CBSE Sample Papers For Class 12 Economics Mock Paper 1

Q1. There are two statements marked as Assertion (A) and Reason (R). Read the statements and chose the correct option:

Assertion (A): Consumption curve is upward sloping.

Reason (R): There exists an inverse relationship between income and consumption.

a: Both A and R are true and R is the correct explanation of A.

b. Both A and R are true but R is not the correct explanation of A.

c. A is correct but R is wrong.

d. A is wrong but R is correct.

Opt:

c. A is correct but R is wrong.

Explanation: The consumption curve slopes upward as there is a direct relationship between income and consumption. As income rises, consumption also rises and vice versa.

Ans:

c. A is correct but R is wrong.

Explanation: The consumption curve slopes upward as there is a direct relationship between income and consumption. As income rises, consumption also rises and vice versa.

Q2. There are two statements marked as Assertion (A) and Reason (R). Read the statements and choose the correct option:

Assertion (A): The balance of payment is always balanced in the accounting sense.

Reason (R): The balance of payment is an accounting statement that is recorded according to the double-entry bookkeeping system.

a. Both A and R are true and R is the correct explanation of A.

b. Both A and R are true but R is not the correct explanation of A.

c. A is correct but R is wrong.

d. A is wrong but R is correct.

Opt:

a. Both A and R are true and R is the correct explanation of A.

Explanation: The balance of payment is an accounting statement that is recorded according to the double-entry bookkeeping system. In this system, receipts side is always equal to payments side. Therefore, from this viewpoint, balance of payments always balances.

Ans:

a. Both A and R are true and R is the correct explanation of A.

Explanation: The balance of payment is an accounting statement that is recorded according to the double-entry bookkeeping system. In this system, receipts side is always equal to payments side. Therefore, from this viewpoint, balance of payments always balances.

Q3. Deposits with commercial banks, reflected as demand deposits of the banks, are called

a. primary deposits.

b. secondary deposits.

c. fixed deposits.

d. cash deposits.

Opt:

a. primary deposits

Explanation: Deposits made by people with commercial banks, reflected as demand deposits of the banks, are called primary deposits. They are reflected as part of the demand deposits of the banks.

Ans:

a. primary deposits

Explanation: Deposits made by people with commercial banks, reflected as demand deposits of the banks, are called primary deposits. They are reflected as part of the demand deposits of the banks.

Q4. There are two statements marked as Assertion (A) and Reason (R). Read the statements and choose the correct option:

Assertion (A): The supply curve of foreign exchange is upward sloping.

Reason (R): There is an inverse relationship between the foreign exchange rate and demand for foreign exchange.

a. Both A and R are true and R is the correct explanation of A.

b. Both A and R are true but R is not the correct explanation of A.

c. A is correct but R is wrong.

d. A is wrong but R is correct.

Opt:

b. Both A and R are true, but R is not the correct explanation of A.

Explanation: Because there is a positive relationship between the foreign exchange rate and the supply of foreign exchange, the supply curve of foreign exchange is upward sloping.

Ans:

b. Both A and R are true, but R is not the correct explanation of A.

Explanation: Because there is a positive relationship between the foreign exchange rate and the supply of foreign exchange, the supply curve of foreign exchange is upward sloping.

Q5. Capital formation by the government in the form of schools, hospitals, etc. is called

a. business fixed investment

b. public investment

c. residential construction investment.

d. inventory investment

OR

National income does not include the value of the

a. compensation in kind

b. income from the transaction of financial assets (shares, debentures, etc.).

c. employer’s contribution to social security schemes

d. operating surplus

Opt:

b. public investment

Explanation: Investment or capital formation by the government in the form of schools, roads, hospitals, etc. is called public investment. The investment done by private individuals is called a private investment.

OR

b. income from the transaction of financial assets (shares, debentures, etc.).

Explanation: The transaction of financial assets does not increase the production of goods and services. It is only the transfer of money from one hand to another, so its value is not included in the national income.

Ans:

b. public investment

Explanation: Investment or capital formation by the government in the form of schools, roads, hospitals, etc. is called public investment. The investment done by private individuals is called a private investment.

OR

b. income from the transaction of financial assets (shares, debentures, etc.).

Explanation: The transaction of financial assets does not increase the production of goods and services. It is only the transfer of money from one hand to another, so its value is not included in the national income.

Q6. Increase in investment leading to an increase in national income is called ________

a. investment accelerator.

b. marginal propensity to save.

c. marginal propensity to consume.

d. investment multiplier.

OR

The term CRR refers to

a. Current Reserve Receipt

b. Currency Reserve Ratio

c. Cash Reserve Ratio

d. Current Reserve Ratio

Opt:

d. investment multiplier.

Explanation:”Investment multiplier tells us that when there is an increment of aggregate investment, income will increase by an amount which is K times the  increment of investment.” – Keynes. Thus an increase in national income due to an increase in investment is called investment multiplier.

OR

c. Cash Reserve Ratio

Explanation: Cash Reserve Ratio (CRR) refers to the minimum percentage of a bank’s total deposits to be kept either as cash or as deposits with the Central Bank.

Ans:

d. investment multiplier.

Explanation:”Investment multiplier tells us that when there is an increment of aggregate investment, income will increase by an amount which is K times the  increment of investment.” – Keynes. Thus an increase in national income due to an increase in investment is called investment multiplier.

OR

c. Cash Reserve Ratio

Explanation: Cash Reserve Ratio (CRR) refers to the minimum percentage of a bank’s total deposits to be kept either as cash or as deposits with the Central Bank.

Q7. As a result of aggregate demand being greater than aggregate supply, the

a. national income will decrease.

b. national income will be constant.

c. national income will increase.

d. national income will be maximum.

Opt:

c. national income will increase.

Explanation: When aggregate demand is greater than aggregate supply, the national income will increase, leading to an inflationary gap.

Ans:

c. national income will increase.

Explanation: When aggregate demand is greater than aggregate supply, the national income will increase, leading to an inflationary gap.

Q8. What are the two accounts that the balance of payment consists of?

a. receipt account and payment account

b. current account and receipt account

c. current account and capital account

d. capital account and payment account

OR

The “spot market” is the market in which the foreign exchange rate prevails at

a. current prices

b. fixed prices

c. base-year prices

d. fluctuating prices.

Opt:

c. current account and capital account

Explanation: The balance of payments comprises two accounts: the current account and the capital account. The current account records goods and services exports and imports, as well as unilateral transfers, whereas the capital account records capital transfers.

OR

a. current prices

Explanation: When a currency is exchanged at its current price, it is referred to as “spot currency.” This market is of a daily nature and does not deal in future transactions of foreign exchange.

Ans:

c. current account and capital account

Explanation: The balance of payments comprises two accounts: the current account and the capital account. The current account records goods and services exports and imports, as well as unilateral transfers, whereas the capital account records capital transfers.

OR

a. current prices

Explanation: When a currency is exchanged at its current price, it is referred to as “spot currency.” This market is of a daily nature and does not deal in future transactions of foreign exchange.

Q9. There are two statements marked assertion (A) and reason (R). Read the statements and choose the correct option:

Assertion (A): The maximum value of MPC is (-)1.

Reason (R): The change in consumption is greater than the change in income at the initial level of income.

a: Both A and R are true, and R is the correct explanation of A.

b. Both A and R are true, but R is not the correct explanation of A.

c. A is correct, but R is wrong.

d. A is wrong, but R is correct.

Opt:

c. A is correct, but R is wrong.

Explanation: The minimum value of MPS is zero because,  in an extreme situation, the only possibility is no change in consumption despite a change in income.

Ans:

c. A is correct, but R is wrong.

Explanation: The minimum value of MPS is zero because,  in an extreme situation, the only possibility is no change in consumption despite a change in income.

Q10. The relationship between investment demand and interest rates is known as the

a. investment function.

b. consumption function.

c. production function.

d. the saving function.

Opt:

a. investment function

Explanation: The relationship between investment demand and the rate of interest is called the investment function. There is an inverse relationship between investment demand and the rate of interest.

Ans:

a. investment function

Explanation: The relationship between investment demand and the rate of interest is called the investment function. There is an inverse relationship between investment demand and the rate of interest.

Q11. How is national income at current prices converted into national income at constant prices? Under what condition is national income at constant prices greater than national income at current prices? ​

Opt:

National income at current prices is converted into national income at constant prices through a price deflator.

National Income at Constant Prices = (National Income at Current Prices x Base Year Price Index) / Current Year Price Index

When constant prices are higher than current prices, national income at constant prices will be higher than national income at current prices. Output increases in the current year, and the price level falls.

Ans:

National income at current prices is converted into national income at constant prices through a price deflator.

National Income at Constant Prices = (National Income at Current Prices x Base Year Price Index) / Current Year Price Index

When constant prices are higher than current prices, national income at constant prices will be higher than national income at current prices. Output increases in the current year, and the price level falls.

Q12. What do you mean by visible and invisible items in the balance of the payments account?

OR

What will be the effect of the appreciation of the domestic currency on the imports and exports of the domestic country? ​

Opt:

Visible Items: All tangible goods that are exported or imported, and the record of these items, are available with the authorities at ports.

Invisible Items: These goods are invisible because their records are not available at the ports. It includes services like, transportation, travelling services, donation, gifts etc.

OR

The effect of the appreciation of domestic currency on the imports and exports of the domestic country will be the following:

a) Imports – The imports of goods and services will rise as the appreciation of currency makes the import cheaper for the residents of the domestic country. They can buy more imported goods and services with the same amount of money.

b) Exports- There will be a fall in the exports of the country as the goods have become costlier for foreigners. The purchasing power of foreign currency falls. So, foreigners can buy fewer goods and services with the same amount of money.

Ans:

Visible Items: All tangible goods that are exported or imported, and the record of these items, are available with the authorities at ports.

Invisible Items: These goods are invisible because their records are not available at the ports. It includes services like, transportation, travelling services, donation, gifts etc.

OR

The effect of the appreciation of domestic currency on the imports and exports of the domestic country will be the following:

a) Imports – The imports of goods and services will rise as the appreciation of currency makes the import cheaper for the residents of the domestic country. They can buy more imported goods and services with the same amount of money.

b) Exports- There will be a fall in the exports of the country as the goods have become costlier for foreigners. The purchasing power of foreign currency falls. So, foreigners can buy fewer goods and services with the same amount of money.

Q13. In an economy the actual level of income is ₹ 400 crores, whereas the full employment level of income is ₹ 800 crores. The MPC is 0.75. Calculate the increase in investment required to achieve the full employment level of income.

Opt:

Given,
Actual level of income = ₹ 400 crores
Full employment level of income = ₹ 800 crores.
MPC = 0.75

MPS = 0.25 (because MPC + MPS = 1)

k = 1/MPS =1/0.25 = 4

k = ΔY/ΔI

4 = 400/ΔI   =  ΔI = 400/4  =100

Thus, an increase of investment of ₹100 crores is required to achieve full employment level of income.

Ans:

Given,
Actual level of income = ₹ 400 crores
Full employment level of income = ₹ 800 crores.
MPC = 0.75

MPS = 0.25 (because MPC + MPS = 1)

k = 1/MPS =1/0.25 = 4

k = ΔY/ΔI

4 = 400/ΔI   =  ΔI = 400/4  =100

Thus, an increase of investment of ₹100 crores is required to achieve full employment level of income.

Q14. According to a report in SBI’s latest edition of Ecowrap, India has experienced a fall in MPC since various types of spending were not available during the COVID-19 pandemic. When the lock-down was imposed in March 2020, the bank deposits (savings, current, and term) increased during lockdown 1 as people turned frugal. But in the second lockdown, these deposits fell by 25%, but no significant fall was noticed in term deposits. Source: The Business Standard on June 2, 2020. ​

What do you mean by “monetary policy”? What monetary policy measures are available to correct deficient demand?

Opt:

Monetary policy refers to the policy of the central bank to control the money supply and credit in an economy. It helps control the deficient demand by restricting the availability of credit.

Measure to correct:(i) Bank Rate: The problem of deficient demand can be solved by lowering the bank rate and thereby increasing the availability of credit.

(ii) CRR: The central bank can increase the lending capacity by lowering the cash reserve ratio. With the expansion of credit, the deficiency in demand will be reduced.

(iii) Open Market Operation: In order to increase the availability of credit, the central bank purchases securities in the open market.

Ans:

Monetary policy refers to the policy of the central bank to control the money supply and credit in an economy. It helps control the deficient demand by restricting the availability of credit.

Measure to correct:(i) Bank Rate: The problem of deficient demand can be solved by lowering the bank rate and thereby increasing the availability of credit.

(ii) CRR: The central bank can increase the lending capacity by lowering the cash reserve ratio. With the expansion of credit, the deficiency in demand will be reduced.

(iii) Open Market Operation: In order to increase the availability of credit, the central bank purchases securities in the open market.

Q15. Explain the “unit of account” functions of money. How did it solve the related problem created by barter?

OR

Explain how the barter system was used to limit future payments. ​

Opt:

Money serves as a medium of value. This function of money implies that it acts as a common unit of exchange such that the value of each commodity is measured, compared, and expressed in a common unit. Money has provided a common yardstick to measure all these different items in a common denomination, which is called price. For example, clothes in meters, milk in liters, and sugar in kg can all be measured in a quantitative and common unit called money.

Before the introduction of money, In the barter system, where goods are exchanged for goods, the value of each good has to be measured in terms of all other goods and all other qualities of goods that are available in the economy. Finding the value of a commodity becomes difficult when there are a large number of goods being produced in the economy. No proper accounting could be done as we didn’t have a common unit of measurement.

OR

As a medium of future payment barter system was quite unhelpful since there was no certainty that the good which is promised to be given in future in exchange for a good in present would maintain its value.

For example, if a basket of mangoes is promised to be given in the season of summers for a kilogram of paddy today, there is uncertainty as the mangoes farming might get destroyed by pests or lack of rainfall, or their quality might be low.

There was also restriction of time. Goods couldn’t be exchanged for a time way ahead in future as uncertainty increases manifold with time in the barter system.

Ans:

Money serves as a medium of value. This function of money implies that it acts as a common unit of exchange such that the value of each commodity is measured, compared, and expressed in a common unit. Money has provided a common yardstick to measure all these different items in a common denomination, which is called price. For example, clothes in meters, milk in liters, and sugar in kg can all be measured in a quantitative and common unit called money.

Before the introduction of money, In the barter system, where goods are exchanged for goods, the value of each good has to be measured in terms of all other goods and all other qualities of goods that are available in the economy. Finding the value of a commodity becomes difficult when there are a large number of goods being produced in the economy. No proper accounting could be done as we didn’t have a common unit of measurement.

OR

As a medium of future payment barter system was quite unhelpful since there was no certainty that the good which is promised to be given in future in exchange for a good in present would maintain its value.

For example, if a basket of mangoes is promised to be given in the season of summers for a kilogram of paddy today, there is uncertainty as the mangoes farming might get destroyed by pests or lack of rainfall, or their quality might be low.

There was also restriction of time. Goods couldn’t be exchanged for a time way ahead in future as uncertainty increases manifold with time in the barter system.

Q16. Find the ‘operating surplus’ and ‘net exports’ from the following given data.

“
Opt:”

NDPFC = NNPFC – NFIFA = 4200 – 200 = ₹4000

= (vii) + (i) + (ii) + (iii) = NDPFC

Operating surplus + 2000 + 400 + 400 = 4000

Operating surplus = 4000 –2000 ­– 400 ­– 400 = ₹1200

GDPMP = NNPFC + Depreciation – NFIFA + NIT

GDPMP = 4200 +100 – 200 + 150 = ₹4250

= (ix) + (x) + (v) + (viii) = GDPMP

= 1500 + 1500 + Net exports + 1100 = 4250

= 4100 + Net exports = 4250

= Net exports = 4250 – 4100 = `150 (in Bn.)

“
Ans:”

NDPFC = NNPFC – NFIFA = 4200 – 200 = ₹4000

= (vii) + (i) + (ii) + (iii) = NDPFC

Operating surplus + 2000 + 400 + 400 = 4000

Operating surplus = 4000 –2000 ­– 400 ­– 400 = ₹1200

GDPMP = NNPFC + Depreciation – NFIFA + NIT

GDPMP = 4200 +100 – 200 + 150 = ₹4250

= (ix) + (x) + (v) + (viii) = GDPMP

= 1500 + 1500 + Net exports + 1100 = 4250

= 4100 + Net exports = 4250

= Net exports = 4250 – 4100 = `150 (in Bn.)

Q17. a. “The term fiscal deficit refers to a broader concept than revenue deficit.”Comment. [3]

b. How are revenue receipts different from capital receipts? [3]

OR

a. Discuss the difference between progressive and regressive taxation. [3]

b. Define tax and non-tax revenue. [3]

Opt:

a. Yes, the fiscal deficit is a broader concept than a revenue deficit. The fiscal deficit is the excess of total budget expenditures over total budget receipts, except borrowings. The fiscal deficit includes the revenue deficit, i.e., the excess of revenue expenditure over revenue receipts. The fiscal deficit can be corrected by the surplus budget, but the fiscal deficit cannot be corrected by the revenue surplus.

b.

OR

a. The progressive and regressive taxation systems are very different from each other. The main differences between a progressive and a regressive tax system are as follows:

i. A progressive tax is a system of taxation in which the rate of tax increases with an increase in income, whereas in a regressive tax, the rate of tax decreases with an increase in income.

ii. In a progressive taxation system, the burden of tax is more on the rich and less on the poor, whereas in a regressive taxation system, the real burden of tax is more on the poor and less on the rich.

b. Tax revenue may be defined as receipts from all kinds of taxes imposed by the government, such as income tax, sales tax, customs duty, etc.

Non-tax revenue may be defined as receipts by the government from sources other than taxes, such as interest, profits, dividends, fees, fines, penalties, external grants, etc.

Ans:

a. Yes, the fiscal deficit is a broader concept than a revenue deficit. The fiscal deficit is the excess of total budget expenditures over total budget receipts, except borrowings. The fiscal deficit includes the revenue deficit, i.e., the excess of revenue expenditure over revenue receipts. The fiscal deficit can be corrected by the surplus budget, but the fiscal deficit cannot be corrected by the revenue surplus.

b.

OR

a. The progressive and regressive taxation systems are very different from each other. The main differences between a progressive and a regressive tax system are as follows:

i. A progressive tax is a system of taxation in which the rate of tax increases with an increase in income, whereas in a regressive tax, the rate of tax decreases with an increase in income.

ii. In a progressive taxation system, the burden of tax is more on the rich and less on the poor, whereas in a regressive taxation system, the real burden of tax is more on the poor and less on the rich.

b. Tax revenue may be defined as receipts from all kinds of taxes imposed by the government, such as income tax, sales tax, customs duty, etc.

Non-tax revenue may be defined as receipts by the government from sources other than taxes, such as interest, profits, dividends, fees, fines, penalties, external grants, etc.

Q18. The motive behind the de-industrialization by the British in India was

a. To make India an exporter of raw materials

b. To make India an exporter of finished goods

c. To make India an importer of finished goods

d. Both (a) and (c)

Opt:

d. Both (a) and (c)

Explanation: The motive for systematically de-industrializing India was two-fold:

(a) to make India a mere exporter of important raw materials for the upcoming modern industries in Britain

(b) To make India a market for the finished products of those industries so that their continued expansion could be ensured to the maximum advantage of their home country, Britain.

Ans:

d. Both (a) and (c)

Explanation: The motive for systematically de-industrializing India was two-fold:

(a) to make India a mere exporter of important raw materials for the upcoming modern industries in Britain

(b) To make India a market for the finished products of those industries so that their continued expansion could be ensured to the maximum advantage of their home country, Britain.

Q19. There are two statements marked assertion (A) and reason (R). Read the statements and choose the correct option: Assertion (A): The Green Revolution led to higher regional disparities and income inequalities. Reason (R): The Green Revolution was only confined to wheat- and rice-growing states like Punjab, Haryana, Western Uttar Pradesh, and Andhra Pradesh.

a. Both A and R are true, and R is the correct explanation of A.

b. Both A and R are true, but R is not the correct explanation of A.

c. A is correct, but R is wrong.

d. A is wrong, but R is correct.

OR

The disadvantage of subsidies is

a. Waste of resources

b. Hide the scarcity of resources.

c. Reduce inequality between rich and poor.

d. Both (a) and (b)

Opt:

a. Both A and R are true, and R is the correct explanation of A.

Explanation: The Green Revolution was only confined to wheat- and rice-growing states like Punjab, Haryana, Western Uttar Pradesh, and Andhra Pradesh. It did not spread equally to the other states. Besides, the inputs used in the Green Revolution were costly in nature. So, both factors led to higher regional disparities and income inequalities.

OR

d. Both (a) and (b)

Explanation: The disadvantages of subsidies are the following: a) Subsidies do not allow prices to indicate the correct availability of good in the market. b) Subsidies encourage people to waste resources. E.g. when electricity is provided at a subsidized rate, people tend to overuse electricity for less important chores.

Ans:

a. Both A and R are true, and R is the correct explanation of A.

Explanation: The Green Revolution was only confined to wheat- and rice-growing states like Punjab, Haryana, Western Uttar Pradesh, and Andhra Pradesh. It did not spread equally to the other states. Besides, the inputs used in the Green Revolution were costly in nature. So, both factors led to higher regional disparities and income inequalities.

OR

d. Both (a) and (b)

Explanation: The disadvantages of subsidies are the following: a) Subsidies do not allow prices to indicate the correct availability of good in the market. b) Subsidies encourage people to waste resources. E.g. when electricity is provided at a subsidized rate, people tend to overuse electricity for less important chores.

Q20. One of the indicators of human development is the

a. density of population

b. fertility rate

c. growth rate of the population.

d. number of people above the poverty line

OR

The reason for the failure of the Great Leap Forward Plan was

a. earthquake.

b. flood.

c. drought.

d. storm.

Opt:

d. number of people above the poverty line.

Explanation: The number of people below the poverty line is one of the indicators of human development. Other indicators are the infant mortality rate, the adult literacy rate, etc.

OR

c. drought.

Explanation: A severe drought killed millions of people in China, due to which professional support was withdrawn and the Great Leap Forward Plan failed.

Ans:

d. number of people above the poverty line.

Explanation: The number of people below the poverty line is one of the indicators of human development. Other indicators are the infant mortality rate, the adult literacy rate, etc.

OR

c. drought.

Explanation: A severe drought killed millions of people in China, due to which professional support was withdrawn and the Great Leap Forward Plan failed.

Q21. Co-operative societies, regional rural banks, and SHGs are the sources of

a. institutional agricultural finance.

b. non-institutional rural credit.

c. institutional urban finance.

d. non-institutional urban credit.

Opt:

a. institutional agricultural finance.

Explanation: Co-operative societies, regional rural banks, and SHGs, along with the government and commercial banks, are the main sources of institutional agricultural finance.

Ans:

a. institutional agricultural finance.

Explanation: Co-operative societies, regional rural banks, and SHGs, along with the government and commercial banks, are the main sources of institutional agricultural finance.

Q22. The reason for a decline in Pakistan’s growth rate in 1990’s was

a. economic recession.

b. political instability.

c. financial crisis.

d. poverty.

Opt:

​b. political instability​

Explanation: In the 1990s, Pakistan met with a drastic decline in economic growth (3.6%), because of political instability.

Ans:

​b. political instability​

Explanation: In the 1990s, Pakistan met with a drastic decline in economic growth (3.6%), because of political instability.

Q23. Read the following statements carefully.

Statement 1: Migration is among the sources of human capital formation.

Statement 2: People migrate from urban areas to rural areas in the search of better employment.

In the light of the given statements, choose the correct alternative:

a. Statement 1 is true, and statement 2 is false.

b. Statement 1 is false and statement 2 is true.

c. Both statements 1 and 2 are true.

d. Both statements 1 and 2 are false.

Opt:

a. Statement 1 is true, and statement 2 is false.

Explanation: Migration is among the sources of human capital formation, as people move to areas where their skills can be better utilized. In search of jobs, a large number of people migrate from rural areas to urban areas. ​

Ans:

a. Statement 1 is true, and statement 2 is false.

Explanation: Migration is among the sources of human capital formation, as people move to areas where their skills can be better utilized. In search of jobs, a large number of people migrate from rural areas to urban areas. ​

Q24. India and Pakistan introduced structural reforms as dictated by

a. United States of America.

b. World Trade Organisation.

c. Central Government.

d. World Bank.

Opt:

d.World Bank.

Explanation: India and Pakistan introduced structural reforms as dictated by World Bank and International Monetary Fund. China did not have any compulsion to introduce it.

Ans:

d.World Bank.

Explanation: India and Pakistan introduced structural reforms as dictated by World Bank and International Monetary Fund. China did not have any compulsion to introduce it.

Q25. The banning of the chlorofluorocarbon compounds was undertaken in the

a. Montreal Protocol

b. Kyoto Protocol

c. Bretten Woods Conference

d. Brundtland Commission

OR

The concept of sustainable development was emphasised by

a. Controlled National Environment Conference

b. United Nations Conference on Environment and Development

c. United Nations Conclave on Environment Degradation

d. United Nations-developed countries

Opt:

a. Montreal Protocol

Explanation: The rapid depletion of the ozone layer and the penetration of harmful ultraviolet rays into the Earth’s atmosphere led to the adoption of the Montreal Protocol, which banned the use of chlorofluorocarbon compounds as well as other harmful chemicals such as carbon tetrachloride, etc.

OR

b. United Nations Conference on Environment and Development

Explanation: UNCED defines sustainable development as the kind of growth that meets the needs of the present generation without compromising the ability of future generations to meet their own needs.

Ans:

a. Montreal Protocol

Explanation: The rapid depletion of the ozone layer and the penetration of harmful ultraviolet rays into the Earth’s atmosphere led to the adoption of the Montreal Protocol, which banned the use of chlorofluorocarbon compounds as well as other harmful chemicals such as carbon tetrachloride, etc.

OR

b. United Nations Conference on Environment and Development

Explanation: UNCED defines sustainable development as the kind of growth that meets the needs of the present generation without compromising the ability of future generations to meet their own needs.

Q26. Read the following statements: assertion (A) and reason (R).

Choose one of the correct alternatives given below:

Assertion (A): “Jobless growth” is an increase in production without an increase in employment.

Reason (R): The limited absorption capacity of the primary sector is the root cause of the jobless growth experienced in India.

a. Both assertion (A) and reason (R) are true, and reason (R) is the correct explanation of assertion (A).

b. Both assertion (A) and reason (R) are true, but reason (R) is not the correct explanation of assertion (A).

c. Assertion (A) is true, but reason (R) is false.

d. Assertion (A) is false, but reason (R) is true.

Opt:

c. Assertion (A) is true, but reason (R) is false.

Explanation: “Jobless growth” refers to a situation whereby production increases without a corresponding increase in employment. Nevertheless, we can find a wide gap between the growth of GDP and employment. The inability of the tertiary sector to create sufficient job opportunities corresponding to its share in GDP is the root cause of the jobless growth experienced in India.

Ans:

c. Assertion (A) is true, but reason (R) is false.

Explanation: “Jobless growth” refers to a situation whereby production increases without a corresponding increase in employment. Nevertheless, we can find a wide gap between the growth of GDP and employment. The inability of the tertiary sector to create sufficient job opportunities corresponding to its share in GDP is the root cause of the jobless growth experienced in India.

Q27. Read the following statement -Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): In India and Pakistan, the occupational structure is shifting from tertiary to primary sector.

Reason: There are not enough employment opportunities in the primary sector.

a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

c. Assertion (A) is true but Reason (R) is false.

d. Assertion (A) is false but Reason (R) is true.

Opt:

d. Assertion (A) is false, but reason (R) is true.

Explanation: In India and Pakistan, the occupational structure is shifting from the primary to the tertiary sector. It is because the primary sector is characterised by low output and disguised and seasonal unemployment.

Ans:

d. Assertion (A) is false, but reason (R) is true.

Explanation: In India and Pakistan, the occupational structure is shifting from the primary to the tertiary sector. It is because the primary sector is characterised by low output and disguised and seasonal unemployment.

Q28. How is population growth a cause of the depletion of natural resources?

Opt:

Population growth is the cause of the depletion of natural resources. The greater the population, the greater the demand for goods and services required to satisfy desires. More inputs are required for production as human desires grow. As a result, rapid population growth has resulted in increased extraction of resources from the environment, resulting in resource depletion.

Ans:

Population growth is the cause of the depletion of natural resources. The greater the population, the greater the demand for goods and services required to satisfy desires. More inputs are required for production as human desires grow. As a result, rapid population growth has resulted in increased extraction of resources from the environment, resulting in resource depletion.

Q29. “Unemployment and poverty go hand in hand.” Elucidate.

OR

Distinguish between open unemployment and disguised unemployment.

Opt:

Poor people do not have enough resources for economic purposes, e.g., a poor farmer cannot use a good variety of seeds and equipment. Therefore, he and his family members may remain unemployed. Due to poverty, they are not in a position to maintain efficiency and productivity. It is not possible for poor men to have a proper education to improve their mental ability. Poverty encourages farmers to mortgage their land to moneylenders, which, in the long run, increases unemployment.

OR

Open unemployment refers to a situation in which a person who is able and willing to work does not get the opportunity to work at the prevailing wage rate. For example, there are 50 people willing to work, but only 30 are employed. As a result, open unemployment stands at 20 people.

Disguised unemployment refers to a situation in which the number of workers engaged in a job is much higher than what is actually required, and if some of them are withdrawn, total production will remain the same. E.g., six people are employed on a field. If two people are withdrawn, total productivity remains unchanged. Two people will be classified as “disguised unemployed.”

Ans:

Poor people do not have enough resources for economic purposes, e.g., a poor farmer cannot use a good variety of seeds and equipment. Therefore, he and his family members may remain unemployed. Due to poverty, they are not in a position to maintain efficiency and productivity. It is not possible for poor men to have a proper education to improve their mental ability. Poverty encourages farmers to mortgage their land to moneylenders, which, in the long run, increases unemployment.

OR

Open unemployment refers to a situation in which a person who is able and willing to work does not get the opportunity to work at the prevailing wage rate. For example, there are 50 people willing to work, but only 30 are employed. As a result, open unemployment stands at 20 people.

Disguised unemployment refers to a situation in which the number of workers engaged in a job is much higher than what is actually required, and if some of them are withdrawn, total production will remain the same. E.g., six people are employed on a field. If two people are withdrawn, total productivity remains unchanged. Two people will be classified as “disguised unemployed.”

Q30 Human Development Indicator, 2015-18

Sources: Human Development Report 2018 and World Development Indicators

Compare the development among three countries based on HDI indicators.

Opt:

a. If we compare other indices of human development, such as the proportion of the population below the poverty line, mortality rates, and access to sanitation, we find that India is ahead of Pakistan.

b. China is ahead of both Pakistan and India in terms of the percentage of people with access to good sanitation facilities.

c. Maternal mortality rates are very high in India and Pakistan. But it is very low in China. Though the above-mentioned indicators of human development are important, they are not sufficient.

d. Besides these, liberty indicators are no less important. In liberty indicators, measures of the extent of constitutional protection for the rights of citizens and the rule of law are included. The usefulness of the human development index in the absence of these indicators will be limited.

Ans:

a. If we compare other indices of human development, such as the proportion of the population below the poverty line, mortality rates, and access to sanitation, we find that India is ahead of Pakistan.

b. China is ahead of both Pakistan and India in terms of the percentage of people with access to good sanitation facilities.

c. Maternal mortality rates are very high in India and Pakistan. But it is very low in China. Though the above-mentioned indicators of human development are important, they are not sufficient.

d. Besides these, liberty indicators are no less important. In liberty indicators, measures of the extent of constitutional protection for the rights of citizens and the rule of law are included. The usefulness of the human development index in the absence of these indicators will be limited.

Q31. a. What is meant by “land ceiling”? [1]

b. Is there any contradiction between the goal of modernization and employment? [3]

OR

Discuss the drawbacks of the Green Revolution. [4] ​

Opt:

a. “Land ceiling” means the fixation of the maximum size of land that an individual can own. It was practised by the Indian government to promote equity in the distribution of agricultural land.

b. Yes, in the beginning, the goal of introducing modern technology may conflict with the goal of increasing employment due to the presumption that the technology reduces the need for labor. For example, the use of computers may reduce the number of workers in a bank. or the use of tractors may reduce the need for farm labor. But after some time, improved and modern technology results in more and new types of jobs, e.g., computer operators, software developers, computer teachers, etc., or the demand for tractors will result in more labour for the manufacturing of tractors and other machine tools. ​

OR

Though the spread of green revolution technology enabled India to achieve self-sufficiency in food grains, increased production, and increased the proportions of marketable surplus, it still failed to increase production in all areas equally or reduce the disparity between rich farmers and poor farmers. The drawbacks of the Green Revolution were as follows:

(a) Benefitted only rich farmers: The inputs used in the green revolution were costly and only affordable for rich farmers. As a result, only wealthy farmers reaped the benefits of the Green Revolution, widening the gap between rich and poor farmers.

(b) Susceptible to pest attack: HYV crops were more vulnerable to pest attack than normal crops.The small farmers were reluctant to adopt the Green Revolution technology as they could lose their output in a pest attack.

(c) Confined to limited crops and areas: Because the Green Revolution was mainly centred on wheat and rice and limited to wheat-growing states like Punjab, Haryana, Western Uttar Pradesh, and Andhra Pradesh, these states became rich. These states became rich while other states remained poor due to the uneven spread of the green revolution. Regional imbalances broadened, as did income and wealth inequalities. It led to the spread of dissatisfaction among those states that were not able to get the benefits of the revolution.

Ans:

a. “Land ceiling” means the fixation of the maximum size of land that an individual can own. It was practised by the Indian government to promote equity in the distribution of agricultural land.

b. Yes, in the beginning, the goal of introducing modern technology may conflict with the goal of increasing employment due to the presumption that the technology reduces the need for labor. For example, the use of computers may reduce the number of workers in a bank. or the use of tractors may reduce the need for farm labor. But after some time, improved and modern technology results in more and new types of jobs, e.g., computer operators, software developers, computer teachers, etc., or the demand for tractors will result in more labour for the manufacturing of tractors and other machine tools. ​

OR

Though the spread of green revolution technology enabled India to achieve self-sufficiency in food grains, increased production, and increased the proportions of marketable surplus, it still failed to increase production in all areas equally or reduce the disparity between rich farmers and poor farmers. The drawbacks of the Green Revolution were as follows:

(a) Benefitted only rich farmers: The inputs used in the green revolution were costly and only affordable for rich farmers. As a result, only wealthy farmers reaped the benefits of the Green Revolution, widening the gap between rich and poor farmers.

(b) Susceptible to pest attack: HYV crops were more vulnerable to pest attack than normal crops.The small farmers were reluctant to adopt the Green Revolution technology as they could lose their output in a pest attack.

(c) Confined to limited crops and areas: Because the Green Revolution was mainly centred on wheat and rice and limited to wheat-growing states like Punjab, Haryana, Western Uttar Pradesh, and Andhra Pradesh, these states became rich. These states became rich while other states remained poor due to the uneven spread of the green revolution. Regional imbalances broadened, as did income and wealth inequalities. It led to the spread of dissatisfaction among those states that were not able to get the benefits of the revolution.

Q32. State whether the following statements are true or false, with valid arguments:

a. Unemployment is an economic problem but not a social problem.

b. Women’s participation rate is lower in India.

Opt:

a. False

Reason: Unemployment is a social problem in the sense that it causes enormous suffering to unemployed workers due to their reduced or nil income. Many social evils like dishonesty, immorality, drinking, gambling, robbery, etc. are the outcomes of unemployment. It disrupts society and necessitates a large, ineffective government investment in law and order.

b. True

Reason: The overall worker-population ratio in India is low in contrast to that in developed countries, resulting in a low women’s participation rate. In urban areas, about 15%, and in rural areas, about 25%, women participate in the labour force, i.e., a major portion of the female population prefers or is bound not to join in any kind of productive or economic activity.

Ans:

a. False

Reason: Unemployment is a social problem in the sense that it causes enormous suffering to unemployed workers due to their reduced or nil income. Many social evils like dishonesty, immorality, drinking, gambling, robbery, etc. are the outcomes of unemployment. It disrupts society and necessitates a large, ineffective government investment in law and order.

b. True

Reason: The overall worker-population ratio in India is low in contrast to that in developed countries, resulting in a low women’s participation rate. In urban areas, about 15%, and in rural areas, about 25%, women participate in the labour force, i.e., a major portion of the female population prefers or is bound not to join in any kind of productive or economic activity.

Q33. a. Explain the term “golden revolution.” [2]

b. Explain the role of buffer stocks in the context of agricultural marketing. [2]

c. Why do Indian farmers need credit? [2]

OR

a. Why is employment considered so important in Indian development policy?  [3]

b. Mention the salient features of the unemployment situation in India. [3]

Opt:

a. The “golden revolution” refers to the period 1991–2003, during which the planned investment in horticulture became highly productive and the sector emerged as a sustainable livelihood option.

b. The government of India has adopted the policy of buffer stocks to minimise the fluctuations in food prices. Buffer stocks serve as shock absorbers in the economy and provide a defence mechanism against the widely fluctuating price levels. Under the buffer stock policy, the government builds up stocks of food through direct purchases from the farmers and releases these stocks for sale in the domestic market when prices are increasing. Buffer stock operations aim at eliminating unduly low prices, which result in bumper crops.

c. Farmers require loans for purchasing seeds, fertilizers, agricultural implements, etc.; we call it productive credit. That is to say, farmers use this credit amount to improve the productivity of their cultivable land. Farmers also require credit for fulfilling their consumption needs, meeting some social obligations, clearing old debts, paying court fees in connection with some litigation, etc. A credit requirement arising out of such needs is called unproductive credit.

OR

a. Employment plays a vital role in the economic development of a country. The process of economic development involves the utilisation of physical and human resources so that the productive potential of a country is realized. Employment allows the labour force of the country to make a positive contribution. Unemployed people are a financial burden on the economy. Unemployment causes human resources to be underutilized, resulting in a double cost of maintenance and a loss of output.

Employment is considered so important in Indian development policy for the following reasons:

(i) More employment will lead to a higher level of national income since production and employment are directly related.

(ii) Employment is crucial to removing poverty.

b. Following are the salient features of the unemployment situation in India:

(i) The incidence of unemployment is much higher in urban areas than in rural areas. In urban areas, the number of skilled workers is high, but the job opportunities for them are few; thus, there is a high rate of unemployment for them.

(ii) Unemployment rates for women are higher than those for men. Women’s labour force participation in urban areas is just 15%, and that in rural areas is 25%. They are still bound to not work in society.

(iii) Women have a higher rate of underemployment.They are working on fields without contributing much to the output in rural areas.

Ans:

a. The “golden revolution” refers to the period 1991–2003, during which the planned investment in horticulture became highly productive and the sector emerged as a sustainable livelihood option.

b. The government of India has adopted the policy of buffer stocks to minimise the fluctuations in food prices. Buffer stocks serve as shock absorbers in the economy and provide a defence mechanism against the widely fluctuating price levels. Under the buffer stock policy, the government builds up stocks of food through direct purchases from the farmers and releases these stocks for sale in the domestic market when prices are increasing. Buffer stock operations aim at eliminating unduly low prices, which result in bumper crops.

c. Farmers require loans for purchasing seeds, fertilizers, agricultural implements, etc.; we call it productive credit. That is to say, farmers use this credit amount to improve the productivity of their cultivable land. Farmers also require credit for fulfilling their consumption needs, meeting some social obligations, clearing old debts, paying court fees in connection with some litigation, etc. A credit requirement arising out of such needs is called unproductive credit.

OR

a. Employment plays a vital role in the economic development of a country. The process of economic development involves the utilisation of physical and human resources so that the productive potential of a country is realized. Employment allows the labour force of the country to make a positive contribution. Unemployed people are a financial burden on the economy. Unemployment causes human resources to be underutilized, resulting in a double cost of maintenance and a loss of output.

Employment is considered so important in Indian development policy for the following reasons:

(i) More employment will lead to a higher level of national income since production and employment are directly related.

(ii) Employment is crucial to removing poverty.

b. Following are the salient features of the unemployment situation in India:

(i) The incidence of unemployment is much higher in urban areas than in rural areas. In urban areas, the number of skilled workers is high, but the job opportunities for them are few; thus, there is a high rate of unemployment for them.

(ii) Unemployment rates for women are higher than those for men. Women’s labour force participation in urban areas is just 15%, and that in rural areas is 25%. They are still bound to not work in society.

(iii) Women have a higher rate of underemployment.They are working on fields without contributing much to the output in rural areas.

Q34. The government enacted IPR-56 in accordance with the socialist model (Industrial Policy Resolution). Three categories were used to classify the industries in this resolution. The first category comprises sectors that are solely controlled by the public sector, whereas the second category includes sectors where the private sector could also enter and grow alongside the public sector. The private sector was given control over the remaining industries. Even so, the government used licences to control the private sector. To enter the market, grow, or broaden their product offerings, businesses needed a licence. However, obtaining a licence for starting new businesses in underdeveloped areas was simpler. Such businesses used to be eligible for perks including tax breaks and discounted electricity.

a. The policy of licencing to start an industry was criticized. Why? [3]

b. What were the measures taken by the government to protect domestic industries from foreign competition? Why did the government protect domestic industries? [3]

Opt:

a. The policy of licencing to start an industry was criticized. This policy was misused by industrial houses. A big industrialist would get a licence not to start a new firm but to restrict competitors from opening new firms. The excessive regulation of licencing was termed the “permit licence raj.”It prevented certain firms from becoming more efficient. Industrialists were spending time obtaining licences or lobbying with the concerned ministries rather than improving the productivity of the firm.

b. The government took the following measures to protect domestic industries:

(a) Tariff: A tariff is a kind of tax that is levied on imported goods to make them more expensive. The government imposed heavy tariffs on imported goods to discourage the demand for imported goods.

(b) Quota: It defines the maximum quantity of a good that can be imported. It was imposed to limit the amount of imports into India.

The reason to impose tariffs and quotas was to restrict imports and, therefore, protect domestic firms from foreign competition.

Reasons to protect domestic industries from foreign goods:

(a) Domestic industries in India were in their infancy, unable to compete with the cheaper goods produced by more developed economies.

(b) Restrictions were also imposed on imports to save foreign exchange for the import of essential goods. It was feared that if no restrictions were placed on imports, then there was the possibility of foreign exchange being spent on the import of luxury goods.

Ans:

a. The policy of licencing to start an industry was criticized. This policy was misused by industrial houses. A big industrialist would get a licence not to start a new firm but to restrict competitors from opening new firms. The excessive regulation of licencing was termed the “permit licence raj.”It prevented certain firms from becoming more efficient. Industrialists were spending time obtaining licences or lobbying with the concerned ministries rather than improving the productivity of the firm.

b. The government took the following measures to protect domestic industries:

(a) Tariff: A tariff is a kind of tax that is levied on imported goods to make them more expensive. The government imposed heavy tariffs on imported goods to discourage the demand for imported goods.

(b) Quota: It defines the maximum quantity of a good that can be imported. It was imposed to limit the amount of imports into India.

The reason to impose tariffs and quotas was to restrict imports and, therefore, protect domestic firms from foreign competition.

Reasons to protect domestic industries from foreign goods:

(a) Domestic industries in India were in their infancy, unable to compete with the cheaper goods produced by more developed economies.

(b) Restrictions were also imposed on imports to save foreign exchange for the import of essential goods. It was feared that if no restrictions were placed on imports, then there was the possibility of foreign exchange being spent on the import of luxury goods.