RBSE 12th Economics Board Model Paper 2022 with Answers in English 

Students must start practicing the questions from RBSE 12th Economics Model Papers Board Model Paper 2022 with Answers in English Medium provided here.

RBSE Class 12 Economics Board Model Paper 2022 with Answers in English

Time: 2:45 Hours
Maximum Marks: 80

General Instruction for the Examinees:

• Candidate must first write his/her Roll No. on the question paper compulsorily.
• All the questions are compulsory.
• Write the answer to each question in the given answer-book only.
• For questions having more than one part, the answers to those parts must be written together in continuity.

Section – A

1. Multiple Choice Questions

(i) Which of the following is not a subject matter of Macro-Economics? [1]
(a) Output Level
(b) Employment Level
(c) Inflation
(d) Demand & Supply Equilibrium
Answer:
(d) Demand & Supply Equilibrium

(ii) Which of the following is not an example of capital good ? [1]
(a) Machines
(b) Equipment
(c) Domestic Computers
(d) Warehouse
Answer:
(c) Domestic Computers

(iii) Meaning of NNP_MP is : [1]
(a) Gross National Product at Market Price
(b) Gross National Product at Factor Cost
(c) Net National Product at Market Price
(d) Net National Product at Factor Cost
Answer:
(c) Net National Product at Market Price

(iv) In which year Central Bank was established in India ? [1]
(a) 1935
(b) 1942
(c) 1950
(d) 1955
Answer:
(a) 1935

(v) Which of the following form of money supply is the most liquid and easy to deal with – 1 [1]
(a) M₁
(b) M₂
(C) M₃
(d) M₄
Answer:
(a) M₁

(vi) Which of the following is a type of Budget ? [1]
(a) Balanced Budget
(b) Surplus Budget
(c) Deficit Budget
(d) All of these
Answer:
(d) All of these

(vii) Reason for the problem of choice is: [1]
(a) Unlimited Wants
(b) Limited Resources
(c) Alternative Uses of Resources
(d) All of these
Answer:
(d) All of these

(viii) The Slope of Indifference curve is : [1]
(a) Concave
(b) Horizontal
(c) Convex
(d) Vertical
Answer:
(c) Convex

(ix) Relation between price & demand in Giffin Goods is: [1]
(a) Positive
(b) Zero
(c) Negative
(d) None of these
Answer:
(a) Positive

(x) Formula to find th Marginal Product is: [1]
(a) \(\frac{T P}{Q}\)
(b) \(\frac{\Delta T P}{\Delta Q}\)
(c) AP × Q
(d) P × Q
Answer:
(b) \(\frac{\Delta T P}{\Delta Q}\)

(xi) The Shape of Average Fixed Cost curve is: [1]
(a) Horizontal
(b) Rectangular Hyperbola
(c) Vertical
(d) ‘U’ Shaped
Answer:
(b) Rectangular Hyperbola

(xii) In short run, the difference htween Total Cost and Total Variable Cost is: 1
(a) TFC
(b) AFC
(c) MC
(d) AC
Answer:
(a) TFC

2. Fill in the Blanks

(i) ………………….. is known as founding father of Modern Economics. [1]
Answer:
John M. Keynes

(ii) ………………….. issues the currency in India. [1]
Answer:
Reserve Bank of India

(iii) The intervention of the government whether to expand demand or reduce. It constitutes the [1]
Answer:
centrally planned economy

(iv) The closed example of a centrally planned economy is [1]
Answer:
China or Russia

(v) Higher Indifference curve gives level of satisfaction / utility. [1]
Answer:
higher

(vi) In long run, all factors of production are
Answer:
variable

3. Answer the following in 10-20 words

(i) What do you mean by‘Economic Agents’? [1]
Answer:
A person, company or organisation that has an influence on the economy by producing, buying or selling is called an economic agent.

(ii) What are ‘Final Goods’ ? [1]
Answer:
Goods which are sold to the ultimate consumer for final consumption and not for any intermediate purpose are called final goods.

(iii) What do you understand by‘Depreciation’? [1]
Answer:
Reduction in the value of fixed assets due to wear and tear, obsolescence or any other reason is called depreciation.

(iv) What is the main purpose of holding cash reserve ? [1]
Answer:
The main purpose of holding cash reserve is to maintain liquidity in order to save the organisation from the problem of liquidity.

(v) What do you mean by Barter System ? [1]
Answer:
Exchange of one good with other good without using any medium of exchange is termed as barter system.

(vi) Give any one example of Capital Receipts. [1]
Answer:
Selling the shares of a public sector unit.

(vii) Name the famous book written by Keynes. [1]
Answer:
The General Theory of Employment, Interest and Money.

(viii) Under Central Planned Economy, by whom all the important decisions are taken ? [1]
Answer:
Under Centrally Planned Economy, all the economic decisions are taken by a central authority or the government of that nation.

(ix) Give any two examples of Complimentary Goods. [1]
Answer:
Car and petrol, pen and ink.

(x) Define Production Function. [1]
Answer:
The production of any commodity depends upon the means of production. Thus, the relationship between the means of production and its production is called production function. It defines the physical relationships between quantity of production and means of production, in a given time period. It is a quantitative relationship not a qualitative one. It can be expressed as:
Q_x = f(L, K)

(xi) What do you understand by‘Decreasing Returns to scale’? [1]
Answer:
When the increase in all inputs in the production process is higher as compared to the proportional increase in production, then the ‘decreasing returns to scale take place.

(xii) Give formula to find out Total Revenue in a perfect competitive market. Answer:
Answer:
Total revenue = No. of units sold x selling price per unit
Or, TR = q × t

Section – B

Question 4.
Explain the relationship between Gross Domestic Product (GDP) distribution and welfare. [2]
Answer:
Welfare of an economy in terms of availability of goods and services depends upon many factors.
One of such factors that can be considered as an index of the welfare of the people of the country is GDP.

GDP is the sum total of the value of all goods and services produced within the domestic territory of a country in a particular year. If the income of the person increases and he/she can buy more goods and services, his/her material well-being improves. So, it may be reasonable to treat his or her income level as his or her level of well-being or welfare. Thus, higher the level of GDP of a country, greater is the well-being of the people of that country. To account for price changes, the value of real GDP is more appropriate instead of nominal GDP because increase in the value of real GDP means increase in the level of output in an economy, other things remaining constant.

Question 5.
If Gross Domestic Product at market price (GDP_MP) is ₹ 310 and Depreciation is ₹ 50, then
calculate Net Domestic Product (NDP_MP). [2]
Answer:
NDP_MP = GDP_MP – Depreciation
NDP_MP = 310 – 50 = ₹ 260

Question 6.
What are the two difficulties of Barter System ? [2]
Answer:
Two difficulties of Barter system are as follows:
(a) Double co-incidence of wants. ,
(b) Difficulty in storing perishable goods.

Question 7.
Differentiate between Revenue Receipts and Capital Receipts. [2]
Answer:
Revenue receipts are those receipts of the government, which do not increase the liability of the government nor decrease the assets of the government, while Capital receipts are those receipts of the government which either create a liability for the government or reduce the assets of the government.

Question 8.
If the taxes are increased by the government, what will be the change in disposable income in that
case ? [2]
Answer:
If taxes are increased by the government, the disposable income will decrease as people will have less income to spend on more number of goods.

Question 9.
Give two differences between Public goods and Private goods. [2]
Answer:
Two differences between public goods and private goods are as follows:

Public Goods	Private Goods
(i) These goods are freely assessable to all the people.	These can be bought only by a selected number of people.
(ii) These try to eliminate discrimination from the society.	These goods contribute to increase discrimination in the society.

Question 10.
Calculate the value of government expenditure multiplier if Marginal Propensity to Consume (MPC) is 0.6. [2]
Answer:
Given, MPC = 0.6.
GM = \(\frac{1}{1-\mathrm{MPC}}\)
= \(\frac{1}{1-0.6}\)
= \(\frac{1}{0.4}\)
= 2.5

Question 11.
Define Micro Economics. [2]
Answer:
Micro-economics is that branch of economics that studies the economic behaviour of an individual unit, which may be a person, a particular household or a particular firm.

Question 12.
Complete the following table with respect to Total utility and Marginal utility.
[2]
Answer:

Total utility (TU)	Marginal Utility (MU)
20	20
38	18
53	15
63	10
71	8
76	5

Question 13.
Differentiate between Short run and Long run. [2]
Answer:
Short run is that period in which only labour is a variable factor while all other factors are fixed while long run is that period in which all the factors are variable.

Question 14.
Draw the indifference curve for perfectly substituted good. [2]
Answer:

Question 15.
What are the two characteristic of Perfect Competitive market ? [2]
Answer:
Two characteristics of perfect competitive market are as follows:

1. Free entry and exit of the firm.
2. Consumer has full knowledge about the market.

Question 16.
Write the formula for elasticity of supply. [2]
Answer:
Elasticity of supply = % change in quantity supplied / % change in price.

Section – C

Question 17.
Explain circular flow of income. [3]
Answer:
In simple economy, firms use their capital to employ other factors of production in order to produce goods and services. The aggregate consumption by the households of the economy is equal to the aggregate expenditure on goods and services produced by the firffis in the economy. Since there is no leakage from the system, total factor payments by firms and total consumption expenditure by households is equal.

Or

Explain any two methods of National Income calculation.
Answer:
Product or Value Added Method
The Product method measures national income in terms of value additions by each producing unit in an economy during the period of one year. This method focuses on calculating this added value of products to determine the national income of a country.
The value added is determined by finding the distinction between the value of output and value of intermediate consumption.
Value Added = Value of Output – Intermediate Consumption

Income Method
National Income is measured from the side of payments made to the primary factors of production in the form of rent, wages, interest and profit for their productive services during a year.

In other words, this method measures national income at the phase of distribution and appears as income paid and/ or received by individuals of the country. Thus, under this method, national income is obtained by summing up of the incomes of all individuals of a country.

Question 18.
Explain credit creation by Banking System. [3]
Answer:
Credit creation is a situation in which banks give more loans to consumers and businesses, with the result that the amount of money in circulation increases. In other words, it refers to the unique power of the banks to multiply loans and advances and hence create credit on the basis of primary deposit of account holders.

Following are the methods of credit creation:
(i) By issuing notes
(ii) By accepting deposits
(iii) By discounting the bills of exchange.

(i) By issuing notes : In modem times, the issue of currency in most of the countries is done by the central bank of the countiy. In India, Reserve Bank of India performs the task of issuing notes. For this purpose, RBI uses minimum reserve system. This is called credit creation by the central bank.

(ii) By accepting deposits : Prof. Honum has divided the deposits into two parts—
(a) Primary deposits
(b) Derived deposits

(a) Primary deposits:
Primary deposits are those deposits that a bank collects from different surplus stakeholders in the economy by different accounts. These consist of cash deposited by the people with the banks in different deposit accounts, such as saving deposits, time or fixed deposits, current or demand deposits and other deposits.
The depositors themselves take the initiative of creation of these deposits.

(b) Derived deposits:
Deposits created from different underlying transactions of bank are called derivative deposits. The prime underlying transaction includes, granting credit to clients in various forms. Therefore the banks, in the process of granting credit, create derivative deposits. The loans are sanctioned and credited to the accounts of the borrowers to create new deposits. Thus, it is true to say “deposits create loans and loans create derived deposits”.

(iii) By discounting bills of exchange : Banks also create credit by discounting bills of exchange like foreign exchange, sale and purchase of foreign securities, etc.

Or

Explain the concept of demand for money for speculative motive.
Answer:
Speculative demand is the holding of real balances for the purpose of avoiding capital loss from holding bonds or stock. Keyness explained the asset motive through what he termed ‘Speculative demand’. In this theory, he argued that demand for money is a choice between holding cash and buying bonds.

Question 19.
Represent the diagram of Production Possibility Frontier (PPF) with the help of table. [3]
Answer:
A production possibility curve or production possibility frontier is a curve which shows the various alternative production possibilities which can be produced with given resources and techniques of production. We know that there is a maximum limit which can be produced with given resources and techniques of production. Jn this situation, if we want to increase the production of a particular commodity, then we will have to reduce the production of some other commodity. This is why, production possibility frontier Or curve is also known as Transformation Curve.

In order to understand the concept of PPC, let us assume that there are two types of goods – Wheat and Mustard, which are to be produced. We also assume that-(i) there is a given amount of productive resources and they remain fixed; (ii) resources are neither unemployed nor underemployed; and (iii) technology does not change. Now consider the following table:

Table : Alternative Production possibilities
Production

Production Possibilities	Mustard (in thousand quintals)	Wheat (in thousand quintals)	Marginal Opportunity Cost
A	0	30	–
B	1	28	2
C	2	24	4
D	3	18	6
E	4	10	8
F	5	0	10

The above table shows various production possibilities between wheat and mustard. If all the given resources are employed for the production of wheat, 30 thousand quintals of wheat are produced. On the other hand, if all the resources are employed for the production of mustard, 5 thousand quintals of mustard are produced. But these two are extreme production possibilities such as B, C, D and E.

With production possibility B, the economy can produce with given resources one thousand quintals of mustard and 28 thousand quintals of wheat and with production possibility C, it can produce 2 thousand quintals of mustard and 24 thousand quintals of wheat. Thus, as the economy is moving from one possibility to another, it takes away some resources from wheat and put them in the production of mustard. Since resources are limited and we have assumed that they are fully employed, the economy has to give up something of one good to obtain some more of the other.

The production possibilities shown above can be illustrated diagrammatically also as is shown in figure.

Or

According to you, how does central problems are solved in a Market Economy ? (Any two)
Answer:
The central problems of an economy can be solved in the following ways:

• By optimum utilization of the resources: We know that resources are available in limited 1 quantity. Hence, these should be utilized in an optimum way. There should be a perfect strategy to use the resources in order to get the maximum output.
• By alternative uses of the resources: We know that the resources can be used alternatively. So, the resources should be used in those purposes that give the maximum output and welfare of the mass.

Question 20.
Explain the concept of Total Revenue with the help of table and diagram. [3]
Answer:
Total Revenue (TR)
A firm produces goods which they sell in the market. Whatever a firm earns by selling their product in the market is referred to as Revenue. Let us suppose that the market price of a unit of the good be p and q be the quantity of the good produced and sold by the firm at market price p. So Total Revenue (TR) of the firm is defined as the total money receipt of the firm from the sale of its total output. TR can also defined as the market price of the good (p) multiplied by the firms output (q). Hence,
TR = p × q

Let us take a numerical example to understand this concept. Let us consider a firm (producer of candles) operating under perfectly competitive market. Market price of a box of candles is ? 10. Now when the firm sells no box, then TR is zero, If they are selling 1 unit of output,
TR =p × q
TR = 1 × 10
TR = 10
Similarly when 2 units of output is sold by the firm, TR = 20, and so on. Let us draw a table using this information.
Table – Calculation of Value of Total Revenue (TR)

Total Output (Q)	Price Per Box (P)	Total Revenue (TR = P × Q)
0	10	0
1	10	10
2	10	20
3	10	30
4	10	40
5	10	50

Total Revenue Curve : TR Curve shows that how total revenue changes as the quantity of goods sold changes. Let us see the shape of TR Curve. The shape of this curve is a straight line showing positive relationship between quantity sold and revenue earned. This straight line curve shows that total revenue increases as the total output increases. Let us draw a curve using information from table.

Or

Explain with the help of diagram the problem of profit maximisation of a firm in the short run in a perfectly competitive market.
Answer:
Profit Maximisation: We know that a firm sells goods produced by it. By selling these goods, a firm earns revenue which is called total revenue (TR).

Profit which is denoted by π is defined as a difference between a firm’s total revenue (TR) and total cost of production (TC): In other words,
π = TR – TC
We can also say that the gap between TR and TC is the firm’s earnings net of costs.
A firm or producer wishes to maximize its profit. For doing this the firm would like to identify the quantity q₀Vt which their profits are maximum. Now an important question arises,
How does the firm identify this quantity qo at which the firm’s profits are maximum?
For profits to\be maximum, three conditions must hold true at q0. These conditions are :
Condition 1 – The price p must be equal to MC (Marginal dost)
Condition 2 – Marginal cost (MC) must be non decreasing at q₀.
Condition 3 – Far the firm to continue to produce –

(a) In short run, price must be greater than the average variable cost (p > AVC) (b) In long run, price must be greater than the average cost ( p > AC).

Section – D

Question 21.
Describe the main two functions of Money. [4]
Answer:
The main functions of money are as follows:

• Medium of exchange : Money acts as a medium of exchange as it facilitates exchange through a common medium, i.e. currency. It also helps in the buying and selling of goods.
• Unit of value: The value of goods can be measured in terms of money. It is a common medium through which we can calculate the value of each and every good. The value of a good in terms of money is called the price. In barter system, the lack of a common denominator for measuring values of goods was a major drawback.

Or

Describe two measures of control of money supply by RBI.
Answer:
(a) Bank rate policy:
It is the rate at which the central bank lends money to commercial banks.
When credit is to be expanded (or money supply is to be increased), the central bank reduces the bank rate, which results in the increase in funds for giving out loans to borrowers or invertors. The bank rate is lowered during deflation, so the commercial banks can borrow more money from central bank and use that money for giving out loans which ultimately increases the purchasing power of people.

The Reserve Bank of India also uses the repo rate (instead of bank rate) to control the supply of money and credit. The rate at which the RBI gives short term loans to commercial banks is called repo rate. Commercial bank can also lend their surplus money to the RBI. The rate of interest at which banks are entitled to do so is called reverse repo rate.

(b) Open market operations:
Open market operations refers to the buying and selling of government securities by the central bank from/to the public and banks. When the central bank buys securities, it adds to cash balance in the economy. If cash balances are increased in the economy, there will be more deposits with commercial banks which will lead to increased flow of credit. And when the central bank sells government securities, it withdraws cash from the economy. When cash balances are reduced, deposits with commercial banks are reduced, which leads to decline in credit.

Question 22.
Graphically explain the change in budget set due to changed in income. [4]
Answer:

Or

Explain the two characteristics of the indifference, curve with the help of diagram.
Answer:
(i) IC Slopes Downwards from Left to Right: An indifference curve slopes downward from left to right. It also means that the slope of IC is negative, indicating that in order o have one more good; he must have less of the other good. It is only then that the satisfaction Level would remain constant at different points of the IC. would remain constant at different points of the IC.

(ii) IC is Convex to the Origin : Indifference curve is convex to the origin. This means that the slope of IC tends to decline, as we move along IC from left to right. The slope of IC is called Marginal Rate of Substitution or MRS. It indicates the rate at which a consumer is willing to substitute one good for the other.

Question 23.
Explain law of\ecreasing mirginal product with diagram. [4]
Answer:
This law states at as more and more of the variable factor is combined with the iìxed factor, marginal produc of the variable factor may initially rise (implying that total output increases at increasing rate), but eventually a situation must come when marginal product of the variable factor starts declining (implying that total output increases only at diminishing rate). A stage may come when marginal product becomes zero (implying that total output stops increasing) or even negative (implying that total output starts declining).

Or

Explain relationship between long run marginal cost curve and average cost curve with the help of diagram.
Answer:
Relationship between AP and MP:

• Both AP and MP can be calculated by Total Production.
• When AP rises, then MP also rises but MP > AP.
• When AP is maximum then MP = AP, or say, MP curve cuts the AP curve at its maximum point.
• When AP falls, then MP also falls but MP < AP.
• There may be a situation when MP decreases and AP increases but opposite never happens.
• MP can be zero or negative, but AP can never be zero or negative.