Students must start practicing the questions from RBSE 12th Economics Model Papers Set 6 with Answers in English Medium provided here.
RBSE Class 12 Economics Model Paper Set 6 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) What led to the emergence of Macroeconomics as a separate branch of study? [1]
(a) World War II
(b) Green revolution
(c) The Great Depression
(d) None of these
Answer:
(c) The Great Depression
(ii) …………………… is the year during which production of goods and services is estimated in the
economy. [1]
(a) accounting year
(b) calendar year
(c) any as per the year of books of accounts
(d) none of these
Answer:
(a) accounting year
(iii) Capital goods are those: [1]
(a) which are used in the production of output for several years
(b) depreciation is charged on the value of these goods ‘
(c) which are used in the process of production for few years only
(d) both (a) and (b)
Answer:
(d) both (a) and (b)
(iv) Which among them are the motives of demand for money? [1]
(a) Transaction
(b) Precautionary
(c) Speculative
(d) All of these
Answer:
(d) All of these
(v) Supply of money is a …………………… concept. [1]
(a) Stock
(b) Real flow
(c) Money Flow
(d) National
Answer:
(a) Stock
(vi) Revenue receipts are broadly classified into: [1]
(a) Tax and Non-tax receipts
(b) Capital and Revenue Receipts
(c) Both (a) and (b)
(d) None of them
Answer:
(a) Tax and Non-tax receipts
(vii) Economic problem arises due to the fact that: [1]
(a) resources are scarce
(b) human wants are unlimited
(c) resources have alternative uses
(d) All of these
Answer:
(d) All of these
(viii) A shift in Budget Line, when prices are constant, is due to: [1]
(a) Change in demand
(b) Change in Income
(c) Change in Preferences
(d) Change in utility
Answer:
(b) Change in Income
(ix) Specific quantity to be purchased against a specific price of the commodity is called: [1]
(a) Demand
(b) Quantity demanded
(c) Both (a) and (b)
(d) None of these
Answer:
(b) Quantity demanded
(x) Which of the following indicates fixed cost? [1]
(a) Electricity bill
(b) Expenses on raw material
(c) Wages of daily workers
(d) Interest on fixed capital
Answer:
(d) Interest on fixed capital
(xi) When production is zero, total cost will be: [1]
(a) Zero
(b) Equal to variable cost
(c) Equal to fixed cost
(d) Equal tq marginal cost
Answer:
(c) Equal to fixed cost
(xii) TC increases at an increasing rate, when MC is: [1]
(a) Constant
(b) Increasing
(c) Decreasing
(d) Negative
Answer:
(b) Increasing
2. Fill in the blanks
(i) Expenditure on final producer goods is called …………………… expenditure. [1]
Answer:
investment
(ii) ……………………… money is accepted as a medium of exchange because of Trust between payer
and the payee. [1]
Answer:
Fiat
(iii) GST stands for ……………………… . [1]
Answer:
Goods and Services Tax
(iv) In ………………………… economy, private sector dominates economic activity. [1]
Answer:
market
(v) An IC is ………………………. to the point of origin. [1]
Answer:
convex
(vi) Other things remaining constant, if on a given piece of land, more and more units of labour are applied, then after a point, the MP of product begins to ……………………… .
Answer:
fall
3. Answer the following in 10-20 words
(i) Define wage rate. [1]
Answer:
The rate at which the labour is sold and purchased is referred to as wage rate.
(ii) What is meant by Net F actor Income from Abroad (NFIA) ? [1]
Answer:
NFIA refers to the difference between factor income earned from abroad and factor payment made to abroad.
(iii) Define GDP. [1]
Answer:
GDP (Gross Domestic Product) is the money value of all the final goods and services produced within the domestic territory of a country during a year.
(iv) Define bank rate. [1]
Answer:
Bank rate refers to the rate at which the central bank lends money to commercial banks as the lender of the last resort. It is applicable to long-term loans.
(v) Government of India has recently launched ‘Jan-Dhan Yojna’ aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are likely to effect national income of the country ? [1]
Answer:
- The idle savings of people would be mobilised and then made available for investment.
- This will likely increase the level of output of goods and services in the country.
- Thus, national income of the country would increase.
(vi) Give two examples of non-tax revenue receipts. [1]
Answer:
- Interest income,
- Income from Public enterprises.
(vii) What is revenue expenditure ? [1]
Answer:
Revenue expenditure is that expenditure which neither creates any asset nor causes a reduction in the liabilities of the government. Example : (i) Payment of salaries of government employees, (ii) Interest payment.
(viii) Activities of production and consumption are also referred to as? [1]
Answer:
Economic activities.
(ix) If the marginal utility is zero, then how much will the total utility be? [1]
Answer:
Total utility is the maximum when marginal utility is zero.
(x) What is the use of production function in economics? [1]
Answer:
In economics, to make decisions for optimum production, the information about different alternative production functions of any goods and services is necessary.
(xi) What is Fixed cost?
Answer:
Fixed cost refers to the expenditure incurred on the fixed factors of production. It does not change with change in output.
(xii) What is the objective of firms in a perfect competitive market? [1]
Answer:
Profit maximization.
Section – B
Quantity 4.
Distinguish between domestic product and national income. [2]
Answer:
Domestic Product: It is the sum of factor incomes generated by all the production units located within the domestic territory of a country during an accounting year. For example, many non-residential companies and foreign banks operate within the domestic territory of India. Income generated by them is included in India’s domestic income.
National Income: It is the sum total of factor income earned by normal residents of a country during an accounting year. For example, income generated by residents and non-residents within the domestic territory of a country is called domestic income and income generated by normal residents within and outside the country is called national income. The difference between the two is net factor income from abroad, which is added to domestic income to obtain national income.
Quantity 5.
If real GDP is ₹ 400 nominal GDP is ₹ 450, calculate price index (Base = 100) [2]
Answer:
Nominal GDP = ₹ 450
Price Index (PI) = ?
Real GDF = 400
Real GDP = \(\frac{\text { Nominal GDP } \times 100}{\text { Price Index }}\)
400 = \(\frac{450 \times 100}{\text { Price Index }}\)
Price Index = \(\frac{450 \times 100}{400}\)
PI = ₹ 112.50
Quantity 6.
Explain standard of deferred payments. [2]
Answer:
When the debtors make a promise that they will make payments on some future date, in those situations, money acts as a standard of deferred payments. It has become possible because money has general acceptability, its value is stable, it is durable and homogenous.
Quantity 7.
What is the significance of measuring fiscal deficit ? [2]
Answer:
The significance of measuring fiscal deficit is that it.reflects total borrowings of the government during the financial year. Accumulated borrowings over the year reflect accumulated burden of National debt which is to be borne by the future generations.
Quantity 8.
Give one point of difference between Revenue expenditure and Capital expenditure. [2]
Answer:
Revenue expenditure does not create government assets, while Capital expenditure creates government assets.
Quantity 9.
What do you mean by Plan expenditure and Non-plan expenditure ? Explain. [2]
Answer:
Plan 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.
Non-plan expenditure refers to the expenditure which is not related to the specified plans and programmes of development, and it is also not related to assistance given by central government to the state governments.
Quantity 10.
Write four measures to reduce budget deficit. [2]
Answer:
- Government should work to reduce Government Expenditure,
- Government should work to increase Revenue Receipts,
- Government should work to increase Non-Tax Revenues,
- Government should disinvest those public companies which are running in loss.
Quantity 11.
Explain the problem of ‘what to produce?’ with the help of an example. Does it arise in every economy? Explain. [2]
Answer:
Every society has to decide which goods are to be produced and in what quantities. Whether more guns should be produced or more butter 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. The society not only 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 meters of cloth, etc. have to be produced.
Yes, this problem arises in every economy because this problem is not only related to the individual; but it is also related to a large society, large industries and government.
Quantity 12.
Rita has ₹ 88 with her. She intended to purchase goods X and Y with this money. The market price of X and Y is ₹ 8 per unit. The marginal utility schedule of goods X and Y is given below. Find out how many units of X and Y should Rita purchase so that she will get maximum satisfaction. [2]
| Units Consumed (Commodity X) | TUx | Marginal Utility |
| 1 | 88 | 40 |
| 2 | 72 | 36 |
| 3 | 64 | 24 |
| 4 | 56 | 20 |
| 5 | 48 | 16 |
| 6 | 40 | 12 |
| 7 | 32 | 8 |
| 8 | 24 | 4 |
| 9 | 16 | 0 |
| 10 | 8 | 0 |
Answer:
We know, in case of two commodities, a consumer strikes equilibrium when:
\(\frac{\mathrm{MUx}}{\mathrm{Px}}=\frac{\mathrm{MUy}}{\mathrm{P} y}\)
\(\frac{\mathrm{MUx}}{\mathrm{MUy}}=\frac{\mathrm{P} x}{\mathrm{P} y}\)
In the present case, Px = Py = 8 per unit so that, equilibrium would be struck when
MUx = MUy according to equation (i)
Or when \(\) = \(\) = 1, according to equation (ii)
It occurs when Rita purchases 8 unit of X (spending 8 × 8 = ₹ 64 and 3 units of Y (Spending 3 × 8 = ₹ 24)
Consider the combination X = 6 and Y = 1, here also MUx = MUy. But it is not an equilibrium pond because here all income is not spent, i.e. affordable in terms of considers income.
Here, consumer’s expenditure exceeds his income i.e., 72 (= 9 × 8) + 40 (= 5 × 8) = 112 >88)
Quantity 13.
How do we prove that a higher IC offers a higher level of satisfaction? [2]
Answer:
Look at the figure given ahead, Point B is on IC1 and point C is on IC2.
At point B, a consumer gets OA, OS combination (or bundles) of goods. At point C, a consumer gets OA, OT combination of goods.
Certainly OT > OS. Implying that at point C a consumer gets more of Good-1 and the same amount of Good-2 as at point B. We know, according to his monotonic preferences, a rational consumer gets more satisfaction from more of the good. Accordingly, C on IC2 (or any other point on IC2) must offer the consumer greater satisfaction than B on IC1 (or any other point on IC1). Hence, it is proved that a higher IC implies a higher level of satisfaction.
Quantity 14.
Why are the law of returns variable proportions and law of diminishing marginal production considered the same? [2]
Answer:
Today, economists have started considering the law of returns of variable proportions and law of diminishing marginal production as one. According to the law of returns of variable proportions, with the use of fixed means along with the variable means, the ratio of means gets changed and its effect is visible on the production. This effect can be seen on the increasing returns, equal returns and diminishing returns, and the condition of increasing returns is in the initial stage only. Eventually, it means diminishing returns only. Therefore, both these laws are considered to be the same.
Quantity 15.
What do you mean by the absence of transportation cost? [2]
Answer:
Buyers and sellers are so close in the perfect competition market that there is no cost to carry one item from one place to another. This is called the absence of transportation costs.
Quantity 16.
What are Shopping Malls? [2]
Answer:
When companies sell various types of goods in large quantities under a single roof, they are known as shopping malls.
Section – C
Quantity 17.
Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these give us the same value of GDP. [3]
Or
Define budget deficit and trade deficit. The excess of private investment over saving of a country in a particular year was ₹ 2000 crores. The amount of budget deficit was (-) ₹ 1500 crores. What was the Volume of trade deficit of that country ? [3]
Answer:
GDP is calculated by the following three methods:
- Value Added method
- Income Method
- Expenditure method.
All these methods should give the same values of GDP. However, to obtain the same result, some adjustments are required. For example, under expenditure method, we get an aggregate called GDP mpj, when all final expenditures are added. From this aggregate, We have to deduct depreciation and net indirect taxes to arrive at NDPFC . Then, by adding NFLA to it, we get national income.
Quantity 18.
Explain the difference between savings account and current account. [3]
Or
Write down any two services provided by banks presently. [3]
Answer:
Following are the points of difference between Savings Account and Current Account:
| Saving Account | Current Account |
| (i) A saving account is designed with the primary purpose to help you to save. | As the name suggests, current accounts are best suited for regular transactions. |
| (ii) This type of account allows the holder to deposit money as per/her convenience, on which the holder can earn interest. | This type of account is more suited for big users like firms, companies, public enterprises, businessmen, etc. |
| (iii) A saving account holder earns interest on his/her deposits. | A current account holder does not earn interest on his/her account. |
| (iv) There is a limit on the nuiftber of withdrawal transactions. | Current account usually does not carry a limit on the number of withdrawal transactions. |
Quantity 19.
Explain the problem of ‘how to produce’. Why does this problem arise? [3]
Or
Explain the problem‘for whom to produce’. [3]
Answer:
There are various alternative techniques of producing a commodity. For example, cotton cloth can be produced with either handlooms or power looms or automatic looms. Production with handlooms involves use of more labour and 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 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.
Quantity 20.
Compare the effect of shift in the demand curve on the equilibrium when the number of firms in the market is fixed with the situation when entry-exit is permitted. [3]
Or
Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity. [3]
Answer:
A rightward shift in the demand curve means increase in the demand of a good. If the demand of a good increases, the equilibrium price will increase. As a result, if the entry- exit is permitted, more firms will enter into market in order to earn abnormal profit. But when a number of firms enter into market, the supply will start to rise. As a result, demand and supply will be balanced and the firms will earn only normal profit in the long run.
On the other hand, if the demand curve shifts to the left, it means that the demand of good has decreased. If the demand of a good has decreased, the supply of a good is now more than that of its demand. As a result, the equilibrium price of the good will decrease. When the profit is decreasing, some firms will leave the market.
Section – D
Quantity 21.
Consider the demand for a good. At price ₹ 4, the demand for the good is 25 units. Suppose price of the good increases to ₹ 5 and as a result, the demand for the good falls to 20 units. Calculate the price elasticity. [4]
Or
Consider the demand curve D(p) = 10 – 3p. What is the elasticity at price ?
Answer:
P = ₹ 4, P1 = ₹ 5
Q = 25 units, Q1 = 20 units
AP = P1 – P = 5- 4 = ₹ 1
AQ = Q1 – Q = 20 – 25 = ₹ – 5 units
Ed = \(\frac{\Delta \mathrm{Q}}{\Delta \mathrm{P}} \times \frac{\mathrm{P}}{\mathrm{Q}}\)
Ed = \(\frac{-5}{1} \times \frac{4}{25}=\frac{-4}{5}\) = -0.8
Ed = (-)0.8
Quantity 22.
Explain the supply of labour by a diagram, in the perfectly competitive market. [4]
Or
How is the new equilibrium struck when supply curve shifts to the left? [4]
Answer:
In the figure, SS is the labour curve that is seen bending backwards after point E, since when the wages of worker was OW, he worked OL hours, but when wages become OW1, he rested more because of income affect and working hours reduced toOL1.
Quantity 23.
What are the contingent functions of money ? [4]
Or
Explain the importance of money. [4]
Answer:
The contingent functions of money are as follows :
(i) Distribution of Social Income : Money facilitates the just distribution of social income. Production activities are done by the collective efforts of various means of production, hence it is necessary to distribute the income obtained from produced commodity in a just and equitable manner. This has been made possible by money.
(ii) Basis of credit: It is money which has created the credit system. Money has made it possible for banks to extend loans.
(iii) Liquidity of wealth : Money provides liquidity to capital or wealth. Today, any person can sell his house in one city, collect the money and easily purchase another house in another city.
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