Students must start practicing the questions from RBSE 12th Economics Model Papers Set 9 with Answers in English Medium provided here.
RBSE Class 12 Economics Model Paper Set 9 with Answers in English
Max. Marks: 80
Time: 2:45 Hours
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) Which option amongst them are the factors of production? [1]
(a) Land, Labour, Capital & Creditors
(b) Land, Labour, Debtors & Creditors
(c) Labour, Capital, Entrepreneurs & Assets
(d) Entrepreneurs, Capital, Land & Labour
Answer:
(d) Entrepreneurs, Capital, Land & Labour
(ii) Quantity measured at a particular point of time is called : [1]
(a) flow
(b) quantity demanded
(c) stock
(d) None of these.
Answer:
(c) stock
(iii) A stock variable : [1]
(a) has no time dimension
(b) is a static concept
(c) both (a) and (b)
(d) None of these
Answer:
(c) both (a) and (b)
(iv) Demand deposits include : [1]
(a) All chequable deposits
(b) Deposits that can be withdrawn as per need
(c) Fixed deposits
(d) Both (a) and (b).
Answer:
(d) Both (a) and (b).
(v) …………………………………. refers to demand deposits or chequable deposits of the people with the commercial banks. [1]
(a) Narrow Money
(b) High Powered Money
(c) Bank Money
(d) None of these.
Answer:
(c) Bank Money
(vi) Tax in which the impact lies on the person on whom it is legally imposed is known as ……………………. . [1]
(a) Direct Tax
(b) Indirect Tax
(c) Value Added Tax
(d) None of these.
Answer:
(a) Direct Tax
(vii) Which of the following is an example of economic activity? [1]
(a) Production
(b) Exchange
(c) Consumption
(d) All of these
Answer:
(d) All of these
(viii) Movement along the demand curve occurs due to change in: [1]
(a) own price of the commodity.
(b) determinants of demand, other than own price of the commodity
(c) Both (a) and (b)
(d) None of these.
Answer:
(a) own price of the commodity.
(ix) Shift in demand curve means: [1]
(a) fall in demand due to rise in own price of the commodity
(b) rise in demand due to fall in own price of the commodity
(c) change in demand due to factors other than own price of the commodity
(d) None of these.
Answer:
(c) change in demand due to factors other than own price of the commodity.
(x) Which of the following is a factor of production? [1]
(a) Land
(b) Labour
(c) Capital
(d) All of these
Answer:
(d) All of these
(xi) The point where total production is maximum, the marginal production will be: [1]
(a) zero
(b) one
(c) infinite
(d) two
Answer:
(a) zero
(xii) The difference between the total cost and variable cost is: [1]
(a) implicit cost
(b) explicit cost
(c) fixed cost
(d) None of these
Answer:
(c) fixed cost
2. Fill in the Blanks
(i) Single-use consumption goods are better known as ………………………….. goods. [1]
Answer:
non-durable,
(ii) As an advisor to the government, the Central Bank frames policies to regulate ……………………. .[1]
Answer:
money market
(iii) …………………………….. are those taxes which are paid by the same person on whom they have been imposed. [1]
Answer:
Direct taxes,
(iv) ………………………………… Economics is related to the study of economic issues which are subject to verification. [1]
Answer:
Positive,
(v) The law of demand explains …………………………. relationship between price and demand of the commodity. [1]
Answer:
negative,
(vi) At higher levels of output, AFC tends to ………………………… .[1]
Answer:
fall
3. Answer the following in 10-20 words:
(i) What is the other name of Microeconomics? [1]
Answer:
The other name of microeconomics s “Price Theory”.
(ii) What is the fixed factor of production? [1]
Answer:
Land.
(iii) What do you mean by change in stock? [1]
Answer:
The difference between the closing stock and opening stock is called change in stock.
(iv) Is value of money stable? [1]
Answer:
No, the value of money is not stable due to the market forces of demand and supply.
(v) Give any one secondary function of money. [1]
Answer:
Unit of account.
(vi) Give any one feature of revenue expenditure. [1]
Answer:
It neither creates any asset nor reduces any liability of the government.
(vii) What is surplus budget? [1]
Answer:
A surplus budget is a condition when income or receipt exceeds cost or outlays.
(viii) Give an example of a country following a mixed economy system. [1]
Answer:
India.
(ix) If the demand for good Y increases as the price of another good X rises. How are the two goods related? [1]
Answer:
X and Y are substitute goods.
(x) The difference between the revenue and cost is called- [1]
Answer:
Profit.
(xi) In a short run, which factor of production is considered as the variable factor? 1
Ans.
Labour.
(xii) if both, the market demand and supply curves are shifted to left, then what will be the effect on equilibrium quantity? [1]
Answer:
Equilibrium quantity decreases.
Section-B
Question 4.
Write a short note on capital [2]
Answer:
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.
Question 5.
Why increasing GDP is not a sole indicator of the welfare of the masses? [2]
Answer:
If the GDP welfare of the people may not necessarily rise. This may happen when increased GDP is concentrated in a few hands, for the rest of the people the income may have fallen. in such a case, the welfare of the entire country cannot be said to have increased. GDP does not take into account changes in inequalities in distribution of income.
Question 6.
How does money act as a medium of exchange? [2]
Answer:
Money is a medium of exchange: This may be considered as the most basic function of money. Money has the quality of general acceptability. As such, all exchanges take place in terms of money. In the modern exchange system, the prices of goods and services are expressed in terms of money.
Question 7.
What is meant by tax? Write down its examples. [2]
Answer:
Tax is a compulsory payment made by an individual, household or a firm to the government without expectation of anything in return. Examples of tax are Income tax, Corporation tax, customs duty, excise duty, and Goods and Service Tax.
Question 8.
Write the main features of tax.
Answer:
Following are the main features of tax :
- Tax is a compulsory payment by the people of the country to the government.
- Revenues collected by tax is spent for public welfare and benefits.
- Tax is a mandatory payment. If not paid in time, fines are imposed.
.
Question 9.
What do you mean by direct and indirect tax? Distinguish between them. [2]
Answer:
Direct tax is the one, the final burden of which is borne by the ¡son on whom it is imposed. For example, income tax is imposed on the income of a person and he himself bears its burden. Indirect tax is the one the final burden of which can be shifted to other persons. Goods and Services tax, excise duty, customs duty are the examples of indirect tax. Direct taxes are compulsory to be paid, while Indirect taxes are not compulsory to be paid.
Question 10.
What are the objectives of imposing different taxes? [2]
Answer:
- Increasing the government income by Revenue Receipts.
- Maintaining the balance of international trade.
- Arrangement of capital for public welfare expenditure and for daily administration services.
- For the arrangement of national, security.
Question 11.
In what sense is economics a normative science? [2]
Answer:
As a normative science, economics involves value judgment. It is prescriptive in nature and describes, ‘what should be’. For example, the question like what should be the level of national income, what should be the wage rate, how can the fruits of national product be distributed among people, all fall within the scope of normative science.
Thus, normative economics is concerned with welfare propositions. Some economists are of the view that value judgments by different individuals will be different, and thus for deriving laws or theories, it should not be used.
Question 12.
Distinguish between decrease in demand or left shift curve and increase in demand or right shift curve. [2]
Answer:
The main reason for change in demand is shown in the following table:
| Decrease In Demand or Left Shift Curve | Increase in Demand or Right Shift Curve |
| Income declines, for normal goods. | Income rises, for normal goods. |
| Income increases, for inferior goods. | Income falls, for inferior goods. |
| Complementary goods’ prices increase. | Complementary goods’ prices decrease. |
| Tastes and preferences change negatively. | Tastes and preferences change positively. |
| Buyers’ quantity decreases. | Quantity of buyers increases. |
| Substitute goods’ price falls. | Substitute goods’ price increases. |
| Expectation of income or price falls. | Income or price expectation rises. |
Question 13.
Explain with the help of a diagram, the geometric method of measuring price elasticity of demand. [2]
Answer:
Geometric method measures elasticity of demand at different points on the demand curve. It is also known as ‘Point Method’ of measuring elasticity of demand.
The figure shows that MN is a straight-line demand curve. A specific point on the demand curve is ‘P. ‘This point divides the demand curve into two parts, viz. lower part PN and upper part PM. Elasticity of demand at Point P is the ratio between lower segment and upper segment.
Elasticity of Demand (at P) = \(\frac{\text { PN (Lower Part from P) }}{\text { PM (Upper Part from P }} \)
Question 14.
Explain the relationship between Average and Marginal Cost curves. [2]
Answer:
The relationship between Marginal Cost and Average Cost is the same as that between any other marginal-average quantities. When marginal cost is less than average cost, average cost falls and when marginal cost is greater than average cost. average cost rises. This marginal-average relationship is a matter of mathematical truism and can be easily understood by a simple example. Suppose a producer produces a commodity at an average cost of ₹30. If cost of producing the next one unit s ₹10, his average cost falls to ₹20.
Now, if he produces one unit more and his average cost falls, it means that the additional unit must have cost him less than ₹20. Now, if he produces one unit more and his average cost rises, it means that the additional unit raises his average cost, and then the marginal unit must have cost him more than ₹20. Finally, if as a result of the production of an additional unit, the average cost remains the same, the marginal unit must have cost him exactly ₹ 20. That is, marginal cost and average cost would be equal in this case.
Question 15.
Explain how price is determined in a perfectly competitive market with fixed number of firms. [2]
Answer:
In perfect competitive market with a fixed number of firms, the price of a commodity is determined by the market forces of the demand and supply. The price is determined at the point where market demand and market supply of a commodity is equal. The point where market demand and market supply of a commodity is equal called equilibrium point and the equilibrium point is the point for the price determination.
Question 16.
constituting the market. Now if we allow for free entry and exit of firms, how will the market price adjust to it? [2]
Answer:
The minimum average cost of the firm is the equilibrium price, therefore, the higher the average cost of the market price, means that the market price will exceed the equilibrium price in such a situation. But in order to earn profìt, firms will enter the market faster. In this case, total supply will be equal to the total demand, and the market price will be equal to the average minimum cost or equilibrium price.
Section-C
Question 17.
Describe the steps involved in the estimation of national income by income method. State any two precautions that must be taken while estimating national income by this method. [3]
Or
Explain the components of final expenditure. [3]
Answer:
Following are the steps taken while estimating national income:
(i) Classification of producing enterprises: All the producing units employing various factors of production are identified and classified into three categories – Primary sector, secondary sector and tertiary sector.
(ii) Fstimate factor incomes paid out by each industrial sector: Take the sum total of all the factor payments made by each industrial sector. The sum of these factor payments represents the contribution of the respective sector to domestic factor income and equals NVAFC.
(iii) Estimated NDPFC: Factor incomes paid out by all the industrial sectors are summed up to arrive at NDPFC.
(iv) Add NFIA to NDPFC: We can arrive at national income by adding NFIA to NDPFC. National Income ,
(NNPFC ) = NDPFC + NFIA.
Precautions:
(a) Avoid capital gains: Capital gains refer to the income from the sale of financial assets such as bonds, debentures, etc. These transactions are not productive transactions. Therefore, any income received by the parties involved of such transactions is not factor income.
(b) Indirect taxes: lndîrect taxes tend to increase the market value of goods and services. Hence, they are included in national income when estimated at market price. But indirect tax paid by the employees should also not be included separately.
Question 18.
What do you mean by traveler cheque facility? [3]
Or
How does a commercial bank create derived deposits? [3]
Answer:
It is a facility provided by the banks to their customers traveling abroad to make their visit more safe and enjoyable. Through these cheques, the person can withdraw the required amount anytime from any branch of the bank. Therefore, the traveler would not take the risk of carrying the cash.
Question 19.
What is meant by mixed economy? [3]
Or
What are the features of mixed economy? [3]
Answer:
In a mixed economy, the aim is to develop a system which tries to include the best features of both the controlled economy and the market economy while excluding the demerits of both. It appreciates the advantages of private enterprise and private property with their emphasis on self-interest and profit motive. Rapid economic development of England, the USA, etc. was due to private enterprise.
At the same time, it says that private property, profit motive, and self-interest of the market economy may not promote the interests of the community as a whole, and as such, the government should remove these defects of private enterprise. For this purpose, the government itself must manage important and selected industries and eliminate the free play of the profit motive and self-interest. Private enterprise, which has its own significance, is also allowed to play a positive role in a mixed economy.
Question 20.
Can you think of any commodity on which price ceiling is imposed in India? What may be the consequence of price-ceiling? [3]
Or
A shift in demand curve has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exit is permitted. Explain.[3]
Answer:
Price ceiling refers to the maximum price that can be charged for a particular good or service. The policy of price ceiling is generally imposed in order to provide the essential commodities to the families below the poverty line on a fair price. In India, wheat and rice are sold with the ceiling price policy. Government provides these essential commodities through ration shops.
Consequences of price ceiling:
- The price ceiling leads to excess demand in the market.
- The goods which are made available through the price ceiling policy are not always adequate. So, people agree to pay more for the additional quantity of the goods which leads to black marketing.
- It is a common matter that the goods which are made available through the policy of price ceiling are not fit for consumption. Adulteration is a common feature of these commodities.
Section-D
Question 21.
Explain the effects on demand of a commodity due to: [4]
(i) Increase in income
(ii) Increase in prices of related goods
Or
Explain consumer’s equilibrium in cardinal approach. [4]
Answer:
(i) Increase in Income: If the other things, that is, determinants of demand other than price such as consumer’s tastes and preferences, income, prices of the related goods change, the entire demand curve will be changed. If our income rises, we tend to purchase more of commodities. Our tendency to purchase is increased when income increases. This will mean more branded clothes, more visits to a restaurant, more shopping, and so on. Thus, as a result of increase in demand, the whole demand curve will shift outward, that is, to the right.
If there are other factors, which are determinants of demand besides the consumer’s taste and prices, changes in prices, changes in the value of related items, then the entire demand curve will change. ¡four income increases, we buy more items. Our tendency is that increased income will mean more branded clothes, more visits to a restaurant, more shopping, and so on. In this way, the increase in demand will result in a complete change demand curve, which is correct.
In the case of increase in income, more of a (normal) good is purchased even when its price is stable. It reflects to a situation of increase in demand or forward shift in demand curve. On the other hand, in this condition of decrease in income, less of a (normal) good is purchased even when its price is constant. This refers to a situation of decrease in demand or backward shift in demand curve.
(ii) Increases In Price of Related Goods: The impact of change in the price of related good on a demand of commodity is called the Cross-Price Effect. The figure indicates that when the price of tea is OP1, the quantity purchased is OT1.
Now, suppose the price of tea is stable but the price of coffee increases. How will you respond as a consumer? As a logical consumer, you can choose some tea instead of coffee. Or, you expect to buy more tea when your price is stable.
Question 22.
Suppose the equation of demand curve and the supply curve is given below. Solve the equation to know the price and quantity. [4]
QD = 8,196 – 3,596P
Qs = 600 + 4,000P
Or
Explain the impact of simultaneous shifts on equilibrium.
Answer:
On the equilibrium price, the quantity of demand and quantity of supply is equal.
So, QD= Qs
8196-35961’ =600+40001’
-3596P-4000P=600-8196
7596P=-7596
P=1
Equilibrium quantity (QD)
=8196-3596
= 4600 units.
=600+(4000 x 1)
4600 units.
Question 23.
Explain some of the limitations of credit creation. [4]
Or
Mention the different methods by which banks advance loans. [4]
Answer:
Limitations of Credit Creation:
1. Development of Banking-Credit creation is more, where development is more. And, the credit creation is lesser, where development of banking is lesser.
2. HabIt of Banking-The country, whose people use more banking facilities, credit creation is more used there.
3. Industrial and Business development-The country, whére industries and businesses are more developed, credit creation is more.
4. The Monetary Policy of Central Bank-The Monetary Policy of Central Bank also affects credit creation. FlexIble and liberal Monetary Policy promotes credit çreation, while rigid monetary policy, keeps it lagging.
It is clear from the given example, that how commercial banks create credit through deposits. How much cash would be created is defined through the cash fund ratio.
According to this example, if the cash fund ratio is 20%, then cash creation would be 8000. Credit creation visualizes a decent format. It is based on the following assumptions-
- A cheque received from a bank can be deposited in some other bank.
- The cash fund ratio of the bank remains stagnant.
- People ask for the loan till the maximum loan providing limit of the bank is reached.
- Banks also try to provide the loans till their maximum limit is reached.
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