By QB365 on 31 Dec, 2022
QB365 provides a detailed and simple solution for every Possible Questions in Class 12 Economics Subject - Important 3 Mark English Medium. It will help Students to get more practice questions, Students can Practice these question papers in addition to score best marks.
12th Standard
Economics
Answer all the following Questions.
Describe the different types of economic systems.
Distinguish between Capitalism and Globalism.
Differentiate between personal and disposable income.
What is the solution to the problem of double counting in the estimation of national income?
Explain Keynes’ theory in the form of flow chart.
Explain about aggregate supply with the help of diagram.
Mention the differences between accelerator and multiplier effect.
Specify the limitations of the multiplier.
Write a note on metallic money.
Write the types of inflation
Give a brief note on NBFI.
What are the functions of NABARD?
Compare the Classical Theory of international trade with Modern Theory of International trade.
What are import quotas?
What is Multilateral Agreement?
State briefly the functions of SAARC.
Mention any three similarities between public finance and private finance.
What are the functions of a modern state?
What are the causes of water pollution?
State the meaning of e-waste.
Elucidate major causes of vicious circle of poverty with diagram
Distinguish between functional and structural planning.
What are the functions of Statistics?
Discuss the important statistical organizations (offices) in India.
Draw the flow chart of Functioning of an Economy Based on Activities
List out a few statistical problems in calculating national income.
Explain how it might be possible for the unemployment rate to decline even though the number of unemployed is growing
Draw the diagram of induced investment and autonomous investment.
In the below given diagram
I. Why does the consumption curve start from Y axis?
II. What is the significance of the 45o
Explain “The Keynes Equation” Keynes equation is expressed as:
Answers
Capitalism:
(i) The means of production are privately owned.
(ii) Manufacturers produce goods and services with profit motive.
(iii) Individual can take up any occupation and develop any skill. E.g. USA.
Socialism:
(i) All resources are owned and operated by the government.
(ii) Public welfare is the main motive.
(iii) There is equality in the distribution of income and wealth. E.g. China
Mixedism:
(i) Both private and public sectors co-exist and work together.
(ii) Resources are owned by individuals and the government. E.g. India
S.No. | Capitalism | Globalism |
1 | Also called free economy or laissez faire or market economy where the role of the government is minimum | Also called extended capitalism. It connects nations together through international trade |
2 | Market determines economic activities within a nation | It aims at global development Manfred |
3 | Adam Smith is the father of the capitalism | D. Steger (2002) coined the term |
S.No | Personal Income | Disposable Income |
---|---|---|
1 | It is the total income received by the individual before payment of direct taxes in a year | It is the individual's income after the payment of income tax |
2 | Disposable income = Personal income - Direct tax |
(i) To avoid double counting, either the value of the final output should be taken into the estimate of GNP or the sum of values added should be taken.
(ii) The value of the final product is derived by the summation of all the values added in the productive process.
(iii) Any commodity which is either raw material or intermediate good should not be included.
(iv) For example, value of cotton enters value of yarn as cost, and value of yarn in cloth and that of cloth in garments.
(v) At every stage only the value which is added should be considered.
(i) Aggregate supply refers to the value of total output of goods and services produced in an economy in a year ie national product or income.
(ii) The components of aggregate supply are:
(iii) Aggregate (desired) consumption expenditure (C)
(iv) Aggregate (desired) private savings (S)
(v) Net tax payments (T)
(vi) Personal (desired) transfer payments to the foreigners (Rf)
AS = C + S + T + Rf
In this figure 2 aggregate supply curves are drawn for the assumption of fixed money wages and variable wages.
Explanation
(i) Z Curve is linear (fixed money wages)
(ii) Z1 curve is non-linear (wage rate increases with employment)
(iii) When full employment level of Nf is reached output cannot be increased by employing more men.
(iv) So aggregate supply curve becomes inelastic (Vertical straight line).
(v) In reality aggregate supply curve will be like Z1 .
(vi) If prices are high and wages low, the producers will employ more labourers.
(vii) 4YAggregate supply is an important factor in determining the level of economic activity.
S. No | Accelerator Effect | Multiplier Effect |
1. | First developed by R. F. Khan redefined by Keynes | Developed by J.M. Clark. Further developed by Hicks, Samuelson |
2. | It is the ratio of the change in national income to a change in investment. \(K=\frac{\Delta Y}{\Delta I}\) |
It is the ratio between induced investment and an initial change in consumption \(\beta=\frac{\Delta \mathrm{I}}{\Delta \mathrm{C}}\) |
(i) Payment towards past debts
(ii) Purchase of existing wealth
(iii) Import of goods and services
(iv) Non availability of consumer goods
(v) Full employment situation
(i) After the barter system and commodity money system, modern money systems evolved.
(ii) Metallic standard is the premier one.
(iii) Some kind of metal, gold or silver is used to determine the standard value of the money and currency.
(iv) Standard coins made out of the metal are the principal coins used under the metallic standard.
(v) These Standard coins are full bodied or full weighted legal tender.
(vi) Their face value is equal to their intrinsic metal value.
(i) On the basis of speed there are four types of inflation - Creeping inflation, Walking Inflation, Running inflation, Galloping inflation.
(ii) Demand-Pull inflation, Cost-Push inflation.
(iii) On the basis of inducement - currency inflation, credit inflation, deficit induced inflation, profit induced inflation, scarcity induced inflation, tax induced inflation.
(i) A non-banking financial institution or company is a financial institution that does not have a full banking license or is not supervised by the central bank.
(ii) They receive deposits and give loans.
(iii) They mobilize people's savings and use the funds to finance expenditure on investment activities.
(iv) The undertake borrowing and lending in the money and capital markets.
(v) They are classified into Stock Exchange and Other Financial institutions.
(vi) Under other financial institutions come Finance Companies, Finance Corporations, Chit Funds, Building Societies, Issue Houses, Investment Trusts, Unit Trusts and Insurance Companies.
1) NABARD acts as a refinancing institution for all kinds of production and investment credit to agriculture, small-scale industries, cottage and village industries, handicrafts, rural crafts and real artisans to promote integrated rural development.
2) It provides short-term, medium term and long-term credit to state co-operative Banks, RRBs, LDBs and other financial institutions approved by RBI.
3) NABARD gives long-term loans (20 Years) to State Government to enable them to subscribe to the share capital of co-operative credit societies.
4). It gives long-term loans to any institution approved by the Central Government or contribute to the share capital or invests in securities of any institution concerned with agriculture and rural development.
5) NABARD co-ordinates the activities of Central and State Governments, Planning Commission and all India and State level institutions entrusted with the development of small scale industries, village and cottage industries, rural crafts, industries in the tiny and decentralized sectors
6) It has the responsibility to inspect RRBs and CO-operative banks, other than primary co-operative societies.
7) It maintains a Research and Development Fund to promote research in agriculture and rural development
S.No | Classical Theory of International Trade |
Modern Theory of International Trade |
---|---|---|
1 |
International trade is on the basis of labour theory of value.
|
International trade is on the basis of general theory of value. |
2 | It presents a one factor (labour) model. | It presents a multi factor (labour and capital) model. |
3 | It attributes the differences in the comparative costs to differences in the productive efficiency of workers in the two countries. |
It attributes the differences in comparative costs to the differences in factor endowments in the two countries. |
(i) It is a trade restriction that sets a limit on the quantity of a good that can be imported into a country in a given period of time.
(ii) Quotas are used to benefit the producers of good in that economy.
(i) It is a multinational legal or trade agreements between countries.
(ii) It is an agreement between more than two countries but not many.
The main functions of SAARC are as follows.
1) Maintenance of the cooperation in the region.
2) Prevention of common problems associated with the member nations.
3) Ensuring strong relationship among the member nations.
4) Removal of the poverty through various packages of programmes.
5) Prevention of terrorism in the region.
Rationality
1. Both public finance and private finance are based on rationality.
2. Maximization of welfare and least cost factor combination underlie both.
Limit to borrowing
1. Both have to be restrained with borrowing.
2. Government cannot live beyond its means.
3. There is a limit to deficit financing by the state.
Resource utilisation
1. Both have to make optimum use of their limited resources.
Administration
1. If the administrative machinery is inefficient and corrupt it will result in wastages and losses.
Defence
1. The Government protects the people from external aggression and internal disorder.
2. Through police and military forces it renders protective services.
Judiciary:
1. It provides adequate judicial structure to render justice to all citizens.
Enterprises
1. The regulation and control of private enterprise comes under the government.
Social Welfare:
1. The state provides education, social security, social insurance, health and sanitation for the people.
Infrastructure
1. Modern States build the base for the economic development of the country by creating social and economic infrastructure.
Macro-economic policy
1. The Government follows fiscal policy and monetary policy to achieve macro economic goals.
Social Justice
1. During the process of growth certain sections of the economy gain at the cost of others.
2. Government intervenes with fiscal measures to redistribute income.
Control of Monopoly
1. State intervenes through control of monopolies and restrictive trade practices to curb concentration of economic power.
Discharge of sewage and waste water:
(i) Sewage, garbage and liquid waste of households, agricultural runoff and effluents from factories are discharged into lakes and rivers.
(ii) These wastes contain harmful chemicals and toxins which make the water poisonous for aquatic animals and plants.
Dumping of solid wastes:
(i) The dumping of solid wastes and litters in water bodies cause huge problems.
Discharge of industrial wastes:
(i) Industrial waste contains asbestos, lead, mercury, grease oil and petrochemicals.
Oil Spill:
(i) Sea water gets polluted due to oil spilled from ships and tankers.
Acid Rain:
(i) When the acidic particles caused by air pollution mix with water vapour, it results in acid rain.
Global warming:
(i) The increase in water temperature affects aquatic plants and animals.
Eutrophication:
(i) The increased level of nutrients in water depletes oxygen in water and this negatively affects fish and other aquatic animal population.
(i) Electronic waste is the new by product of the Info Tech society.
(ii) It includes a growing range of electronic devices from household appliances, such as refrigerators, air conditioners, cell phones, computers.
(iii) e-waste can be defined as the result when consumer, business and household devices are sent for re-cycling (e.g., television, computers, audio-equipments, VCR, DVD, telephone, Fax, Xerox machines, wireless devices, video games).
(i) The cause for vicious circle of poverty is demand and supply.
(ii) On the supply side, the low level of real income leads to low level of saving and investment and to deficiency of capital.
(iii) Deficiency of capital leads to low productivity and back to low income.
(iv) On the demand-side, low level of real income leads to low demand so investment is less, therefore deficiency of capital, low productivity and low income.
Functional Planning:
(i) It refers to that planning which seeks to remove economic difficulties by directing all the planning activities within the existing economic and social structure.
Structural Planning:
(i) It refers to a good deal of changes in the socioeconomic framework of the country.
(ii) Under developed countries follow this type of planning.
(I) Statistics presents facts in a definite form.
(ii) It simplifies mass of figures.
(iii) It facilitates comparison.
(iv) It helps in formulating and testing.
(v) It helps in prediction.
(vi) It helps in the formulation of suitable policies.
Central Statistical Office (CSO)
(i) It is responsible for co-ordination of statistical activities in the country and for evolving and maintaining statistical standards.
(ii) It compiles National Accounts, conducts Annual Survey of Industries and Economic Census, compiles Index of Industrial Production and Consumer Price Indices.
(iii) It deals with social statistics, training, international co-operation, Industrial Classification, etc.
National Sample Survey
Organisation
NSSO has four divisions:
(i) Survey Design and Research Division
(ii) Field Operations. Division
(iii) Data Processing Division
(iv) Co-ordination and Publication Division
The Programme Implementation Wing has 3 Divisions:
(i) Twenty Point Programme
(ii) Infrastructure Monitoring and Project Monitoring
(iii) Member of Parliament Local Area Development Scheme.
1. There is National Statistical Commission and one autonomous Institute, i.e., Indian Statistical Institute.
(i) Accurate and reliable data are not adequate, as farm output in the subsistence sector is not completely informed. In animal husbandry, there are no authentic production data available.
(ii) Different languages, customs, etc., also create problems in computing estimates.
(iii) People in India are indifferent to the official inquiries. They are in most cases non-cooperative also.
(iv) Most of the statistical staff are untrained and inefficient.
i. This may be possible if the number of new entrants into the labor force is increasing at a greater rate than the number of people who are becoming unemployed.
ii. Since the unemployment rate is a ratio and the numerator is growing more slowly than the denominator then the unemployment rate will fall.
I. Does the consumption curve start from Y Axis:
a) In this diagram, income is measured horizontally and consumption is measured vertically.
b) In 45o line at all levels, income and consumption are equal.
c) It is a linear consumption function based on the assumptional that consumption changes by the same amount as does income.
II. Significance of the 45o line:
a) Thus the consumption function measures not only the amount spent on consumption but also the amount saved.
b) This is because the propensity to save is merely the propensity not to consume.
c) The 45o line may therefore be regarded as a zero-saving line, and the shape and position of the C curve indicate the division of income between consumption and saving.
n = pk (or) p = n / k
Where
n is the total supply of money
p is the general price level of consumption goods
k is the total quantity of consumption units the people decide to keep in the form of cash.
because it is measured in terms of consumer goods.
According to Keynes, peoples desire to hold money is unaltered by monetary authority. So, price level and value of money can be stabilized through regulating quantity of money (n) by the monetary authority.
Later, Keynes extended his equation in the following form:
n = p (k + rk') or p = n/(k + rk')
Where,
n = total money supply
p = price level of consumer goods
k = peoples' desire to hold money in hand (in terms of consumer goods) in the total income of them
r = cash reserve ratio
k' = community’s total money deposit in banks, in terms of consumers goods.