12 Economics sp02

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Class 12 - Economics
Sample Paper 02
Maximum Marks: 40
Time Allowed: 90 minutes
General Instructions:
1. There are a total 60 questions in this paper out of which 50 questions are to be attempted.
2. This paper is divided into three Sections:
a. Section A – Contains 24 questions. Attempt any 20 questions.
b. Section B – Contains 24 questions. Attempt any 20 questions.
c. Section C – Contains 12 questions. Attempt any 10 questions.
3. All questions carry equal marks.
4. There is no negative marking.
Section A
1. The FRBM Act aims at reducing gross fiscal deficit by:
a. 0.5%
b. 3%
c. 2%
d. 1%
2. Raising bank rate by the central bank in India during excess demand is
a. Inflationary
b. Stabilisation
c. Deflationary
d. Destabilisation
3. Primary deficit can be zero if ________.
a. Fiscal deficit > Interest payments
b. Fiscal deficit = Interest payments
c. Fiscal deficit < Interest payments
d. Revenue deficit < Fiscal deficit
4. Which of the following is a budget type?
a. Balanced budget
b. Surplus budget
c. Deficit budget
d. All of them
5. Which one is the invisible item of Balance of Payment?
a. Banking
b. Shipping
c. All of these
d. Communication
6. Green NNP
a. Green NNP = NNP N+ Net fall in the stock of natural capital
b. Green NNP = GDP – Net fall in the stock of natural capital
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c. Green NNP = NNP – Net fall in the stock of natural capital

d. Green NNP = NDP – Net fall in the stock of natural capital
7. When was Twelfth five year plan started
a. 2007-2012
b. 1997-2002
c. 2012-2017
d. 2002-2007
8. How many countries are members of WTO at present?
a. 190
b. 180
c. 164
d. 156
9. Valmiki Ambedkar Awas Yojna was launched in:
a. 2000
b. 2001
c. 2004
d. 2005
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10. Match the following. Options are
a. NCERT I. It takes measures for promotion and coordination of university education
b. IGNOU II. Implementing policies in the field of school education
c. UGC III. Responsible for the introduction and promotion of open university
a. a - (iii), b - (ii), c - (i)
b. a - (ii), b - (iii), c - (i)
c. a - (iii), b - (i), c - (ii)
d. a - (ii), b - (i), c - (iii)
11. Which of the following is not an institutional source of rural credit?
a. Commission Agents
b. Self-Help Groups
c. Commercial Banks
d. Cooperative Societies
12. An example of a direct tax is
a. Toll Tax
b. Interest
c. Service tax
d. Excise duty
13. One of the various quantitative instruments used by the central bank in during inflation is ________.
a. Reduce bank rate
b. Fall in CRR
c. Fall in repo rate
d. Rise in Bank rate
14. A surplus budget is one where?
a. Estimated revenues > Estimated expenditure
b. All of these
c. Estimated revenues < Estimated Receipts of the govt.

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d. Estimated revenues = Estimated expenditure

15. What percentage of India was literate at the time of independence?
a. 16 percent
b. 7 per cent
c. 12 percent
d. 40 percent
16. Which of the following will not be included in balance of trade?
a. Travelling by citizens of one country to another
b. All of these
c. Export of handicraft
d. Import of machinery
17. Cotton textile mills were mainly located in:
a. Western India
b. Southern India
c. Eastern India
d. Northern India
18. Green Revolution introduced during the planning process was restricted mainly to crops like
a. wheat and rice
b. jowar and bajra
c. cereals and pulses
d. cotton and jute
19. LQP raj refers to:
a. license, quota, privatisation raj
b. license, quarter, privatisation raj
c. liberalisation, quota, permit raj
d. license, quota, permit raj
20. Who advocated that India would be truly independent only when the poorest of its people become free
of human suffering?
a. Mahatma Gandhi
b. Jawahar Lal Nehru
c. Subhash Chandra Bose
d. Indira Gandhi
21. Which of the following is not an example of physical capital?
a. Education and knowledge in people
b. Raw material
c. Building
d. Machinery
22. TANWA project relates to ________.
a. Both for men and women
b. Men
c. Women
d. None of these
23. The poverty line defined for urban areas as consumption worth rs ____ per person a month
a. 428
b. 454
c. 328
d. 228

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24. Which one of the following organisations regulates the health sector in India?
a. UGC
b. AICTE
c. ICMR
d. RBI
Section B
25. Assertion (A): Loans from the rest of the world are a negative item.
Reason (R): It is recorded on the capital account of BoP.
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 true but R is false.
d. A is false but R is true.
26. Which statement is false regarding economic planning
a. It is concerned with whole of economic life of a country
b. It is the purposive adoption of resources to social ends
c. It is a path of action in terms of policy measures which were followed in the past
d. It is an organised efforts to achieve objective within fixed framework
27. Assertion (A): Skill is valued because it contributes to the process of production by raising the level of
efficiency.
Reason (R): Overtime skill has emerged as a significant driver of growth which is known as human
capital.
28. Which of the following countries initiated its process of Economic Reforms in the year 1991?
a. Pakistan
b. India
c. China
d. Russia
29. Assertion (A): Most landholdings were economic yielding low output at a high cost.
Reason (R): Landholdings were both small as well as fragmented.
30. When was the Planning Commission set up?
a. 1949
b. 1947
c. 1950
d. 1952
31. Steps taken towards liberalisation
a. Dereservation of industries
b. Delicensing of imports
c. All of these
d. Delicensing of industries
32. One of the two components of Capital budget are:

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a. Capital receipts
b. Investment receipts
c. Expenditure receipts
d. Revenue receipts
33. Assertion (A): We may not get a proper picture of the economic and social status of the people over
time in case the poverty line is changed.
Reason (R): If the poverty line is refixed at a lower level of expenditure we shall get a smaller number
of people below the poverty line.
34. Human capital is similar to physical capital because
a. They are factors of production and raise nation’s ability to produce goods and services
b. They are factors of production
c. none of these
d. Raise nation’s ability to produce goods and services
35. Rural development implies:
a. Providing health facilities in rural areas
b. Development of an agriculture
c. Everything that raises the quality of life of rural people
d. Spread of agriculture among rural people
36. Which of the following was not the objective of economic plans?
a. Increase in national income
b. Increase in employment
c. Spread of education
d. Social justice
37. Assertion (A): Low CAD along with low borrowings has been a stable feature of India's BoP accounts.
Reason (R): The deficit on the current account has often been met through borrowings in the capital
account.
38. One of the objectives of the government budget is ________.
a. Increasing regional disparities
b. Allocation of resources
c. Provision of private goods
d. Unbalanced growth
39. Assertion (A): Central Bank acts as an advisor to the government.
Reason (R): As an advisor to the government, it manages accounts of the government.
40. Assertion (A): Budget is a reflection of government policies and a set of objectives that the government
seeks to fulfill through the budget.

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Reason (R): Budget of the government shows its comprehensive exercise on taxation and subsidies.
41. Assertion (A): Full employment is an extremely important social objective of planning.
Reason (R): Equitable distribution of income implies social equality.
42. Which of the following is not a Quantitative Method of credit control?
a. Open Market Operation
b. Bank Rate Policy
c. Variable Reserve Ratio
d. Margin Requirements
43. The midday meal, Public distribution system, integrated child development scheme etc.
a. Growth oriented approach
b. Minimum basic needs approach
c. None of these
d. Poverty alleviation approach
44. A deficit budget is one where
a. Estimated revenues = estimated expenditure
b. Estimated revenues > estimated expenditure
c. Estimated revenues < estimated Receipts of the govt.
d. Estimated revenues < estimated expenditure
45. Per capita income is calculated?
a.
b.
c.
d.
46. Assertion (A): Agricultural diversification refers to the allocation of some of the farm's productive
resources into new activities or crops to reduce market risks.
Reason (R): Diversification helps stabilization of farm's income by lowering the market risk.
47. Make in India programme was launched in ________.
a. 2015
b. 2014
c. 1991
d. 2016

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48. Surplus in BoP occurs when:

a. receipts > payments
b. both receipts = payments and receipts > payments
c. receipts < payments
d. receipts = payments
Section C
Question No. 49 to 54 are based on the given text. Read the text carefully and answer the
questions:
The money supply is all the currency and other liquid instruments in a country's economy on the date
measured. The money supply roughly includes both cash and deposits that can be used almost as easily
as cash. Governments issue paper currency and coin through some combination of their central banks
and treasuries. Bank regulators influence the money supply available to the public through the
requirements placed on banks to hold reserves, how to extend credit and other regulation. An increase
in the supply of money typically lowers interest rates, which in turn, generates more investment and
puts more money in the hands of consumers, thereby stimulating spending.
The supply of money is a stock concept. It refers to the total stock of money(of all types) held by the
people of a country at a point of time. Supply of money includes that stock of money which is held by
people, other than the suppliers of money themselves.
49. Supply of money refers to the quantity of money ________.

a. as on 31st March
b. as on any point time
c. every month
d. every week
50. The stock of money with the money issuing authorities ________ part of the money supply.
a. form
b. does not form
c. limit
d. does not limit
51. ________ deposits constitutes money supply.
a. demand
b. credit
c. fixed
d. All of these
52. The claim of one bank against the other ________ part of the money supply.
a. form
b. is not load
c. is loan
d. does not form
53. Supply of money includes that stock of money which is held by the people which does not include the
________ of that money.
a. debitor
b. receiver
c. creditor
d. supplier

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54. What happens when there is an increase in the supply of money?

i. Interest rates fall
ii. Money in hand increases
iii. Investment decreases
iv. Interest rates increases
a. i, ii, iii
b. iii, iv
c. i and ii
d. ii, iii, iv
Question No. 55 to 60 are based on the given text. Read the text carefully and answer the
questions:
Investors embraced the perceived safety of the American dollar as the financial crisis shook the world
in 2008. But since March 2009, as stock markets rebounded and investors again rolled the dice in
riskier markets, the dollar has suffered, raising questions about whether its status as a go-to currency
for trade and investment would fade in the coming years.
Washington officially supports a strong dollar, but a weaker dollar, while raising the prices of imported
goods like oil, also helps give American manufacturers an edge in foreign markets by decreasing the
relative price of their products. Officials in the Obama White House have done little to curb the dollar's
more recent slide.
As budget deficits reached an estimated $1.6 trillion for 2009 and the government printed money to
finance its financial rescue programs, other countries and investors started to get nervous. China,
which holds the most dollar reserves, raised concerns about rising American debt, and some of its top
officials floated proposals that would replace the dollar as the world's reserve currency. Global
investors began putting more of their money into Euros. And in October, rumors surfaced that the oil-
producing countries would stop pricing oil in dollars, though that speculation was quickly batted down
by governments in the Middle East and Russia.
The American economy is still the largest in the world, and with so many trillions of dollars being held
by foreign governments, the dollar's dominance in world markets is not likely to fade quickly. Still,
worries abound.
55. Demand for foreign currency depends upon:

a. direct foreign investment in the domestic economy
b. repayment of international loans
c. investment in rest of the world
d. Both repayment of international loans investment in rest of the world
56. Decrease in demand for foreign currency leads to ________ in exchange rate.
a. constant
b. rise
c. appreciation
d. fall
57. Direct purchases by the rest of the world are an important source of ________ for foreign transactions.
a. both supply and demand
b. None of these
c. supply
d. demand

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58. The ________ market is of daily nature.

a. spot
b. foreign
c. regular
d. future
59. The price of one currency in terms of another currency is known as the ________ or simply the ________.
a. national exchange rate, price rate
b. currency exchange rate, value exchange
c. money exchange rate, exchange rate
d. foreign exchange rate, exchange rate
60. Who among the following does not participate in the foreign exchange market?
a. Brokers
b. Authorised dealers
c. Monetary authorities
d. Central Bank

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Class 12 - Economics
Sample Paper 02
Solution
Section A
1. (a) 0.5%
Explanation: 0.5%
2. (c) Deflationary
Explanation: Doing so would discourage investment and lead to deficient aggregate demand via
multiplier process
3. (b) Fiscal deficit = Interest payments
Explanation: Fiscal deficit = Interest payments
Primary Deficit = Fiscal Deficit - Interest Payments
4. (d) All of them
Explanation: A budget can be a balanced budget, deficit budget or a surplus budget.

5. (c) All of these
Explanation: All the options are the invisible item of Balance of Payment.
6. (c) Green NNP = NNP – Net fall in the stock of natural capital
Explanation: ''Green NNP'' is a national accounting concept that subtracts off from GNP not just.
depreciation of capital, but also depletion of environmental assets.
7. (c) 2012-2017
Explanation: Twelfth five year plan started in 2012 with an objective to reduce poverty, to improve
equality among states and to eliminate gender gaps.
8. (c) 164
Explanation: The WTO has 164 members and 23 observer governments. Liberia became the 163rd
member on 14 July 2016, and Afghanistan became the 164th member on 29 July 2016.
9. (b) 2001
Explanation: Launched in 2001, the Valmiki Ambedkar Awaas Yojana is a centrally sponsored scheme
which aims to improve the living conditions of slum dwellers across India, hoping to transform the way
of life in these slums. Given the fact that the growth of our nation depends on the growth of
individuals, this scheme hopes to help slum dwellers utilise their potential, helping them achieve a
decent standard of living.
10. (b) a - (ii), b - (iii), c - (i)
Explanation: NCERT pertains to school education.IGNOU is an open university and UGC pertains to
university education.
11. (a) Commission Agents
Explanation: Commission Agents are a non-institutional source of credit.
12. (a) Toll Tax
Explanation: Toll tax has to be paid by the person on whom it is levied. It cant be shifted.
13. (d) Rise in Bank rate
Explanation: Increase in bank rate is often followed by increase in the market rate of interest.
Accordingly, the cost of credit increases. This lowers the demand for credit and therefore the supply of
money tends to fall. Accordingly, inflation is corrected.

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14. (a) Estimated revenues > Estimated expenditure

Explanation: Surplus budget means a budget where the budgeted receipts are more than Budgeted
expenditure.
15. (a) 16 percent
Explanation: Being backward economy, the literacy rate of India was 16% on the eve of independence,
reflecting social backwardness as a reflection of economic backwardness.
16. (a) Travelling by citizens of one country to another
Explanation: Balance of trade only includes exports and imports of merchandise.
17. (a) Western India
Explanation: The cotton textile industry was concentrated in the cotton-growing belt of Maharashtra,
Rajasthan and Gujarat i.e. Western part of the country.
18. (a) wheat and rice
Explanation:
The period 1960 to 1980 is also called ‘golden era’ for the record foodgrain production like Wheat and
Rice. It is because of the green revolution that our country has become self-sufficient in food
production and even buffer stocks of food grains have been created for use in the times of natural
calamities like drought and floods.
19. (d) license, quota, permit raj
Explanation: The license, quota, permit raj was the elaborate system of licences, regulations and
accompanying red tape that were required to set up and run businesses in India between 1947 and
1990. The New Economic Policy (NEP) aimed at replacing LQP raj by liberalisation, privatisation and
globalisation (LPG) policies.
20. (a) Mahatma Gandhi
Explanation: Poverty, according to Mahatma Gandhi, is suffering which thousands of people are
undergoing. Only a few sections of people in Indian society are free from this suffering. They in turn
dominate the poorer section. So, unless and until the majority gets free from this cycle of poverty, India
cannot be considered an independent country in the true sense.
21. (a) Education and knowledge in people
Explanation: Education and knowledge in people is not an example of physical capital.
22. (c) Women
Explanation: Farm women's groups, focusing on income generation through the employment of
women in productive activities at the household level.
23. (b) 454
Explanation: Suresh Tendulkar Committee defined the poverty line on the basis of monthly spending
on food, education, health, electricity and transport. According to this estimate, a person who spends
Rs. 27.2 in rural areas and Rs. 33.3 in urban areas a day are defined as living below the poverty
line. The Rangarajan panel considered people living on less than Rs. 32 a day in rural areas and Rs. 47 a
day in urban areas as poor.
24. (c) ICMR
Explanation: ICMR (Indian Council for Medical Research) enforces rules and regulations relating to
education and research in the health sector.
Section B
25. (d) A is false but R is true.
Explanation: Loans from the rest of the world are a positive item. It is recorded on the capital account
of BoP.
26. (c) It is a path of action in terms of policy measures which were followed in the past

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Explanation: Economic planning is a term used to describe the long term plans of an incumbent
government to manage the economy. Economic planning is a common feature of big government and
usually dictates increased spending and deficits to fund government programs and public works
projects.
27. (b) Both A and R are true but R is not the correct explanation of A.
Explanation: Skill is valued because it contributes to the process of production by raising the level of
efficiency. Higher the skill, the greater the contribution to the process of production, accordingly the
higher the value of the reward.
28. (b) India
Explanation: India initiated its process of Economic Reforms in the year 1991.
Explanation: Most landholdings were uneconomic yielding low output at a high cost. Landholdings
were both small as well as fragmented.
30. (c) 1950
Explanation: Planning Commission set up in 1950.
31. (c) All of these
Explanation: To liberalise the Indian economy, industrial licensing was abolished, many industries
reserved for the public sector were dereserved and import licensing was also abolished in most
industries.
32. (a) Capital receipts
Explanation: Capital receipts refer to those money receipts of the government which either create a
liability for the government or cause a reduction in the assets.
33. (a) Both A and R are true and R is the correct explanation of A.
Explanation: We may not get a proper picture of the economic and social status of the people over
time in case the poverty line is changed because of the poverty line is refixed at a lower level of
expenditure we shall get a smaller number of people below the poverty line.
34. (a) They are factors of production and raise nation’s ability to produce goods and services
Explanation: The human capital is the brain behind the technicalities and processes of the physical
capital. Both are needed for a society or nation to grow.
35. (c) Everything that raises the quality of life of rural people
Explanation: Rural development is the process of improving the quality of life and economic well-
being of people living in rural areas, often relatively isolated and sparsely populated areas.
36. (c) Spread of education
Explanation: The spread of education not the objective of economic plans.
Explanation: High CAD along with high borrowings has been a stable feature of India's BoP
accounts. The deficit on the current account has often been met through borrowings in the capital
account.
38. (b) Allocation of resources
Explanation: Its budgetary policy, the Government of a country directs the allocation of resources in a
manner such that there is a balance between the goals of profit maximisation and social welfare.
Production of goods which are injurious to health is discouraged through heavy taxation. On the other
hand, the production of socially useful goods is encouraged through subsidies.
39. (c) A is true but R is false.
Explanation: Central Bank acts as an advisor to the government. As an advisor to the government, it
frames policies to regulate the money market.

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Explanation: A budget is a reflection of government policies and a set of objectives that the
government seeks to fulfill through the budget. The budget of the government shows its comprehensive
exercise on taxation and subsidies.
Explanation: Both A and R are true but R is not the correct explanation of A.
Full employment is important social objective of planning because it implies that the process of
economic growth in the country is not Hijacked by the richer sections of the society. Although equitable
distribution of income implies social equality, because equitable distribution refers to a situation when
differences in income are allowed but only within certain limits.
42. (d) Margin Requirements
Explanation: Margin Requirements is the qualitative instrument of credit control. Quantitative
instruments are those instruments of credit control which focus on the overall supply of money in the
economy.
43. (b) Minimum basic needs approach
Explanation: The basic needs approach is one of the major approaches to the measurement of absolute
poverty in developing countries. Many modern lists emphasize the minimum level of consumption of
'basic needs' of not just food, water, clothing and shelter, but also sanitation, education, and healthcare.
44. (d) Estimated revenues < estimated expenditure
Explanation: Deficit budget is a budget in which the government revenues raised by the government
falls short of the government expenditure .
Deficit budget = estimated government revenue < estimated government expenditure

45. (b)
Explanation: Per capita income, also known as income per person. It is calculated by national income
and dividing it by the total population.
Explanation: Diversification helps stabilization of farm's income by lowering the market risk since if
one crop fetches low revenue the other may fetch high.
47. (b) 2014
Explanation: Make in India programme was launched in 2014.
48. (a) receipts > payments
Explanation: receipts > payments
Section C
49. (b) as on any point time
Explanation: as on any point time
50. (a) form
Explanation: form
51. (a) demand
Explanation: demand
52. (d) does not form
Explanation: does not form
53. (d) supplier
Explanation: supplier
54. (c) i and ii
Explanation: An increase in the supply of money typically lowers interest rates, which in
turn, generates more investment and puts more money in the hands of consumers, thereby

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stimulating spending.
55. (d) Both repayment of international loans investment in rest of the world
Explanation: Both repayment of international loans investment in rest of the world
56. (d) fall
Explanation: fall
57. (c) supply
Explanation: supply
58. (a) spot
Explanation: spot
59. (d) foreign exchange rate, exchange rate
Explanation: The price of one currency in terms of another currency is known as the foreign
exchange rate or simply the exchange rate.
60. (d) Central Bank
Explanation: The major participants in the foreign exchange market are commercial banks, foreign
exchange brokers, and other authorised dealers and monetary authorities.

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myCBSEguide

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c. Green NNP = NNP – Net fall in the stock of natural capital

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d. Estimated revenues = Estimated expenditure

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48. Surplus in BoP occurs when:

49. Supply of money refers to the quantity of money ________.

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54. What happens when there is an increase in the supply of money?

55. Demand for foreign currency depends upon:

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58. The ________ market is of daily nature.

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14. (a) Estimated revenues > Estimated expenditure

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