CBSE Important Questions Class 12 Macro Economics Chapter 1

Important Questions Class 12 Macroeconomics Chapter 1

Important Questions for CBSE Class 12 Macroeconomics Chapter 1 – Introduction to Macroeconomics

Important Questions Class 12 Macroeconomics Chapter 1 are created by the subject matter experts as per the revised CBSE Syllabus. Students can gain a better understanding of the chapter’s main topics as well as important questions from the perspective of the exam to score higher. 

Thorough solutions are provided with the Chapter 1 Class 12 Macroeconomics Important Questions, allowing students to build a stronger foundation in the fundamentals of Macroeconomics, which are covered in Chapter 1 of Class 12 Macroeconomics, such as national interest, national income, and accounting, as well as the overall state of the country. 

CBSE Class 12 Macroeconomics Chapter-1 Important Questions

Study Important Questions for Class 12 Macroeconomics Chapter 1 – Introduction to Macroeconomics Notes

Students can preview the important questions for Class 12 Macroeconomics Chapter 1 below:

 Very Short Answer Question 

1 Mark

Q1. Vinod Limited sold patents costing Rs.20,000 to Rs.22,000. Treatment will be —

1. a) Less 22000 operating activities and add 20,000 in investing activities 
2. b) add 2000 operating activities and Less 22,000 in investing activities 
3. c) Less 20000 operating activities and add 20,000 in investing activities 
4. d) Less 2000 operating activities and add 20,000 in investing activities 

Ans: (d) Less 2000 operating activities and add 20,000 in investing activities 

Rationale: Sale of a patent cannot be considered as an operating activity

Q2. Who is called the ‘Father of modern economics’? 

Ans: Adam Smith is known as the ‘Father of modern economics’.

Q3. What is an export?

Ams: Export is a function of international trade in which items manufactured in one country are shipped to another for future sale or trade. The sale of such commodities contributes to the producing country’s gross domestic product.

Q4. Positive economics states 

1. a) What is supposed to be 
2. b) Central problems of an economy 
3. c) What is 
4. d) What will be

Ans: (c) What is

Q5. Normative economics states

1. a) Central problems of an economy 
2. b) What is 
3. c) What ought to be 
4. d) What was 

Ans: (c) What ought to be 

Q6. What is import?

Ans: Imports are goods or services that are brought into a country from another country.The term “import” is derived from the word “port” because commodities are frequently delivered by boat to foreign countries. Imports and exports form the backbone of international trade.

Q7. What is the name of John Maynard Keynes’ celebrated book? 

Ans: ‘The General Theory of Employment, Interest, and Money,’ released in 1936, is the name of John Maynard Keynes’ celebrated book.

Q8. In Economics, a good is something which 

1. a) is a service. 
2. b) can be a service. 
3. c) appears appealing. 
4. d) satisfies wants and needs. 

Ans: (d) Satisfies wants and needs

Q9. The term Macro is derived from  

Ans: Latin word ‘Macros’ which means “large”

Short Answer Questions 

3 or 4 Marks

Q1. Differentiate between microeconomics and macroeconomics.

Ans: The following table explains the differences between microeconomics and macroeconomics: 

Q2. What are economic agents? 

Ans: Individuals or institutions that make economic decisions are referred to as “economic units” or “economic agents.”They could be consumers who choose what and how much to consume. 

• They could be manufacturers of goods and services who decide what and how much to produce. 
• They could be institutions such as the government, corporations, or banks that make economic decisions such as how much to spend, what interest rate to charge on credit, how much to tax, and so on.

Q3. What is entrepreneurship?

Ans: Entrepreneurship refers to the ability and willingness to conceive, organise, and manage a business initiative, as well as any risks associated with it, to generate profit. The most visible manifestation of entrepreneurship is the establishment of new businesses.

Q4. Define the great depression.

Ans: The Great Depression, which lasted from 1929 to 1933, was the worst economic downturn in the history of the industrialised world. Economic historians commonly attribute the start of the Great Depression to the sharp and disastrous drop in US stock market prices on October 29, 1929, known as “Black Tuesday”. Some, however, argue that the stock market crash was a symptom of the Great Depression rather than a cause of it.

Long Answer Questions (6 Marks)

Q1. What are macroeconomics and microeconomics, and what is the connection between the two? 

Ans: Microeconomics is the study of individual and business decisions about resource allocation and the pricing of goods and services. It focuses on supply and demand, as well as other economic forces that influence price levels.

Macroeconomics is the study of the economic activities in a country as a whole, rather than just individual businesses.

While these two economic subjects appear to be separate, they are, in fact, interconnected and complement one another due to many overlapping concerns.

Higher inflation, for example, would increase the cost of raw materials for businesses, influencing the price of the end product charged to the public. “The link between macroeconomics and the theory of individual behaviour is a two-way street,” says Professor Ackley.

Although microeconomic theories should serve as the foundation for collective ideas, macroeconomics can also help with microeconomic knowledge. For example, empirically stable macroeconomic generalisations that appear to contradict microeconomic theories may aid in understanding individual behaviour.

Q2. Explain the scope of macroeconomics.

Ans: The scope of Macroeconomics is as follows: 

• To comprehend the operation of the economy: Understanding how the economy works require an understanding of macroeconomic variables. Macroeconomic challenges are related to the behaviour of total income, output, employment, and the overall price level of the economy.
• Economic Policies: Macroeconomics is especially useful for economic policy. Modern governments, particularly those in developing countries, are confronted with a plethora of domestic issues. For example, overcrowding, inflation, the balance of payments, general underproduction, and so on.
• Unemployment in General: Unemployment is thus, caused by a lack of effective demand. Total investment, total output, total income, and total consumption should all be increased to boost effective demand. As a result, macroeconomics is particularly important in studying the causes, consequences, and treatments of general unemployment.
• National Income: Understanding macroeconomics is essential for assessing the economy’s overall performance in terms of national income. When the Great Depression of the 1930s began, it became necessary to investigate the causes of general overproduction and general unemployment.
• Economic Growth: A subfield of macroeconomics focuses on growth, and is known as growth economics. Macroeconomic principles are used to assess an economy’s resources and capacities. To boost the economy’s overall level of economic development, plans for overall increases in national income, output, and employment are developed and implemented.

Q3. What are the different ways in which resources can be allocated, and what are their respective advantages and disadvantages? 

Ans: The problem of resource allocation can be solved by either free individual interaction or a government-controlled economic system. There are three major market systems that determine resource allocation.

1. Planned Economy: A centrally planned economy is one in which the government or a central authority plans all of the major activities of the economy. The government makes all major decisions concerning the production, exchange, and consumption of goods and services. The central authority strives for a specific resource allocation as well as the distribution of the final combination of goods and services deemed desirable for society as a whole. The primary goal of a centrally planned economy is to promote social welfare.

Advantages: 

• Higher economic growth and development due to social welfare objectives.
• Reduced income and social inequalities.
• Reduced duplication of resources
• Improved and optimum resource utilisation.

Disadvantages:

• Lack of individual choice.
• Restricts individual rights
• As the government makes the decisions, there is no say for individuals.
• Inefficiency exists, as the products are as per government decisions, irrespective of consumer choice.

1. Market Economy: In a market economy, the market organises all economic activities. A market is characterised by the free interaction of individuals engaged in their respective economic activities.

In other words, a market is a collection of arrangements in which economic agents freely exchange their assets or products with one another. Furthermore, no government interference occurs, and the private sector exerts influence. The economy is determined by the forces of demand and supply, as well as the behaviour of economic participants. Profit maximisation is the primary goal of the market economy.

Advantages: 

• Higher efficiency due to competition between firms.
• To enable differentiation, and gain a competitive advantage, firms offer a wide variety of products.
• Innovation in products takes place to boost consumer demand.
• There is efficient resource production and utilisation.

Disadvantages:

• There is little or no concern for society or the environment because of the profit motive.
• Exploitation of people takes place. 
• Cutthroat competition leads to competitive disadvantages.
• The social, economic, and income inequalities take place.

1. Mixed Economy: The economy in which both the government and the private sector own and operate production factors is known  as a “mixed economy.” Profit maximisation is the primary goal of the private sector, while social welfare is the primary goal of the public sector. The central planning authority and the price mechanism deal with major issues.

Advantages: 

• Efficient allocation of resources.
• Social welfare
• Private sector is encouraged.
• Reduction in economic differences

Disadvantages:

• Delay in decision making.
• High possibility of resource wastage.
• More chances of corruption and black marketing.
• Lack of proper economic planning.

Q4. What are the different types of goods produced in an economy? 

Ans: The following are some examples of different categories of goods:

• Consumer goods: The quantity demanded of such goods rises as consumer income rises and falls as consumer income falls. Such items are known as regular goods.
• Free goods: These are products that have an infinite supply and are provided by nature as a free gift. These items are known as ‘Free Goods.’ For example, air, sea, water, sunlight, desert sand, and so on.
• Economic goods: These are vegetables, cereals, minerals, fruits, and fish that are neither man-made nor limitless in supply from nature. All of these items are only available for purchase and sale in the market.
• Substitute goods: Substitute goods are items that can be consumed or used in place of others. Furthermore, an increase in the price of one type of good increases the demand for its substitutes, while a decrease in the price decreases the demand for its substitutes. Tea and coffee, for example, are acceptable substitutes.
• Private goods: All goods owned by private entities are considered private goods. Private commodities include a car, a house, a motorcycle, a mobile phone, books, a television set, and so on.
• Public goods: Many goods are jointly owned by society, the general public, or the government. These are known as public or government goods. Public goods, social goods, or government goods include roads, bridges, hospitals, and government schools, among other things.
• Consumer goods: Consumer Goods are goods that are directly used for consumption by the consumer. Consumer products include bread, biscuits, butter, jam, rice, fish, eggs, shoes, clothing, fans, books, pens, cooking gas, and so on.
• Capital goods: All items that are not immediately consumed but are used in subsequent manufacturing are referred to as “Producer Goods” or “Capital Goods.” For example, seeds, fertilisers, tools, machinery, and raw materials.