By QB365 on 31 Dec, 2022
QB365 provides a detailed and simple solution for every Possible Questions in Class 12 Economics Subject - Revision Model Question Paper, 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
PART - I
Note : i ) All Questions Are Compulsory.
ii) Choose The Most Suitable Answer From The Given Four Correct Alternatives.
The branches of the subject Economics is
Wealth and welfare
production and consumption
Demand and supply
micro and macro
Expenditure method is used to estimate national income in_______
Construction sector
Agricultural Sector
Service sector
Banking sector
Keynes attributes unemployment to__________
A lack of effective supply
A lock of effective demand
A lack of both
None of the above
The average propensity to consume is measured by
C/Y
CxY
Y/C
C+Y
Paper currency system is managed by the
Central Monetary authority
State Government
Central Government
Banks
When prices rise slowly, we call it
galloping inflation
mild inflation
hyper inflation
deflation
A Bank is a
Financial institution
Corporate
An Industry
Service institutions
Online Banking is also known as.
E-Banking
Internet Banking
RTGS
NEFT
Trade between two countries is known as ____ trade
External
Internal
Inter-regional
Home
Which of the following is not an example of foreign direct investment?
the construction of a new auto assembly plant overseas
the acquisition of an existing steel mill overseas
the purchase of bonds or stock issued by a textile company overseas
the creation of a wholly owned business firm overseas
The other name for Special Drawing Rights is
Paper gold
Quotas
Voluntary Export Restrictions
None of these
New Development Bank is associated with
BRICS
WTO
SAARC
ASEAN
The tax possesses the following characteristics
Compulsory
No quid pro quo
Failure to pay is offence
All the above
The word budget has been derived from the French word "bougette" which means
A small bag
An empty box
A box with papers
None of the above
One of the most important market failures is caused by __________
Positive externalities
Negative externalities
Both
None of the above
Electronic waste is commonly referred as _______
solid waste
composite waste
e-waste
hospital waste
Which is not the feature of economic growth?
Concerned with developed nations
Gradual change
Concerned with quantitative aspect
Wider concept
Which of the following country adopts indicative planning?
France
Germany
Italy
Russia
Sources of secondary data are______
Published sources
Unpublished sources
Neither published nor unpublished sources
Both (a) and (b)
A measure of the strength of the linear relationship that exists between two variables is called:
Slope
Intercept
Correlation coefficient
Regression equation
PART - II
Note : Answer Any Seven Questions and Question.No.30 is Compulsory.
Define Macro Economics
Define National Income.
What is consumption function?
Define Money.
Define Commercial banks.
Define International trade.
Write the meaning of Special Drawing rights.
State the meaning of environment.
Define economic development
What is Statistics?
PART - III
Note : Answer Any Seven Questions and Question.No.40 is Compulsory.
State the importance of Macro Economics.
List out the uses of national income.
Write any five differences between classism and Keynesianism.
Write a note on metallic money.
Give a brief note on NBFI.
Describe the subject matter of International Economics.
List out the achievements of ASEAN.
Mention any three methods of redemption of public debt.
Explain different types of air pollution.
What are the functions of NITI Aayog?
PART - IV
Note : Answer all the Questions.
Discuss the scope of Macro Economics.
Explain the importance of national income
Describe the types of unemployment
Explain Keynes psychological law of consumption function with diagram.
Describe the phases of Trade cycle.
What are the objectives of Monetary Policy? Explain.
Explain the relationship between Foreign Direct Investment and Economic development.
Explain the objectives of IMF.
Explain the scope of public finance.
State and explain instruments of fiscal policy
Briefly explain the relationship between GDP growth and the quality of environment.
Discuss the economic determinants of economic development.
Bring out the arguments against planning.
Elucidatethe nature and scope of Statistics.
Answers
micro and macro
Construction sector
A lock of effective demand
C/Y
Central Monetary authority
mild inflation
Financial institution
Internet Banking
External
the purchase of bonds or stock issued by a textile company overseas
Paper gold
BRICS
All the above
A small bag
Negative externalities
e-waste
Wider concept
Germany
Both (a) and (b)
Correlation coefficient
Macro economics is the branch of economics that studies the behaviour and performance of an economy as a whole.
"The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend". - Alfred Marshall
(i) Consumption function is a functional relationship between total consumption and gross national income.
(ii) C = f(Y)
Consumption (C) is the dependent variable
Income (Y) is the independent variable
(i) Money is, what money does - Walker:
(ii) Money can be anything that is generally acceptable as a means of exchange and at the same time acts as a measure and a store of value. - Crowther.
A Commercial bank is a financial institution that accepts deposits and advances loans and are profit motivated.
(i) International trade refers to the trade or exchange of goods and services between two or more countries.
(ii) It is a trade among different countries or trade across political boundaries.
(i) Also called 'Paper Gold', SDR is a form of international reserves created by the IMF in 1969 to solve the problem of international liquidity.
(ii) They are allocated to IMF members in proportion to their quotas.
(iii) It is used as a means of payment to meet balance of payments deficits.
(i) Environment means "all the conditions, circumstances, and influences surrounding and affecting the development of an organism or group of organisms".
(ii) It also means that the complex of physical, chemical and biotic factors that act upon an organism or an ecological community ultimately determine its form and survival.
Development must, therefore, be conceived as a multidimensional process involving major changes in social structures, popular attitudes and national institutions and acceleration of growth, the reduction of inequality and the eradication of absolute poverty.
Michael P. Todaro
(i) Statistics as a science of estimates and probabilities.
(ii) Statistics is the collection, organisation, presentation, analysis and interpretation of numerical data.
(i) Macro economics helps to understand the functioning of the economy at the aggregate level, to evolve strategies to solve the basic problems.
(ii) To understand the future problems, needs and challenges.
(iii) To provide opportunities to use scientific investigation to understand reality.
(iv) To make meaningful comparison and analysis of economic indicators. To predict the future and formulate suitable policies to avoid economic crises.
(i) National income is of great importance for the economy of a country.
(ii) National income helps us to know the relative importance and contribution of each sector. We could find how income is produced, how it is distributed, how much is spent, saved or taxed.
(iii) National income data is used to build economic models in short run and long run.
(iv) Data regarding gross income, output, saving & consumption is used in economic planning.
(v) National income data is used to build economic models in short run and long run.
(vi) It is used to make international comparison, inter - regional comparison and inter - temporal comparison of growth of the economy during different periods.
(vii) If income is equally distributed, the per capita income will reflect the economic welfare of the country.
S. No: | Keynesianism | Classicism |
1. | Short-run equilibrium | Long-run equilibrium |
2. | Saving is a vice | Saving is a social virtue. |
3. | Money functions as medium of exchange and store of value | Money acts as a medium of exchange |
4. | Macro approach to national problems | Micro approach to macro problems |
5. | State intervention is advocated | Favoured laissez-faire policy |
(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) 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.
Pure Theory of Trade
(i) This component explains the causes for foreign trade, composition, direction and volume of trade, determination of the terms of trade and exchange rate, issues related to balance of trade and balance of payments.
Policy Issues
(i) Policy issues such as free trade vs. protection, methods of regulating trade, capital and technology flows, use of taxation, subsidies and dumping, exchange control and convertibility, foreign aid, external borrowings and foreign direct investment, measures of correcting disequilibrium in BoP are covered.
International Cartels and Trade Blocs
(i) Economic integration, cartels, customs unions, monetary unions, trade blocs, economic unions and multinational corporation are covered
International Financial and Trade Regulatory Institutions
(i) Financial institutions like IMF, IBRD, WTO are part of International Economics.
(i) It facilitates free movement of goods, services and investments within ASEAN by creating a single regional market
(ii) It provides free access to the marketers of one member country to the markets of all other member countries, thus fostering growth.
(iii) It improves business competitiveness between businesses from different countries.
(iv) It paves way for market and investment opportunities for the member nations.
(v) It fosters co-operations in many areas including industry and trade.
Introduction:
(i) The process of repaying a public debt is called redemption.
(a) Sinking Fund
(i) The Government establishes a separate fund into which every year a fixed amount of money is credited.
(ii) By the time the debt matures, the fund accumulates enough amount to pay off the principal along with interest.
(a) Conversion
(i) An old loan is converted into a new loan.
(ii) A high interest public debt is converted into a low interest public debt.
(c) Budgetary Surplus
(i) When the Government has a surplus budget, it can be used for repaying the debt.
Indoor Air Pollution:
(i) It refers to toxic contaminants that we encounter in our daily lives in our homes, schools and workplaces.
(ii) (e.g.) cooking and heating with solid fuels on open fires.
Outdoor Air Pollution:
(i) It refers to ambient air.
(ii) The common sources of outdoor air pollution are caused by combustion processes from motor vehicles, solid fuel burning and industry.
1. Co-operative and competitive federalism to enable the States to have active participation.
2. Shared national agenda for development priorities and strategies.
3. Decentralized planning to restructure the planning process into a bottom up model.
4. Vision and scenario planning to design medium and long-term plans.
5. Network of expertise
6. Harmonization of actions across different layers of government.
7. Conflict resolution for mutual consensus to intersectoral, inter departmental, inter state and centre state issues.
8. Coordinating interface with the world to harness global expertise and resources.
9. Internal consultancy to central and State governments on policy and programmes.
10. Capacity building and technology up-gradation and providing managerial and technical know how.
11. Monitoring and evaluation of policies and progammes.
National Income:
(i) Measurement of national income and its composition by sectors are the basic aspects of macro economic analysis.
(ii) It gives a long term understanding of the growth process of an economy.
Inflation:
(i) Estimating the general price level based on wholesale price, index, consumer price.
Business Cycle:
(i) Cyclical movements can be studied based on aggregate economic variables.
Poverty and Unemployment:
(i) Clear understanding about the magnitude of poverty and unemployment helps allocation of resources and adapting corrective measures.
Economic Growth:
(i) The growth and development of an economy and the factors determining them could be understood only through macro analysis.
Economic Policies:
(i) Macro Economics is used to frame economic policies.
(ii) Economic policies are used to solve the basic problems, to overcome the obstacles and to achieve growth.
(i) National income is of great importance for the economy of a country.
(ii) National income helps us to know the relative importance and contribution of each sector. We could find how income is produced, how it is distributed, how much is spent, saved or taxed.
(iii) National income data is used to formulate monetary policy, fiscal policy and other policies.
(iv) Data regarding gross income, output, saving and consumption is uscd in economic planning.
(v) National income data is used to build economic models in short run and long run.
(vi) It is used to make international comparison, inter regional comparison and inter temporal comparison of growth of the economy during different periods.
(vii) If income is equally distributed, the per capita income will reflect the economic welfare of the country.
Cyclical unemployment:
(i) During the downturn phase (recession and depression) of trade cycle, income and output fall leading to cyclical unemployment.
(ii) It is caused by deficiency of effective demand
Structural unemployment:
(i) Unemployment due to massive and deep rooted changes in economic structure leads to structural unemployment.
(ii) Lack of demand for the product or shift in demand to other products cause this type of unemployment.
(iii) (e.g.) rise in demand for mobile phones has adversely affected the demand for cameras, tape recorders
Disguised unemployment:
(i) It occurs in agriculture when more people are there than required. Even if some workers are withdrawn, production does not suffer.
Actual marginal productivity is zero, less or negative.
(i) Seasonal unemployment
1. In agriculture and agro based industries like sugar, production activities are carried out only in some seasons.
2. These industries offer employment only during that season in a year.
3. People remain unemployed during the off season.
4. Seasonal unemployment takes place from demand side also (eg) ice cream industry, holiday resorts
(ii) Frictional unemployment (Temporary unemployment)
1. It arises due to imbalance between supply of labour and demand for labour.
2. It is because of immobility of labour, lack of necessary skills, break down of machinery, shortage of raw materials.
3. The persons who lose jobs and in search of jobs also come under frictional unemployment
(iii) Educated unemployment
1. Educated people are underemployed or unemployed when qualification does not match the job.
2. Faulty education system, lack of employable skills, mass student turnout and preference for white collar jobs are highly responsible for educated unemployment.
Law
According to Keynes, "men are disposed as a rule and on the average to increase their consumption as their income increases but not by as much as the increáse in their income".
Propositions
1. When income increases, consumption expenditure also increases, but by a smaller amount
(a) When income increases from 120 to 180; consumption also increases from 120 to 170 but the increase in consumption is less than the increase in income, 10 is saved.
2. The increased income will be divided in some proportion between consumption expenditure and saving
(a) When income increases to 180 and 240, it is divided between consumption (170 and 220) and saving (10 and 20)
3. Incrcascs in income always lead to in incrcase in both consumption and saving
(a) Increases in income to 180) and 240; lead to increased consumption 170 and 220; increased saving 10 and 20.
(b) It is clear from the widening area below the C curve and the saving gap between 45o line and C curve.
Y | C | S |
---|---|---|
120 | 120 | 0 |
180 | 170 | 10 |
240 | 220 | 20 |
Boom or Prosperity:
1. The employment and the movement of the economy beyond full employment is the characterized features of boom.
2. There is hectic activity, money wages rise, profits increase, interest rates go up, demand for bank credit increases.
3. There is all round optimism.
Recession:
1. The turning point from boom condition is recession.
2. Failure of a company or bank brings a phase of recession.
3. Investments are drastically reduced, production falls, income and profits decline.
4. There is panic in the stock market and business is dull.
5. Liquidity preference of the people rises and money market becomes tight.
Depression:
1. The level of economic activity becomes extremely low.
2. Firms incur loss and close down resulting in unemployment.
3. Interest rate, profits, wages are low.
4. Agricultural class and wage carners are badly affected.
5. Banks do not lend to businessmen.
6. The extreme point of depression is called as "trough".
7. Keynes said that autonomous investment of the government can help the economy to come out of depression.
Recovery:
1. After depression, recovery sets in the upswing.
2. It begins with the revival of demand for capital goods.
3. The demand slowly picks up and in due course there is more production, profit, income, wages and employment.
4. Recovery may be initiated by innovation or investment or by government.
Introduction
(i) Monetary Policy is the macroeconomic policy laid down by the Central Bank towards the management of money, supply and interest rate. It is associated with Milton Friedman
1) Neutrality of Money
(i) Wicksteed, Hayek and Robertson are the chief exponents of neutral money.
(ii) They say that the monetary authority should aim at neutrality of money in the economy.
(iii) Monetary changes cause distortion and disturbances in the proper functioning of the economic system of the leading to all economic fluctuations.
2) Exchange Rate Stability
(i) It is a traditional objective from the Gold Standard period
(ii) When there was disequilibrium in the balance of payment, it was automatically corrected by movements.
(iii) It was popularly known as "Expand Currency and Credit when gold is coming in; Contract currency and credit when gold is going out."
(iv) If there is instability in the exchange rates, it would result in outflow or inflow of gold resulting in unfavorable balance of payments.
3) Price Stability
(i) Crustave Cassel and Keynes suggested price stabilization as a main objective of monetary policy.
(ii) Stable Price creates public confidence, promotes business activity and ensures equitable distribution of income and wealth leading to prosperity and welfare
(iii) Price stability does not mean price rigidity or price stagnation.
(iv) A mild increase in the price level provides a tonic for economic growth.
4) Full Employment
(i) Unemployment was socially dangerous, economically wasteful and morally deplorable.
(ii) Both Keynes' General Theory of Employment, Interest and Money in 1936, the objective of full employment became very important
5) Economic Growth
(i) Economic growth is the process whereby the real per capita income of a country increases
(ii) There is increase in the total physical or real output
(iii) Monetary policy should promote sustained and continuous economic growth by maintaining equilibrium between the total demand for money and total production capacity for creating increase in saving and investment.
(iv) Flexible monetary policy is the best solution.
6) Equilibrium in the Balance of Payments (BoP)
(i) World trade was faster than world liquidity.
(ii) Increasing deficit in BoP reduces the ability of an economy to achieve other objectives.
(iii) Many less developed countries reduce their imports which adversely affects development activities, so monetary authority should make efforts to bring equilibrium in the BoP.
1. FDI is an important factor in global
2. Foreign trade and FDI are closely related.
3. In developing countries like India FDI in tie natural resource sector like plantations, increases rade.
4. Foreign production by FDI is useful to substitute foreign trade.
5. FDI is also influenced by the income generated from the trade and regional integration schemes.
6. FDI accelerates the economic growth by facilitating essential imports needed for development programs like capital goods, technical know-how, raw materials, other inputs and even scarce consumer goods.
7. When the export earnings of a country are not sufficient to finance for imports, FDI may be required to fill the trade gap.
8. FDI is encouraged by foreign exchange shortage, desire to create employment and acceleration of the pace of economic development.
9. Many developing countries strongly prefer foreign investment to imports.
(i) To promote international monetary cooperation among the member nations.
(ii) To facilitate faster and balanced growth of international trade.
(iii) To ensure exchange rate stability by curbing competitive exchange depreciations.
(iv) To reduce exchange controls imposed by member nations.
(v) To establish multilateral trade and payment system in respect of current transactions.
(vi) To promote the flow of capital from developed to developing nations.
(vii) To solve the problem of international liquidity.
Public Finance
(i) Public finance is a study of the financial aspects of Government.
Public Revenue:
(i) Public revenue deals with the methods of raising revenue such as tax and non-tax, the principles of taxation, rates of taxation, impact, incidence and shifting of taxes and their effects.
Public Expenditure
(i) It studies the fundamental principles that govern the Government expenditure, effects of public expenditure and control of public expenditure.
Public Debt
(i) Public debt deals with the methods of raising loans from internal and external sources.
(ii) The burden, effects and redemption of public debt fall under this head.
Financial Administration
(i) This part deals with the Annual master financial plan of the Government, the budget, the various objectives, steps in preparing a public budget passing or sanctioning, allocation, evaluation and auditing.
Fiscal Policy
(i) Taxes, subsidies, public debt and public expenditure are the instruments of fiscal policy.
(i) Strong economic growth or high GDP growth leads to excessive use of resources.
(ii) Natural resources are essential inputs for production in many sectors;
(iii) Production and consumption lead to pollution and other pressures on the environments.
(iv) Poor environmental quality affects economic growth and well being by lowering the quantity and quality of resources or due to health impact.
(v) There is the need to balance growth and the sustainability of eco system.
(vi) So we have to ensure our sustainable existence, consume less and curb economic growth.
Natural Resource:
(i) The existence of natural resources in abundance is essential for development.
(ii) But Japan, though it lacks natural resources imports them and achieves faster rate of economic development with the help of technology.
Capital Formation:
(i) Capital formation refers to the net addition to the existing stock of capital goods which are either tangible (plants, machinery) or intangible (health, education).
(ii) Capital formation helps increase productivity of labour, production and income.
(iii) Advanced techniques of production can be used and leads to better utilization of natural resources, industrialization and expansion of markets which are essential for economic progress.
Size of the Market:
(i) Large size of the market would stimulate production, increase employment and raise the National per capita income.
Structural Change:
(ii) Structural change refers to change in the occupational structure of the economy.
(iii) Any economy is divided into primary secondary and tertiary sector.
(iv) Any economy which is predominantly agricultural remains backward.
Financial System:
(i) Financial system implies the existence of an efficient and organized banking system in the country.
(ii) There should be an organized money market to facilitate easy availability of capital.
Marketable Surplus:
(i) It refers to the total amount of farm output cultivated by farmers over and above their family consumption needs.
(ii) This surplus brings income, raises purchasing power, employment and output in other sectors.
Foreign Trade:
(i) A country with favorable balance of trade is always developed.
Economic System:
(i) A country with free market system enjoys better growth rate compared to controlled economies.
Introduction:
(i) Planning may retard private initiatives, hamper freedom of choice, involve huge cost of administration and stop automatic adjustment of price mechanism.
(i) Loss of freedom
1. Regulations and restrictions are the backbone of a planned economy.
2. Economic freedom consists of freedom of consumption, freedom of choice of occupation, freedom to produce and the freedom to fix prices for the products.
3. Under planning, crucial decisions are made by the Central Planning Authority.
4. The consumers, producers and the workers enjoy no freedom of choice.
5. Hayek in his book 'Road to Serfdom' explains that centralized planning leads to loss of personal freedom and ends in economic stagnation.
(ii) Elimination of Initiative
1. Planning follows routine proocedure and may cause stagnation in growth.
2. Absence of private ownership and profit discourages entrepreneurs from risk taking.
3. Attractive profit is the incentive for searching new ideas, new methods.
4. All enjoy equal reward under planned economy irrespective of their effort, efficiency.
5. So, nobody is interested in undertaking new and risky ventures.
6. The bureaucracy and red tapism cause procedural delay and time loss.
7. So, even socialist countries like Russia and China offer incentives to private firms.
(iii) High cost of Management
1. Plan formulation and implementation involve an army of staff for data collection and administration.
2. Lewis remarks, "The better we try to plan, the more planners we need".
3. Inadequate data, faulty estimations and improper implementation of plans result in wastage of resources and cause either surplus or shortages.
(iv) Difficulty in advance
calculations
1. Advance calculations in a precise manner is impossible with regard to consumption and production.
2. It is also difficult to put the calculations into practice under planning.
Conclusion
1. The arguments against planning are mostly concerned with centralized and totalitarian planning.
Nature of Statistics
(i) Different Statisticians and Economists differ in views about the nature of statistics.
(ii) Some call it a science and some say it is an art
(iii) Tippet considers Statistics both as a science as well as an art.
Scope of statistics
(i) Statistics is applied in every sphere of human activity social and physical.
Statistics and Economics
(i) Statistical data and techniques are immensely useful in solving many economic problems.
Statistics and Firms
(i) Statistics is used in many firms to find whether the product is conforming to specifications or not.
Statistics and Commerce
(i) Market survey helps to find the present conditions and to forecast the likely changes in future.
Statistics and Education
- Statistics is necessary for the formulation of policies to start new course.
- Public and private educational institutions do research and development work to test the past knowledge and evolving knowledge.
Statistics and Planning
(i) In the modern world, a "world of planning" almost all the organisations in the government are using planning for efficient working, for the formulation of policy decisions and execution of the same.
(ii) In India, statistics play an important role in planning both at the central and the state government levels, but the quality of data is highly unscientific.
Statistics and Medicine
(i) t-test is used to compare the efficiency of two medicines.
Statistics and Modern applications
(i) Recent developments in computer and information technology have enabled statistics to integrate their models and thus make statistics a part of decision making procedures of many organisations.
(ii) There are many software packages available for solving simulation problems.