RBSE 12th Economics Model Paper Set 1 with Answers in English

Students must start practicing the questions from RBSE 12th Economics Model Papers Set 1 with Answers in English Medium provided here.

RBSE Class 12 Economics Model Paper Set 1 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) Economic agents refer to all those ……………………… who take economic decisions. [1]
(a) institutions
(b) individuals
(c) both (a) and
(b) (d) none of these
Answer:
(c) both (a) and

(ii) ……………………….. refers to any commodity that satisfies human wants, needs and provides utility
to its purchasers. [1]
(a) Goods
(b) Services
(c) Both (a) and (b)
(d) None of these
Answer:
(b) Services

(iii) Services require possession of ……………….. and ……………………….. which may be of mental and
intellectual in nature. [1]
(a) goods and services
(b) specialized knowledge and skills
(c) assets and liabilities
(d) capital and human labour
Answer:
(b) specialized knowledge and skills

(iv) Which amongst the following is the correct definition of MONEY? [1]
(a) Any good which is commonly used as a store of value.
(b) Any good which is exchanged for gold at a fixed rate.
(c) Any good which is acceptable to a bank.
(d) Any good which is commonly accepted as a medium of exchange.
Answer:
(d) Any good which is commonly accepted as a medium of exchange.

(v) Barter system refers to a system wherein goods are: [1]
(a) exchanged for goods
(b) not exchanged at all goods
(c) are exchanged for domestic currency
(d) exchanged for foreign currency
Answer:
(a) exchanged for goods

(vi) A government budget: [1]
(a) is a statement of actual expenditure and receipts of the government for a financial year.
(b) is a statement of expected receipts and expenditure of the government.
(c) indicates the BOP status of the economy.
(d) detailed discussion of the achievements of the government during the five year plans.
Answer:
(b) is a statement of expected receipts and expenditure of the government.

(vii) Simple economy is the one in which: [1]
(a) the degree of interdependence is moderate
(b) the degree of exchange is moderate
(c) both (a) and (b)
(d) none of these
Answer:
(c) both (a) and (b)

(viii) Utility is referred to as: [1]
(a) Consumption
(b) Production
(c) Value addition
(d) Want satisfying power
Answer:
(d) Want satisfying power

(ix) In which analysis can utility be measured in definite numbers such as 1,2,3,4 etc. ? [1]
(a) Cardinal Utility Analysis
(b) Ordinal Utility Analysis
(c) Both (a) and (b)
(d) None of these
Answer:
(a) Cardinal Utility Analysis

(x) During short period, production can be increased through: [1]
(a) greater application of fixed factors
(b) greater application of variable factors
(c) greater application of all the factors of production
(d) none of these
Answer:
(b) greater application of variable factors

(xi) Per unit production of variable factor is called: [1]
(a) Total product
(b) Average product
(c) Marginal product
(d) None of these
Answer:
(b) Average product

(xii) Which one of the following leads to the law of variable proportions ? [1]
(a) Some factors are constant
(b) Specialization of factors
(c) Some factors are more efficient than others
(d) None of these
Answer:
(a) Some factors are constant

2. Fill in the blanks

(i) Institutional agents like state or’ statutory bodies like- RBI, SEBI &TRAI are referred to as ………………………. in Economics. [1]
Answer:
economic agents

(ii) ………………………. is a medium of exchange. [1]
Answer:
Money

(iii) Primary deficit in a government budget is ……………………… . [1]
Answer:
Fiscal deficit- interest payment

(iv) Study of economy as a whole is called …………………….. ecopomics. [1]
Answer:
macro

(v) Utility derived from consuming one additional unit of a commodity is referred to as …………………….. . [1]
Answer:
marginal utility

(vi) Production function shows the ……………………….. relationship jjjg^een physical inputs and physical output. [1]
Answer:
technical

3. Answer the following in 10-20 words

(i) Define consumption goods. [1]
Answer:
Those goods that directly satisfy the wants of the consumers are known as consumption goods.

(ii) Define the term investment. [1]
Answer:
An increase in the stock of capital in a year is called investment or capital formation.

(iii) Define current transfer. [1]
Answer:
Transfer made from the current income of the payer and added to the current income of the recipient for consumption expenditure is called current transfer.

(iv) Define barter syatem.
Answer:
Barter system of exchange is a system in which one good is exchanged for another good.

(v) Define money. [1]
Answer:
Money is something which is generally acceptable as a medium of exchange and can be converted into other assets without losing its value and time.

(vi) Define government budget. [1]
Answer:
Government Budget is an annual financial statement containing estimates of anticipated expenditure and revenue of the government for the upcoming financial year.

(vii) State any one objective of government budget. [1]
Answer:
Reallocation of resources.

(viii) What is the essence of economics? [1]
Answer:
Scarcity and choice.

(ix) Define marginal utility. [1]
Answer:
Marginal utility can be defined as the additional utility derived from the consumption of one additional unit.

(x) What is meant by TP? [1]
Answer:
TP means total product or sum total of output produced by all the units of a variable.

(xi) What is AP? [1]
Answer:
AP stands for average product. It is output per unit of the variable factor used in the process of production.

(xii) What do you mean by market equilibrium? Explain. [1]
Answer:
Market equilibrium is a situation of the market in which demand for a commodity in the market exactly matches its supply corresponding to a particular price.

Section – B

Question 4.
Write a short note on Adam Smith. [2]
Answer:
Adam Smith is regarded as the founding father of modem economics. He was a Scotsman and a professor at the university of Glasgow. Philosopher by training, his well-known work “An Enquiry into the Nature and causes of the Wealth of Nation” was published in the year 1776 and it is regarded as the first major comprehensive book on the subject.

Question 5.
Write a short note on J.M. Keynes. [2]
Answer:
John Maynard Keynes, popularly known as J .M. Keynes, was a British economist. He was bom in 1883. He was educated in King’s College, Cambridge, UK and was later appointed as the Dean in Kings College, Cambridge. He prophesied the break-down of the Peace Agreement of the war in the book ‘The Economic Consequence of the Peace (1919)’. His book ‘General Theory of Employment, Interest and Money’ (1936) is regarded as one of the most influential economics books of economics of the twentieth century.

Question 6.
What is Legal Reserve Ratio ? State its components. [2]
Answer:
Legal Reserve Ratio refers to the minimum ratio of deposits which every bank is legally required to keep as reserves.
Components: There are two components of LRR.

• Cash Reserve Ratio : The percentage of deposits that every bank is required to maintain with the central bank as cash reserve.
• Statutory Liquidity Ratio : The percentage of total deposits which bank is required to maintain with itself.

Question 7.
What is Government budget ? [2]
Answer:
Government budget is a statement of the estimates of the Government Receipts and Government Expenditure during the period of one financial year. It unveils/ reveals fiscal policy of the government, focusing on growth and stability of the economy.

Question 8.
Write any two objectives of government budget. [2]
Answer:
Following are the two objectives of government budget:

• High rate of GDP growth : Through its revenue and expenditure policy, the government strives to achieve a high rate of GDP growth. It makes investment expenditure on infrastructure.
• Balanced Regional growth : While allocating funds for infrastructural development, focus is placed on the development of backward regions of the country.

Question 9.
Define revenue deficit in a government budget. [2]
Answer:
Revenue deficit in government budget shows excess of Revenue Expenditure over Revenue Receipts.
Revenue Deficit = Revenue Expenses – Revenue Receipts

Question 10.
What do you mean by fiscal deficit ? [2]
Answer:
Fiscal deficit is the excess of Total Expenditure over Total Receipts. It is estimated as under:
Fiscal deficit = Total expenditure – Total receipts other than borrowings.

Question 11.
How is‘choice’a core parameter in the study of economics? [2]
Answer:
Choice is the consequence of scarcity. Choice emerges when limited resources are to be used for the satisfaction of unlimited wants. A rupee cannot buy ten things when the price of each thing is ₹ 1. You have to choose the thing you would prefer to have; you have to forego nine things in favour of the one thing you choose to have. Choosing one alternative and not choosing others is the problem of choice. It is also called economic problem, which it stems out of scarcity.

Question 12.
Draw the indifference curve. [2]
Answer:

Question 13.
What happens to the demand for a substitute good of a commodity when the price of the commodity falls/rises? [2]
Answer:
If the price of one commodity falls, then the demand of other commodity decreases.
In contrast, when the price of one commodity rises, then the demand of other commodity increases.

Question 14.
Write a short note on factors of production: land and labour. [2]
Answer:
(i) Land: The meaning of land is not the soil alone or the surface of the Earth, but it refers to all the free gifts of nature, in which in addition to land, in.common language, natural resources, water, air, light, heating, mines and soil fertility is included. Land cannot be shifted from one place to another like labour and capital. Land is limited and of varying fertility.

(ii) Labour: Labour is a physical or mental effort of human being in the process of production for economic purposes. Any work done for the sake of pleasure or love does not represent labour in economics. It is. directly connected with human efforts. The workers’ efficiency differs from one worker to other.

Question 15.
What do you mean by very short (limited time) period market? [2]
Answer:
In this market, due to limited time period, the sale of the product does not increase or decrease. It means supply is completely fixed. Only demand may change. Example: Perishable products like – milk, curd, butter, fruits, vegetables, eggs, etc.

Question 16.
What do you understand by long-run market? [2]
Answer:
When the period of time becomes so long that it is possible to adjust the production according to demand, then it is a long-term situation. Since the time duration is quite long, we can change all the variable as well as fixed factors. Changing the fixed and variable factors can help adjust both, the supply and the demand.

Section – C

Question 17.
What is the difference between microeconomics and macroeconomics? [3]
Or
What are the important features of a capitalist economy? [3]
Answer:
The distinction between microeconomics and macroeconomics is as follows:

Basis	Microeconomics	Macroeconomics
Meaning	Microeconomics is that branch of economics which studies the behaviour of individual units of an economy such as a firm, a household etc.	Macroeconomics is that branch of economics which studies the behaviour of aggregates of the economy as a whole.
Objective	It aims at determining the price of a commodity or a factor of production.	It aims to determine aggregate output and employment level ofthe economy.
Assumption	It assume that all the macro variables remain constant. It assumes that national output, consumption, saving etc. are constant.	It assumes that all the micro variables remain constant, while studying the level of output.
Alternative Name	It is also known as “PriceTheory’.	It is also known as ‘Income and Employment Theory.

Question 18.
What is a ‘legal tender’ ? What is ‘fiat money’ ? [3]
Or
What is High Powered Money ? [3]
Answer:

• Legally, money is anything proclaimed by law as a medium of exchange.
• Paper notes and coins (collectively called currency) is money as a matter of law.
• Nobody can refuse its acceptance as medium of exchange.

Fiat Money: It is defined as money which is under the ‘FIAT’ (order or authority) of the government to act as money.

Question 19.
Discuss the central problems of an economy. [3]
Or
What do you mean by the production possibilities of an economy? [3]
Answer:
Human wants are unlimited and productive resources such as land and other natural resources like raw material, capital, equipments etc. by which goods and services are produced to satisfy those wants, are scarce. The problem of scarcity of resources is felt not only by individuals, but also by the society as a whole. This gives rise to the problem of how to use scarce resources to attain maximum satisfaction. This is generally called ‘Economic Problem’. Every economic system, whether it is capitalist, socialist or mixed, has to deal with this central problem of scarcity of resources relative to wants for them. The central economic problems are further divided into three basic economic problems. These are:

(i) What to produce? Every society has to decide which goods are to be produced and in what quantities. Whether more heavy machineries should be produced or more edible items should be produced; or whether more capital goods like machines, equipments, dams etc. should be produced or more consumer goods such as bread should be produced. Not only the society has to decide about what goods are to be produced, but it has also to decide in what quantities these goods would be produced. In a nutshell, a society must decide how much wheat, how many hospitals, how many schools, how many machines, how many metres of cloth, etc. have to be produced.

(ii) How to produce? There are various alternative techniques of producing a commodity. For example, cotton cloth can be produced with either handlooms or automatic looms. Production with handlooms involves use of more labour and while production with automatic looms involves use of more machines and capital. A society has to decide whether it will produce cotton cloth using labour, intensive techniques or capital-intensive techniques. Likewise, for all other goods and services, it has to decide whether to use labour intensive techniques or capital¬intensive techniques. Obviously, the choice would depend on the availability of different factors of production (i.e., labour and capital) and their relative prices. It is in the society’s interest to use those techniques of production that make best use of the available resources.

(iii) For whom to produce? Another important decision which a society has to take is for whom to produce. The society cannot satisfy all the wants of all the people. Therefore, it has to decide who should get how much of the total output of goods and services. In other words, it has to decide about the share of different people in the national cake of’goods and services.

Question 20.
Explain market equilibrium. [3]
Or
When do we say there is excess demand for a commodity in the market? [3]
Answer:
Market equilibrium is a situation of market in which demand for a commodity is exactly equal to its supply, corresponding to a particular price. Thus, in a state of equilibrium, the market clears itself as market demand = market supply of the commodity. There is neither excess demand nor excess supply. In such a situation, the price that prevails in the market is called equilibrium price. It is called general theory of price determination or price determination theory of demand and supply.

Section – D

Question 21.
A consumer wants to consume two goods. The prices of the two goods are ₹ 4 and ₹ 5 respectively. The consumer’s income is ₹ 20. [4](i) Write down the equation of the budget line.
(ii) How, much of good 1 can the consumer consume, if she/he spends her/his entire income on that good?
(iii) How much of good 2 can she/he consume if she/he spends her/his entire income on that good?
(iv) What K the slope of the budget line ?
Or
How does the budget line change if the price of good two decrease by a rupee but the price of good 1 and the consumer’s income remain unchanged ? [4]
Answer:
(i) Let the two goods be x and y.
Given:
P_x = ₹ 4, P_y = ₹ 5,
Income of the consumer = ₹ 20. The equation of budget line:
P_xX + P_yY = M
4x + 5y = 20

(ii) If the consumer spends her/his entire income on Good x, the money spent on Good y will be zero.
So, equation-wise
P_xX + P_yY = M
4x + 0 = 20
4x = 20
x = 20
x = 5 units
Therefore, 5 units of Goods x can be consumed.

(iii) If the consumer spends her/his entire income on Good y, the money spent on Good x will be zero.
So, equation-wise :
P_xX + P_yY = M
0 + 5y = 20
5y = 20
y = 20
y = 4 units. Therefore, 4 units of Goods y can be consumed.

(iv) Slope of the budget line:
Px / Py = 4/5 = 0.8

Question 22.
What is equilibrium? [4]
Answer:
Equilibrium is defined as the situation where the plans of all the consumers as well as the firms in the market match and the market clears. Market equilibrium is defined as a state of the market when demand of a commodity is equal to its supply, corresponding to a particular price. Thus, we can say that in equilibrium, the aggregate quantity that all the firms wish to sell equals to the quantity that all Market Demand.

Question 23.
What is a barter system ? What are its drawbacks ? [4]
Or
What are the main functions of money ? How does money overcome the shortcomings of the barter system ? [4]
Answer:
exchange one commodity for another before the monetary system came into existence. For example, if a person having rice wants wheat, then he can exchange rice with a person who has wheat and needs rice. The economy having barter system was called C-C economy, i.e. commodity exchanged for commodity.

The various drawbacks of the barter system are as follows:

• Problem of double coincidence of wants: Double coincidence of wants implies that needs of two individuals should complement to each other for the exchange to take place.
• Lack of common unit of value: Under barter system, there was no common unit for measuring the value of one good in terms of the other goods for the purpose of exchange.
• Difficulty in storage of wealth : It was very difficult to store commodities for the purpose of future exchange. Perishable goods like grains, milk etc. could not be stored for exchange in future. Therefore, wealth storage was a major difficulty of barter system.

Lack of standard of deferred payments: The future payments could not be met in a C-C economy as wealth could be stored. It was very difficult to pay back loans.