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Answer the following. (Class 12 Economics SQP 2026-27, Q17B)

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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(B)

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

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

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

At break-even, what is saving?

Hint 2

If people buy less than planned, what happens to unsold stock?

Hint 3

AD − I = C.

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)(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)

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.