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Read the following… (Class 12 Economics SQP 2024-25, Q1)

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EconomicsCBSE Class 12 · Sample paper, session 2024-25 · 1 mark · Assertion-reason

CBSE Class 12 Economics sample paper 2024-25: question 1

From the official CBSE sample question paper for 2024-25, section A, question 1, for 1 mark. Try it first; the hints and our step-by-step solution are below.

Q1 · 1 mark · Assertion-reasonCompetency-basedMoney and Banking

Read the following statements: Assertion (A) and Reason (R). Choose the correct option from those given below:
Assertion (A): The government can reduce the deflationary gap by purchasing government securities in the open market.
Reason (R): The Central Bank purchases government securities in the open market to increase the lending capacity of commercial banks.

  1. (A)Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
  2. (B)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
  3. (C)Assertion (A) is true, but Reason (R) is false.
  4. (D)Assertion (A) is false, but Reason (R) is true.

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2024-25.

Hints

Open one hint at a time and try again before the next.

Hint 1

Who conducts open market operations?

Hint 2

Check the subject of each sentence carefully.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. Assertion: False. Open market operations are a tool of the central bank (RBI), not the government. (Buying securities does help reduce a deflationary gap, but it is the central bank that does it.)

    Reason: True. When the central bank buys government securities it pays money to banks and the public, which raises banks' reserves and their capacity to lend.

  2. A is false (wrong authority) and R is true. Option (D).

    1 mark

Answer: (D) Assertion (A) is false, but Reason (R) is true.

Where the marks are

  • Truth of A and R and the link between them (1 mark)

Revise the chapter

  • Chapter: Money and Banking (notes, formulas, where marks are lost and every past question)
Practise this chapterBoard-style questions from Money and Banking, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2024-25: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.