Students must start practicing the questions from RBSE 12th Economics Model Papers Set 8 with Answers in English Medium provided here.
RBSE Class 12 Economics Model Paper Set 8 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) Aggregation is involved in: [1]
(a) Microeconomics
(b) Macroeconomics
(c) Both (a) and (b)
(d) None of these
Answer:
(c) Both (a) and (b)
(ii) Washing machine purchased by laundry services agencies will be regarded as:
(a) capital good
(b) intermediate good
(c) final good
(d) Both (a) and (c)
Answer:
(d) Both (a) and (c)
(iii) TV, fridge, radio are all examples of ………………….. goods. [1]
(a) durable consumer
(b) semi-durable
(c) single use
(d) capital
Answer:
(a) durable consumer
(iv) Which of the following is a component of M1 measure of money supply? [1]
(a) Term deposit
(b) Demand deposit
(c) Cash reserves of commercial bank
(d) None of these
Answer:
(d) None of these
(v) If money supply in the country is measured using M3 measure, it is called: [1]
(a) Aggregate Demand
(b) Aggregate Supply
(c) Aggregate Monetary resources
(d) Both (a) and (b)
Answer:
(c) Aggregate Monetary resources
(vi) Which of the following is an example of Indirect Tax in India?
(a) Goods and Services Tax
(b) Value Added Tax
(c) Custom Duty and Excise
(d) All of these
Answer:
(d) All of these
(vii) Which amongst them is /are the central problem/s of an economy? [1]
(a) Allocation of resources
(b) Distribution of resources
(c) Consumption of resources
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)
(viii) Law of demand must fail in case of: [1]
(a) Normal Goods
(b) Giffen Goods
(c) Inferior Goods
(d) Both (b) and (c)
Answer:
(b) Giffen Goods
(ix) In case of Giffen goods, the slope of demand curve is: [1]
(a) Negative
(b) Positive
(c) Parallel to X axis
(d) Parallel to Y axis
Answer:
(b) Positive
(x) If the average cost is ₹ 20 and it is minimum when 4 units are produced, what will be the marginal cost of producing 4 units? [1]
(a) ₹ 20
(b) ₹ 80
(c) ₹ 24
(d) ₹ 5
Answer:
(a) ₹ 20
(xi) ………………… is someone who produces goods. [1]
(a) Consumer
(b) Producer
(c) Seller
(d) None of these
Answer:
(b) Producer
(xii) DRS in the concept of production and cost stands for: [1]
(a) Diminishing rate of substitution
(b) Drastic rate of supply
(c) Diagrammatic resource system
(d) None of these
Answer:
(a) Diminishing rate of substitution
2. Fill in the blanks
(i) Single use consumption goods have relatively …………………….. value than the durable goods. [1]
Answer:
less
(ii) Demand Deposits = Primary deposits + ……………………. . [1]
Answer:
Secondary Deposits
(iii) ……………………… are those taxes whose burden can be shifted. [1]
Answer:
Indirect taxes
(iv) In ……………………….. economy, economic decisions and driven by the motive of social welfare. [1]
Answer:
centrally planned
(v) Marginal Rate of substitution indicates slope of …………………… . [1]
Answer:
IC
(vi) Expenditure on raw material leads to …………………… . [1]
Answer:
variable cost
3. Answer the following in 10-20 words
(i) Define Microeconomics. [1]
Answer:
Microeconomics is that branch of economics which studies the behaviour of individual units of an economy such as a firm, a household etc.
(ii) Who takes the economic decisions in a capitalist economy? [1]
Answer:
Economic decisions are based upon the market forces in a capitalist economy.
(iii) Give any two examples of factor income. [1]
Answer:
Rent and wages.
(iv) In what form do banks create money? [1]
Answer:
Banks create money in the form of demand deposits.
(v) Define fiscal deficit. [1]
Answer:
Fiscal deficit refers to the excess of total expenditure over the sum of revenue receipts and total capital receipts excluding borrowings.
(vi) Define Primary deficit. [1]
Answer:
It is the difference between fiscal deficit and interest payments.
Primary deficit = Fiscal deficit – Interest Payment.
(vii) Give an example of a country following the free system of economy. [1]
Answer:
USA/UK.
(viii) Why does the demand curve slope downwards? [1]
Answer:
Demand curve slopes downwards because of:
- Law of diminishing marginal utility,
- Income effect,
- Substitution Effect,
- New consumers,
- Different alternative uses of product.
(ix) Law of variable proportions is also called as- [1]
Answer:
Law of diminishing marginal product.
(x) What is the formula to calculate short-run marginal cost (SMC)? [1]
Answer:
SMC = Change in total cost/change in output.
(xi) When the market demand is more than market supply, then what will this condition be called? [1]
Answer:
Excess Demand.
Section – B
Question 4.
“Gross Domestic Product (GDP) does not give us a clear indication of economic welfare of a country”. Defend or refute the given statement with valid reason. [2]
Answer:
Yes, the given statement is defended, as GDP may not take into account—
- Non-monetary exchanges like services of housewife.
- Externalities, i.e. benefits and harms which are caused due to economic activities.
Question 5.
Explain the impact of rise in exchange rate on national income. [2]
Answer:
Foreign exchange rate refers to the rate at which one currency is exchanged for the other. If the exchange rate rises from $ 1 = ₹ 45 to $ 1 = ₹ 60, the Indian rupee is said to be depreciated. It implies that there is fall in the value of domestic currency against foreign currency. Depreciation implies that domestic goods became cheaper in terms of foreign currency and hence the demand for exports increases. As exports increase, there will be increase in employment growth, aggregate demand which causes higher economic growth. This results in a bigger share of national income.
Question 6.
Write a short note on fiat money. [2]
Answer:
Fiat moiney is the money which is accepted as money under the terms of the law. It includes only money held outside the banks, i.e with the public, and not that which is held by the banks.
Question 7.
What do you mean by Government budget ? How many types of government budgets exist ? [2]
Answer:
Government budget is a statement of the estimates of the government receipts and government expenditure during the period of the financial year. It unveils / reveals fiscal policy of the government, focusing on growth and stability of the economy. There are two types of government budget:
- Revenue budget
- Capital budget.
Question 8.
Differentiate between Revenue budget and Capital budget. [2]
Answer:
Revenue budget, also called ‘revenue account’, includes ‘Revenue Receipts’ and ‘Revenue Expenditure’ of the government, or we can say that revenue account, shows current receipts of the government and related expenditure.
Question 9.
What do you mean by Non-tax receipts ? Mention their sources [2]
Answer:
Non-tax receipts are those receipts which arise from sources other than taxes. There are three main sources of non-tax receipts in India:
- Interest receipts
- Income from public enterprises
- Foreign grants and donations.
Question 10.
Differentiate between Revenue Receipts and Capital Receipts. [2]
Answer:
Revenue receipts are those money receipts which do not create a liability for the government and also do not lead to reduction in assets of the government.
Capital receipts are those money receipts of the government which either create a liability for the government or cause a reduction in its assets.
Question 11.
Explain the problem of‘for whom to produce?’. [2]
Answer:
Another important decision which a society has to take is for whom to produce. The society cannot satisfy all wants of all the people. Therefore, it has to decide who should get how much of the total output of goods and services. In other words, it has to decide about the share of different people in the national cake of goods and services.
Question 12.
If X is a commodity and Y is its substitute commodity, then what will be the effect of decrease in the price of Y commodity on the demand for commodity X? Explain with the help of a diagram. [2]
Answer:
In substitution effect, the commodity that becomes cheaper, can be substituted for relatively expensive commodity. If the price of commodity Y decreases, then the demand for commodity X will reduce, since consumer will substitute commodity Y in place of commodity X.
It is clear from the figure, that when the price of commodity Y was OP, the demand for commodity X was OQ. When the price of commodity Y decreases to OP1( the demand for commodity X becomes OQ1. The demand curve for substitution goods is positive.
Question 13.
From the following table, prepare a demand schedule for household B, given demand schedule of household A, C and market demand schedule. [2]
Answer:
| Household B’s Price (in ₹) | Demand Schedule Quantity |
| 7 | 26 – ( 8 + 11) = 7 |
| 6 | 36 – (10+ 16) = 10 |
| 5 | 51 – (14 + 22) = 15 |
| 4 | 71 – (19 + 30) = 22 |
| 3 | 98 – (26 + 42) = 30 |
Question 14.
Why are AVC, ATC and MC curves U-shaped? [2]
Answer:
It is due to the Law of Variable Proportions. Law of variable proportions (diminishing returns) states that as the units of variable factor are increased, MP first rises and then falls. When MP rises, MC falls and when MP falls, MC rises. It is the behaviour of MC, which determines the behaviour of AC. When MP is maximum then MC is minimum and when AP is maximum then AC is minimum. Under 2nd stage, MC and AC both rises.
Question 15.
In relation to determining price in perfect competition, what is the position of the firm and industry? [2]
Answer:
The price is determined by the industry in perfect competition and the firm has to accept that price.
Question 16.
What is the shape of Marginal Revenue Curve of firm in perfect competition? [2]
Answer:
In perfect competition, a firm’s marginal revenue curve is in the form of a straight line parallel to the X axis.
Section – C
Question 17.
During a given year, nominal national income increased by 14 per cent while the real national income increased by only 6 per cent. What has caused the difference between nominal income and real income ? What is real per capital income ? [3]
Or
Define depreciation. Does depreciation take accidental loss of a capital goods into account ? [3]
Answer:
An increase in nominal national income during a year is caused by two factors. It may increase due to rise in price level due to increase in output of goods and services or due to both. Therefore, an increase of 14 per cent in nominal national income has resulted partly from 6 per cent increase in output. Thus, an 8% (14-6) increase in nominal national income is caused by the rise in price level.
The real per capital income can be calculated if population is given. In this, population is not known, hence real per capital income cannot be calculated.
Question 18.
From where did modem banking business start ? [3]
Or
Give two definitions of bank. [3]
Answer:
Modem banking business started from Europe. In the year 1157, Bank of Venice was established in Italy. After that, in the year 1401, Bank of Barcelona, in the year 1407, Bank of Geneva, in the year 1609, Bank of Amsterdam, in the year 1619, Bank of Hamburg, and in year 1694, Bank of England was established.
Question 19.
Discuss the concept of opportunity cost with an example. [3]
Or
What does slope of PPC show? [3]
Answer:
Stocks of resources available to a community are given. When the community decides to channel its resources in the production of certain commodities, then they have to abandon some other products which the community could have produced with these resources. From the perspective of a society using a resource for any purpose, it means that we want to sacrifice that good. Those resources that encourage their current use, are called the Cost of Opportunity.
In essence, the cost of production of an object is that quantity of other items which we have to sacrifice.
Example: A carpenter, in one day, can make either one table or 2 chairs. The opportunity cost of 1 table = 2 chairs which can be made instead of a table.
Question 20.
How is the optimal amount of labour determined in a perfectly competitive market? [3]
Or
How is the wage rate determined in a perfectly competitive labour market? [3]
Answer:
The optimum amount of labour in a competitive market is determined at the point where the marginal cost of labour is equal to the benefits obtained from the labour. It means that the optimum amount of labour is determined at the point where demand and supply of the labour is equal. It means W = VMP L
Section – D
Question 21.
What is meant by consumer’s equilibrium? State the conditions required for consumer’s equilibrium. [4]
Or
What are the assumptions of ordinal utility approach? [4]
Answer:
Consumer’s equilibrium refers to a situation in which the consumers get maximum satisfaction from their income and there is no tendency to make any change in their current expenditure. In other words, a consumer is in equilibrium when he considers his actual behaviour to be the best possible in the circumstances and there is no need to change his behaviour till the circumstances remain unchanged. The following two conditions are required for the consumer to be in equilibrium:
- A given budget line must be tangent to an indifference curve, or marginal rate of substitution of X for Y (MRS xy) must be equal to the price ratio of the two goods Px/Py
- Indifference curve must be convex to the origin at the point of tangency.
Question 22.
When do we say that there is an excess supply in market? [4]
Or
Suppose one commodity has the following demand and supply function. QD = 100 – 20 P, Q S = – 5 + 15P. Find out the equilibrium price and quantity.
Answer:
When the market price exceeds the equilibrium price, consumers demand a lower quantity of goods, thereby increasing the quantity of good than supplied. This situation is called excess supply.
Question 23.
Explain some of the important functions of commercial banks.
Or
Explain the methods of credit creation.
Answer:
Functions of commercial banks are broadly classified into three categories :
- Primary functions
- Agency-related function
- General utility functions.
(1) Primary or main functions: Commercial banks perform two primary functions :
(a) Accepting deposits: Accepting deposits from the public is the most important function of a bank. Customers deposit their savings in the saving account and banks pay interest on savings. To attract deposits of public, bank offer different types of accounts. These are:
- Savings Account
- Fixed Deposit Account
- Current Account
- Recurring Deposit Account
- Pradhan Mantri Jan-Dhan Yojana Account.
(b) Advancing loans: Another important function of bank is advancing of loans.
Banks provide loan facility to its regular customers. Bank grants loans mainly for the construction of house, education, marriage, purchase of vehicle, etc. Banks provide loans in the following ways:
- Loans or Advances,
- Cash credit,
- Overdraft,
- Discounting the bills of exchange.
2. Agency-related functions : Banks also perform agency functions for and on behalf of their customers. Customers have to give the bank in writing for these services. Some services that are performed by the bank are free of cost, and for some services, banks charge an amount of fees. Following are the works performed by the bank as an agency:
- Cheque bill collection,
- Cheque bill payment,
- Payment from customers,
- Receipts from customers,
- Sale and purchase of foreign securities,
- Transfer of payments,
- Working as a trustee.
3. General Utility Functions: Modem banks also perform additional tasks along with formal functions which are as follows:
- Providing locker facility,
- Foreign exchange facility,
- Traveller cheque facility,
- Creation of credit,
- Arrangement of public loans,
- Collection and publication of information,
- Credit card facility,
- ATM facility,
- Internet banking facility,
- Mobile banking facility.
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