ISC- 2023

Practice Paper 5

Class -XII Maximum Marks- 80

Subject- Economics Time allowed- 3Hours
Candidates are allowed 15 minutes for only reading the paper.
They must not start writing during this time.

Answer all questions in Section A, Section B and Section C.

Section A consists of objective / very short answer type questions.
Section B consists of short answer type questions.
Section C consists of long answer type questions
The intended marks for questions or parts of questions are given in
brackets[ ].
The question paper consists of six printed pages

SECTION A – 16 MARKS
Question 1
i) Which of the following is NOT a reason for the downward slope of demand
curve? [1]
a. Income Effect
b. Substitution Effect
c. Giffen effect
d. Law of diminishing MU

ii) Indifference curve is convex to the origin due to [1]

a. Assumption of non-satiety
b. Assumption of transitivity
c. Law of Diminishing Marginal returns
d. Law of DMRS

iii) When the demand for a commodity increases by 10%, following a fall in
the price by 8%, the demand curve will be: [1]
a. horizontal
b. downward sloping gentle sloped straight line starting from Y-axis
c. downward sloping steeper straight line touching the X, axis
d. parallel to the price axis.

iv) The given table reflects [1]

Tax base in ₹ Tax rate in %

1000 10

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 2000 10
a. Progressive tax
b. Proportional tax
c. Regressive tax
d. Degressive tax

v) The Supply curve in the market period is [1]

a. Horizontal
b. Downward sloping
c. Steeper upward sloping
d. Vertical, parallel to Y axis

vi) The components currency held by public + demand deposits held by

commercial banks+ other deposits with RBI represents [1]
a. M0
b. M1
c. M3
d M4

vii) The stage of Diminishing returns in the short run production function
starts from the point where, [1]
a. TP = MP
b. MP = AP at minimum point of AP
c. MP=AP at maximum point of AP
d. MP is maximum

viii) Under Perfect competition, P= AR=MR because [1]

a. Price can be raised continuously
b. Price discrimination
c. Price remains constant
d. None of the above

ix) Which of the following type of market does not require to incur selling
costs? [1]
a. Monopoly
b. Oligopoly
c. Monopolistic competition
d. Monopoly and Perfect competition

x) What is understood by Private final consumption expenditure? [1]

xi) Why is the demand curve indeterminate for an oligopolist? [1]
xii) If MPS =0.2, what is the value of Investment multiplier? [1]
xiii) What do you understand by Dirty floating? [1]
xiv) Define Fiat money? [1]

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xv) Mention one limitation to the process of credit creation. [1]

SECTION B (32 MARKS)

Question 2
i) The initial demand for a commodity was 100 units. With a rise in price by
₹5, the demand decreases by 5 units. The elasticity of demand being 1.2,
calculate the price before the change in demand. [2]
ii) “Labour unrest and consequent wage hike led to prices of cotton textile
products soaring in Surat.” Analyse the statement with reference to the
relationship between cost of production and supply, stating what would
happen to supply in the given situation. [2]

Question 3
i) Distinguish between impact and incidence of a tax. [2]
ii) What is the implication of intense competition in an oligopoly market? [2]

Question 4
i) Mention one difference between potential supply and actual supply. [1]
ii) Explain the shape of the AVC curve in the short run. [3]

Question 5
i) Draw and compare between the AR curves faced by a monopolist and that
under Monopolistic competition. [2]
ii)Explain what happens to equilibrium income when planned saving is
greater than planned investment in the economy? [2]

Question 6
i) Can a producer continue to produce even while making losses in the short
run? Explain. [2]
ii) The gap between ATC and AVC curves decreases with an increase in the
output. Explain. [2]
OR
i) Explain how money plays a role in ‘distribution of national income’ and
‘determination of factor prices’. [4]

Question 7
i) Why is the Indifference curve downward sloping? [2]
ii) Explain regressive taxation with a numerical example. [2]
OR
i) Explain the properties of a Savings function. [4]

Question 8
i) Differentiate between the concepts of Real cost and Social cost. [2]
ii) Explain the ‘discounting of bills’ function of commercial banks. [2]

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Question 9
i) State two assumptions of Law of Equi marginal utility. [2]
ii) Why is the third stage in Law of variable proportions known as the stage
of negative returns? ` [2]

SECTION C (32 MARKS)

Question 10
i) Mention two implications of Floor Price. [2]
ii) Explain with a schedule and a diagram the determination of equilibrium
price and quantity in a free market. [6]

Question 11
i) Prepare a hypothetical revenue schedule to show the values of TR, AR in a
imperfectly competitive market. [2]
ii) Discuss the following methods of Debt redemption:
a) Terminal annuities
b) Capital levy
c) Debt conversion
d) Statutory reduction in rate of interest [6]

Question 12
i) Briefly mention the steps used in calculation of Nation income using
Income method. [2]
ii) Calculate NDPmp using both Income method and Expenditure method.[6]
Items ₹ in crores
i) Government final consumption expenditure 1000
ii) Profits 700
iii) Net indirect taxes 110
iv) Private final consumption expenditure 1500
v) Net exports (-) 20
vi) Compensation of employees 1200
vii) Rent 200
viii) Interest 270
ix) Net factor income from abroad 30
x) Mixed income 600
xi) Gross domestic capital formation 700
xii) Net domestic capital formation 600

OR
i) How is the value of Gross national disposable income obtained? [2]
ii) Calculate Domestic Income and National income using expenditure
method from the given values. [6]

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Items ₹ in crores
1. Wages and salaries 750
2. Rent 150
3. Private Final Consumption Expenditure 680
4. Net Indirect Taxes 120
5. Royalty 100
6. Profits 350
7. Government Final Consumption Expenditure 1,350
8. Net imports 80
9. Social security contribution to employers 110
10. Social security contribution to employees 90
11. Consumption of fixed capital 170
12. Net factor income to abroad (-)20
13. Interest 450
14. Gross domestic capital formation 250

Question 13
Read the passage given and answer the questions that follow:

The Indian Rupee depreciated by around 10% against the US dollar and the
rupee was the worst-performing Asian currency in 2022.

This decline was mainly on account of appreciation in the US currency on

safe haven appeal amid fears of recession and inflation across many parts of
the world and Russia-Ukraine war.
How did the Rupee Perform in 2022?
During the year, the rupee fell to a lifetime low of 83.2 against the dollar.
Compared to rupee, depreciation of other Asian currencies was to a lesser
extent.
During the year, the Chinese Yuan, Philippine Peso and Indonesian Rupiah
fell around 9%. South Korean Won and Malaysian Ringgit declined by nearly
7% and 6%, respectively.
However, the Reserve Bank of India (RBI) heavily intervened in the forex
market to defend rupee. Since the beginning of 2022, the country’s foreign
exchange reserves have fallen by USD 70 billion. It stood at USD 562.81
billion as of 23rd December 2022.

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Reserves have witnessed a bit of erosion but the central bank is now starting
to again build up its reserves and that would act as a buffer in times of
uncertainty.
a) What was the main reason for fall in external value of rupee against
dollars in 2022? [2]
b) How has the Central bank of the country tried to defend the Indian
currency? [2]
c) Discuss any two measures to restore equilibrium in BOP. [4]

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