PRE-BOARD EXAMINATION (2023-24) CLs: I SUBJECT: ECONOMICS MARKING SCHEME, SECTION A: MACRO ECONOMICS 2 nf-lZ, 9) (©) Cash reserve ratio MARKS | (c) Both statements 1 and 2 are true OR (a) Statement 1 is true and statement 2 is false (a) There is a Capital Account Surplus of 30 million US Dollars vafafes (A) ex-ante saving (©) Credit side of capital account OR (@) Debit side of capital account Reserve Bank Of India (RBI) (d) Rationalisation of taxes in pro-poor direction. 1.67 (@) Assertion (A) is false but Reason (R)is tue. rls}ele|alay (@) Assertion (A) is false but Reason (R) is true The given statement can be defended on the following grounds, as GDP may not take into account: (i) Non-monetary exchanges like services of housewives. (1) (ii) Extemalities (benefits/harms) caused by human activities.(1) (iii) Distribution of Income (GDP). (1) (n0 marks to be allotted if no/wrong reason(s) are given) oR Reason : (i) Itis a final expenditure because itis an investment expenditure. (1.5) (ii) It is an intermediate expenditure because itis an expenditure on single use producer | goods. (1.5) “Autonomous transactions are those international economic transactions which are independent of the state of Balance of Payments (BOP). These transactions generally take place with ‘economic motive’. These transactions are called ‘above the line’ transactions in the Balance of Payments account. Whereas; ‘Accommodating transactions are those international economic transactions which are ‘undertaken (by competent authorities) to cover the surplus or deficit in Balance of Payments. These transactions are independent of any economic motive and are called “below the line’ transactions in the Balance of Payments account. 1S Ls B Government can impose higher rate of tax on income of the rich and on the goods consumed by the rich. This will bring down disposable income of the rich. The amount so collected can be spent on providing free services, like education, subsidized food to the poor people, e.g,, this will raise disposable income of the poor reducing the gap between rich and poor. 14 Effective Demand refers to that level of employment where Aggregate Demand (AD) is Page 1 of 6equal to Aggregate Supply (AS). O) : s pp nei Demand (AD) is less than ex-ante Aggregate Supply (AS): ead buyers are planning to buy less than what producers are planning to produce. It wi ht ereation of undesired inventories in the hands of producers. As result, producers mit plan to reduce the production. This mechanism will continue to operate tll the two for. become equal. (3) OR (i) Here, MPC = 1 Hence, Multiplier (K) =1/1 -MPc / 1-1 © So, Multiplier = «0 (infinity) 7) (ii) Here, MPS = 1 Now, K=1/MPS 1 Hence, Multiplier (K) = 1 (2) 15 | MONEY CREATION/DEPOSIT CREATION/CREDIT CREATION BY MERCIAL BANK Money creation (or deposit creation or credit creation) by the banks is determined by (i) the amount of the initial fresh deposits and (ii) the Legal Reserve Ratio (LRR) the minimum ratio of deposit legally required to be kept as liquid assets by the banks. It is assumed that all the money that goes out of banks is redeposited into the banks. Let the LRR be 20% and there is a fresh deposits of Rs.10009, As required the banks keep 20% i.e. Rs.2000 as reserves. Suppose the banks lend the remaining Rs.8000. Those who borrow, use this money for making payments. As assumed those who receive payments, put the money back into the banks. In this way banks receive fresh deposits of Rs. 8000. The banks again keep 20% i.e. Rs.1600 as reserves and lend Rs.6400, which is also 80% of the last deposit. The money again comes back to the banks leading to a fresh deposit of Rs. 6400.The money goes on multiplying in this way, and ultimately total money creation is Rs.50000. Given the amount of fresh deposit and the LRR, the total money creation is :Total money/credit creation =Initial deposit India has performed moderately over the years. Majority of its people still depend on agriculture. Infrastructure is lacking and more than one fourth of its population live below poverty line. () > Pakistan performed low because of political instability, overdependence on remittances and foreign aid along with volatile performance of agriculture. a > China has used the market system to succeed in raising the rate of growth in economy with stress on alleviation of poverty. ) (any other valid argument should be allotted marks) 31 Rural development is a comprehensive term which essentially focuses on action for the 4 development of areas that are lagging behind in the overall development of the village economy. ‘Some of the areas which are in need of fresh initiatives for rural development are: 1. Development of human resources like literacy, more specifically, female literacy, education and skill development. 2 a of human resources like health, addressing both sanitation and public ath. Honest implementation of land reforms. Development of the productive resources in each locality. Infrastructure development like electricity, irrigation, credit, marketing, transport facilities including construction of village roads and feeder roads to nearby highways, facilites for agriculture research-and extension, and information dissemination. 6. Special measures for alleviation of poverty and bringing about significant improvement in the living conditions of the weaker sections ofthe population, wae Page 4 of 6(Any three) OR Sustainable development - It refers to the development process that meets the needs of present gencration without compromising on the ability of the future generations to meet | their respective needs. | Use of Non-conventional Sources of Energy (any two) CNG in Urban Areas: In some cities of India, the use of Compressed Natural Gas. | (CNG) as fuel in public transport system has significantly lowered air pollution and the | air has become cleaner in the last few years. | Wind Power: In areas where speed of wind is usually high, wind mills can provide |_slecricity without any adverse impact onthe environment Th iil costs high but | the long term benefits easily absorb the cost incurred. (Any other | relevant point with explanation) | Education is an important source of human capital formation, Investment in education | stimulates economic development in the following ways: | (A) Raises production- Knowledgeable and skilled workers can make better use of | fsouees their disposal. It will increase production in the economy. An educated and trained person can apply his knowledge and skill at farm, factory and office to increase | production @ | (B) Raises efficiency and productivity- Investment in education increases efficiency and productivity, and hence yields higher income to the people.(1) (©) Brings positive changes in outlook and attitudes. - Knowledgeable and skilled people have modem outlook and attitudes; that they make rational choice in respect of places and jobs. () | (D) Improves quality of life. Education improves quality of life as it provides better job, | high income and improves health. It results in better standard of living, La) | The introduction of High Yielding Varieties (HYVs) of seeds and the increased use of fertilisers, pesticides and irrigation facilities are known collectively as the Green Revolution which resulted in the increase in crop yield needed to make India self- sufficient in food grains. Various land reforms were also undertaken in order to make Green Revolution successful. Thus, Green Revolution included the following measures : | ( Use of High Yielding Varieties (HYVs) of seeds (i) Increase in irrigation cover (iii) Use of insecticides and pesticides (iv) Consolidation of holdings (v) Rural electrification (vi) Improvement in rural infrastructure (vii) Agricultural credit facilities (viii) Use of chemical fertilisers Green Revolution was implemented because of the following reasons : Food Security, Low Irrigation Facility, Conventional Methods OR 1. Little industrialisation and decline of handicrafts 2._Low agricultural output and high imports of grains. Page 5 of 63. Low figure of national red extreme and per capita income which show poverty. Very sluggish economic progress." ‘Unemployment and underemployment. 4 Very high infant mortality rate, low life expectancy and low standard of living. (L446) apa 34 (A) The environment performs four vital functions (i) it supplies resources: resources here include both renewable and non-renewable resources. Renewable resources are those which can be used without the possibility of the resource becoming depleted or exhausted. That is, a continuous supply of the resource remains available. Examples of renewable resources are the trees in the forests and the fishes in the ocean, Non-renewable resources, on the other hand, are those which get exhausted with extraction and use, for example, fossil fuel (ii) it assimilates waste (ji) it sustains life by providing genetic and bio diversity and (iv) it also provides aesthetic services like scenery ete. @) (B) The rising population of the developing countries and the affluent consumption and production standards of the developed world have placed a huge stress on the environment. QB) Page 6 of 6