KENDRIYA VIDYALAYA SANGAYHAN

SUBJECT -ECONOMICS (030)

CLASS-XII Sample Paper 2
Marking scheme
Part A- Macro Economics

Sr no Answers Marks

1 ( a ) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation for 1
Assertion (A) .

2 ( c ) Credit side of capital account 1

3 c) Banker to Government 1

4 b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation 1
for Assertion (A).

5 (d ) Assertion (A) is false but Reason (R) is true. 1

Or
(a) ₹ 140

6 0.3 1
Or
2

7 (a ) Commercial banks 1

8 (c ) Autonomous transactions 1
or
3.(c)-(iii)

9 d) Assertion (A) is false but Reason (R) is true. 1

10 (d ) Assertion (A) is false but Reason (R) is true. 1

11 (1 ) GDPmp = PFCE+GFCE+GDCF+ (X-M) 3

= 900+400+250+(-30)
= ₹ 1520
(2 ) NNPfc = GDPmp +NFIA-CFC-NIT
= 1520+ (-40 )- 20 -100
=1520 – 160ss
National income (NNPfc ) = ₹ 1360

12 3

sr Autonomous items Accommodating items

n
 o

1 These refer to those 1. These are not related to profit

economic transactions which maximisation.
take place due to economic
motives i.e. these are related
to the transaction which are
determined by profit
maximisation.

2 These transactions take place 2. These transactions take place on

on both account current and capital account only.
capital account.

3 These are known as ‘above These are known as ‘above the line
the line items’ items’

0r
The rate at which currency of one country is converted into currency of the country, is called
foreign exchange rate.

Fixed exchange rate- Fixed exchange rate system refers to the system in which the rate of
exchange for a currency is fixed by the government. Under this system, government is
responsible to stabilise the exchange rate.

Flexible exchange rate system -refers to a system exchange rate between currencies of
different countries is determined by the market forces of demand and supply.

13 Given that MPC = 0.75 and MPS =0. 25 and Investment is increased by 4
(2+2)
₹ 2000 crore.
(a ) Change in Income (∆Y)
K = 1/1-MPC = 1/1-0.75 =4
We know K=∆Y/∆I
4=∆Y/2000
∆Y= ₹ 8000 crore.
(a) Change in consumption expenditure (∆C)
∆C =∆Y- ∆I
∆C = 8000-2000
∆C = ₹6,000 crores.

14 Two Fiscal measures which may be used to solve the problem of inflation are: 4
( a) As increase in Taxes
(b ) Decrease in Government Spending
15 (a ) The central bank acts as the banker to the government ,maintain accounts of 4
government for the purpose of accepting deposits and advancing loans . The Central bank
purchases and sells govt securities in the open market operations on behalf of the govt.
( b) open market operations (OMO) -refers to buying and selling of government securities
(bonds) by the central bank from /to the general public.

By selling government securities the central bank soak liquidity from the economy.
By purchasing government securities the central bank releases liquidity in the economy .
or
Working of credit creation process : Total credit = initial deposits ×1/ LRR
Initially, customer deposits ₹ 10,000 and LRR is 20 % . Bank keeps ₹ 2000 reserves to meet
customers’ obligations and give loans of ₹ 8000. Those who borrow will spend this money
and same ₹ 8000 will ultimately come back to bank as fresh deposits .And this process goes
continuously until initial deposits becomes equals to total reserves. Credit creation process is
give below:

Total deposits creation = Initial deposits ×1/ LRR = 1000 0× 1/20 = 10000 × 5 = ₹ 50000

16 ( a) The given statement is correct .Real GDP is a better indicators 6

Of economic growth than Nominal GDP as it not affected by changes in general price level.
Numerical example:

Goo Price of Price of Quantity of Nominal GDP Real GDP

ds current base current (P0Q1)
(P1Q1)
year (P1 in year year (Q1 in
₹) (P0 in units)
₹)

A 20 10 100 2,000 1,000

B 10 5 200 2,000 1,000

C 30 20 50 1,500 1,000

ℇP1Q1=5,500 ℇP0Q1=3,000

In the above example the difference between Real GDP and Nominal GDP is 5,500-3,000=
2,500 .
This is the only the monetary difference as the quantity sold in the market remains
unchanged and the variation on the value of GDP is merely due to the change in the prices in
the economy.
( b) Depreciation on capital asset = cost of the asset- scrap value / estimated life of the
capital asset,
Depreciation= 5000-0/40
 Depreciation = ₹ 125 crore

17 (a) It is revenue expenditure as it neither creates any asset nor reduces any liability of the 6
government.
(b) It is a capital expenditure as it increases assets of the government.
(c) It is a capital expenditure as it reduces liability of the government.
(d) It is revenue expenditure as it neither creates any asset nor reduces any liability of the
government.
(e) It is a capital expenditure as it increases assets of the government.
(f) It is a revenue expenditure as it neither creates any asset nor reduces any liability of
the government.
Or
(a ) it refers to change in direction of resources from one use to other .The govt seeks to re
allocate resources with a view to balance the goals of profit maximisation and social welfare.
Unlink private enterprises, govt targets social welfare also along with profit motive.
Production of goods which are injurious to health is discouraged through heavy taxation .on
the other hand, production of socially useful goods is encouraged through subsidies.

( b) revenue receipts are those receipts of govt during the fiscal year which do not affect
asset or liability status of the government .Example tax receipts , non- tax receipts.
Capital receipts are those receipts which create liability for government and reduce govt
asset. Example borrowings, disinvestment , recovery of loan.

18 c) Trading in wheat 1

19 (b) three 1
or
c) both a) and b)

20 (C ) 1988 1
Or
( c) (ii), (i), (iii), (iv)

21 a) National Bank for Agriculture and Rural Development 1

22 (D)-iv 1

23 ( c ) Statement-I is true, Statement-II is false. 1

24 ( c) Statement-I is true, Statement-II is false. 1

25 (b) CNG 1
 Or
(c ) Brundtland Commission.

26 (a) Both the statements are true. 1

27 (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation 1
of Assertion (A).

28 strategies for sustainable Development: 3

i. It is necessary to limit the human population to the carrying level of
environment.
ii. Technical progress should be input efficient not input consuming.
iii. Rate of depletion of non-renewable resources should not exceed rhe arte of
their creation.
Protection from pollution to health and quality of life

29 Micro credit refers to credit and other financial services provided to the poor through Self 3
Help Groups (SHGs) and non government organisations. The Self Help Groups are playing a
crucial role in meeting the credit requirements of the poor by inculcating saving habits
among the rural households.
Or
Yes, I agree with given statement.
No paid leave – In a casual job, the worker isn't paid for any leave. Even in the case of sick
leave or annual leave, the employee isn't paid.
2. No regular income – For any employee, regular income is one important factor behind
their motivation to work.

30 A) Explain the table 2+2

B) India has most skewed Sex ratio

31 There is only one CGST and uniform SGST rate across all the states unlike the separate tax 4
rates in old tax structure. Cascading effect is reduces which makes GST very simple and easy
to compute. Taxpayers' burden is lessened as it is expected that GST would reduce the prices
of goods and commodities.
Or
(i) Abolition of Intermediaries - The main objective of land reforms was to abolish
intermediaries like zamindars, etc. With the abolition of intermediaries, the tenants came
4
into direct contact with the government and were freed from exploitation by the zamindars.
Moreover, the ownership of land gave tenants the incentive to increase output in agriculture.
(ii) Land Ceilings - This means fixing the maximum size of land which could be owned by an
individual. The purpose of the land ceiling was to promote equity in agriculture and reduce
the concentration of land ownership in a few hands.

32 1. Cheap inputs are used so good for countries like India. 4

2. Healthy and tasty food as it avoids the use of chemical based inputs.
 3. Sustains the fertility of soil.
4.Source of employment
5. Environment friendly and promotes sustainable development

33 Rural banking has raised the level of rural farm and non-farm output, income and 6
employment, especially after the Green Revolution.
The following are the advantages of an increase in rural banking facilities
(i) Raising farm and non-farm output by providing services and credit facilities to farmers.
(ii) Generating credit for self-employment schemes in rural areas.
(iii) Achieving food security which is clear from the abundant buffer stocks of grains.
However, the expansion and promotion of rural banking sector have taken a back seat after
reforms, and it suffers from the following limitations
(i) Small and marginal farmers receive only a very small portion of the institutional credit.
(ii) Rural banking is suffering from the problems of a large amount of over dues and default
rate.
(iii) The source of institutional finance is inadequate to meet the requirements of
(iv) There exist regional inequalities in the distribution of institutional credit.
To improve the situation, the banks should build relationship with farmers. Also, the farmers
should be made to understand the importance of thrift and of efficient utilization of the
loaned amount.
Or
1. Regulation of markets.
2. Encouraging co-operating marketing.
3.Minimum Support Price
4. Improving physical infrastructure.
5. provisions of storages and warehousing
6. Market information: Market information is provided to the farmers through TV and Radio.
Kishan channel has been started for this purpose.
34 Industrial Sector Reforms 6
The following steps were taken in the Industrial Policy announced on July, 24 1991 to
deregulate the industrial sector:
(i) Abolition of Industrial Licensing :Government abolished the licensing requirement of all
industries, except for the industries, which are: Liquor, Cigarettes, electronic, aerospace,
Defence equipment, Industrial explosives , Dangerous chemicals, drugs and
pharmaceuticals.
(ii) Contraction of Public Sector :The number of industries reserved for the public sector was
reduced from 17 to 8 to 3 (Railways, Atomic energy Defence ) .Presently, only two industries
are ’ reserved for public sector. They are: Railways and atomic energy.
(iii) De-reservation of Production Areas : The production areas which were earlier reserved
for SSI were de-reserved but limit of investment for SSI was raised to 1 crore (presently 5
crores)
(iv) Expansion of Production Capacity: Producer’s were allowed to expand their production
capacity according to market demand. The need for licensing was abolished.
(v) Freedom to Import Capital Goods: The business and production units were given freedom
to import capital goods to upgrade their technology.
Vi) Abolition of Monopolistic Restrictive Trade Practices (MRTP) act 1969: All the firms with
the investment of Rs.100 crore or more were called MRTP firms and were subjected to
several restrictions ( to prevent creation of monopolies or concentration of economic powers
in few hands). Now these firms do not need to take prior approval from government for
taking investment decisions. MRTP act was replaced by Competition Act-2002