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Answer the following. (Class 12 Economics SQP 2026-27, Q17A)

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EconomicsCBSE Class 12 · Sample paper, session 2026-27 · 6 marks · Long answer

CBSE Class 12 Economics sample paper 2026-27: question 17(A)

From the official CBSE sample question paper for 2026-27, section A, question 17(A), for 6 marks. Try it first; the hints and our step-by-step solution are below.

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

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2026-27.

Hints

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

Hint 1

Write the consumption function C = c̄ + bY.

Hint 2

When the RBI buys securities, money flows into banks.

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. (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)

Revise the chapter

Practise this chapterBoard-style questions from Determination of Income and Employment, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2026-27: 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.