Skip to content

Ceteris paribus, a… (Class 12 Economics SQP 2026-27, Q3)

questionbuddy.in/q/cbse-12-economics-2026-27-sqp-q3-ceteris-paribus-rise-price-foreign

EconomicsCBSE Class 12 · Sample paper, session 2026-27 · 1 mark · MCQ

CBSE Class 12 Economics sample paper 2026-27: question 3

From the official CBSE sample question paper for 2026-27, section A, question 3, for 1 mark. Try it first; the hints and our step-by-step solution are below.

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)

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

What happens to the rupee price of imports when the dollar gets dearer?

Hint 2

Fewer imports means less need for foreign currency.

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. 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)

Revise the chapter

Practise this chapterBoard-style questions from Open Economy Macroeconomics, 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.