatisation (reducing the government's role in PSUs).
  1 mark
2. (II) Way 1: the government withdraws from the ownership and management of public sector companies (for example by disinvestment, selling part of its equity).
  1 mark
3. (II) Way 2: outright sale of public sector companies to the private sector.
  1 mark
Answer: (I) Privatisation. (II) Government withdrawal from ownership and management, and outright sale of PSUs.
Where the marks are
- Policy identified (1)
- Two ways (1 + 1)
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Answer one of these 2 alternatives.
Q29(A) · 3 marks · Short answerRural Development
Though livestock population in India is quite impressive but its productivity is quite low.
Briefly explain any two initiatives that can be taken to enhance the livestock productivity.
Try it first, then show our solutionSolution
1. Better breeds and technology: encourage improved (cross-bred, high-yielding) animal breeds and modern technology in animal husbandry to raise milk and meat yields.
  1½ marks
2. Veterinary care: set up veterinary clinics with better facilities and provide credit and insurance for livestock, so animals stay healthy and productive.
  1½ marks
Answer: Improved breeds and modern technology, and better veterinary care, can raise livestock productivity.
Where the marks are
- Initiative 1 explained (1½)
- Initiative 2 explained (1½)
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OR
Q29(B) · 3 marks · Short answerCompetency-basedEmployment: Growth, Informalisation and Other Issues
Mehak is employed in a private firm which has hired only five workers. She generally remains insecure that she can be terminated from her job, without any prior notice. In contrast, her elder sister Sehaj works as a nurse in a government hospital.
On the basis of the given text and common understanding answer the following questions:
1. (I)
  Identify the sectors in which Mehak and Sehaj are employed.
  1 mark
2. (II)
  State any two differences between the identified sectors in which they are working.
  2 marks
Try it first, then show our solutionSolution
1. (I) Mehak (private firm with only five hired workers) is in the informal sector; Sehaj (nurse in a government hospital) is in the formal sector.
  1 mark
2. (II) Job security: informal-sector workers can be dismissed without notice and have no job protection, while formal-sector workers enjoy job security.
  1 mark
3. (II) Income and benefits: informal-sector workers usually lack regular income and social security, while formal-sector workers get a regular income with benefits such as provident fund, pension and paid leave.
  1 mark
Answer: (I) Mehak: informal sector; Sehaj: formal sector. (II) Formal jobs offer job security and regular income with social security; informal jobs do not.
Where the marks are
- Sectors identified (½ + ½)
- Two differences (1 + 1)
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Q30 · 4 marks · Short answerIndian Economy 1950-1990
Answer the following.
1. (I)
  Explain briefly the role of Karve Committee, 1955 in promoting rural development.
  2 marks
2. (II)
  “Britain maintained a monopoly control over India’s exports and imports.”
  Justify the statement, giving valid reasons in support of your answer.
  2 marks
Try it first, then show our solutionSolution
1. (I) The Karve Committee (1955) recommended using village and small-scale industries for rural development. These industries are labour-intensive, so they generate more employment in rural areas and help spread income.
  2 marks
2. (II) Under British rule more than half of India's foreign trade was restricted to Britain, and the rest was allowed only with a few countries such as China, Ceylon and Persia. The opening of the Suez Canal in 1869 cut transport costs and further tightened Britain's control over India's trade.
  2 marks
Answer: (I) It promoted village and small-scale industries, which are labour-intensive and create rural employment. (II) Over half of India's trade was with Britain, the rest with a few countries, and the Suez Canal (1869) tightened British control.
Where the marks are
- Role of Karve Committee (2)
- British monopoly over India's trade justified (2)
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Q31 · 4 marks · Short answerEmployment: Growth, Informalisation and Other Issues
“Government of India has played an important role in generating employment directly /indirectly.”
Do you agree with the given statement? Give valid reasons in support of your answer.
Try it first, then show our solutionSolution
1. Yes, I agree. Direct employment: the government recruits people in its administrative departments, public sector industries, banks, railways and other government-run organisations.
  2 marks
2. Indirect employment: when government enterprises expand output, private firms that supply inputs to them or buy their output also expand, creating additional jobs in the private sector. Government employment schemes (e.g. MGNREGA) and asset-creating programmes add further jobs.
  2 marks
Answer: Agree: the government creates jobs directly in its departments and enterprises, and indirectly through linked private-sector expansion and employment programmes.
Where the marks are
- Direct employment explained (2)
- Indirect employment explained (2)
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Answer one of these 2 alternatives.
Q32(A) · 4 marks · Short answerCompetency-basedHuman Capital Formation in India
Refer the following text carefully:
Keha and Mandeep graduated recently. Keha in order to improve her physical fitness, reduce stress and increase overall well-being, enrolls in yoga classes, while Mandeep, invests in internet data, online job portals and counselling services to explore suitable career opportunities.
Identify and explain the sources of human capital formation indicated in the above text.
Try it first, then show our solutionSolution
1. Keha's yoga classes are an expenditure on health.
  ½ mark
2. Good physical and mental health raises efficiency, learning ability and long-term work performance, giving a more productive future workforce; so health spending is a source of human capital formation.
  1½ marks
3. Mandeep's spending on internet data, job portals and career counselling is an expenditure on information (about the job market).
  ½ mark
4. Such information helps him find jobs that best match his skills, improving his employability, productivity and earnings, so it too forms human capital.
  1½ marks
Answer: Keha: expenditure on health; Mandeep: expenditure on information. Both raise productivity and earning capacity, forming human capital.
Where the marks are
- Health identified and explained (½ + 1½)
- Information identified and explained (½ + 1½)
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OR
Q32(B) · 4 marks · Short answerCompetency-basedHuman Capital Formation in India
Avyaan’s education enables him to take informed decisions related to his health, finances, and social responsibilities. On the other hand, Amyra has received technical training in machine operations to improve her skills and productivity with the aim of increasing output.
In the context of the distinction between human development and human capital formation, identify which case represents human development. Give valid reasons to justify your answer.
Try it first, then show our solutionSolution
1. Avyaan's case represents human development. Human development aims at expanding people's choices and well-being as ends in themselves; education is valued because it lets him make informed decisions on health, finances and social responsibilities, improving his quality of life.
  2 marks
2. Amyra's technical training aims at raising her skills and productivity to increase output. That is human capital formation, which treats education and training as a means to higher productivity and income.
  2 marks
Answer: Avyaan's case is human development (education improves well-being and choices); Amyra's is human capital formation (training to raise output).
Where the marks are
- Avyaan identified with reason (2)
- Amyra contrasted as human capital formation (2)
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	Column I		Column II
(p)	Self-employed	i	An engineer working with ONGC
(q)	Regular salaried employees	ii	A construction worker
(r)	Casual wage labourers	iii	Photographer running own studio

Answer one of these 2 alternatives.

Q33(A) · 6 marks · Long answerCompetency-basedComparative Development Experiences of India and its Neighbours

Answer the following.

(I)

Refer to the following data carefully:

Some Selected Indicators of Human Development, 2017-2019

Item	India	China	Pakistan
Maternal Mortality Rate (per 1 lakh births)	103	23	154
Gross National Income per Capita (PPP US$)	6,951	18,025	5,374
Mean years of Schooling (aged 15 and above) in %	6.6	8.1	4.4
People using at least basic drinking Water Source (% of population)	93	97	90

Answer the following questions on the basis of the given data and common understanding:
(a) List one key measure of both income and health indicators given in the above table.
(b) On the basis of the given data, compare and critically examine any two human development indicators of India and China.

4 marks

(II)
State the meaning of Special Economic Zones and its significance.
2 marks

Try it first, then show our solutionSolution

(I)(a) Income indicator: Gross National Income per capita (PPP US$). Health indicator: Maternal Mortality Rate (per 1 lakh births).
1 mark
(I)(b) Maternal mortality is far higher in India than in China: 103 women die per 1 lakh births in India against 23 in China, showing China's much better maternal health care.
1½ marks
(I)(b) Access to basic drinking water is fairly good in both: China 97% and India 93%, showing considerable progress in basic amenities, with China slightly ahead. (Also: China's GNI per capita of 18,025 is more than 2.5 times India's 6,951.)
1½ marks
(II) A Special Economic Zone (SEZ) is a geographical region whose economic laws differ from the country's usual economic laws.
1 mark
(II) Significance: SEZs attract domestic and foreign investment, promote exports and trade, and foster industrial development and employment (as China used them to attract FDI after 1978).
1 mark

Answer: (I)(a) GNI per capita (income) and maternal mortality rate (health). (I)(b) China is far ahead in maternal mortality (23 vs 103) and slightly ahead in water access (97% vs 93%). (II) SEZs are regions with separate economic laws that attract investment and promote trade.

Where the marks are

Income and health indicators (½ + ½)
Two indicators compared (1½ + 1½)
SEZ meaning (1)
SEZ significance (1)

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Q33(B) · 6 marks · Long answerComparative Development Experiences of India and its Neighbours

Answer the following.

(I)
Refer to the given image carefully:
Describe the indicated policy introduced by China in the late 1970s and its consequences.
3 marks
(II)
State any two challenges faced in the effective implementation of Great Leap Forward Campaign.
3 marks

Figure in the paper: Cartoon-style illustration of a child riding a tricycle-cart looking distressed, carrying on the cart two adults and two elderly people (four grandparents/parents) behind, depicting the burden on one child. See it in the official paper.

Try it first, then show our solutionSolution

(I) The image (one child pulling a cart carrying two parents and four grandparents) shows the consequence of China's one-child policy, introduced in the late 1970s to control population growth.
1 mark
(I) Consequences: the population growth rate fell sharply, but the policy led to a decline in the sex ratio and a demographic imbalance; the proportion of elderly people is rising and is expected to exceed the young population, so one working child must support many dependants.
2 marks
(II) Challenge 1: a severe drought caused havoc in China, killing about 30 million people.
1½ marks
(II) Challenge 2: after conflicts with China, Russia withdrew the professionals it had sent to help China's industrialisation.
1½ marks

Answer: (I) The one-child policy cut population growth but caused a falling sex ratio and an ageing population. (II) Severe drought and withdrawal of Soviet experts hampered the GLF.

Where the marks are

Policy identified and its consequences (marked as a whole, 3)
Two challenges of GLF (1½ + 1½)

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Q34 · 6 marks · Case-basedCompetency-basedEnvironment and Sustainable Development
Refer to the following text carefully:
India is adopting a multifaceted approach to mitigate global warming by diversifying its energy sources and enhancing access while also increasing the share of non-fossil fuels, improving energy efficiency, and promoting stability across its energy systems. India’s energy transition is being pursued through a combination of initiatives across various sectors, including nuclear, solar, and wind energy, green hydrogen, battery storage, and critical minerals, which help to address both energy security and transition imperatives simultaneously. India has already surpassed the goal of 50 per cent installed power capacity from non-fossil fuel sources, which stood at 51.93% at the end of December 2025, supported by record annual additions of renewable energy capacity. The progress in expanding non-fossil fuel-based power capacity has been supported by a wide variety of initiatives to boost renewable energy systems. Additionally, new measures are being taken to support other clean sources of energy such as the National Nuclear Mission, the Green Hydrogen Mission, and the Bio Energy Programme.
Source: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2219915&utm_source=chatgpt.com&reg=3&lang=2 (adapted and modified)
On the basis of the given text and common understanding, answer the following questions:
1. (I)
  State the meaning of Global Warming.
  1 mark
2. (II)
  India has already achieved more than 50% of its installed power capacity from non-fossil fuel sources. Identify any two major government initiatives that support this transition.
  1 mark
3. (III)
  Elaborate any two strategies adopted by India to ensure sustainable development.
  4 marks
Try it first, then show our solutionSolution
1. (I) Global warming is the gradual increase in the average temperature of the earth's lower atmosphere due to the increase in greenhouse gases (from burning fossil fuels, deforestation, etc.).
  1 mark
2. (II) Two initiatives: the National Nuclear Mission and the Green Hydrogen Mission (also the Bio Energy Programme).
  1 mark
3. (III) Wind energy: in areas with high wind speed, windmills generate electricity without harming the environment. The initial cost is high, but the long-term benefits easily absorb it.
  2 marks
4. (III) Solar energy: photovoltaic cells / solar panels convert sunlight into electricity. This is very useful in remote areas where grid supply is impossible or very costly, and it is pollution-free.
  2 marks
Answer: (I) Rise in the earth's average temperature due to greenhouse gases. (II) National Nuclear Mission and Green Hydrogen Mission. (III) Wind and solar energy as clean, renewable sources.
Where the marks are
- Meaning of global warming (1)
- Two initiatives (½ + ½)
- Two strategies explained (2 + 2)
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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.