RBSE 12th Economics Model Paper Set 3 with Answers in English

Students must start practicing the questions from RBSE 12th Economics Model Papers Set 3 with Answers in English Medium provided here.

RBSE Class 12 Economics Model Paper Set 3 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) Macroeconomics is concerned with: [1]
(a) The level of output of goods and services in the economy
(b) GDP Growth
(c) General price level
(d) All of the above
Answer:
(d) All of the above

(ii) Goods that satisfy human wants directly are referred to as: [1]
(a) capital goods
(b) intermediate goods
(c) consumer goods
(d) none of these
Answer:
(c) consumer goods

(iii) Who are the final users? [1]
(a) consumers
(b) producers .
(c) government
(d) both (a) and (b)
Answer:
(d) both (a) and (b)

(iv) Money which is accepted as a medium of exchange because of trust between the payer and the payee is called: [1]
(a) Full bodied
(b) Fiduciary
(c) Credit
(d) Fiat
Answer:
(b) Fiduciary

(v) Full bodied money is that money whose money value arid commodity value are ………………………… in the market. [1]
(a) Equal
(b) different
(c) declared as equal by the government
(d) declared as equal by the RBI
Answer:
(a) Equal

(vi) The budget consists of: [1]
(a) the financial performance of the government over the past one year.
(b) the financial programs and policies of the government for the next one year.
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

(vii) The resources for satisfying human Wants are: [1]
(a) limited
(b) available at zero prices
(c) unlimited
(d) None of these
Answer:
(a) limited

(viii) Diagrammatic presentation of consumer’s indifference set is called: [1]
(a) Indifference Curve
(b) Utility curve
(c) Budget Line
(d) None of these
Answer:
(a) Indifference Curve

(ix) An Indifference curve is related to: [1]
(a) Consumer’s Income
(b) Prices of two goods
(c) Total utility derived from consumption of two goods
(d) Choice and preferences of consumer
Answer:
(d) Choice and preferences of consumer

(x) The shape of marginal product curve is: [1]
(a) ‘U’ shaped
(b) Inverse ‘U’ shaped
(c) Rectangular hyperbola
(d) None of these
Answer:
(b) Inverse ‘U’ shaped

(xi) When MP cuts AP at its highest point: [1]
(a) MP > AP
(b) MP < AP
(c) MP = AP
(D) None of these
Answer:
(c) MP = AP

(xii) When MP is decreasing, TP increases: [1]
(a) at an increasing rate
(b) at a decreasing rate
(c) at a constant rate
(d) None of these
Answer:
(b) at a decreasing rate

2. Fill in the blanks

(i) The degree of aggregation is ……………………… in macroeconomics as compared to microeconomics. [1]
Answer:
higher

(ii) With the evolution of ……………………… store of value has become possible. [1]
Answer:
money

(iii) Disinvestment of equity in PSUs, is a …………………….. policy instrument. [1]
Answer:
fiscal

(iv) …………………….. is a system by which people of an area are living. [1]
Answer:
Society

(v) Total Utility will be maximum when marginal utility is ………………………… . [1]
Answer:
zero

(vi) Total output is maximum when MP is ……………………… . [1]
Answer:
zero

3. Answer the follow ing in 10-20 words

(i) Name the main types of final goods. [1]
Answer:
Final goods are of two types :
(a) Consumer Goods
(b) Final Investment Goods or Consumer Durable Goods.

(ii) What are stock variables ? [1]
Answer:
Stock variables refer to those variables, which are measured at a particular point of time.

(iii) What are flow variables ? [1]
Answer:
Flow variables refer to those variables, which are measured over a period of time.

(iv) What is bank money ? [1]
Answer:
Bank money refers to demand deposits held with the commercial banks.

(v) Define demand deposits. [1]
Answer:
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.

(vi) Give two examples of revenue receipts. [1]
Answer:
(a) Tax receipts
(b) Income from public enterprises.

(vii) Give two examples of capital receipts. [1]
Answer:
(a) Market borrowings
(b) Recovery of loans.

(viii) Which type of economics deals with facts? [1]
Answer:
Positive economics.

(ix) What do you mean by ‘monotonic preferences’? [1]
Answer:
Monotonic preferences means that a rational consumer always prefers more of a commodity which offers him a higher level of satisfaction.

(x) What does increasing returns to a factor mean ? [1]
Answer:
First stage of production function is called the stage of increasing returns. The law of increasing returns operates because of indivisibility of fixed factors. It means, in order to produce goods upto a given limit, at least one unit of the fixed factor is fixed.

(xi) What do you mean by law of diminishing returns to a factor? [1]
Answer:
Law of diminishing returns states that as more and more of the variable factor is combined with the fixed factor, a stage must ultimately come when marginal product (and eventually average product) of the variable factor starts declining.

(xii) What is the meaning of excess supply? [1]
Answer:
When the market supply is more than the market demand at a certain price (S > D) is called excess supply.

Section – B

Question 4.
Explain how distribution of gross domestic product is a limitation as a measure of economic welfare. [2]
Answer:
If the national income of a country is rising, the welfare of the people may not necessarily rise.
This may happen when increased national income is concentrated in a few hands. For the rest, the income may, infact has fallen. In such a case, the welfare of the entire country cannot be said to have increased.

Question 5.
Distinguish between real GDP and nominal GDP. Which of these is an indicator of economic welfare? [2]
Answer:
Real GDP: It is the money value all final goods and services measured at constant prices.
Real GDP is an indicator of economic welfare because it shows the availability of goods and services to the people of the country.
Nominal GDP: It is the money value of all final goods and services measured at current prices.

Question 6.
What are Other Deposits (OD) measures of Ml ? [2]
Answer:
Other Deposits are the deposits held by the RBI of all economic units except the government and banks. Other deposits include the deposits of semi-government, public financial institutions (like IDBI, IFCI etc.), foreign central banks and governments, the IMF etc.

Question 7.
What do you mean by planned expenditure ? [2]
Answer:
Planned expenditure refers to that expenditure which relates to the specified plans and programmes of development and assistance of the central government to the state governments. It includes both Revenue Expenditure and Capital Expenditure.

Question 8.
What do you mean by non-planned expenditure ? [2]
Answer:
Non-planned expenditure refers to the expenditure which is not related to the specified plans and programmes of development, and is also not related to the assistance of the central government to state governments.

Question 9.
Why is recovery of loans classified as capital receipts ? [2]
Answer:
The central government offers loans to the state governments to cope up with the emergent situations. When these loans are recovered, assets of the government are reduced. Accordingly, these are classified as Capital Receipts.

Question 10.
Why is Payment of Interest classified as Revenue Expenditure? [2]
Answer:
Payment of interest does not create any asset for the government and also does not cause any reduction in liability of the government. Therefore, it is classified as Revenue Expenditure.

Question 11.
Write two features each of positive economics and normative economics. [2]
Answer:
Positive Economics:

• Positive economics is that science in which analysis is confined to cause and effect relationship.
• Positive economics is concerned with the facts about the economy.

Normative Economics:

• Economics as a normative science is concerned with what‘ought to be’.
• Normative economics deals primarily with economic goals of a society and the policies adopted to achieve certain goals.

Question 12.
What is elasticity of demand? [2]
Answer:
The elasticity of demand is the measurement of responsiveness of demand for a commodity to the change in any of its determinants, viz., price of the commodity, price of the substitutes and complements, consumers’ income and consumers’ expectations regarding prices.

Question 13.
What do you understand by price elasticity of demand? [2]
Answer:
The price elasticity of demand is defined as the degree of responsiveness or sensitiveness of demand for a commodity to the change in its price.

Question 14.
Define law of variable proportions. [2]
Answer:
According to law of variable proportions, as more and more units of a variable factor are combined with same quantity of fixed factors, total production first increases at ap increasing rate, then at diminishing rate, and finally starts diminishing. It implies that marginal product first rises and then diminishes eventually. Law of variable proportions is also known as law of returns to a factor. It is a short-term concept.

Question 15.
What is the meaning of industry? [2]
Answer:
The group of firms which produce any particular good is called industry.

Question 16.
What do you understand by cut-throat competition? [2]
Answer:
When there is huge competition between different firms then it is called cut-throat competition.

Section – C

Question 17.
What do you mean by Capitalist Economy/Market Economy? [3]
Or
What do you mean by Centrally Planned Economy? [3]
Answer:
Market Economy is a free economy. It is also known as Laissez-fair Economy or Capitalist Economy. In this all, means of production are owned, controlled and operated by the private sector. Producers are free to decide, ‘what’, ‘how’ and ‘for whom’ to produce on the basis of market. The price of the commodity is determined by the market forces of demand and supply. All the economic activities are guided by profit motive. There is no government intervention in economic activities.

Question 18.
What role of RBI is known as‘Lender of Last Resort’? [3]
Or
Explain the role of Cash Reserve Ratio in controlling credit creation. [3]
Answer:
Any commercial bank which is facing financial crisis and needs to obtain funds for functioning seeks the help of the central bank of the country. In India, the RBI is the Central bank and if provides assistance to those banks in the form of credit, thereby saving them getting bankrupt. Therefore, by acting as a guarantor for commercial banks, the RBI maintains a sound and healthy system of banking in the country.

Question 19.
What do you mean by positive economic analysis? [3]
Or
What is normative economic analysis? [3]
Answer:
Positive economics is concerned with the facts as they exist. It does not pass any value judgement regarding what is right and what is wrong. In positive economic analysis, we obtain proposals, principles and laws in pursuance of some rules of logic. These principles, law and propositions explain the relationship between cause and effect in economic forms. In positive micro economics, we are largely concerned with the determination of relative prices and allocation between different commodities.

In positive macro-economics, we are widely worried about how national income and employment levels, total consumption and general level of investment and prices are determined. For example, the production of wheat was 1,600 tons this year (hypothetical value). This statement is a positive economic analysis, as only fact is being presented but no value judgement is being provided.

Question 20.
At what level of price, do the firms in a perfectly competitive market supply when free entry and exit is allowed in the market? How is equilibrium quantity determined in such a market? [3]
Or
How is the equilibrium number of firms determined in a market where entry and exit is permitted? [3]
Answer:
Firms supply the minimum average cost or balance at the price leVel. In such a market, the balance quantity is determined at the point where the price line intersects the market demand curve.

OP is the equilibrium price, DD is demand curve, E is equilibrium point and OQ equilibrium quantity. From the picture, it is clear that the price is intersecting the demand P on the demand curve DD on the E point. So, the equilibrium quantity will be OQ.

Section – D

Question 21.
If a consumer has mionotonic preference, can she be indifferent between the bundles (10, 8) and (8, 6)? [4]
Or
Suppose a consumer’s preferences are monotonic. What can you say about her preference ranking over the bundle (10, 10), (10, 9) and (9, 9) ? [4]
Answer:
No, a consumer cannot be indifferent between the bundles (10, 8) and (8,6) as the bundle (10, 8) contains more quantities of both the goods. So, if a consumer has monotonic preference, she would prefer the bundle (10, 8) over the bundle (8, 6) and she cannot be indifferent between the given bundles.

Question 22.
What are the two aspects of shift in supply curve? [4]
Or
Suppose the market determined rent for apartments is too high for common people to afford. If the government comes forward to help those seeking apartments on rent by imposing control on rent, what impact will it have on the market for apartments? [4]
Answer:
Similar to shift in demand, shift in supply or change in supply also has two aspects:
1. Increase in Supply and
2. Decrease in Supply.

Let us study both these cases and the effect of increase and decrease in supply on equilibrium price.
1. Increase in Supply: In case of increase in supply, the supply curve shifts to the right.
2. Decrease in Supply: In case of decrease in supply, the supply curve shifts to the left.

Question 23.
What are the instruments of monetary policy of the RBI ? [4]
Or
Explain the role of Reverse Repo Rate in controlling money supply. [4]
Answer:
Instruments of monetary Policy of the RBI are as follows:
(i) Qualitative instruments, and
(ii) Quantitative instruments.

Qualitative instruments are:
(a) Marginal requirement: The grant of loans by the commercial banks is on the basis of value of security that is kept as mortgage; when the central bank restricts the money flow, it results in increase in marginal requirement for loans and vice-versa in case of credit policy.

(b) Selective credit control: It deals with the enhanced flow of credit to sectors that need priority, while negative aspect deals with restricting credit flow to a particular sector.

(c) Moral Suasion: It is a type of persuasion technique which is applied by the central bank to keep pressure on commercial bank in order to abide by the monetary policies that are defined.

Quantitative measurers:
(a) Bank rate: The rate at which central bank provides loans to the commercial banks is called bank rate. If bank rate is increased commercial bank will increase the rate of lending which will reduce the capacity of public to take credit vice-versa.

(b) Open Market operations: Buying securities by the central bank will boost the economy, while selling of securities by it will clear the surplus cash balance of the economy which leads to limited money supply.