RBSE 12th Economics Model Paper Set 2 with Answers in English

Students must start practicing the questions from RBSE 12th Economics Model Papers Set 2 with Answers in English Medium provided here.

RBSE Class 12 Economics Model Paper Set 2 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) The term macro is derived from Greek word MAKROS meaning: [1]
(a) large
(b) small
(c) both (a) and (b)
(d) none of these
Answer:
(a) large

(ii) Goods are …………………….. while services are …………………….. . [1]
(a) tangible, intangible
(b) intangible, tangible
(c) manufactured, produced
(d) None of these
Answer:
(a) tangible, intangible

(iii) Final goods are used by the: [1]
(a) consumers
(b) producers
(c) government
(d) All of these
Answer:
(d) All of these

(iv) Which among these is a characteristic of barter system ? [1]
(a) A common medium of exchange
(b) A common unit of account
(c) A standard for deferred payments
(d) Double coincidence of wants
Answer:
(d) Double coincidence of wants

(v) Introduction of money has: [1]
(a) separated the act of sale and purchase of an individual
(b) combined the act of sale and purchase of an individual
(c) expanded the scope of sale and purchase
(d) both (a) and (c)
Answer:
(d) both (a) and (c)

(vi) Who presents the Budget in the Parliament?
(a) Chief Minister of Delhi
(b) Prime Minister of india
(c) President of India
(d) Minister of Finance of India
Answer:
(d) Minister of Finance of India

(vii) Principal characteristics of resources are: [1]
(a) They are scarce in relation to our needs
(b) They have alternative uses
(c) Botn(a) and (b)
(d) None of these
Answer:
(c) Botn(a) and (b)

(viii) When Marginal Utility is Negative, Total utility is: [1]
(a) Zero
(b) Diminishing
(c) Maximum
(d) Minimum
Answer:
(b) Diminishing

(ix) The law of Diminishing Marginal Utility states that when more and more units of a commodity
are consumed, marginal utility: [1]
(a) begins to increase
(b) remains constant
(c) begins to decrease
(d) None of these
Answer:
(c) begins to decrease

(x) In case of diminishing returns to a factor: [1]
(a) Total product increases at diminishing rate
(b) Total product increases at increasing rate
(c) Marginal product diminishes
(d) both (a) and (c)
Answer:
(d) both (a) and (c)

(xi) The stage of negative returns to a factor sets in when: [1]
(a) MP is diminishing
(b) MP is rising
(c) MP is negative
(d) Both (a) and (c)
Answer:
(c) MP is negative

(xii) The shape of TP curve is: [1]
(a) Positively sloped
(b) Negatively sloped
(c) Inversely sloped
(d) Both (b) and (c)
Answer:
(a) Positively sloped

2. Fill in the blanks

(i) Study of general price level in the economy will fall under the subject matter of …………………… .[1]
Answer:
macroeconomics

(ii) ………………………… is the central bank of India. [1]
Answer:
Reserve Bank of India

(iii) Direct tax is called direct because it is collected directly from ……………………… . : [1]
Answer:
the income earners

(iv) Microeconomics studies economic activities of …………………………… units. [1]
Answer:
individual

(v) As more and more of a commodity is consumed, total utility …………………… at diminishing rate. [1]
Answer:
increases

(vi) Stages of production are the consequences of ……………………… . [1]
Answer:
law of variable proportions

3. Answer the following in 10-20 words

(i) Define final goods. [1]
Answer:
Final goods are those goods which are meant for final consumption and for final investment.

(ii) Define indirect taxes. [1]
Answer:
Indirect taxes refer to those taxes which are imposed by the government on production and sale of goods and services.

(iii) What are subsidies ? [1]
Answer:
Subsidies are the ‘economic assistance’ given by the government to the firms and households to promote general welfare.

(iv) Define money supply. [1]
Answer:
The stock of money held by the public at a point of time in an economy is referred to as the money supply.

(v) State the components of money supply. [1]
Answer:
The components of money supply are:
(a) Currency held with the public, and
(b) Demand deposits with banks.

(vi) What are revenue receipts in government budget ? [1]
Answer:
Revenue receipts refer to those receipts which neither create any liability nor cause any reduction in the assets of the government.

(vii) What are capital receipts ? [1]
Answer:
Capital receipts refer to those receipts which either create liability or cause reduction in assets of the government.

(viii) Which type of economics deals with the opinions? [1]
Answer:
Normative economics.

(ix) What is the meaning of consumer’s equilibrium? [1]
Answer:
It is the state in which a consumer is said to be in equilibrium when he is buying such a combination of goods that leaves him with no tendency to rearrange his purchase of goods.

(x) What do you understand by MP? [1]
Answer:
MP means marginal product. It is additional output attributed to an additional unit of the variable factor, other factors remaining constant.

(xi) When is TP maximum in relation to MP? [1]
Answer:
When MP is zero, there is not addition to TP. Hence, TP is maximum at this point.

(xii) What do you mean by market demand? Explain. [1]
Answer:
Market demand is the sum total of quantities which are demanded by various consumers at a certain price in the market.

Section – B

Question 4.
Milk is always a consumer good. Defend or refute. [2]
Answer:
This is refuted.

• Milk is a consumer good and it does not depend on the use of bread.
• When it is purchased by a household, it is a consumer good.
• When it is purchased by a restaurant, it is an intermediate good.

Question 5.
Distinguish between domestic product and national product. [2]
Answer:

• Domestic product is concerned with all the production done both by normal residents and non-residents in the domestic territory of a country.
• National product of a country is generated anywhere in the world by the normal residents of that country.

Question 6.
Differentiate between Cash Reserve Ratio and Statutory Liquidity Ratio. [2]
Answer:
Cash Reserve Ratio refers to the minimum percentage of net demand and time deposits which commercial banks are required to maintain with the central bank. Statutory Liquidity Ratio refers to the minimum percentage of net demand and time deposits in the form of specified liquid assets which commercial banks are required to maintain with themselves.

Question 7.
Define Primary Deficit. [2]
Answer:
Primary Deficit is the difference between Fiscal Deficit and Interest Payment. It is estimated as under:
Primary Deficit = Fiscal Deficit – Interest Payment
PD = FD – IP
Primary deficit indicates government borrowing on account of current year expenditure and current year receipts of the government.

Question 8.
What do you mean by Revenue Receipts ? [2]
Answer:
Revenue receipts are those money receipts which do not create any liability for the government and also do not lead to reduction in assets of the government.

Question 9.
What do you mean by Capital Receipts ? [2]
Answer:
Capital receipts are those money receipts of the government which either create a liability for the government or cause a reduction in its assets.t

Question 10.
What do you mean by Capital Expenditure ? [2]
Answer:
Capital expenditure refers to the estimated expenditure of the government in a fiscal year which creates assets or causes a reduction in liabilities.

Question 11.
State the theories that we study in micro-economics. [2]
Answer:

• Theory of demand and consumer behaviour,
• Theory of supply and producer behaviour,
• Production theories, explaining how production responds to different combinations of inputs,
• Theory of price determination, explaining how prices of goods and sendees are determined in different markets.

Question 12.
What does movement on the same demand curve show? [2]
Answer:
Movement along a demand curve indicates a change in quantity demanded in response the change in the commodity’s price.

Question 13.
What does the shift of a demand curve indicate ? [2]
Answer:
A shift in demand curve indicates a change in demand in response to a change in determinant of demand (like income, price of the goods, tastes, expectations, etc.) other than the commodity’s price.

Question 14.
Explain the relationship between average product (AP) and marginal product (MP). [2]
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, (iv) 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.

Question 15.
What is the meaning of perfect competition market? [2]
Answer:
Perfect competition refers to a market situation in which there are large number of buyers and sellers of homogenous products. The price of the product is determined by industry with the forces of demand and supply.

Question 16.
What is the meaning of homogenous product? [2]
Answer:
Homogenous product means that the products of various firms are indistinguishable from each other; they are perfect substitutes for one another.

Section – C

Question 17.
Describe the four major sectors in an economy according to macroeconomic point of view. [3]
Or
Describe the Great Depression of 1929. [3]
Answer:
These are as follows:
(i) Firm: Firms are the producing units. They purchase or hire the factors of production and produce a variety of goods and services. The main motive of a firm is to maximise its profit. This sector is responsible for investment role in GDP.

(ii) Household Sector: Households supply factor services to the firms and earn factor incomes for supplying these productive services. Money thus received is spent on the purchase of goods and services for their consumption. It also provides a market for the consumption of output of the firm. This sector is responsible for consumption expenditure role in GDP.

(iii) External Sector: This sector receives payment for exports and makes payment-for imports. Capital from foreign countries may flow into the domestic country or domestic country may also provide capital to the foreign market.

(iv) Government: The government sector is responsible for framing laws and regulating policies that affect the economy as were as people.

Question 18.
Explain the functions of commercial banks. [3]
Or
Do you consider a commercial bank as the ‘creator of money’ in the economy ? [3]
Answer:
Following are the functions of commercial banks :

• They accept deposits from the public. These deposits can be withdrawn by cheques and are repayable on demand,
• A commercial bank uses the deposited money for lending and for investment in securities,
• It is a commercial institution whose aim is to earn profit. It charges higher rate of interest from the borrowers and pays much lower rate of interest to the depositors,
• It is a unique financial institution that creates demand deposits which serves as a medium of exchange.

Question 19.
What is a production possibility frontier? [3]
Or
Discuss the subject matter of economics. [3]
Answer:
A production possibility curve or a 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 of goods which can be produced with given resources and techniques of production. In 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, we assume that there are two types of goods which are to be produced. We also assume that-

• there is a given amount of productive resources and they remain fixed;
• resources are neither unemployed nor underemployed; and
• technology does not change.

Question 20.
When do we say there is excess supply for a commodity in the market? [3]
Or
What will happen if the price prevailing in the market is: [3]
(i) above the equilibrium price?
(ii) below the equilibrium price?
Answer:
When the market price exceeds the equilibrium price, consumers demand less for a commodity thereby increasing the quantity of good than supplied. This situation is called excess supply.

Here, SS is the supply curve, DD is the demand curve, A is the equilibrium point,
OP is the equilibrium price, OP₁ is the market price and BC shows excess supply.

Section – D

Question 21.
Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2 if she spends her entire income. The prices of the two goods are ₹ 6 and ₹ 8 respectively. How much is the consumer’s income? [4]
Or
Suppose a consumer wants to consume two goods which are available only in integer units. The two goods are equally priced at ₹ 10 and the consumer’s income is ₹ 40. [4]
(i) Write down all the bundles that are available to the consumer.
(ii) Among the bundles that are available to the consumer, identify those which cost her exactly ₹ 40
Answer:
Budget line equation = P_xX + P_yY = M
Here, P_x = ₹ 6
P_y = ₹ 8
x = 6 unit
y = 8 unit
6 × 6 + 8 x 8 = M
36 + 64 = M
M = ₹ 100

Question 22.
What are the basic assumptions of market equilibrium under perfect competition? [4]
Or
What are the two aspects of shift in demand curve? [4]
Answer:
These are the four basic assumptions of market equilibrium under perfect competition:

• Price and quantity supplied are positively related or that supply curve of a commodity slopes upward from left to right,
• Price and quantity demanded are negatively related or that demand curve of a commodity slopes downward from left to right,
• Forces of supply and demand operate freely without any government intervention,
• Factors other than price like tastes and preferences of customers, prices of related goods, income of the consumers, size of the market etc remain unchanged.

Question 23.
What are the alternative definitions of money supply in India ? [4]
Or
What is money multiplier ? What determines the value of this multiplier ? [4]
Answer:
The alternative definitions of money supply in India are as follows:
Measures of M₁ include-
(i) Currency notes and coins with the public (excluding cash in hand of all commercial banks). (C)

(ii) Demand deposits of all commercial and co-operative banks excluding interbank deposits. (DD) Where demand deposits are those deposits which can be withdrawn by the depositor at any time by means of cheque. No interest is paid on such deposits.

(iii) Other deposits with RBI (O.D.)
M₁ = C + DD + OD Where, other deposits are the deposits held by the RBI of all economic unit except the government and banks. OD includes DD of semi¬government public financial institutions, foreign central bank and government, IMF etc.

Measures of M₂
M₁ [C + DD + OD] + Post Office saving deposits
Measures of M₃
M₁ + Time deposits of all commercial and Co-operative banks
Time deposits are the deposits that cannot be withdrawn before the expiry of the
stipulated time for which deposits are made. For example, fixed deposits.
Measures of M₄
M₃ + Time deposits with the Post office saving organization (excluding National Saving Certificates)