RBSE 12th Economics Model Paper Set 5 with Answers in English

Students must start practicing the questions from RBSE 12th Economics Model Papers Set 5 with Answers in English Medium provided here.

RBSE Class 12 Economics Model Paper Set 5 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) Who is regarded as the father of modem day economics? [1]
(a) Adam Smith
(b) John Maynard Keynes
(c) F. W. Taylor
(d) Henry Fayol
Answer:
(a) Adam Smith

(ii) Durable consumption goods have relatively ……………………… value than the single use goods. [1]
(a) higher
(b) lower
(c) similar
(d) None of these
Answer:
(a) higher

(iii) In the estimation of national income, only the value of ……………………… goods is taken into consideration. [1]
(a) final
(b) intermediate
(c) capital
(d) consumer
Answer:
(a) final

(iv) ………………….. and …………………….. are the primary functions of money. [1]
(a) Medium of exchange, Measure of value
(b) Measure of value, Store of value
(c) Store of value, Transfer of value
(d) Transfer of value, Medium of exchange
Answer:
(a) Medium of exchange, Measure of value

(v) The ……………………….. of money tells us about how much money does an individual desire. [1]
(a) demand
(b) supply
(c) Both (a) and (b)
(d) None of these
Answer:
(a) demand

(vi) Which of the following is/are the objectives of government budget? [1]
(a) Allocation Function
(b) Redistribution Function
(c) Stabilisation Function
(d) All of these
Answer:
(d) All of these

(vii) Which of the following situation is correct in regard to scarcity? [1]
(a) Supply of resources >demand for resources
(b) Supply of resources < demand for resources
(c) Supply of resources = demand of resources
(d) None of these
Answer:
(b) Supply of resources < demand for resources

(viii) Marginal rate of substitution of X for Y is calculated as: [1]
(a) PX / PY
(b) PY / PX
(c) ΔY / ΔX
(d) All of these
Answer:
(c) ΔY / ΔX

Question (ix)
Given the money income and the price, the line that shows all different combinations of two goods that a consumer can buy by spending all his income is called: [1]
(a) Production Line
(b) Budget Line
(c) Cost Line
(d) Both (a) and (b)
Answer:
(b) Budget Line

Question (x)
The costs which vary as the level of output varies are called: [1]
(a) Prime costs
(b) Real costs
(c) Indirect cos
(d) None of these
Answer:
(a) Prime costs

Question (xi)
Which one of the following is a correct formula ? [1]
(a) TC = TFC × TVC
(b) TC = TFC / TVC
(c) TC = TFC + TVC
(d) TC = TFC – TVC
Answer:
(c) TC = TFC + TVC

Question(xii)
When production level is zero, then fixed cost is :
(a) Zero
(b) Negative
(c) positive
(d) Equal to variable cost
Answer:
(c) positive

2. Fill in the blanks

(i) ……………………….. is regarded as the father of modem economics. [1]
Answer:
John Keynes

(ii) In the barter system of exchange, acts of sale and purchase of an individual occurs at the ………………………… point of time. [1]
Answer:
same

(iii) ……………………… tax affects the national income. [1]
Answer:
GST

(iv) Economics is a science of …………………….. .
Answer:
human behaviour

(v) A set of IC’s drawn in a graph is called ………………………. .[1]
Answer:
indifference map

(vi) ……………………. is only a long period possibility. [1]
Answer:
Returns to scale

3. Answer the following in 10-20 words

(i) Give two examples of intermediate goods. [1]
Answer:
Two examples of intermediate goods are:

1. raw material
2. office stationary.

(ii) Give an example of externality which reduces welfare of the people. [1]
Answer:
Smoke out of chimneys of factories reduces welfare of the people.

(iii) What is meant by transfer income? Give an example. [1]
Answer:
Income received without rendering any productive services is called transfer income. For example: scholarship, old-age pension etc.

(iv) What is meant by Cash Reserve Ratio ? [1]
Answer:
Cash Reserve Ratio refers to the ratio of total deposits that the commercial banks are legally required to keep with the central bank at zero rate of interest.

(v) What is a central bank ? [1]
Answer:
A central bank is an apex body that controls, operates, regulates and directs the entire banking and monetary structure of an economy.

(vi) Give two examples of indirect taxes. [1]
Answer:

1. GST,
2. Service tax.

(vii) What is GST? [1]
Answer:
GST is a comprehensive value added tax imposed on manufacture, sale and consumption of goods and services at national level.

(viii) In a simple economy, wants of people are? [1]
Answer:
Unlimited.

(ix) If the consumer is forced to release the use of that item even after the point of maximum satisfaction, then what effect does it have on the consumer? [1]
Answer:
Total utility starts declining.

(x) State two assumptions of production function. [1]
Answer:

1. A fixed, given technology is used,
2. Costs of means of production remain the same.

(xi) State two characteristics of production function. [1]
Answer:

1. It indicates a functional relationship between physical input and physical output of a firm.
2. The production function is always applied in context to a certain period of time.

(xii) What is the condition of demand and supply at any other point in place of equilibrium point? [1]
Answer:
There may be a demand surplus or a supply excess at any point other than the equilibrium point.

Section – B

Questions 4.
If Real GDP is ₹ 200 and price Index (with base = 100) is 110, calculate Nominal GDP.
Answer:
Real GDP = \(\frac{\text { Nominal GDP } \times 100}{\text { Price Index }}\)
Real GDP = ₹ 200;
Price Index = 110
200 = \(\frac{\text { Nominal GDP } \times 100}{110}\)
Nominal GDP = \(\frac{200 \times 110}{100}\) = ₹ 220

Questions 5.
If the nominal GDP is ₹ 1200 and price index (with base = 100) is 120, calculate Real GDP. 2
Answer:
Real GDP = \(\frac{\text { Nominal GDP }}{\text { Price Index }}\) × 100
Nominal GDP = 120
Price Index = 120
= \(\frac{1200 \times 100}{120}\) = ₹ 1000

Questions 6.
Explain the ‘unit of account’ function of money.
Answer:
Money acts as a standard measure of value to which all other things can be compared.” Money measures the value of economic goods. Money works as a common denominator into which the value of all goods and services are expressed.

When we express the value of a commodity in terms of money, it is called price, and by knowing the prices of various commodities, it is easy to calculate exchange ratio between them.

Questions 7.
Differentiate between public goods and private goods.
Answer:
Those goods whose benefit is for everyone are called public goods, like roads and hospitals. Private or personal goods are those goods whose benefit is not for the public but for the individuals, like personal car.

Questions 8.
What do you mean by capital expenditure ?
Answer:
Capital Expenditure refers to the estimated expenditure of the government in a fiscal year which creates assets or causes a reduction in liabilities, like-expenditure on land and building, purchase of shares, etc.

Questions 9.
What do you mean by non-development expenditure? [2]
Answer:
When government spends on government services, it is termed as non-development expenditure.
For example: expenditure for administration and expenditure for defence equipment.

Questions 10.
Write two characteristics of taxes. [2]
Answer:
Following are the two characteristics of taxes :

1. It is a payment given by public to the government which is compulsory.
2. Payments received by taxes is used for social welfare and for public benefit.

Questions 11.
Why do the central problems of an economy arise? [2]
Answer:
Human wants are unlimited and productive resources such as land and other natural resources, raw materials, 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 Problems’. Every economic system, be it capitalist, socialist or mixed, has to deal with this central problem of scarcity of resources relative to their wants.

Question 12.
Estimate the value of total utility and marginal utility from the following table: [2]

Units Consumed (Commodity X)	TUx
1	200
2	390
3	570
4	740
5	900

Answer:

Units Consumed (Commodity X)	TUx	Marginal Utility
1	200	200
2	390	190
3	570	180
4	740	170
5	900	160

The table shows that:
MU_n = TU_n – TU_n – 1
TU = ΣMU
= 200 + 190 + 180 + 170 + 160 = 900

Question 13.
Convert this table into a diagram which shows the relation of Total Utility and Marginal Utility. [2]

Units Consumed (Commodity X)	TUx	Marginal Utility
1	200	200
2	390	190
3	570	180
4	740	170
5	900	160

Answer:

Question 14.
What do you understand by the third stage of negative returns? [2]
Answer:
As the amount of a variable factor continues to increase with a constant quantity of, the other fixed factors, a stage is reached when the total product declines and the marginal product becomes negative. This phenomenon of negative returns in stage 3 is due to the fact that the quantity of the variable factors becomes too excessive relative to the fixed factors so that they obstruct each other with the result that the total output falls instead of rising. Besides, too large a number of the variable factors also impairs the efficiency of the fixed factors. The proverb “too many cooks spoil the broth” aptly applies to this situation. In such a situation, a reduction in the units of the variable factors will increase the total output. Just as in the first stage, marginal product of the fixed factors is positive due to its limitedness, in the third stage, the marginal product df the variable factors is negative due to its excessiveness.

Question 15.
What is the shape of demand curve of perfect competition? [2]
Answer:
The demand curve of a competitor firm is perfectly elastic, that is, it is in the form of a horizontal line parallel to the X-axis.

Question 16.
Is the perfect competition seen in the real world? [2]
Answer:
Perfect competition is an imaginary concept. It does not exist in reality.

Section – C

Question 17.
Distinguish between stock and flow. Between net investment and capital which is a stock and which is a flow ? Compare net investment and capital with flow of water into a tank. [3]
Or
What is the difference between planned and unplanned inventory accumulation ? Write down the relation between change in inventories and value added of a firm. [3]
Answer:
Difference between Stock and Flow:

Basis	Stocks	Flows
(i) Meaning	Stock relates to a point of time.	Flow relates to a period of time.
(ii) Nature	Stock has no time dimension. So, it is a static concept.	Flow has time dimension. So, it is a dynamic concept.
(iii) Effect	Stock influences flow; e.g. large stock of capital will lead to increased flow of goods and services.	Flow influences stock; e.g. monthly increase in income of household leads to growth in their wealth.
(iv) Examples	Capital, wealth, supply of money etc.	Income expenditure, investment etc.

Between net investment and capital, capital is stock and net investment is flow. Stock can be assumed as to the amount or level of water in a tank. At any point of time, the amount or the level of water in a tank can be measured. Similarly, the capital is also a stock variable, as it can also be measured at any point of time. Now, if water is flowing out of a tank through a tap, then the level of water will change over time. The difference in water level over an interval of time is an example of a flow variable. Similarly, net investment gives the difference in the investment level over a period of time.

Question 18.
Explain the importance of money in modem time. [3]
Or
Write down two secondary functions of money. [3]
Answer:
In present time, money has an important place in every sphere of economic activity. The operations of economy cannot be imagined today without money. Marshall has rightly said, “Money is that pivot around which the science of economics revolves.” Prof Harris, clarifying the importance of money, says, “All human and divine things, fame and prestige bow down before money.”

It is evident from the above discussion, that in present time, money is of utmost importance.

Question 19.
What are the three central problems of an economy? Why do they arise? [3]
Or
Explain the problem ‘what to produce’ with the help of an example. Does it arise in every economy? Explain. [3]
Answer:
Human wants are unlimited and productive resources such as land and other natural resources, raw materials, capital equipments, etc. with 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 ‘the Economic Problem’. Every economic system, be it capitalist, socialist or mixed, has to deal with this central problem of scarcity of resources relative to wants for them.

Question 20.
How do the equilibrium price and the quantity of a commodity change when price of input used in its production changes? [3]
Or
If the price of a substitute Y of good X increases, what impact does it have on the equilibrium price and quantity of good X? [3]
Answer:
The change in price of the input used in. the production process affects the equilibrium price and quantity of a commodity in the following ways:
(i) When the price of the input used in the production process increases, the cost of production will increase which will lead to decrease in the profit and the supply will also be decreased. As a result, the supply curve will shift to the left, it means the production will decrease and the equilibrium price will increase.

(ii) When the price of the input used in the production, process decreases, the cost of production will decrease Which will lead to increase in the profit and the supply will also increase. As a result, the supply curve will shift to the right, it means the production will be increased in order to bring a balance between the supply and the demand of the market and the equilibrium price will decrease in this condition.

Section – D

Question 21.
Consider a market where there are just two consumers and suppose their demands for the good are given as follows : [4]
Calculate the market demand for the good.

p	d1	d2
1	9	24
2	8	20
3	7	18
4	6	16
5	5	14
6	4	12

Or
What do you mean by an ‘inferior good’ ? Give some examples. [4]
Answer:

p	d1	d2	Market demand = d1 + d2
1	9	24	9 + 24 = 33
2	8	20	8 + 20 = 28
3	7	18	7 + 18 = 25
4	6	16	6 + 16 = 22
5	5	14	5 + 14 = 19
6	4	12	4 + 12 = 16

Question 22.
Describe with the help of diagram that the increase in demand and supply does not show any effect on the equilibrium price. [4]
Or
What will be the effect on the equilibrium price and quantity if the supply curve shifts to the left and right side? Explain it by a diagram. [4]
Answer:

In this figure, DD demand curve shifts to right to D₁D₁ and SS supply curve shifts to right to S₁S₁ and thus show equal increase, since here proportionate change has occurred in demand and supply. Thus, equilibrium price keeps stable at P.

Question 23.
Explain any four functions of central bank. [4]
Or
Define credit multiplier. What role does it play in determining the credit creation power of the banking system ? Use a numerical illustration to explain. .
Answer:
Functions of the central bank are as follows :

• Regulator of currency : The main function of the central bank is to print currency notes, and in India, the RBI has the sole right is in this regard.
• Lender of last resort: Commercial banks can borrow from the RBI by keeping eligible securities as collateral at the time of need or crisis, when there is no other choice.
• Regulator of economy: The central bank controls the money supply in the system, monitors different key indication like GDP, inflation etc.
• Monetary authority :The central bank controls the supply of money in the economy to stabilize, the exchange rate, maintains healthy balance of payment, attain financial stability, control inflation and strengthen banking system.