XII ECONOMICS

INDIVIDUAL APPROACH BEST EDUCATION

By G.S.Behl (9810332316)

S.NO. SECTION A: MACRO ECONOMICS MARKS

1 (c) Cash reserve ratio 1
2 (c) Both statements 1 and 2 are true 1
OR
(a) Statement 1 is true and statement 2 is false
3 (d) There is a Capital Account Surplus of 50 million US Dollars. 1

4 (A) ex-ante saving 1

5 (c) Credit side of capital account 1
OR
(d) Debit side of capital account
6 Reserve Bank Of India (RBI) 1
7 (d) Rationalisation of taxes in pro-poor direction. 1
8 1.67 1
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 The given statement can be defended on the following grounds, as GDP may not take 3
into account:
(i) Non-monetary exchanges like services of housewives. (1)
(ii) Externalities (benefits/harms) caused by human activities.(1)
(iii) Distribution of Income (GDP). (1)
(no marks to be allotted if no/wrong reason(s) are given)
OR
Reason :
(i) It is a final expenditure because it is an investment expenditure. (1.5)
(ii) It is an intermediate expenditure because it is an expenditure on single use
producer
goods. (1.5)
 XII ECONOMICS
INDIVIDUAL APPROACH BEST EDUCATION
By G.S.Behl (9810332316)
12 Autonomous transactions are those international economic transactions which are 1.5
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 1.5
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.
13 Government can impose higher rate of tax on income of the rich and on the goods 4
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 4
equal to Aggregate Supply (AS). (1)

If ex-ante Aggregate Demand (AD) is less than ex-ante Aggregate Supply (AS), it means
buyers are planning to buy less than what producers are planning to produce. It will lead
to creation of undesired inventories in the hands of producers. As a result, producers
might plan to reduce the production. This mechanism will continue to operate till the
two forces become equal. (3)
OR
(i) Here, MPC = 1
Hence,
Multiplier (K) =1/1 –MPC
= 1/ 1 - 1
=∞
So, Multiplier = ∞ (infinity) (2)
(ii) Here, MPS = 1
Now, K = 1/MPS
=1/1
Hence, Multiplier (K) = 1 (2)
 XII ECONOMICS
INDIVIDUAL APPROACH BEST EDUCATION
By G.S.Behl (9810332316)
15 MONEY CREATION/DEPOSIT CREATION/CREDIT CREATION BY MERCIAL BANK 4
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.10000. 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×1/
16 (a) Y= C + I 𝐿𝑅𝑅 (3) 6

Y= (100+ 0. 8Y) +200

= 300+0.8 Y
Y-0.8 Y= 300
0.2 Y =300
Y= 300/0.2 =Rs.1500 crores
(b) C= C + 0.8 Y (3)
Substitute the value of Y = 1500
= 100+ 0.8(1500) is required to
= 100 + 1200 = Rs.1300 crores gap.

Savings = Income (Y)- Consumption (C) aggregate supply

= 1500 - 1300
= Rs.200 crores an Economy: In the
OR supply of
Inflationary gap: The excess of Aggregate Demand above the level
that maintain full employment level of equilibrium is termed as
inflationary (1.5)
Excess Demand: is the amount by which the aggregated demand
exceeds at full employment level. It causes inflation. (1.5)
 XII ECONOMICS
INDIVIDUAL APPROACH BEST EDUCATION
By G.S.Behl (9810332316)
Role of Open Market operations in Correcting Inflationary Gap in case of
Inflation, the Central Bank sell the securities to the public. It reduces

money in an economy and credit / money creation power of Commercial Banks. Thus,
the Aggregate Demand decreases and ultimately the economy attains equilibrium. (3)
17 Income method 6
NDPFC =COE+ OS + Mixed income
NDPFC= COE+ Rent+ Interest+ Profit+ Mixed Income
NDPFC =500+100+150+350+400
NDPFC = 1500

NNPMP = NDPFC+NFIA+NIT NNPMP (1)

= 1500+(-)20+100 NNPMP= 1580
(0.5)
Crore

Expenditure method
(1.5)
GDPMP=PFCE +GFCE + NDCF +CFC+ NET EXPORT
GDPMP=900+450+280+100+(-)30 GDPMP=1700
Crore (1)

(0.5)
NNPMP= GDPMP-CFC+NFIA
NNPMP=1700-100+(-)20
NNPMP=1580 Crore (1.5)
SECTION B: INDIAN ECONOMIC DEVELOPMENT

18 (C) Brain drains 1

19 (B) Disguised Unemployment 1
OR
(B) Self-employed worker
20 (c) Both statements 1 and 2 are true 1
21 (D) Establishment of Metro in Delhi 1
 XII ECONOMICS
INDIVIDUAL APPROACH BEST EDUCATION
By G.S.Behl (9810332316)
22 (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct 1
explanation of Assertion (A).
OR
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A).
23 (D) General Agreement on Tariffs and Trade(GATT) 1
24 (b) industries 1
25 (A) NABARD 1
26 (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation 1
of Assertion (A).
OR
(d) Assertion (A) is false but Reason (R) is true.
27 (A) Direct 1
28 It is true that India and Pakistan started their journey of development nearly at the 3
same time in a similar way. Both the nations adopted policies like economic planning,
dominance of public sector, high public expenditure, etc. In the post 1947 period.
There has been a decline in the annual growth of GDP in Pakistan over the year,
whereas
India met with moderate increase in GDP. The probable reasons for slower growth in
Pakistan are political instability overdependence on remittance and foreign aid along
with volatile performance of agricultural sector However, India met with greater
success owing to efficient economic planning and better implementation as compared
to Pakistan.
29 (i) To get raw materials from India at cheap rates to be used by upcoming 3
modern industries in Britain;
(ii) To sell finished product of British industries in Indian market at higher prices.
or
The two main land reforms undertaken in India are as follows :

(i) Abolition of Intermediaries – The idea behind this move was that ownership
would give incentives to the tillers to make improvements in agricultural output.
Almost 200 lakh tenants came into direct contact with the government and were freed
from exploitation.
(1.5)
 XII ECONOMICS
INDIVIDUAL APPROACH BEST EDUCATION
By G.S.Behl (9810332316)
(ii) Consolidation of Land Holdings – As scattered and fragmented agricultural land
is unproductive, the farmer is given one big piece of land in lieu of small and
fragmented
fields. (1.5)
30 i. Till the late 1970s, all the three countries were maintaining the same level of 4
low
development. (1)

ii. Over the last three decades, the three countries have taken different levels of
development

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. (1)
Pakistan performed low because of political instability, overdependence on
remittances and foreign aid along with volatile performance of agriculture.
(1)
China has used the market system to succeed in raising the rate of growth in
economy with stress on alleviation of poverty. (1)
(any other valid argument should be allotted marks)
 XII ECONOMICS
INDIVIDUAL APPROACH BEST EDUCATION
By G.S.Behl (9810332316)
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. Development of human resources like health, addressing both sanitation and
public health.
3. Honest implementation of land reforms.
4. Development of the productive resources in each locality.
5. Infrastructure development like electricity, irrigation, credit, marketing, transport
facilities including construction of village roads and feeder roads to nearby
highways, facilities 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 of the population.
(Any three)

OR

Sustainable development - It refers to the development process that meets the needs
of present generation 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
electricity without any adverse impact on the environment. The initial cost is high but

the long term benefits easily absorb the cost incurred. (Any other
relevant point with explanation)
 XII ECONOMICS
INDIVIDUAL APPROACH BEST EDUCATION
By G.S.Behl (9810332316)
32 Education is an important source of human capital formation. Investment in education 4
stimulates economic development in the following ways:
(A) Raises production- Knowledgeable and skilled workers can make better use of
resources at 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. (1)
(B) Raises efficiency and productivity- Investment in education increases efficiency
and productivity, and hence yields higher income to the people.(1)
(C) 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. (1)
(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. (1)
33 The introduction of High Yielding Varieties (HYVs) of seeds and the increased use of 6
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 :
(i) Use of High Yielding Varieties (HYVs) of seeds
(ii) 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.
 XII ECONOMICS
INDIVIDUAL APPROACH BEST EDUCATION
By G.S.Behl (9810332316)
3. Low figure of national income and per capita income which showed extreme
poverty.
4. Very sluggish economic progress.’
5. Unemployment and underemployment.
6. Very high infant mortality rate, low life expectancy and low standard of living.
(1 ½*4=6)
34 (A) The environment performs four vital functions (i) it supplies resources: resources 6
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 (iii) it sustains life by
providing genetic and bio diversity and (iv) it also provides aesthetic services like
scenery etc. (3)

(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. (3)