MUST DO CONTENT

      CLASS- XII (2021-22)

       ECONOMICS
UNDER THE GUIDANCE OF :-
SHRI. K.S UPADHYAYA
(RDE- DISTRICT EAST)
DR.SHRI. P.K TYAGI
(DDE- ZONE III)

MEMBERS OF THE TEAM:-

MACRO ECONOMICS:-
MR. NITIN VERMA (PGT ECONOMICS) RPVV GANDHI NAGAR
MS. RENU ARORA (PGT ECONOMICS) SOE KHICHRIPUR
MS. POONAM SALUJA (PGT ECONOMICS) SHANKAR NAGAR

INDIAN ECONOMIC DEVELOPMENT:-

MS. INDU VERMA (PGT ECONOMICS) S.K.V NO 1 GANDHI NAGAR

MR. POONAM AGGARWAL (PGT ECONOMICS) KAILASH NAGAR

SYLLABUS (2021-22):
Part A: Introductory Macroeconomics
Unit 1: National Income and Related Aggregates :(10 marks)
What is Macroeconomics? Basic concepts in macroeconomics: consumption
goods, capital goods, final goods, intermediate goods; stocks and flows;
gross investment and depreciation. Circular flow of income (two sector
model); Methods of calculating National Income - Value Added or Product
method, Expenditure method, Income method. Aggregates related to
National Income: Gross National Product (GNP), Net National Product (NNP),
Gross Domestic Product (GDP) and Net Domestic Product (NDP) - at market
price, at factor cost; Real and Nominal GDP. GDP and Welfare
Unit 3: Determination of Income and Employment (12 marks)
Aggregate demand and its components. Propensity to consume and
propensity to save (average and marginal). Short-run equilibrium output;
investment multiplier and its mechanism. Meaning of full employment and
involuntary unemployment. Problems of excess demand and deficient
demand; measures to correct them - changes in government spending,
taxes and money supply through Bank Rate, CRR, SLR, Repo Rate and
Reverse Repo Rate, Open Market Operations, Margin requirement.

Part B: Indian Economic Development

Unit 7: Current challenges facing Indian Economy (12 marks)
Employment: Growth and changes in work force participation rate in
formal and informal sectors; problems and policies
Infrastructure: Meaning and Types: Case Studies: Health: Problems and
Policies- A critical assessment;
Sustainable Economic Development: Meaning, Effects of Economic
Development on Resources and Environment, including global warming
Unit 8: Development Experience of India: (06 marks)
A comparison with neighbours India and Pakistan India and China Issues:
economic growth, population, sectoral development

Points to remember:- 
1. Please attempt all the questions. 
2. Write down the correct serial number of the questions.  
3. Try to write your answers in points. 
4. Draw the diagram wherever needed. 
5. Try to attempt the questions in sequence.
 UNIT 1- National Income and related aggregates
Circular flow of income :  Circular flow of income is how income generates in production
process , then gets distributed among factors of production and ultimately gets disposed in the
form of consumption expenditure on goods and service by households. 
Stock variable:  stock variable is a variable whose magnitude is measured at a particular point
of time. It is not time dimensional. Examples are capital, wealth, fixed assets, distance, 
population, money supply etc.
Flow variable : flow variable  is a variable whose magnitude is  measured during a given period
of time. It is time dimensional. Examples are income ,expenditure, export , import , GDP,
production etc. 
Answer these:
1. Explain the Circular flow of income.
2. Write the difference between stock and flow. Give examples.
3. Identify stock and flow variable  from the following and give  reason.
a. Wealth
b. Investment 
c. Income
d. Capital
e. Export 
Final goods – final goods are the goods which are purchased for consumption by consumer
households and for investment by firms. E.g.  Milk purchased by consumers, machinery
purchased by a firm etc. value of final goods is added to national income.
Intermediate goods – intermediate  goods are the goods which are:
a. Purchased for resale purpose by a firm in the same year. And
a. Completely used up in the production process.
Examples are milk purchased by a dairy, wheat purchased to make biscuits by a factory
etc.
Value of intermediate goods are not to be added to national income as these are included in the
value of final goods. Adding value of intermediate goods in national income leads to the
problem of double counting and overestimates the national income.    
Consumption/consumer goods – these are the goods which satisfy the wants of consumers
directly. For example wheat, clothes , washing machine etc. 
Capital goods- these are the final goods which help in the production of goods and services and
have expected lifetime of more than one year.  E.g   tools and equipment , machinery purchased
by firms etc.
Consumption of fixed capital (depreciation) : It is the fall in the value of fixed assets due to
normal wear and tear and expected obsolescence. It can be calculated by dividing the value of
fixed assets by its expected life in number of years.   
Gross Investment – it is the addition to the stock of  capital of an economy during a given
period of time.
Net Investment – it is the  net addition to the stock of  capital of an economy during a given
period of time.
Note : net investment = gross investment -  Consumption of fixed capital (depreciation).
What domestic territory includes:
1. Political  frontiers including territorial water and airspace.
2. Ships and aircrafts operated by residents between two or more countries.
3. Fishing vessels, oil and natural  gas rigs, floating platforms operated by residents in the 
international water. 
4. Embassies , consulates and military  establishments of the country located abroad.
Normal resident : normal  resident refer to  an individual or institution who ordinarily resides in
a country and whose center of economic interest lies in that country. 
*Citizens of other country who  resides in India  for more  than one year becomes normal
resident  of India.
Factor income- income which is received by factors of production for rendering their services in
the production process. Factor income is included in national income. Examples are rent ,wages,
interest and profit.  
Transfer income – income which is received without rendering productive services in return.  It
is not included in national income. Examples are old age pensions, scholarships e.t.c.
Answer these:
1 . Classify the following goods into final and intermediate goods with reason.
a. Wheat purchased by a flour mill.
a. Tractor purchased by a farmer.
b. Car purchased by a taxi driver.
c. Computer purchased by a school.
d. Goods unsold at the end of year.
2.  Write differences between transfer income and factor income. Give examples.
3. Difference between gross investment and net investment is…………….. 
4. Which of the following are normal residents of India:
     a. American visiting India for medical treatment.
     b. Sri Lankan working in an Indian company in India since 2017.
     c. Tourists visiting India for one month.
5. Branch of an Indian company in the USA comes under domestic territory of
…………………   
6. The Indian embassy in Afghanistan comes under domestic territory of ………………… 
National income(NNPFC :-it is the sum total of factor incomes generated by the normal residents
of a country within the domestic territory of that country and in the rest of world during an
accounting year. It includes NFIA.
Domestic income(NDPFC):- it is the sum total of factor incomes generated within the domestic
territory of a country by residents and non residents during an accounting year. It does not 
include  NFIA.
Important concepts:
GDPMP = GDPFC + INDIRECT TAXES – SUBSIDIES
GNPMP = GDPMP +NFIA  
NNPFC = GDPMP – CONSUMPTION OF FIXED CAPITAL + NFIA – INDIRECT TAXES + SUBSIDIES. 
NFIA = FIFA – FITA
NET INDIRECT  TAXES = INDIRECT TAXES – SUBSIDIES
Now calculate NNPFC  from the following.
GDPMP                          = 1500 
GST (INDIRECT TAXES)  =150
SUBSIDIES                       = 50
NFIA                                 =100
DEPRECIATION               =200

Items not to be included in national income and domestic income.( PRECAUTIONS)

S – Second hand goods ‘sale and purchase( already counted in the NY of the year they were
produced.) 
W- Windfall gains like winning from lottery, horse race etc.(no  contribution to flow of goods &
services)
I – Intermediate goods value.( already included in the value of final goods.)
F – financial transactions like sales & purchase of shares ,debentures(no  contribution to flow of
goods  & services).
T – Transfer income and payments (no  contribution to flow of goods & services)
Besides production of services for self consumption is not included (difficult to  measure 
market value)
But,  production of goods for self consumption is  included (as it contribute to current
production)

Which of the following will be included in national income  (give reasons)

1. Commission and brokerage -( yes, these are productive services)
2. Construction of flyovers, hospitals ,school, building, ( yes,  these are part of capital
formation)
3. Free meals, clothes , bonus , rent  free house, medical facilities, retirement pension,
salaries and wages in cash,  to employees. ( yes , as these are part of compensation of
employees)
4. Dividend / undistributed profit – ( yes ,as these are part of operating surplus ).
5. Interest paid by the firm to the bank( yes, the interest has been paid on loan taken for
productive purposes.
6. Interest paid by the individual to the bank(no ,the interest has been paid on loan taken
for consumption purpose.
7. Dividend received by Ram from a foreign company .( yes ,as it is a part of FIFA)
8. Expenditure on advertisement/scientific research/entertainment allowance( no ,as these
are intermediate  expenditures.
9. Salaries paid to Indian working in US embassy in India (Yes ,it is a part of FIFA)
10. Dividend received by a foreigner from investment in Indian company( No, as it is FITA)    
11. Old age pension/scholarships/remittances/GST ( no, as these are transfer
income/payments)
12. Expenditure by government  on street light , free medicines & education( yes, as these
are part of government  final consumption expenditure)
13. Purchase of truck to transport goods by a company 
14.  Payment of income tax
15. Expenditure by government on providing free education
16. Payment of fees to a lawyer engaged by a firm.
Which of the following will be included in domestic income  (give reasons)
1.  Dividend received by Ram from a foreign company .( no, as it is not generated in the
domestic territory of India)
2. Salaries paid to Indian working in US embassy in India(no, as it is not generated in the
domestic territory of India)
3. Dividend received by a foreigner from investment in Indian company.( Yes, as it is
generated in the domestic territory of India)
4. Salaries paid to Japanese working in Indian embassy in Japan(Yes ,as it is generated in
the domestic territory of India)
5. Domestic/household services performed by a woman may not be considered as an
economic activity. Defend or refute the given statement with valid reason.
 6. Compensation to the victims of a cyclone is an example of a welfare measure taken by
the government. State with valid reason, should it be included/not included in the
estimation of national income of India.
REAL GDP(GDP AT CONSTANT NOMINAL GDP(GDP AT CURRENT PRICE)
PRICE)
GDP Measured at base year prices GDP Measured at current year prices
Affected by change in quantity of physical output Affected by both change in price and quantity of
physical output
Measures the true performance of growth of the Not necessarily measures true performance of
Economy growth of the Economy

Real GDP = (Nominal GDP X 100 / GDP Deflator)

REAL NATIONAL INCOME NOMINAL NATIONAL INCOME

National income Measured at base year prices
Affected by change in quantity of physical output
Measures the true performance of growth the
Economy
National income Measured at current year prices
Affected by both change in price and quantity of
physical output
Not necessarily measures true performance of
growth of the Economy

Real National income = (Nominal National income X 100 / price index)

Answer these:
1. What is the difference between Real GDP and Nominal GDP? Which one of these is a
better indicator of growth of an economy?
2. To nullify the effect of change in price in national income ………………is used.
3. If the value of GDP deflator is 120 and real GDP IS 24000 , then find the value of nominal
GDP?
4. Real GDP in 2019 is 500 and Nominal GDP in 2019 is 650, find GDP deflator. 
GDP as a true indicator of welfare has following limitations:
1. Affected by changes in price : Without any increase in real output GDP can increase due
to increase in price. 
2. Distribution of GDP : GDP does not ensure that goods and services are evenly
distributed in an economy or not. If there are large numbers of poor people in a country
with high GDP, how can it be said to be a true indicator of the welfare of people.
3. Composition of GDP : if any increase in GDP is due to increase in the production of war ,
ammunition , liquor etc. then welfare of people may not increase.
4. Externalities : there are two types of externalities. (a)Positive externalities which result
in the benefit of people for which people don’t pay. Like parks for which people don’t
pay but it increases their welfare. (b) Negative externalities which result in the harm of
 people caused by a firm. Industries cause pollution which adversely affects the health
and welfare of people.
GDP doesn’t take into account positive and negative externalities but welfare of people
is affected.
Non monetary transactions : non monetary transactions like services of housewife ,
kitchen gardening are not included in the estimation of GDP , because their market value
is difficult to estimate. But these transactions increase the welfare of people.

EXTENDED LEARNING:
1. EXPENDITURE METHOD
GDPMP = Private final consumption expenditure + Government final consumption expenditure
+ Gross domestic capital formation + Net Exports
2. INCOME METHOD
NDPFC = Compensation of employees + Operating surplus + Mixed income of self employed
3. Value Added Method
Value added= Value of output - Intermediate consumption

ANSWER THESE:
1. Sale of private vehicles is increasing day by day. Analyze its impact on GDP and
Welfare. 
 
1. In the determination of social welfare, what matters is the quantum of output 
rather than the composition of output. Defend or repute.

3.   State with valid reason, which of the following statement is true or false: 
(a) GDP growth as an index of welfare loses its importance if there is deep economic
divide in the economy. 
(b) Real GDP may increase without any increase in the quantity of output in the
economy.

                            Unit-3 - Determination of Income and Employment

Aggregate demand refers to the total value of final goods and services which all sectors of an
Economy are planning to buy at a given level of income during a period of time.
Components of AD= C + I + G + NX 
Where, C= Consumption Expenditure of Household
          I= Investment Expenditure
                           G= Government Expenditure
                            NX = Exports -Imports [X-M].
Aggregate supply refers to the money value of final goods and services that all the producers
are willing to supply in an economy in a given period of time.
AS = National Income(Y).

 For Two Sector Economy: - AD=C+I

                                                   (Y)AS= C+S.
 Consumption function: -

                                              C=𝐶+bY
Where, C = Total Consumption

𝐶 = Autonomous Consumption
[ i.e., Consumption at zero level of Income or minimum Consumption for survival]
b = Change in consumption/change in Income  [Cy ] = MPC
Y = Income

Saving Function: -
i.e. Y=C+S
S=Y–C

= - 𝐶 + (1 – b) Y

= - 𝐶 + (MPS.)Y         where [-𝐶 =  S ] 

where -𝐶= Negative savings because income is zero and person is still consuming for survival.

MPS = Change in saving/Change in income  = [ΔS/ΔY ] 

TYPES OF PROPENSITIES TO CONSUME

APC=C/Y MPC=∆C/∆Y

   I        APC=1 i.MPC=1

           [when C=Y] [when change in consumption= change in income]
ii. APC>1 ii. MPC can never be greater than one
            [when C>Y] [∵Change in consumption can never be
iii. APC<1 greater than change in income]
            [when C<Y] iii. MPC=0
iv. APC can never be zero [when change in consumption is zero]
       [͙∵Consumption can never be zero] iv. 0<MPC<1
v. APC can never be negative or         (v)    MPC falls with successive increase in   
less than zero . income

             [∵Consumption can never be

less than zero]               
vi. APC falls with increase in
income

TYPES OF PROPENSITIES TO SAVE

APS=  S/Y MPS= ∆S/∆Y 
   i. APS can never be equal to one i.        MPS=1
[APS≠1] [when change in saving= change in
i.e. Saving can never be equal to income]
income ii. MPS= 0
ii. APS=0 [when change in saving=0]
[when saving is zero] iii. MPS can never be negative or less than zero
iii. APS<0 [∵change in saving can never be
[when saving is less than income] negative]
iv. APS can never be greater than iv. MPS can never be greater than one
one [∵change in saving can never be greater
[͙∵ Saving can never be greater than than change in income]
income]

Break-Even point is a point when consumption is equal to income [i.e. C=Y or S=0] and savings
are zero.

RELATIONSHIP BETWEEN APC & APS AND MPC & MPS:-

   APS + APC = 1                                    MPS + MPC = 1

INVESTMENT refers to increase in the stock of capital goods during a financial year.

Aggregate Demand and Aggregate Supply are Ex-Ante Concepts

Ex-Ante Investment/ Planned Investment Ex-Post Investment

Refers to the amount of investment which all the Refers to actual or realized investment
firms plan to invest at different levels of the income in an economy during a financial year
in the economy at the beginning of the period. at the end of the period.

Ex- Ante Savings/ Planned Savings Ex-Post Savings/ Realised Savings

Refers to amount of savings which all the Refers to the actual savings in an
households intended to save at different levels of economy during a financial year at the
income in the economy at the beginning of period. end of the period.

LETS SOLVE THESE!!!

Ques 1. Giving reasons state whether following statements are true or false.
.The value of MPS can never be negative.
      Ans.        True, since MPS=  Change in saving/Change in income  and change in savings can
never be negative.
ii. Value of APC can be zero.
      Ans.        False, since consumption can never be zero.
iii. The value of APS can never be greater than one.
      Ans.        True, because savings can never be greater than income.

Ques.2 Define the following:-

(I) Full Employment: - It is a situation in which all those who are able to and willing to work at
the prevailing wage rate gets the job.
(ii) Involuntary Unemployed: - It is a situation where a worker is willing and able to work at the
prevailing wage rate but does not get work.   

Excess demand/ Inflationary gap refers to the situation when AD>AS corresponds to full
employment level of output.
● Output: - It does not affect output since the economy is already at full employment
level.
● Employment: No impact on employment since full employment exists.
● General price level: - It leads to rise in general price level (inflation) as AD >AS.

     Measures to correct excess demand

 Fiscal policy :-
 (I) Decrease in government spending.                        
 (ii) Increase in taxes.      
 It decreases personal disposable income of people and demand for goods and services
decreases and hence AD decreases                                            
                                                                  
Monetary policy:-
(i) Increase in bank rate.
(ii) Increase in Repo rate
(iii)Sale of securities in open market .                                                                                                
 (iv) Increase in CRR                          
  (v) Increase in SLR
  (vi)Increase in margin requirements
  (vii)Increase in Reverse Repo Rate
All of the above measures decrease the loan giving capacity of commercial banks which decreases the
demand of loans for consumption and investment purposes and hence AD decreases.
                                                                                                                                                 
Deficient demand/ Deflationary gap refers to the situation when AD<AS corresponds to full
employment level of output.
● Output: - Due to lack of sufficient demand output decreases.
● Employment: It causes involuntary unemployment in the economy.
● General price level: - It leads to fall in general price level (deflation) as AD <AS.
●  Fiscal policy :-
 (I) Increase in government spending.                        
 (ii) Decrease in taxes.      
 It increases personal disposable income of people and demand for goods and services
increases and hence AD increases                                            
                                                                  
● Monetary policy:-
1. Decrease in bank rate
2. Decrease in Repo rate
3. Purchase of securities in open market .                                                                        
4. Decrease in CRR                          
5. Decrease in SLR
6.  Decrease in margin requirements
7.   Increase in Reverse Repo Rate
● All of the above measures increase the loan giving capacity of commercial banks which
increases the demand of loans for consumption and investment purposes and hence AD
 increases.                                                                                                                                              
  

 Let’s have a look at these!!!

Q1.  Define Repo rate?
Q2. Explain the role of the following in correcting deficient demand in an economy?
a. Open market operations
a. Bank rate
Q3. Distinguish between excess demand and deficient demand.
Determination of equilibrium level of Income and employment in an economy is determined
when Aggregate Demand (i.e., C+I) is equal to Aggregate Supply (i.e., Total Output or C+S).
  
● 1. AD – AS Approach: -
Equilibrium is determined where AD=AS i.e., Effective demand
● When AD>AS: -
Buyers are planning to buy more than what sellers are planning to produce (i.e., AD>AS) due to
which Inventory (stock of unsold goods) decreases and producer will increase production that
starts increasing Income until AD=AS.
● When AD<AS: -
It means buyers would be willing to buy less than what the producers are willing to produce
(i.e., AD<AS) due to which Inventory (stock of unsold goods) increases and producer will
decrease production that starts decreasing Income until AD=AS.
● 2. SAVING- INVESTMENT Approach: -
Equilibrium level of Income is determined where Planned Saving= Planned Investment.
● When S> I: -
It means buyers would be willing to buy less than what the producers are willing to
produce (i.e., AD<AS) due to which Inventory (stock of unsold goods) increases and
producer will decrease production that starts decreasing Income until S=I.
● When S<I: -
Buyers are planning to buy more than what sellers are planning to produce (i.e., AD>AS)
due to which Inventory (stock of unsold goods) decreases and producer will increase
production that starts increasing Income until S=I
 ● INVESTMENT MULTIPLIER: -
It measures the change in Income(ΔY) due to change in Investment(ΔI)

K= ΔY/ΔI K= 1/MPS K= 1/1-MPC

● Multiplier is directly Related to MPC and Inversely related to MPS.

LET'S LOOK AT THESE

Ques1. State True  or False with reason :-

    I.       MPC and multiplier are directly related 
    Ans.  True, because K=1/1-MPC
II. If aggregate demand exceeds aggregate supply, Income rises 
    Ans.  True, since AD>AS -> Inventory decreases -> Production increases -> Income increases 
III. When Investment multiplies is 1, then value of MPS is Zero
   Ans.   False, because K=1/MPS -> 1 = 1/MPS -> MPS=1
Ques2. In an Economy, the consumption function is C=500+0.75Y, when C= Consumption
expenditure and Y is income. Calculate equilibrium level of income & consumption expenditure,
when I=5000. Also find the value of the multiplier.
Ans.     Y = C+I
             Y = 500 + 0.75Y + 5000
             Y - 0.75Y = 5500
              0.25Y = 5500
             Y = 22,000
             C = 500 + 0.75 (22,000)
                 = 17,000
             Consumption expenditure at equilibrium level of National Income = Rs.17,000.
             K=1/1-MPC   =  1/1-0.75 , hence, K=4
Employment and Unemployment
 
 
Labor force
All such people who are over 14 years of age, who are able and also willing to work are
included in the labor force.
- Total labor force of India in 2011-12 = 473 million
Three quarters of it is rural and 70% are male.
 
Workers - All those who are engaged in economic activities are called workers.
- People away from labor for a short time (due to illness, injury, bad weather, festivals
etc.) are also called workers.
Workforce = Labor force – unemployed people
 
Worker population ratio = (number of workers / total population) × 100
 
Number of workers = (Worker population ratio × total population) / 100
 
Participation in employment of population (gender wise)- In rural and urban areas
of India, participation is higher for men than women. Reasons are (i) Men easily migrate
to the workplace (ii) Females are discouraged by family members (iii) More job
opportunities for men in all sectors.
 
But in rural sectors women participation in the workforce is higher than urban areas
because(i) they help in farming with family members and (ii) poverty. 

Types of workers
 
Self-employed –Shop Owner, owner of his own enterprise, shopkeeper of chickens,
Doctor's own clinic, tailor etc. who do their work on their own are called self employed
workers. 52% of the workforce belong to this category.
 
Casual workers - Who sometimes get employment such as construction workers, ice
cream sellers whose income is not fixed. 30% of people in India fall into this category
 
Regular salaried employees - 18% of people in India fall into this category. Police,
Army, Government employees, people working in any company who get regular salary,
they fall in this category.
 
Why regular salaried people are lower in rural areas than in urban areas. 
a.More employment opportunities in urban areas.
b.Infrastructure in urban areas are more developed.
c.Educational differences. 
 
Informalization of workforce
It refers to a situation when proportion of workforce in the informal sector  to total
workforce increases.
 
1-Formal or organized sector-
1.Organized sectors follow all labor laws made by the government.
2 -Establishments of all government sectors along with the Private sector employing 10
or more employees.
3-They get the benefits of economic and social security
 
2-Informal or unorganized sector
(a)Farmers, agricultural laborers, laborers, self-employed etc. come under this
category.
 (b)It includes All private enterprises with less than 10 employees
(c)They don’t get the benefits of economic and social security.
(d) They do not follow all labor laws made by the government.
 
Unemployment--
 The section of the labor force that is willing and able to work at the prevailing wage rate
but does not get a job.
 
Sources of unemployment data in India--
1-Census
2-NSSO (from National Sample Survey Office) once in 5 years
3-Unemployment registration data
 
Open unemployment --- The unemployment that is visible directly in urban areas.
People are willing and able to work but don’t get work at prevailing wage rates. 
 
Disguised Unemployment - Unemployment that is not directly visible is often found in
the agricultural sector. More people are engaged in work than actually needed.
 
Seasonal unemployment --- This unemployment is according to the weather cycle, it is
also found in the agricultural sector.
 
What can the government do to generate employment in the country
 
1-May appoint in government departments
2-Can make schemes like MNREGA
3-Increase in production can generate new employment opportunities
4-Can provide financial assistance to private entrepreneurs to come forward and work
 
Suggestions to remove/ reduce poverty
a.Development of agriculture sector
b.Development of small scale industries
c.Employment generation programme
d.Increase GDP
e.Reforms in education.

Answer the following questions

 1-What is labor force ?
2-What is workforce?
3-Why are the regular wage workers in urban areas more than in rural areas?
4- Why is the percentage of men more in the workforce than women?
5-What is a self-employed workforce?
6-Explain open unemployment and hidden unemployment?
7-How can the government generate new jobs?
8- What is jobless growth ?
9- What is informalisation of the workforce ? What is the difference between organized
and unorganized sector?

 
 
Infrastructure
Infrastructure: Infrastructure is a system that contributes to the economic and social
development of a country. By developing the infrastructure, a country or a state can achieve the
status of development.

What is included in the infrastructure - roads, rail ports, airports, dams, power stations, oil gas
pipelines, telecommunication facilities, schools, colleges, hospitals, all health services,
sanitation, drinking water, bank insurance and currency systems come under the infrastructure.

Infrastructure is also called the lifeline of the economy

The basic structure is divided into two parts

1-Economic- It has a direct impact on the production of goods and services. Its 3 areas are
energy, transport and communication
2-Social - It improves the quality of human resources.  Its fields are education, health and
housing

Infrastructure's contribution to economic development

1- Enhance quality of life

2- Increases employment.
3-Increasing productivity of factors of production
4-Promotes outsourcing

Status of Infrastructure in India

1 - Rural areas of India still lack drinking water, sanitation facilities, electricity, fuel, roads etc.
2-India is spending only very less of its GDP on infrastructure, 
3- people in rural sector still uses bio fuel.
Health

Health is not only the absence of diseases but it is complete physical , mental and social well
being. 
What are the indicators or figures to check the health level of a country ----

1-Infant mortality - Infants who die before 1 year after birth (out of 1000 infants) is called
infant mortality rate.
2-Maternal Mortality Rate 
3-Life expectancy - When an infant is born, it is estimated based on its health, how many years
it will live, it is called its life expectancy.

4-Nutrition level - how much nutritious food the women and children of the country are getting
is called the nutritional level of the country

5-The health level of the country is determined based on the number of infectious and non
infectious diseases in the country.

What is included in the health infrastructure?

Every citizen's access to 
a. Hospitals
a. doctors, 
b. nurses and others,
c. beds and hospital equipment, 
d. pharmaceutical industry and 
e. accessibility to health services

Role of Government in health infrastructure

a. Open medical colleges 
a. take steps against those indulged in  food adulteration
b. license for drugs and monitoring 
c. investigation of fraud medical practitioners 
d. keep record of birth and death

 Health infrastructure reform since independence –

1 - The number of hospitals in India has increased

2- The number of beds in hospitals in India has increased
3 - Number of dispensaries in India has increased
4- In India, 4 diseases have been completely eradicated like smallpox, polio, leprosy and nervous
disease.
Role of private sector in health infrastructure-

The private sector plays a very important role in the health infrastructure in India. Without the
private sector, India's health infrastructure cannot be imagined.
1- About 70% of the total number of hospitals are private sector
2- About 40% of beds are in private hospitals
3-Approximately 60% dispensary is private sector
4-80% of the people coming from outside countries are treated in private hospitals .it promotes
medical tourism
Indian System of Medicine. ISM-

1-Ayurveda
2-yoga
3- Unani
4-siddha
5-Naturopathy
6-homeopathy

These are the 6 parts of the Indian medical system, collectively known as Ayush.

Women Health problems in India-

a. female foeticide
a. marriage at young age
b. Anaemia
c. abortion 

What is GBD
It is an indicator by which experts find out the number of people who die untimely due to a
particular disease and also find out how many years people spent incapacitation due to diseases
in which they did not do any productive work for the country.

There is a severe lack of health infrastructure in rural India.

1 – less number of hospital in rural area

2- Basic facilities like X RAY or blood test are not available in village
3-Essential medical facilities like pediatric, gynecological, obstetric treatment are also not
available in the village.
4-More than 50% of married women suffer from anemia
5-sex ratio is constantly decreasing.

Poor people spend 12% of their income and rich people spend 2% on health services

Critical assessment of health infrastructure in india 

a. inequitable distribution of health services
a. lack of manpower
b. communicable disease
c. lack of manpower
d. poor sanitation facilities.

Answer the following questions

1- What is the contribution of infrastructure in the economic development of any country?

2-What is the status of infrastructure in India?
3-What are the indicators to check the health level of any country?
4-Which diseases have been completely eradicated in India?
5 - Highlight the role of private sector in health infrastructure?
6- What are the health problems in India?
7-What is the status of health infrastructure in rural India?
8- critically appraise health infrastructure in India.

UNIT-VII 

ENVIRONMENT AND SUSTAINABLE DEVELOPMENT 

Environment: It is defined as all those conditions and their effects which influence human life. It 
includes: biotic components, viz, plants and animals, and abiotic components, viz, trees, water and
air. 
Functions of Environment:  

1.Environment offers Resources for production: Environment includes physical resources (minerals, 
wood, water, soil and others) which are available to us as a free gift of nature. 

2. Environment Sustains Life: Environment includes sun, soil, water and air which are
essential  ingredients for the sustenance of human life.  
3. Environment Assimilates Water: Production and consumption activities generate wastes. 

4. Environment Enhances Quality of Life: Surroundings include rivers, oceans, mountains and

deserts.  Renewable and Non-renewable Resources: - 

Carrying capacity of environment include:

1. Resource extraction must be less than resource regeneration.

2. Waste should be absorbed by environment.
 NOTE:- If these two conditions are not fulfilled then it leads to environment crisis.

GLOBAL WARMING: - It is a situation referring to a gradual but consistent increase in global 

temperature, thanks to environment pollution and deforestation. Owing to emission of
Green  House Gases 

SUSTAINABLE DEVELOPMENT: - A process of development that does not cause environment 

degradation and therefore, does not reduce production capacity of future generations.  
FEATURES OF SUSTAINABLE DEVELOPMENT: - 

(i) Sustained rise in real per capita income and economic welfare  
(ii) Rational use of natural resources.  
(iii) No reduction in the ability of future generations to meet their own needs.  
(iv) No increase in pollution.  

Land Degradation: - Degradation land in terms of soil erosion is a serious concern in the context of 
environmental issues in India. According to one estimate, India is suffering soil erosion to the tune of 
nearly 5 billons tones a year. Implying a colossal loss of nitrogen, phosphorus and potassium, which are 
the essential ingredients of soil fertility and essential inputs of crop production. 

Strategies to achieve sustainable development 

a. use of non-conventional source of energy
a. protect biodiversity
b. recycling of hazardous waste
c. organic farming

Answer these: - 

1. Give two example of biotic components of environment. 

2. Which of the following is a necessary condition of sustainable
development? I. Increase in the quality of life  
II. Reduction in the level of pollution  
III. Conservation of the stock of natural capital  
IV. All of these  
3. What do you mean by environment? Explain four functions of the environment.
4.  Explain how industrialization is responsible for the pollution of environment.  5. What is
meant by sustainable development? State the features of sustainable development. 
          

UNIT-8 - Comparative studies  India, Pakistan and China 

 Similar development strategies of India and Pakistan 

After independence (1947), India and Pakistan adopted almost a similar strategy of growth. 

1. Mixed economic system- Both followed a mixed economy model of growth.

  2. Economic planning- Both India and Pakistan adopted economic planning i.e., Five Year Plans.
India adapted 5 year plan in 1951 and Pakistan in 1956.
      
3. Economic reforms- Both of them introduced economic reforms at the same time (India in 
1991 and Pakistan in 1988).

Common success shared by India and Pakistan 

1. Rise in GDP
2. Reduction in poverty. 
3. Self-sufficiency in food grains.
4. Modernization

Reasons for slow growth and re-emergence of poverty in Pakistan.  

1. Slow rate of growth of agriculture.

2. Dependence on foreign loans.
3. High rate of inflation.  
4. Political instability.

CHINA 
Economy- After the establishment of People's Republic of China under one-party rule, all  the critical
sectors of the economy, enterprises and lands owned and operated by  individuals, were brought
under government control.  

Great Leap Forward (GLF) campaign: 

In 1958, program named the ‘Great Leap Forward (GLF)’ campaign was initiated to modernize 
China's economy. 

The aim of this campaign was to transform agrarian economy into a modern economy through the 
process of rapid industrialization.  
 Great Proletarian Cultural Revolution: 

The Great Proletarian Cultural Revolution was introduced between 1966 to 1976 in China. It was a
system under which students and professionals were sent to work and learn from the  countryside.  

Reforms Introduced in China: 

Economic reforms were introduced in China in 1978.

One child policy: It was adopted by China in 1979, has reduced the growth rate of population.
Containing its population growth rate, China can now focus on quality of life rather than sustenance 
of the people.  

Comparative Study of India and China

1. GDP growth rate - Higher in China.

2. Economic reforms- India in 1991,China in 1978.
3. Foreign Trade- China has greater share in foreign trade than India.
Announcement of First Five-Year Plan 

India- 1951. 

China- 1953. 

Pakistan- 1956. 

Feature Country 

a. One child norm                                          China 

b. Low fertility rate                                        China 
c. High degree of urbanization                    China 
d. Highest density                                           India  
e. mixed economy India and                         Pakistan 
f. Growth due to service sector                 Pakistan  
g. Least Self-reliant                                         Pakistan 
h. Socialist economy                                     China 
i. Maximum percentage of                           Pakistan 
               undernourished population  

Salient demographic indicators of China, Pakistan and India  

1. Population- China has the largest population followed by India in Pakistan. The population  of
Pakistan is very less. 
2. Growth rate of population- Although China is the most populated country, its annual growth  rate of
population is the  lowest as compared to India and Pakistan. It is due to one child  policy initiated in China. 
 3. Density of population- Since China geographically occupies the largest area among the 3 
countries, density of population of China is the lowest followed by Pakistan and India.  
4. Sex ratio- Due to preference of male child, sex ratio is the lowest in India as compared to  China
and Pakistan 
5. Fertility rate- As a result of one child policy, fertility rate is lowest in China as compared to  Indian .
Pakistan.  
6. Urbanization- Urbanization is highest in China followed by Pakistan and India.  

Answer these: 

Q1. Great Leap Forward campaign was started in………… (1978/1958)  

Q2. Explain the role of the following strategies in the development of china: 

a) Great Leap Forward 

b) Special Economic Zone 
c) Dual Pricing System 

Q3. Mention the various indicators of human development.

CASE STUDY:
Q1.Read the following text carefully and answer questions given below:
SINO-PAK FRIENDSHIP CORRIDOR
The China-Pakistan Economic Corridor (CPEC) relationship between the two nations. But it has
also sparked criticism for burdening Pakistan with mountains of debt and allowing China to use
its debt strategic assets of Pakistan.
The foundations of CPEC, part of China’s Belt and Road Initiative, were laid in May 2013. At
the time, Pakistan was reeling under weak economic growth. China committed to play an integral
role in supporting Pakistan’s economy.
Pakistan and China have a strategic relationship that goes back decades. Pakistan turned to
China at a time when it needed a rapid increase in external financing to meet critical investments
in hard infrastructure, particularly power plants and highways. CPEC’s early harvest projects met
this need, leading to a dramatic increase in Pakistan’s power generation capacity, bringing an end
to supply-side constraints that had made rolling blackouts a regular occurrence across the
country.
Pakistan leaned into CPEC, leveraging Chinese financing and technical assistance in an attempt
to end power shortages that had paralyzed its country’s economy. Years later, China’s influence
in Pakistan has increased at an unimaginable pace.
China As Pakistan’s Largest Bilateral Creditor: China’s ability to exert influence on Pakistan’s
economy has grown substantially in recent years, mainly due to the fact that Beijing is now
Islamabad’s largest creditor. According to documents released by Pakistan’s finance ministry,
Pakistan’s total public and publicly guaranteed external debt stood at $44.35 billion in June 2013,
just 9.3 percent of which was owed to China. By April 2021, this external debt had ballooned to
$90.12 billion, with Pakistan owing 27.4 percent —$24.7 billion — of its total external debt to
China, according to the International Monetary Fund (IMF). Additionally, China provided
financial and technical expertise to help Pakistan build its road infrastructure, expanding
north-south connectivity to improve the efficiency of moving goods from Karachi all the way to
Gilgit-Baltistan (POK). These investments were critical in better integrating the country’s ports,
especially Karachi, with urban centers in Punjab and KhyberPakhtunkhwa provinces. Despite
power asymmetries between China and Pakistan, the latter still has tremendous agency in
determining its own policies, even if such policies come at the expense of the long-term
socioeconomic welfare of Pakistani citizens.
(https://www.usip.org/publications/2021/05/pakistans-growing-problem-its-china-economic-corri
dor - Modified)
1.Outline and discuss any two economic advantages of China Pakistan Economic Corridor
(CPEC) accruing to the economy of Pakistan. (3marks)
2. Analyze the implication of bilateral ‘debt-trap’ situation of Pakistan vis-à-vis the Chinese
Economy. (3marks)
Q2.Read the following text carefully and answer questions given below.

Though the data on the international poverty line for Pakistan is quite healthy, scholars using the official
data of Pakistan indicate rising poverty there. The proportion of the poor in the 1960s was more than
40% which declined to 25% in 1980s and started rising again in 1990s. The reasons for the slowdown of
growth and re-emergence of poverty in Pakistan's economy, as scholars put it, are agricultural growth
and Food Supply situation were based not on an institutionalized process of Technical change but on
good harvest. When there was a good harvest, the economy was in good condition, when it was not, the
economic indicators showed stagnation or negative trends. You will recall that India had to borrow from
the IMF and World Bank to set right its Balance of payments crisis ; foreign exchange is an essential
component for any country and it is important to know how it can be earned. If a country is able to build
up its foreign exchange earnings by sustainable export of manufactured goods, it need not worry. In
Pakistan most foreign exchange earnings came from remittances from the Pakistani workers in the
Middle East and the exports of highly volatile agricultural Products; there was also growing dependence
on foreign loans on the one hand and increasing difficulty in paying back the loans on the other.
 However, during the last few years, Pakistan has recovered its economic growth and has been
sustaining. In 2015-16, the Annual plan 2016-17 reports that, the GDP registered a growth of 4.7%,
highest when compared to the previous eight years. While agriculture recorded growth rate far from
satisfactory level, Industrial and Service sectors grew at 6.8 and 5.7 % respectively. Many
macroeconomic indicators have begun to show stable and positive trends.

1. Explain two reasons for the slowdown of growth and re-emergence of poverty in Pakistan.(3)
2. On what parameters one can say that Pakistan is recovering its economic growth?(3)
 PRACTICE PAPER
Class XII (TERM II) 2021-22 Time: 2 Hours

This is a Subjective Question Paper containing 13 questions.

This paper contains 5 questions of 2 marks each,5 questions of 3 marks each and 3 questions of 5 marks

2 marks questions are Short Answer Type Questions and are to be answered in 30 -50 words

3 marks questions are Short Answer Type Questions and are to be answered in 50 -80 words

5 marks questions are Long Answer Type Questions and are to be answered in 80 -120 words

This question paper contains Case/Source Based Questions.

1. Distinguish between stock and flow.

Or
Distinguish between factor income and transfer income. (2 marks)

2. In an economy the consumption function is

C=1000+0.75Y, where C is consumption expenditure and Y is income. Calculate equilibrium level
of income when Investment is Rs 5000 crores.
Or
An increase of Rs 2000 crores in investment leads to rise in national income by Rs 1000 crores.
Find out marginal propensity to consume. (2 marks)

3. ‘As income rises, people tend to save more.’ Justify the given statement. (2 marks)

4. ‘Women’s health is a matter of great concern.’ Give two reasons in support of the statement
above.
Or
On the basis of data given below analyze comparatively percentage of regular salaried employee
in rural and urban areas. (2 marks)

Sector /distribution of Rural areas Urban areas

workforce (%)
Self employed 56% 43%
Regular salaried 9% 42%
employees
Casual wage workers 35% 15%

5. How Social and economic infrastructure are interrelated? (2 marks)

6. Giving valid reasons explain which of the following will be included in the estimation of national
income.
a. Payment of fee to a lawyer engaged by a firm.
b. Dividend received by Ram, a resident of India from foreign company.
c. Purchase of truck to carry goods by a production unit.

Or

Real GDP in 2019 is Rs 500 cores and Nominal GDP in 2019 is Rs 650 crores. Find the value of
price index. (3 marks)

7. Compare India and USA on the basis of ‘Government health spending as a percentage of GDP’.

India China USA Sri Lanka

Indicators
Infant 34 8 5.7 7.5
mortality
rate/1000
live births.
Under 5 39.4 9.3 6.6 8.8
mortality
rate/1000
live birth
Infant 88 99 95 99
immunized
DTP (%)
Government 3.9 5.7 16.8 3.0
health
spending as
a
percentage
of GDP (%).

Read the following text carefully and answer question no 8 and 9 given below.

Though the data on international poverty line for Pakistan is quite healthy, scholars using
the official data of Pakistan indicate rising poverty there. The proportion of poor in 1960s was
more than 40% which declined to 25% in 1980s and started rising again in 1990s. The reasons for
the slowdown of growth and re-emergence of poverty in Pakistan's economy, as scholars put it,
are agricultural growth and Food Supply situation were based not on an institutionalized process
 of technical change but on good harvest. When there was a good harvest, the economy was in
good condition, when it was not, the economic indicators showed stagnation or negative trends.
You will recall that India had to borrow from the IMF and World Bank to set right its Balance of
payments crisis; foreign exchange is an essential component for any country, and it is important
to know how it can be earned. If a country is able to build up its foreign exchange earnings by
sustainable export of manufactured goods, it need not worry. In Pakistan most foreign exchange
earnings came from remittances from the Pakistani workers in the Middle East and the exports
of highly volatile agricultural Products; there was also growing dependence on foreign loans on
the one hand and increasing difficulty in paying back the loans on the other.

However, during the last few years, Pakistan has recovered its economic growth and has
been sustaining. In 2015-16, the Annual plan 2016-17 reports that, the GDP registered a growth
of 4.7 %, highest when compared to the previous eight years. While agriculture recorded growth
rate far from satisfactory level, Industrial and Service sectors grew at 6.8 and 5.7 % respectively.
Many macroeconomic indicators have begun to show stable and positive trends. (3 marks)

8. Explain two reasons for the slowdown of growth and re-emergence of poverty in Pakistan.
(3 marks)

9. On what parameters can one say that Pakistan is recovering its economic growth? (3 marks)

10. ‘GDP as an index of welfare may understate or overstate welfare.’ Explain the statement using
examples of positive and negative externalities. (3 marks)

11. Explain the role of the following in correcting deficient demand in an economy.
A. Open market operations.
B. Taxation. (5 marks)

12. (a) Calculate the value of national income from the following data. (3 marks)

Particulars Rs in crores
Private final consumption expenditure 900

Profit 100
Government final consumption expenditure 400

Net indirect taxes 100

Net domestic capital formation 230

Change in stock 50
 Net factor income to abroad 40

Consumption of fixed capital 20

Net imports 30

(b)Value of intermediate goods is not included in the estimation of national income. Explain
giving reason. (2 marks)

Or

(a) Calculate NVA at factor cost from the following data: (3 marks)

Particulars Rs in crores
Total sales 2000
Change in stock (-)70
Production for self-consumption 120
Purchase of raw material 400
Exports 150
Electricity charges 100
Income tax 40
Goods and service tax 70
Subsidy 40

(b) Discuss in brief the circular flow of income in 2 sector economy. (2 marks)

13. (a) ’Global warming’ is human induced.’ Suggest any two methods to reduce human induced
global warming. (2 marks)

(b) Working in formal sector has benefits has benefits over informal sector. Discuss any two
advantages of working in Formal sector. (3 marks)