Students must start practicing the questions from RBSE 12th Economics Model Papers Set 4 with Answers in English Medium provided here.
RBSE Class 12 Economics Model Paper Set 4 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) Study of General price level is a part of study of …………………… branch of economics. [1]
(a) Microeconomics
(b) Macroeconomics
(c) Both (a) and (b)
(d) None of these
Answer:
(b) Macroeconomics
(ii) ………………….. are those goods that are still in the process of value addition. [1]
(a) Capital goods
(b) Intermediate goods
(c) Producer goods
(d) None of these
Answer:
(b) Intermediate goods
(iii) Durable, semi durable and non durable are types of ………………………… goods. [1]
(a) capital
(b) final
(c) consumer
(d) none of these
Answer:
(c) consumer
(iv) Money that is issued by the order of government is called: [1]
(a) Credit money
(b) Full bodied money
(c) Fiat money
(d) Fiduciary money
Answer:
(c) Fiat money
(v) When money value of money exceeds its commodity value then it is called: [1]
(a) Fiduciary money
(b) Credit money
(c) Full bodied money
(d) Fiat money
Answer:
(b) Credit money
(vi) The two aspects of Budgetary or Fiscal policies are: [1]
(a) Revenue and Capital
(b) Assets and Liabilities
(c) Revenue and Expenditure
(d) Capital and Expenditure
Answer:
(c) Revenue and Expenditure
(vii) Scarcity of resources exists: [1]
(a) at the micro level
(b) at the Macro level
(c) Both (a) and (b)
(d) None of these
Answer:
(c) Both (a) and (b)
(viii) Which of the following is an assumption under IC Analysis ? [1]
(a) Monotonic preferences of the consumer
(b) Declining Marginal Rate of Substitution
(c) Cardinal Numbers
(d) All of these
Answer:
(a) Monotonic preferences of the consumer
(ix) When MRS is diminishing, IC is: [1]
(a) convex to the origin
(b) concave to the origin
(c) straight line
(d) None of these
Answer:
(a) convex to the origin
(x) When total product is maximum then marginal product: [1]
(a) decreases
(b) increases
(c) is also maximum
(d) is zero
Answer:
(d) is zero
(xi) When MP is constant: [1]
(a) TP is also constant
(b) TP is zero
(c) TP is increasing at a constant rate
(d) TP is decreasing at a constant rate
Answer:
(c) TP is increasing at a constant rate
(xii) Fixed costs are also known as: [1]
(a) Supplementary cost
(b) Overhead cost
(c) Indirect cost
(d) All of these
Answer:
(d) All of these
2. Fill in the blanks
(i) Determination of National income and employment generation is the central issue in …………………….. . [1]
Answer:
macroeconomics
(ii) The desire of an individual to have money is called ……………………… for money. [1]
Answer:
demand
(iii) Primary deficit in a government budget will be zero, when …………………… . [1]
Answer:
fiscal deficit is equal to interest payment
(iv) Choices are the outcome of ………………………… . [1]
Answer:
scarcity
(v) IC analysis of consumer’s equilibrium is based on the concept of …………………… measurement of utility. [1]
Answer:
ordinal
(vi) AP is output per unit of the ………………….. factor. [1]
Answer:
variable
3. Answer the following in 10-20 words
(i) What are intermediate goods ? [1]
Answer:
Intermediate goods are those goods which are used as raw material for further production of other goods or for resale in the same year.
(ii) Define national income or national product. [1]
Answer:
National income (or national product) refers to net monetary value of all the final goods and services produced by the normal residents of a country during a year.
(iii) What is nominal GDP ? [1]
Answer:
When GDP is measured at current price, it is called nominal GDP.
(iv) What are time deposits in bank ? [1]
Answer:
Time deposits are the deposits which cannot be withdrawn before the expiry of the stipulated time for which deposits are made; for example-fixed deposits.
(v) What is high-powered money ? [1]
Answer:
High powered money is money produced by the RBI and the government. It consists of the following:
- Currency held by the public
- Cash reserve with the banks.
(vi) What do you mean by non-debt creating capital receipts ? Give two examples of such receipts. [1]
Answer:
Non-debt creating capital receipts include all the capital receipts except the borrowings. Such receipts do not give rise to debt. Example:
- Recovery of loans
- Proceeds from disinvestment.
(vii) What is direct tax ? [1]
Answer:
A tax whose impact and incidence lies on the same person is called a direct tax.
(viii) What leads to emergence of choice? [1]
Answer:
Scarcity of resources.
(ix) How many methods of utility analysis are there? [1]
Answer:
There are two methods of utility analysis are:
- Cardinal utility analysis,
- Ordinal utility analysis.
(x) What is returns to factor? [1]
Answer:
It refers to the behaviour of output when only one variable factor of production is increased in short-run and fixed factors remain constant.
(xi) What are the steps of calculating total output product (TP)? [1]
Answer:
Total output product can be calculated from the following steps:
- By summation of output of different units of factors,
- By multiplying average product with units of factors of production,
- TP = ZMP.
- Or TP = APx units of factors of production.
(xii) What do you mean by excess demand? [1]
Answer:
When the market demand is more than the market supply at a certain price (S < D) is called excess demand.
Section – B
Question 4.
Sale of petrol and diesel cars is rising particularly in big cities. Analyse its impact on gross domestic product and welfare. [2]
Answer:
As a result of rising sale of cars, their production increases and hence GDP increases.
Rising sale of diesel cars particularly in big cities spreads air pollution, which raises medical bills of people living over there. This causes reduction in welfare. Thus, mere increase in GDP cannot be taken as an index of welfare.
Question 5.
Suppose in an imaginary economy, GDP at market price in a particular fiscal year was ₹ 4000 crores, National Income was ₹ 2500 crores, Net Factor Income paid by the economy to rest of the world was ₹ 400 crores and the value of net indirect taxes is ₹ 450 crores. Estimate the value of consumption of fixed capital for the economy from the given data. [2]
Answer:
NNPFC = GDPMP – Consumption of fixed capital – NFIA – NIT
2500 = 4000 – Consumption of fixed capital – 400 – 450
2500 = 3150- Consumption of fixed capital
Consumption of fixed capital
= 3150 – 2500
= ₹ 650 crores.
Question 6.
Explain the ‘medium of exchange’ function of money. [2]
Answer:
Money when used as a medium of exchange helps to eliminate the basic limitations of the barter exchange system, that is the lack of double coincidence of wants. Individuals can exchange their goods and services for money and then can use this money to buy other goods and services according to their needs and convenience. The process of exchange shall have two components, sale and purchase. The ease at which money is converted into other goods and services is termed as ‘liquidity of money’.
Question 7.
Why is expenditure on subsidies termed as an important item of Revenue Expenditure ? [2]
Answer:
Expenditure on subsidies do not cause any reduction in liability of the government and also does not create any asset for the government. Revenue expenditure refers to the estimated expenditure of the government in a fiscal year which does not create assets or causes a reduction in liabilities. Therefore, expenditure on subsidies is termed as an important item of Revenue Expenditure.
Question 8.
Write the objectives of fiscal policy. [2]
Answer:
Following are the objectives of fiscal policy:
- Contributing resources for economic development.
- Allocation of resources.
- Removing the inequalities does in distribution of income and wealth.
Question 9.
Why is tax received by government not considered as Capital Receipt ? [2]
Answer:
Taxes received by the government do not create a liability for the government and also do not cause reduction in assets of the government which are two characteristics of Capital Receipts. Therefore, tax received by government is not considered as capital receipt.
Question 10.
Why payments of loans is called Capital Expenditure? [2]
Answer:
Payment of loans is called to be a capital expenditure because it creates assets for the government and also causes reduction in liabilities of the government.
Question 11.
Give the meaning of economic problems. [2]
Answer:
Economic problems arise due to the scarcity of resources relative to human wants. Since the society cannot satisfy all its wants due to limited availability of goods and services, it must make a choice as to which wants are to be satisfied and which wants need to be left unfulfilled for the time being. Since resources are limited, the society has to choose between the alternative uses of the available resources. This is known as the problem of choice or economic problem.
Question 12.
State the assumptions of indifference curve. [2]
Answer:
Assumptions of indifference curve analysis:
(i) More Quantity of Goods is Better Than the Less : It is believed that the consumer will always like a greater amount of quality goods, provided the other things remain unchanged in their disposal.
(ii) Preferences or Indifferences of a Consumer are Transitive: Suppose, there are three combinations of two goods A, B and C. If the consumer is indifferent between A and B and C, it is then assumed that he will be indifferent between A and C too. This condition implies that consumer’s tastes are quite consistent. This assumption is known as Assumption of Transitivity.
(iii) Utility is Ordinal: It is truly believed that consumers can evaluate different combinations of the objects according to their liking.
(iv) Diminishing Marginal Rate of Substitution : This principle is related to the logic that the particular desires are saturated and various goods are not the right choice for each other.
Question 13.
Explain the effects on budget line due to the change in income with the help of a diagram. [2] Answer:
Question 14.
Can the total product and average product be zero? [2]
Answer:
Total product and average product cannot be zero in any state of production. Only when the production is stopped in the industry, then such a situation may come up. Though total production and average production diminish in the second and third stages of production, they never become zero.
Question 15.
How is the price of product determined in perfect competition? [2]
Answer:
The price of the goods in perfect competition is determined by the relative strengths of the demand and supply of the industry.
Question 16.
“In perfect competition, the firm is acceptor of price”. What does it mean? [2]
Answer:
Individual firms have no role in determining the price of the item in perfect competition.
In the market, the price is determined by the industry and at the same price the firm has to sell its product, hence it is called the acceptor of price.
Section – C
Question 17.
What are the four factors of production and what are the remunerations to each of these called? [3]
Or
Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain. [3]
Answer:
The four factors of production are as follows:
- Land: It is a natural resource and the primary factor of production. The remuneration given for the use of land is called rent.
- Labour: People are the base of every production unit, as they perform all the physical and mental work that is required for production. The remuneration paid for labour is called wages and salaries.
- Capital: It refers to monetary investment required to carry on the process of production. It can also imply the investment in machinery, assisting tools, etc. The remuneration paid for capital is called interest.
- Entrepreneurship: He is that person who brings all the factors of production together and manages them. The reward of entrepreneurship is called profit.
Question 18.
Explain barter or exchange system with the help of an example. [3]
Or
What do you understand by value of money ? [3]
Answer:
Mohan produces wheat and he has more wheat than he needs. Similarly, Sohan produces cloth and he has more cloth than he needs for himself, then when the need arises, both persons can exchange wheat and cloth and fulfil their individual needs, i.e. Mohan will buy cloth by selling wheat and Sohan will buy wheat by selling cloth. This is what barter system means.
Question 19.
Give the meaning of economic problem. [3]
Or
Give any two assumptions of production possibility curve. [3]
Answer:
Economic problems arise due to scarcity of resources relative to human wants. Since the society cannot satisfy all its wants due to limited availability of goods and services, it must make a choice as to which wants are to be satisfied and which wants need to be left unfulfilled for the time being. Since resources are limited, society has to choose between the alternative uses of the available resources. This is known as the Problem of Choice oreconomic problem.
Question 20.
How are equilibrium price and quantity affected when income of the consumers: [3]
(a) increases?
(b) decreases?
Or
Using supply and demand curves, show how an increase in the price of shoes affects the price of a pair of socks and the number of pairs of socks bought arid sold. [3]
Answer:
(a) An increase in the income of the consumers, will give rise to the equilibrium price as well as the quantity of a good. As the consumers will have more money to spend, they will demand more for the quantity of a good. The increased demand of a good would bring excess demand in the market which will ultimately increase the equilibrium price and the producers will produce more.
(b) A decrease in the income of the consumers is likely to decrease the equilibrium price as well as the quantity of a good. As the consumers will have less money to spend, they will demand less for the quantity of a good. The decrease demand of a good would bring excess supply of a product which will ultimately decrease the equilibrium price and the producers will produce less.
Section – D
Question 21.
Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic ? [4]
Or
Suppose there are two consumers in the market for a good and their demand functions are as follows :
d1(p) = 20, p for any price less than or equal to 20 and d1 (p) = 0 at any price greater than 20.
d2(p) = 30 – 2p for any price less than or equal to 15 and d2(p) = 0, at any price greater than 15. Find out the market demand function. [4]
Answer:
No, the preferences of my friend are not monotonic. If the friend had monotonic preference, he would not be indifferent between the bundles (5, 6) and (6, 6) because bundle (6,6) has more quantities of both the goods.
Question 22.
What does equilibrium mean? In which situation is the market said to be in a state of equilibrium? [4]
Or
Explain market equilibrium through a table and diagram. [4]
Answer:
The market condition in which there is no tendency for change of any kind is called the state of equilibrium. In the state of equilibrium, both demand and supply are equal.
Market equilibrium : This is that state of market, in which total market supply is equal to the total market demand.
Qs = Qd [Where Qs = total market supply; Qd = total market demand].
Question 23.
Explain the role of the Reserve Bank of India as the lender of last resort.” [4]
Or
(a) State any two components of Mj Measures of money supply. [4]
(b) Elaborate any two instruments of credit control as exercised by the Reserve Banks of India.
Answer:
The total amount of deposits held by all commercial banks in the country is much larger than the total size of their resources. If all the account holders of all commercial banks in the country want their deposits back at the same time, the banks will not have enough means to satisfy the need of every account holder and there will be bank failures. The Reserve Bank of India plays a crucial role here.
In case of a crisis like the above, it stands with the commercial banks as a guarantor and extends loans to ensure the solvency of the latter. This system of guarantee assures individual account holders that their money will be returned in case of a crisis and there is no need to panic thus, avoiding bank failures. This role of the RBI as the monetary authority is known as ‘the lender of last resort’.
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