# CBSE Class 12 Economics Term 2 Exam 2022: Sample Paper With Solution By Experts For Last-Minute Revision

Check and solve the following sample paper for CBSE Class 12 Economics Term 2 Exam 2022 below.  The solutions are provided below each question here.

CBSE Class 12 Economics

CSBE Class 12 Economics Term 2 Exam 2022 would be conducted on May 28, 2022. Students are in their final mode of revision now. The more questions the students solve, the better they can perform. So, the experts at Jagran Josh have come up with a few questions as samples along with solutions below.

## CBSE Class 12 Economics Term 2: Sample Paper

1. Distinguish between stocks and flows. Also, give two examples of each.

Ans.

 Stock Flow It refers to that variable which is measured at a point in time. It refers to that variable which is measured over a period of time. It does not have a time dimension. It has a time dimension as its magnitude can be measured over a period of time Examples – Population of India as of 31.3.2021, Money Supply, National Wealth Examples – No of birth during 2020, national income, Expenditure in money.

2. Define externalities. Give an example of a negative externality. What is its impact on welfare?

Ans:- Externalities: - GDP index does not account for externalities: the good and bad impact of economic activities without the price or penalty.

Impact on welfare: This also lowers the significance of GDP as an index of welfare.

3. Distinguish between ‘real’ GDP and ‘nominal’ GDP. Which of these is a better index of the welfare of the people and why?

Ans. NOMINAL GDP:-Nominal GDP is the market value of the final goods and services (Q) produced within the domestic territory of a country during an accounting year, as estimated using the current year price (P).

Nominal GDP = Q x P

(When nominal GDP rises, the flow of goods and services in the economy may or may not rise during an

accounting year)

REAL GDP:- Real GDP is the market value of the final goods and services (Q) produced within the domestic territory of a country during an accounting year, as estimated using the Base year price (*P).

Nominal GDP = Q x *P

GDP AND WELFARE:- Real GDP is considered an index of the welfare of the people. The welfare of the people is measured in terms of the availability of goods and services per person. Higher the growth of GDP, the greater the flow of goods and services. Greater is the availability of goods and services per person.

4 . Giving reasons explain how should the following be treated in estimated GDP at market price?

(i) Fees to a mechanic paid by a firm.

(ii) Interest paid by an individual on a car loan taken from a bank.

(iii) Expenditure on purchasing a car for use by a firm.

Ans. (i) Fees paid to the mechanic by a firm is not included because it is an intermediate cost of the firm.

(ii) Interest paid by an individual is not included because the loan is taken to meet consumption expenditure and therefore interest paid on such a loan is not a factor payment.

(iii) Expenditure on the purchase of care by a firm is included because it is an investment expenditure, a final expenditure.

5. Giving reason, explain whether the following are included in the domestic products of India.

(i) Profits earned by a branch of a foreign bank in India.

(ii) Payment of salaries to its staff by an embassy located in New Delhi.

Ans. (i) As the profits are earned in the domestic territory of India, the profits earned by a branch of the foreign bank in India will be 'included' in the domestic income of India.

(ii) Payment of salaries to its staff by an embassy located in New Delhi will 'not be included' in the domestic income of India, as it is not a part of the domestic territory of India.

(iii) As interest received by an Indian resident from its abroad firms is a factor income from abroad, it will 'not be included' in the domestic income of India.

6. Calculate Net value added at factor cost from the following data.

 S.No Items Rs. In lakh 1 Purchases of raw materials 300 2 Import duty 20 3 Excise duty 30 4 Net addition to stock 50 5 Value of output 500 6 Depreciation 10

Ans:- Net value added at factor cost = Value of output - Purchases of raw materials – Depreciation - Import duty - Excise duty

= Rs. 500 – 300 - 10 – 20 – 30 lakh = Rs. 140 Laks

Net value added at factor cost = Rs. 140 Laks

7. What is aggregate supply?

Ans. Aggregate supply refers to the flow of goods and services in an economy during one year. This is ex-ante output during the year

8. Give the mining of involuntary unemployment

Ans. Involuntary unemployment refers to a situation when people are willing to work at the existing wage rate, but are not getting work owing to a lack of demand in the market

9. C= 100 + 0.4 Y is the consumption function of an economy where C is consumption expenditure and

Y is national income. Investment expenditure is 1,100. Calculate

(I) Equilibrium level of national income.

(II) Consumption expenditure at the equilibrium level of national income.

Ans:-At equilibrium:- Y=C+I

Y=100+0.4Y+1100

Y= 1200+0.4Y

Y-0.4=1200

0.6Y=1200

Y=1200/0.6=2000

C=100+0.4Y

= 100+0.4(2000) =100+800 =900

(I) Equilibrium level of national income= 2000

(II) Consumption expenditure at the equilibrium level of national income =900

10. Calculate Marginal propensity to save from the following data about an economy which is in equilibrium :

National income = 1,000

Autonomous consumption expenditure = 100

Investment = 120

Ans: At the equilibrium level , Y = C + I

Y = ̅+ MPC(Y) +I

1000 = 100+ MPC (1000) + 120

1000 = 220 + 1000(MPC)

1000 ( MPC) = 780

MPC = 780 / 1000 = 0.78

MPS = 1 – MPC , MPS = 1 – 0.78 = 0.22

11. What is ‘excess demand’? Explain the role of ‘reverse repo rate’ in removing it?

Ans.  Excess demand Inflationary gap) refers to a situation when Aggregate Demand is more than Aggregate Supply (AD > AS) corresponding to the full employment level in the economy.

The reverse repo rate induces the commercial bank to park its surplus funds with the RBI for a short period of time. To Correction situation Deficient demand (Deflationary gap) :

(i)Reverse repo rate is decreasing.

(ii) As a follow-up action, the commercial bank will reduce their deposits with the RBI (CB)

(iii) This, in turn, will increase their ability to land money.

(iv) Consequently, consumption and investment expenditure will be increased.

(v) Implying an increase in AD correct and Deficient demand (Deflationary gap) situation.

12. “Since the late 1970s, many developing countries, including India started paying attention to enterprises and workers in the informal sector.” Comment.

Ans. The given statement is correct. The reason is that employment in the formal sector is not growing. The percentage of people employed in the formal sectors in India is only 6 per cent. The rest 94 per cent are in the informal sector. However, workers and enterprises in the informal sector do not get regular income; they do not have any protection from the Government.

Workers are dismissed without any compensation. The technology used in the informal sector enterprises is outdated. Workers of the informal sector live in slums and are squatters. Of late, owing to the efforts of the International Labour Organisation (ILO), the Indian government has initiated the modernisation of informal sector enterprises and provision of social security measures to informal sector workers.

13. Is it necessary to generate employment in the formal sector rather than in the informal sector? Why?

Ans: The formal sector not only provides employment but also several social security benefits. A worker in the formal sector gets a higher salary and social security benefits. Various social security benefits that the worker can be assured of a better quality of life when he becomes old or physically disabled. After the life of a worker, his family members can be assured of a decent life. The situation is totally opposite in the informal sector where even a regular salary is a dream for most workers. Hence, it is necessary to generate employment in the formal sector rather than in the informal sector.

14. Define Infrastructure. Explain social infrastructure and economic infrastructure

Ans. It refers to such core elements of economic & social change which serve as a support system to production activity in the economy.

Economic infrastructure:

It refers to all such elements of economic change as power, transport, communication etc. which serve as a support system to the process of economic growth. It fosters economic growth which results in an increase in the standards of living of the people.

Social Infrastructure:

It refers to core elements of social change like- schools, colleges, hospitals, banking etc. which serve as a support system to the process of social development of a country. Social infrastructure focuses on human resource development, implying the development of skilled personnel as well as healthy & efficient human beings.

15. What similar development strategies have India and Pakistan followed for their respective developmental paths?

Ans. Similar developmental strategies of India and Pakistan are

1. India has the largest democracy in the world. Pakistan has an authoritarian militarist political power structure.
2. Both India and Pakistan followed a mixed economy approach. Both countries created a large public sector and planned to raise public expenditure on social development.

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CBSE Class 12 Economics Sample Paper for Term 2 Exam 2022: Best for Last Minute Revision

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