EconomicsCBSE Class 12 · Board exam 2026 (session 2025-26)

CBSE Class 12 Economics: 2026 board paper, set 58/1/1

The question paper set in the CBSE Class 12 board exam of 2026, 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 question paper from cbse.gov.in: https://www.cbse.gov.in/cbsenew/question-paper/2026/XII/Economics.zip (a zip; this paper is the file 58-1-1_Economics.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 (1).

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/assertion-reason 1-10 (1 mark each), 3-mark 11-12, 4-mark 13-15, 6-mark 16-17
B	18-34	Indian Economic Development: MCQ/assertion-reason 18-27 (1 mark each), 3-mark 28-29, 4-mark 30-31, 6-mark 32-34

Instructions in brief: All questions compulsory; no overall choice, internal choice in a few questions; separate questions for Visually Impaired candidates in lieu of visual-input questions.

Section A

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

Q1 · 1 mark · MCQNational Income Accounting
In a two sector economy, the flow of factor payments moves from __________ to __________. (Choose the correct option to fill in the blanks)
1. (A)firms, households
2. (B)firms, government
3. (C)banks, households
4. (D)households, firms
Try it first, then show our solutionSolution
1. In the two-sector circular flow, households own the factors of production (land, labour, capital, enterprise) and sell their services to firms. Firms pay rent, wages, interest and profit in return.
2. So factor payments flow from firms to households (and household consumption spending flows back from households to firms). Option (A).
  1 mark
Answer: (A) firms, households
Where the marks are
- Direction of factor payments in the two-sector model (1 mark)
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Q2 · 1 mark · Assertion-reasonCompetency-basedMoney and Banking
Read the following statements : Assertion (A) and Reason (R). Choose the correct option from those given below :
Assertion (A) : Money is of perishable nature and is generally accepted by all at any point of time.
Reason (R) : Money serves as a store of value, facilitating individuals to transfer purchasing power from the present to the future.
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. Money (currency) is durable, not perishable; being durable is what lets it be accepted at any time.
  Reason: True. Money is a store of value: it lets people keep purchasing power today and use it in the future.
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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Q3 · 1 mark · MCQOpen Economy Macroeconomics
Read the following statements carefully :
Statement 1 : Depreciation of currency is an economic action undertaken by the government of a nation under the fixed exchange rate system.
Statement 2 : Under the floating exchange Rate system, authorities actively intervene in the foreign exchange market by way of maintaining foreign exchange reserves.
In the 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: a deliberate cut in the value of the currency by the government under a fixed exchange rate system is devaluation. Depreciation is a fall in value caused by market forces under a flexible rate.
2. Statement 2 is false: under a pure floating system the rate is set by demand and supply of foreign exchange; the authorities do not actively intervene with reserves (that happens under fixed or managed floating rates). Option (D).
  1 mark
Answer: (D) Both statements 1 and 2 are false.
Where the marks are
- Devaluation vs depreciation; no intervention under a floating rate (1 mark)
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Q4 · 1 mark · MCQDetermination of Income and Employment
In an economy, when __________ is insufficient to achieve the level of output corresponding to the full employment, the difference is termed a deflationary gap. (Choose the correct option to fill in 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
Try it first, then show our solutionSolution
1. A deflationary gap is measured at the full-employment level of output: it is the amount by which planned spending falls short of that output.
2. Planned spending is ex-ante aggregate demand. When ex-ante AD is insufficient for full-employment output, the shortfall is the deflationary gap. Option (A).
  1 mark
Answer: (A) ex-ante Aggregate Demand
Where the marks are
- Deflationary gap = shortfall of ex-ante AD (1 mark)
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Q5 · 1 mark · MCQNational Income Accounting
In an economy, exclusion of ___________ may lead to under estimation of the value of Gross Domestic Product (GDP). (Choose the correct option to fill in the blank)
(i) Barter Transactions
(ii) Services provided by family members
(iii) Illegal activities
(iv) Depreciation of Assets
1. (A)(i) and (ii)
2. (B)(ii) and (iii)
3. (C)(iii) and (iv)
4. (D)(i), (ii) and (iii)
Try it first, then show our solutionSolution
1. Barter transactions and the services of family members (housework, caring for children) are productive activities, but they do not pass through the market, so they are left out of GDP even though output is produced.
2. Leaving them out makes GDP smaller than the true value of production, i.e. underestimates it. Illegal activities are not counted as production, and depreciation is not part of the output being estimated, so (iii) and (iv) do not fit. Option (A).
  1 mark
Answer: (A) (i) and (ii)
Where the marks are
- Non-market production (barter, family services) leads to underestimation (1 mark)
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Q6 · 1 mark · MCQDetermination of Income and Employment
Identify, which of the following is true at the Break Even level of Income. (Choose the correct option)
1. (A)Slope of Consumption Curve = Slope of Saving Curve
2. (B)Average Propensity to Consume (APC) = Average Propensity to Save (APS)
3. (C)Slope of Saving Curve = Unity (1)
4. (D)Average Propensity to Consume (APC) = Unity (1)
Try it first, then show our solutionSolution
1. At the break-even level of income, consumption equals income (C = Y) and saving is zero.
2. So APC = C/Y = 1 and APS = 0. (APC = APS would need both to be 0.5, which is not the break-even condition.) Option (D).
  1 mark
Answer: (D) Average Propensity to Consume (APC) = Unity (1)
Where the marks are
- At break-even C = Y, so APC = 1 (1 mark)
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Q7 · 1 mark · MCQNational Income Accounting
Read the following statements carefully :
Statement 1 : Final goods are those goods which normally lose their identity in the production process.
Statement 2 : Final goods may get transformed during the consumption process by a consumer.
(Choose the correct option)
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: goods that lose their identity in production are intermediate goods (e.g. flour used by a baker). Final goods are bought for final use and do not pass through further production.
2. Statement 2 is true: a final good can still be transformed while the consumer uses it (e.g. a household cooks raw vegetables), because that change is consumption, not production for sale. Option (B).
  1 mark
Answer: (B) Statement 1 is false and statement 2 is true.
Where the marks are
- Final goods do not lose identity in production; they may change during consumption (1 mark)
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Q8 · 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) : Unilateral Transfers are recorded in the Current Account of the Balance of Payments (BoP) of a nation.
Reason (R) : Capital account records transactions which cause a change in the assets or liabilities of the country.
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. Unilateral transfers (gifts, remittances, grants) need no repayment and are recorded in the current account of the BoP.
  Reason: True. The capital account records transactions that change a country's assets or liabilities (loans, investment).
2. R describes the capital account, so it does not explain why transfers go into the current account. Option (B).
  1 mark
Answer: (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
Where the marks are
- Truth of A and R and the link between them (1 mark)
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Q9 · 1 mark · MCQMoney and Banking
“In the Indian Banking System, the Statutory Liquidity Ratio (SLR) plays a vital role in controlling the credit creation capacity of the Commercial Banks, as it __________.” (Choose the correct option to fill in the blank)
1. (A)ensures that all the deposits are converted into liquid assets.
2. (B)requires banks to maintain a percentage of deposits in the form of liquid assets.
3. (C)sets the maximum interest rate which the banks can charge on loans.
4. (D)promote banks from lending beyond a specific proportion of their total reserves.
Try it first, then show our solutionSolution
1. Statutory Liquidity Ratio (SLR) is the share of a bank's net demand and time liabilities that it must keep in liquid assets such as cash, gold and approved government securities.
2. Because that part of deposits cannot be lent, a higher SLR reduces the funds available for credit creation. Option (B).
  1 mark
Answer: (B) requires banks to maintain a percentage of deposits in the form of liquid assets.
Where the marks are
- Definition of SLR (1 mark)
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Q10 · 1 mark · MCQMoney and Banking
‘In an economy, the currency held by the public, Net Demand Deposits with Commercial Banks and Net Time Deposits with Commercial Banks stand at ₹ 1,42,000 crore, ₹ 22,000 crore and ₹ 86,000 crore respectively. The value of Money Supply (M $_{1}$ ) would be ₹ __________ crore. (Choose the correct option to fill in the blank)
1. (A)2,50,000
2. (B)86,000
3. (C)1,64,000
4. (D)1,42,000
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). Net time deposits belong to the broader measure M3, not M1.
2. M1 = ₹ 1,42,000 crore + ₹ 22,000 crore = ₹ 1,64,000 crore. Option (C).
  1 mark
Answer: (C) 1,64,000
Where the marks are
- M1 = currency + net demand deposits (1 mark)
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Answer one of these 2 alternatives.
Q11(A) · 3 marks · Short answerCompetency-basedNational Income Accounting
Meera and Shahid are two classmates, who were comparing India’s economic growth over the years.
Meera referred to the increase in Gross Domestic Product (GDP) at current prices prevailing in market, while Sahid insisted on considering GDP after adjusting for inflation. Their debate on which of the two measures gives a true picture of people’s well-being, remained inconclusive.
Considering the above mentioned situation, elaborate with valid reason, which of the two variables is considered a better indicator of welfare and why ?
Try it first, then show our solutionSolution
1. Shahid's measure, GDP adjusted for inflation (real GDP), is the better indicator of welfare.
  1 mark
2. Real GDP values output at constant (base-year) prices, so it changes only when the physical quantity of goods and services changes. It strips out the effect of price changes and shows the real growth of output available to people.
  1 mark
3. Nominal GDP (at current prices) can rise only because prices rise, with no extra goods and services produced. Such a rise does not make people better off, so nominal GDP can overstate well-being.
  1 mark
Answer: Real GDP (Shahid's view) is the better welfare indicator because it moves only with physical output, while nominal GDP can rise merely due to inflation.
Where the marks are
- Real GDP chosen as the better indicator (1)
- Real GDP changes only with physical output (1)
- Nominal GDP may change due to prices (1)
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OR
Q11(B) · 3 marks · Short answerCompetency-basedNational Income Accounting
Two friends, Ravi and Harry were discussing whether the money received from sale of an old car should be included in India’s National income.
Ravi was of the view that it should be included in India’s National income while Harry did not agree with him.
They also had difference of opinion on the treatment of brokerage paid to the car dealer.
As their Economics teacher, state the treatments with valid arguments.
Try it first, then show our solutionSolution
1. Harry is right. Sale of an old (second-hand) car is not included in national income. The car was counted in the year it was produced; its resale only transfers ownership of an existing good and adds nothing to current production.
  1½ marks
2. The brokerage paid to the car dealer is included: it is a payment for a productive service (arranging the sale) rendered in the current year.
  1½ marks
Answer: Sale of the old car is excluded (already counted when produced); the dealer's brokerage is included (current productive service).
Where the marks are
- Old car excluded, with reason (1½)
- Brokerage included, with reason (1½)
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Q12 · 3 marks · Short answerMoney and Banking
“Under the provisions stated in the Section 20 and Section 21 of the Reserve Bank of India (RBI) Act, 1934, the RBI is mandated to handle the banking operations of the Government of India.”
In the light of the given statement, elaborate the indicated function of the Reserve Bank of India.
Try it first, then show our solutionSolution
1. The function indicated is RBI as banker to the government. RBI keeps the accounts of the Central and State governments: it accepts their deposits, makes payments on their behalf and handles remittances, exchange and other banking operations for them.
  2 marks
2. It also lends to the government (for example through ways and means advances) when there is a temporary shortfall or a financial crisis, so that government functioning is not disrupted, and it advises the government on financial matters.
  1 mark
Answer: RBI acts as banker to the government: it manages government accounts, receipts, payments and remittances, and provides credit to the government when needed.
Where the marks are
- Identifies and explains RBI as banker to the government (marked as a whole, 3)
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Answer one of these 2 alternatives.
Q13(A) · 4 marks · Long answerNational Income Accounting
For a hypothetical economy, assuming there are only two firms (X and Y) with equal values of Gross Value Added (GVA).
On the basis of the following data, estimate the value of Domestic Sales of both the firms (X and Y) :
S. No. Items Amount (in ₹ crore)
(i) Value of Output of firm Y 700
(ii) Purchases by firm X from firm Y 200
(iii) Exports by firm X 100
(iv) Purchases by firm Y from firm X 150
(v) Additions to Stock of firm X 50
Try it first, then show our solutionSolution
1. Firm Y's purchases from X (₹ 150 crore) are its intermediate consumption. GVA of Y = Value of output − Intermediate consumption = 700 − 150 = ₹ 550 crore.
  1 mark
2. No exports or change in stock are given for Y, so its output is all sold at home: Domestic sales of Y = GVA + intermediate consumption = 550 + 150 = ₹ 700 crore.
  1 mark
3. GVA of X = GVA of Y = ₹ 550 crore. X buys ₹ 200 crore from Y, so Value of output of X = 550 + 200 = ₹ 750 crore.
  1 mark
4. Value of output = Domestic sales + Exports + Change in stock, so Domestic sales of X = 750 − 100 − 50 = ₹ 600 crore.
  1 mark
Answer: Domestic sales: firm X ₹ 600 crore, firm Y ₹ 700 crore.
Where the marks are
- GVA of Y ₹ 550 crore (1)
- Domestic sales of Y ₹ 700 crore (1)
- GVA of X = ₹ 550 crore, output ₹ 750 crore (1)
- Domestic sales of X ₹ 600 crore (1)
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OR
Q13(B) · 4 marks · Short answerCompetency-basedNational Income Accounting
Ms. Reeta D’Costa, retired from the post of Income Tax Commissioner in the year 2023.
Apart from her pension, she also receives the following from various sources :
- Rental income from a flat she owns.
- Interest income from her fixed deposits.
- Money sent by her children settled abroad.
Identify and classify, her monthly incomes into ‘factor income’ and ‘transfer income’, with valid reasons.
Try it first, then show our solutionSolution
1. Factor income: rent from her flat (income for the service of land/property) and interest on her fixed deposits (income for the service of capital).
  1 mark
2. Her pension is also a factor income: it is deferred compensation of employees, part of the payment for the work she did while in service.
  ½ mark
3. Transfer income: money sent by her children settled abroad (a gift; no service is given in return).
  ½ mark
4. Factor income is earned by factors of production in return for productive services rendered.
  1 mark
5. Transfer income is received without rendering any productive service in return; it is a one-sided payment.
  1 mark
Answer: Factor incomes: rent, interest and the retirement pension (deferred wages). Transfer income: money sent by her children abroad.
Where the marks are
- Rent and interest as factor income (½ + ½)
- Pension as factor income (½)
- Money from children as transfer income (½)
- Meaning of factor income (1)
- Meaning of transfer income (1)
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Q14 · 4 marks · Short answerCompetency-basedOpen Economy Macroeconomics
Michel, an entrepreneur of Country Zeta, borrowed $ 5 million from an overseas bank to expand his textile business.
During the same financial year, the Government of Country Zeta secured a loan of $ 30 Billion from an International Financial Institution to manage the ongoing Balance of Payments.
Samuel, an Economics student categorised both of these transactions as ‘autonomous transactions’ in the BoP account of the country.
Do you agree with his classification ? Justify your answer with valid reasons.
Try it first, then show our solutionSolution
1. No, Samuel's classification is not fully correct. The government's $ 30 billion loan from an international financial institution, taken to manage the BoP position, is an accommodating transaction: it is undertaken by the monetary authorities to cover a deficit (or surplus) in the BoP, not for profit or any other economic motive.
  2 marks
2. Michel's $ 5 million loan to expand his textile business is an autonomous transaction: it is made for an economic motive (profit), independently of the state of the BoP.
  2 marks
Answer: Disagree: Michel's business loan is autonomous (economic motive), but the government's loan to manage the BoP is accommodating.
Where the marks are
- Government loan identified as accommodating, with meaning (2)
- Michel's loan as autonomous, with meaning (2)
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Q15 · 4 marks · Short answerCompetency-basedMoney and Banking
Refer the given image carefully :
Explain any two measures that can be taken by the Central Bank to control the indicated macroeconomic problem.
Figure in the paper: A weighing balance tilted: the left pan (holding goods) is raised/higher with up arrows labelled 'General Price level'; the right pan (holding coins) is lower, with down arrows labelled 'Value of Money' above it. See it in the official paper.
Try it first, then show our solutionSolution
1. The image shows the general price level rising and the value of money falling: the problem indicated is inflation (excess demand).
2. Raise the repo rate: commercial banks borrow from the RBI at a higher cost, so they raise their lending rates. Credit becomes dearer, borrowing for consumption and investment falls, aggregate demand falls and the price rise is checked.
  2 marks
3. Open market operations (sale of securities): the central bank sells government securities in the open market. Buyers pay with bank funds, so banks' reserves and their capacity to create credit fall. Lending and aggregate demand fall, controlling inflation. (Raising CRR or SLR works the same way by reducing lendable funds.)
  2 marks
Answer: The problem is inflation; the central bank can raise the repo rate and sell government securities (OMO) to reduce credit and aggregate demand.
Where the marks are
- Repo rate raised: credit dearer, AD falls (2)
- OMO sale of securities: bank reserves fall, AD falls (2)
Open Q15 on its own page
Answer one of these 2 alternatives.
Q16(A) · 6 marks · Long answerCompetency-basedDetermination of Income and Employment
“Income of an economy increased from ₹ 20,000 to ₹ 50,000 crore. Savings of the economy increased from ₹ 2,000 crore to ₹ 10,000 crore.”
1. (i)
  Calculate Average Propensity to Consume (APC) and Average Propensity to Save (APS), before and after the rise in income.
  4 marks
2. (ii)
  Draw appropriate conclusion regarding the behaviour of Average Propensity to Consume (APC) as his income increases.
  2 marks
Try it first, then show our solutionSolution
1. Consumption = Income − Saving. Before: C = 20,000 − 2,000 = ₹ 18,000 crore. After: C = 50,000 − 10,000 = ₹ 40,000 crore.
2. (i) Before the rise: APC = C/Y = 18,000/20,000 = 0.9; APS = S/Y = 2,000/20,000 = 0.1.
  2 marks
3. (i) After the rise: APC = 40,000/50,000 = 0.8; APS = 10,000/50,000 = 0.2. (Check: APC + APS = 1 in each case.)
  2 marks
4. (ii) As income rises from ₹ 20,000 crore to ₹ 50,000 crore, APC falls from 0.9 to 0.8. So APC has an inverse relationship with income: people consume a smaller proportion of income as income grows (and save a larger proportion).
  2 marks
Answer: APC 0.9 and APS 0.1 before; APC 0.8 and APS 0.2 after. APC falls as income rises.
Where the marks are
- APC and APS before (1 + 1)
- APC and APS after (1 + 1)
- Conclusion: APC falls as income rises (2)
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OR
Q16(B) · 6 marks · Long answerCompetency-basedDetermination of Income and Employment
“Under a study, examining the spending habits of a hypothetical economy, it was observed that even households with zero income managed to consume basic necessities.
As the income of people increased, their consumption also increased, but not as rapidly as income.”
Based on the given text and common understanding, answer the following questions :
1. (i)
  Identify and elaborate the type of consumption indicated in the first para of the above text.
  3 marks
2. (ii)
  Explain, the reason behind the positive slope of Aggregate Demand Curve.
  3 marks
Try it first, then show our solutionSolution
1. (i) Consumption at zero income is autonomous consumption (c̄).
  1 mark
2. (i) It does not depend on the level of income. It is the minimum consumption needed for survival, financed out of past savings or borrowing even when income is zero; it is the intercept of the consumption function C = c̄ + bY.
  2 marks
3. (ii) Aggregate demand AD = C + I. Investment is assumed autonomous (fixed), but consumption rises with income because MPC is positive (0 < b < 1). So when income rises, consumption and hence AD rise. AD therefore has a direct relation with income and the AD curve slopes upward, starting from c̄ + Ī at zero income.
  3 marks
Answer: (i) Autonomous consumption, the income-independent minimum consumption. (ii) AD = C + I rises with income because consumption rises with income (positive MPC), so the AD curve slopes upward.
Where the marks are
- Autonomous consumption identified (1)
- Its meaning (2)
- Positive slope of AD explained through C rising with income (3)
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Q17 · 6 marks · Case-basedCompetency-basedGovernment Budget and the Economy
Refer the given text carefully :
According to the Economic Survey 2024-25, the government budget’s projections for the fiscal year 2025-26 indicate that gross direct tax revenue will rise by 12.7%, while gross indirect tax collections are expected to grow by 8.3% relative to FY 2024-25.
Direct taxes include income tax and corporate tax, reflecting earnings and profits of households and firms. It plays a key role in revenue growth of the government. Indirect taxes encompass Goods and Services Tax (GST), custom duties and other transaction-based levies.
Higher growth rate projected for direct taxes suggests a push to enhance tax buoyancy through improved compliance and reforms. On the other hand, indirect taxes are expected to benefit from consumption trends and Goods and Services Tax (GST) administration improvements. The balance tax strategy aims to mobilise resources while supporting fiscal consolidation and sustainable economic growth.
On the basis of the above passage and common understanding, answer the following questions :
1. (i)
  Differentiate between the two types of taxes indicated in the above text, with suitable examples.
  4 marks
2. (ii)
  Elaborate the likely consequences of the tax projections made by the government.
  2 marks
Try it first, then show our solutionSolution
1. (i) The two taxes are direct taxes and indirect taxes. A direct tax is one whose impact and incidence fall on the same person: the person who pays it bears it and cannot shift it.
  1½ marks
2. (i) Example of a direct tax: income tax (or corporation tax).
  ½ mark
3. (i) An indirect tax is one whose impact and incidence can fall on different persons: it is paid by a seller but shifted to buyers through prices.
  1½ marks
4. (i) Example of an indirect tax: Goods and Services Tax (GST) (or customs duty).
  ½ mark
5. (ii) Higher projected collections (direct taxes +12.7%, indirect taxes +8.3%) strengthen the government's revenue base. This helps it reduce borrowing and the fiscal deficit (fiscal consolidation), while funding development spending, so supporting sustainable growth. Faster growth of direct taxes also makes the tax system more progressive.
  2 marks
Answer: (i) Direct taxes (e.g. income tax) cannot be shifted; indirect taxes (e.g. GST) can be shifted. (ii) Higher tax revenue strengthens finances, supports fiscal consolidation and sustainable growth.
Where the marks are
- Direct tax meaning and example (1½ + ½)
- Indirect tax meaning and example (1½ + ½)
- Consequences: stronger revenue base, fiscal consolidation, growth (2)
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S. No.	Items	Amount (in ₹ crore)
(i)	Value of Output of firm Y	700
(ii)	Purchases by firm X from firm Y	200
(iii)	Exports by firm X	100
(iv)	Purchases by firm Y from firm X	150
(v)	Additions to Stock of firm X	50

Section B

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

Q18 · 1 mark · MCQIndian Economy on the Eve of Independence
Read the following statements carefully :
Statement 1 : During the British rule in India, the export surplus was utilised to import of invisible items from Britain.
Statement 2 : Indians paid for the expenses incurred by an office set up by the colonial government in Britain.
In the light of above 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: India's large export surplus under British rule was not used to bring goods into India; it went to pay for the import of invisible items (services) from Britain and other charges.
2. Statement 2 is true: India also paid for the expenses of an office set up by the colonial government in Britain (home charges), along with war expenses. Both drained India's wealth. Option (C).
  1 mark
Answer: (C) Both statements 1 and 2 are true.
Where the marks are
- Export surplus used for invisibles and home charges (1 mark)
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Q19 · 1 mark · Assertion-reasonCompetency-basedHuman Capital Formation in India
Read the following statements : Assertion (A) and Reason (R), Choose the correct option from those given below :
Assertion (A) : Education facilitates the assimilation of knowledge and competencies. It also fosters inventive capacities and enhances the aptitude to integrate advance technology.
Reason (R) : Education plays a pivotal role in transforming cognitive perspectives and serves as a catalyst for the economic advancement of 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: True. Education helps people absorb knowledge and skills, encourages innovation and makes it easier to adopt new technology.
  Reason: True. Education changes the way people think and drives a nation's economic progress.
2. Both are true, but R speaks about the effect on the nation's development, not why education builds knowledge and inventive capacity in individuals, so it is not the explanation of A. Option (B).
  1 mark
Answer: (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
Where the marks are
- Truth of A and R and the link between them (1 mark)
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Q20 · 1 mark · MCQLiberalisation, Privatisation and Globalisation: An Appraisal
Read the following text carefully :
“In the recent times, the Government of India, has introduced several measures to encourage greater public participation in the capital market, including both primary and secondary stock markets.”
Under which sector have the above mentioned reforms been introduced ? (Choose the correct option)
1. (A)Industrial
2. (B)Financial
3. (C)Taxation
4. (D)Foreign Trade
Try it first, then show our solutionSolution
1. Measures to widen public participation in primary and secondary stock markets concern the capital market.
2. Capital-market reforms are part of the financial sector reforms of 1991 (along with banking reforms and the role of SEBI). Option (B).
  1 mark
Answer: (B) Financial
Where the marks are
- Capital-market reforms belong to the financial sector (1 mark)
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Q21 · 1 mark · MCQEnvironment and Sustainable Development
The Montreal Protocol was signed in the year 1987 committing nations to __________. (Choose the correct option to fill in the blank)
1. (A)protect biodiversity from any further losses.
2. (B)reduce the impact of global warming.
3. (C)protect ozone layer from depletion incurred due to chlorofluoro carbons .
4. (D)reduce the impact of deforestation.
Try it first, then show our solutionSolution
1. The Montreal Protocol (1987) is the international treaty on substances that deplete the ozone layer.
2. It commits countries to phase out chlorofluorocarbons (CFCs) and similar chemicals to protect the ozone layer. Option (C).
  1 mark
Answer: (C) protect ozone layer from depletion incurred due to chlorofluoro carbons.
Where the marks are
- Montreal Protocol is about ozone depletion (1 mark)
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Q22 · 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) : The notion of rural development encompasses a far wider spectrum than agricultural advancement.
Reason (R) : Government interventions in the agricultural sector remain imperative, as it constitutes the primary means of sustanance for the rural population.
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. Rural development covers far more than farm growth: education, health, sanitation, infrastructure, credit and non-farm jobs.
  Reason: True. Agriculture is still the main source of livelihood in rural India, so government support to it is necessary.
2. R explains why agriculture needs support; it does not explain why rural development is wider than agriculture. Option (B).
  1 mark
Answer: (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
Where the marks are
- Truth of A and R and the link between them (1 mark)
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Q23 · 1 mark · MCQEmployment: Growth, Informalisation and Other Issues
Identify, which of the following, highlights a highly relevant issue associated with evolving employment trends in India’s labour market ?
1. (A)Progressive increase in the share of permanent salaried employees.
2. (B)Increase in the proportion of casually employed individuals.
3. (C)Expansion of self-employment avenues in all regions.
4. (D)Significant rise in job opportunities within the formal sector.
Try it first, then show our solutionSolution
1. Recent trends in India's labour market show casualisation of the workforce: the share of casual wage labour has grown relative to regular salaried jobs.
2. This rise in the proportion of casually employed workers, who lack job security and social benefits, is the relevant concern. Option (B).
  1 mark
Answer: (B) Increase in the proportion of casually employed individuals.
Where the marks are
- Casualisation of the workforce (1 mark)
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Q24 · 1 mark · MCQEmployment: Growth, Informalisation and Other Issues

Match the terms given in Column-I with their respective meaning in Column-II. Select the correct option :

	Column-I		Column-II
(i)	Seasonal Unemployment	(a)	Private enterprises hiring less than 10 employees
(ii)	Self-employed	(b)	Workers using their own resources to earn livelihood
(iii)	Unorganised sector	(c)	Unemployment occurring in specific season
(iv)	Disguised Unemployment	(d)	Zero Marginal Productivity

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

Try it first, then show our solutionSolution

Seasonal unemployment occurs in a specific season (c); self-employed workers use their own resources to earn a livelihood (b).
The unorganised sector covers private enterprises hiring fewer than 10 workers (a); disguised unemployment means zero marginal productivity (d). Option (C).
1 mark

Answer: (C) (i)-(c); (ii)-(b); (iii)-(a); (iv)-(d)

Where the marks are

Correct matching of all four terms (1 mark)

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Q25 · 1 mark · MCQEnvironment and Sustainable Development
“Sustainable development refers to the development that meets the need of the present generation without compromising the ability of the future generations, to meet their own needs.”
The above mentioned definition has been given by __________. (Choose the correct option to fill in the blank)
1. (A)United Nations Conference on Environment and Development
2. (B)United Nations Committee on Environment and Development
3. (C)United Nations Committee on Protection of Environment
4. (D)United Nations Conference on Protection of Environment
Try it first, then show our solutionSolution
1. The definition "development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs" is the standard one quoted in NCERT.
2. It is attributed there to the United Nations Conference on Environment and Development (UNCED). Option (A).
  1 mark
Answer: (A) United Nations Conference on Environment and Development
Where the marks are
- UNCED definition of sustainable development (1 mark)
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Q26 · 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) : The Government of India adopted the measure of regulation of markets to improve marketing conditions for agricultural products.
Reason (R) : Regulation of market ensured transparent pricing, fair trade practices, and protection for farmers against exploitation in agricultural marketing.
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. To improve the marketing of farm produce, the government regulated markets (set up regulated markets/mandis).
  Reason: True. Regulated markets brought transparent pricing and fair practices and protected farmers from exploitation by middlemen.
2. R gives the purpose of A, so it correctly explains it. 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)
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Q27 · 1 mark · MCQComparative Development Experiences of India and its Neighbours
Arrange the following events in China’s economic development history in correct chronological sequence and select the correct option :
I. Great Proletarian Cultural Revolution.
II. Great leap forward
III. Introduction of Economic Reforms
IV. Launch of the First Five Year Plan
1. (A)II, IV, III, I
2. (B)IV, II, I, III
3. (C)II, IV, I, III
4. (D)IV, I, II, III
Try it first, then show our solutionSolution
1. Dates: First Five Year Plan 1953 (IV), Great Leap Forward 1958 (II), Great Proletarian Cultural Revolution 1966–76 (I), economic reforms 1978 (III).
2. Correct order: IV, II, I, III. Option (B).
  1 mark
Answer: (B) IV, II, I, III
Where the marks are
- Chronology 1953, 1958, 1966, 1978 (1 mark)
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Answer one of these 2 alternatives.
Q28(A) · 3 marks · Short answerCompetency-basedEmployment: Growth, Informalisation and Other Issues
“Employment in the formal sector guarantees better income and social benefits compared to informal sector job.”
Defend or refute the above statement with valid reason and example.
Try it first, then show our solutionSolution
1. The statement is defended. Formal-sector workers get regular income, fair wages and social security benefits such as provident fund, pension, paid leave and medical benefits, and their jobs are protected by labour laws.
  1 mark
2. Informal-sector workers do not get regular income or social security; they can be dismissed without notice or compensation.
  1 mark
3. Example: a government employee gets a regular salary, pension and other benefits, while a daily-wage construction worker has no fixed income or social security.
  1 mark
Answer: Defended: formal jobs give regular income, social security and job protection, which informal jobs lack (e.g. government employee vs daily-wage worker).
Where the marks are
- Formal sector: regular income and social security (1)
- Informal sector lacks these (1)
- Valid example (1)
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OR
Q28(B) · 3 marks · Short answerCompetency-basedHuman Capital Formation in India
During the ‘Mann ki Baat’ program aired on 29th June, 2025, Prime Minister shared that World Health Organisation (WHO) has declared India as a Trachoma free (an eye disease). This achievement, he shared, is a result of sustained efforts in health care, sanitation, awareness and medical access.
In the light of the above statement, explain how investments in health care contributes to a nation’s development. Support your answer with valid arguments.
Try it first, then show our solutionSolution
1. Investment in health care (like the efforts that made India trachoma-free) gives a nation a healthy workforce. A healthy person is more productive than an unhealthy one and can work without interruption for a longer working life.
  1½ marks
2. Higher labour productivity raises output and incomes; health spending is therefore a source of human capital formation and, through it, of economic growth and development. Healthy people also gain more from education and training.
  1½ marks
Answer: Health investment creates a healthy, more productive workforce with a longer working life, building human capital and promoting development.
Where the marks are
- Explanation of health investment raising productivity and development (marked as a whole, 3)
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Q29 · 3 marks · Short answerComparative Development Experiences of India and its Neighbours
“In the late 1970’s China’s population growth rate has sharply declined as compared to India.”
Elucidate the reasons and impacts of this situation.
Try it first, then show our solutionSolution
1. Reason: China introduced the one-child policy in the late 1970s (1979), which sharply cut its population growth rate compared with India.
  1½ marks
2. Impact: a fall in the proportion of young people and a rise in the proportion of elderly people (ageing population) in later decades, raising the burden of old-age support (also a skewed sex ratio).
  1½ marks
Answer: China's one-child policy (late 1970s) cut population growth; the impact was an ageing population.
Where the marks are
- Reason: one-child policy (1½)
- Impact: ageing population (1½)
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Answer one of these 2 alternatives.
Q30(A) · 4 marks · Short answerIndian Economy on the Eve of Independence
State and explain any two changes which were observed in India’s occupational structure during the British Rule.
Try it first, then show our solutionSolution
1. Change 1, shift towards industry and services in some regions: parts of the Madras Presidency, Bombay and Bengal saw a fall in the share of the workforce in agriculture and a matching rise in manufacturing and services.
  2 marks
2. Change 2, rising dependence on agriculture in other regions: in Orissa, Rajasthan and Punjab the share of the workforce in agriculture increased. So the occupational structure showed growing regional variation, while overall about 70–75% of the workforce stayed in agriculture.
  2 marks
Answer: Regional variation: a shift towards industry and services in Madras, Bombay and Bengal, but rising dependence on agriculture in Orissa, Rajasthan and Punjab.
Where the marks are
- Change 1 stated and explained (½ + 1½)
- Change 2 stated and explained (½ + 1½)
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OR
Q30(B) · 4 marks · Short answerIndian Economy on the Eve of Independence
“The British sought to achieve their vested interest through their policies of infrastructural development in India.”
Do you agree with the given statement ? Justify your answer with valid explanation.
Try it first, then show our solutionSolution
1. Yes, I agree. The British built infrastructure mainly to serve colonial interests. Roads and railways were built to move the army within India and to carry raw materials from the interior to ports for export to Britain, and to bring British manufactured goods into Indian markets.
  2 marks
2. Ports and inland waterways served the same trade purpose, and the electric telegraph was introduced mainly to maintain law and order. Rural roads, all-weather roads and services for ordinary people were neglected, so the infrastructure did little for India's own development.
  2 marks
Answer: Agree: railways, roads, ports and the telegraph were developed to move troops, raw materials and British goods and to maintain control, not to develop India.
Where the marks are
- Agreement justified with the purpose of infrastructure (marked as a whole, 4)
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Q31 · 4 marks · Short answerComparative Development Experiences of India and its Neighbours
“At the time of independence, both India and Pakistan inherited similar colonial economic structures. Both the nations adopted many similar economic planning strategies.”
Explain any two such similarities in the developmental path of India and Pakistan.
Try it first, then show our solutionSolution
1. Mixed economy: both India and Pakistan followed a mixed economic system in which the public sector and the private sector worked together, with the state playing a large role in planning and heavy industry.
  2 marks
2. Import substitution: both adopted import-substitution industrialisation, using tariffs and quotas to protect domestic industries from foreign competition. (Also: both started development planning through five-year plans and both introduced economic reforms around 1988–1991.)
  2 marks
Answer: Both adopted a mixed economy and an import-substitution strategy (also five-year plans and later reforms).
Where the marks are
- Similarity 1 explained (2)
- Similarity 2 explained (2)
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Q32 · 4 marks · Case-basedCompetency-basedEmployment: Growth, Informalisation and Other Issues
Answer the following.
1. (A)
  State the meaning of ‘Disguised Unemployment’.
  1 mark
2. (B)
  In the light of the given chart, analyse the gender-wise sectoral distribution of workers.
  Chart: Sector-wise Gender Distribution of Workers (%), male vs female workers.
  3 marks
Figure in the paper: Bar chart 'Sector-wise Gender Distribution of Workers (%)' with y-axis 'Percentage of Workers' (0-80) and x-axis 'Sectors': Manufacturing, Construction, Trade, Transport, Education, Health, Accommodation & Restaurant, IT/BPOs, Financial Services. Hatched bars = male workers, vertically-lined bars = female workers. Approx. male/female: Manufacturing 77/22, Construction 83/16, Trade 76/23, Transport 86/13, Education 55/44, Health 48/50, Accommodation & Restaurant 76/23, IT/BPOs 61/37, Financial Services 61/37. See it in the official paper.
Try it first, then show our solutionSolution
1. (A) Disguised unemployment is a situation where more people are engaged in work than needed: they appear to be employed but their marginal productivity is zero, so removing them would not reduce output.
  1 mark
2. (B) Male workers dominate most sectors: in manufacturing (about 77% vs 22%), construction (about 83% vs 16%), trade, transport (about 86% vs 13%) and accommodation & restaurants, men are three to six times as many as women.
  1 mark
3. (B) Female participation is lowest in construction and transport, showing gender inequality in these physically demanding or male-dominated fields.
  1 mark
4. (B) Education and health show a balanced distribution (health about 50% female vs 48% male; education about 44% vs 55%), and IT/BPOs and financial services have moderate female shares (about 37%).
  1 mark
Answer: (A) Disguised unemployment: workers whose marginal productivity is zero. (B) Men dominate most sectors, women are fewest in construction and transport, and education and health are nearly balanced.
Where the marks are
- Meaning of disguised unemployment (1)
- Male dominance in most sectors (1)
- Low female share in construction/transport (1)
- Balance in education and health (1)
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Answer one of these 2 alternatives.
Q33(A) · 6 marks · Long answerCompetency-basedLiberalisation, Privatisation and Globalisation: An Appraisal
Answer the following.
1. (i)
  Mr. Ravi, an IT entrepreneur from Bengaluru, observed that several MNC’s prefer India as their outsourcing Hub for services like software development, customer support, data management etc.
  His friend Priya believes this is due to certain inherent advantages of the Indian economy.
  In your opinion, state and explain any two factors that make India a preferred outsourcing destination.
  3 marks
2. (ii)
  “In the post-independence era, India adopted a protective tariff policy.”
  Do you agree with the given statement ? Justify your answer with any two valid arguments.
  3 marks
Try it first, then show our solutionSolution
1. (i) Growth of IT and communication: fast, cheap telecommunications and the internet let services such as software, call centres and data processing be delivered from India to clients anywhere.
  1½ marks
2. (i) Skilled, low-cost manpower: India has a large pool of educated, English-speaking, technically skilled workers available at relatively low wages, which cuts costs for MNCs.
  1½ marks
3. (ii) Yes, I agree. After independence India followed import substitution and protected its industries with high tariffs and quotas. One aim was to promote domestic production by replacing imports with goods made at home.
  1½ marks
4. (ii) The second aim was to shield infant domestic industries from more efficient foreign competition, giving them time to grow and become competitive.
  1½ marks
Answer: (i) Advanced IT/communication and cheap skilled labour make India an outsourcing hub. (ii) Agree: tariffs protected infant industries and promoted import substitution.
Where the marks are
- Two factors for outsourcing, each stated and explained (½ + 1 each)
- Agreement with two arguments for protective tariffs (1½ each)
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Q33(B) · 6 marks · Long answerLiberalisation, Privatisation and Globalisation: An Appraisal
Answer the following.
1. (i)
  ‘Strategic sale of a public sector undertaking and minority sale of their shares are methods of disinvestment.’ Defend or refute the given statement with valid argument.
  3 marks
2. (ii)
  Discuss briefly, how bilateral trade agreements are different from multilateral trade agreements ?
  3 marks
Try it first, then show our solutionSolution
1. (i) The statement is defended. Both are methods of disinvestment, i.e. the government reducing its ownership of public sector enterprises to raise resources, bring in private participation and improve efficiency.
  1 mark
2. (i) In a strategic sale, a large stake in the PSU is sold to a private buyer along with management control. In a minority sale, only a small part of the shares is sold to the public or institutions, and the government keeps control.
  2 marks
3. (ii) A bilateral trade agreement is an agreement between two countries for the exchange of goods and services, with terms (tariff cuts, quotas) applying only to those two.
  1½ marks
4. (ii) A multilateral trade agreement is one among more than two countries (e.g. under the WTO), with the same terms applying to all members.
  1½ marks
Answer: (i) Defended: both are disinvestment methods (strategic sale transfers control; minority sale keeps government control). (ii) Bilateral agreements involve two countries; multilateral ones involve more than two.
Where the marks are
- Disinvestment defended with both methods explained (3)
- Bilateral agreement (1½)
- Multilateral agreement (1½)
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Q34 · 6 marks · Case-basedCompetency-basedHuman Capital Formation in India
Read the following text carefully :
To ensure inclusive and quality education for all, the Indian government has launched several important schemes. These schemes aimed at improving access, equity and learning outcomes, especially among disadvantaged group.
The Right to Education (RTE) Act, passed by the India Parliament on August 4, 2009, guarantees free and compulsory education to every child between 6-14 years of age. It ensures that all children have access to education in neightbourhood schools, until they complete elementary education. Another key initiative is Sarva Siksha Abhiyan (SSA). It was introduced in 2001. It is one of India’s flagship programmes for the Universalisation of Elementary Education.
Digital India Campaign, launched on July 1, 2015, focuses on transforming India into a digitally empowered society by improving mobile and internet connectivity, particularly in rural and remote regions. This initiative supports digital learning & access to educational resources.
Through these initiatives, the government strives to create an equitable, accessible & quality driven educational environment for all children, laying a strong foundation for national development.
On the basis of the given text and common understanding, answer the following questions :
1. (i)
  Identify, which law guarantees free and compulsory education upto the age of 14 years. Explain, how does it help in enhancing access to education.
  3 marks
2. (ii)
  In your opinion, how has the increase in public spending on education contributed to India’s social and economic transformation ? Support your answer with valid arguments.
  3 marks
Try it first, then show our solutionSolution
1. (i) The Right to Education (RTE) Act, 2009 guarantees free and compulsory education to every child aged 6–14 years.
  1 mark
2. (i) It enhances access by removing the financial burden of schooling (no fees) and by requiring schools within the neighbourhood, so children, especially from disadvantaged groups, can enrol and complete elementary education.
  2 marks
3. (ii) Higher public spending on education has made education available to weaker sections, promoting social equality. It has raised skills and knowledge, giving people better jobs and higher productivity (human capital formation), raised incomes and standards of living, and supported the country's overall economic development.
  3 marks
Answer: (i) The RTE Act, 2009; free and neighbourhood schooling widens access. (ii) Public education spending promotes equality, skills, productivity, incomes and development.
Where the marks are
- RTE Act identified (1)
- How RTE enhances access (2)
- Social and economic effects of public spending on education (marked as a whole, 3)
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Source: official question paper, cbse.gov.in. Chapter tags and solutions are ours. Spotted a transcription error? Write tosupport@questionbuddy.in.