20 Sample Papers - Economics (Solved) PDF

CBSE Economics Class 12
Sample Paper 1 Solutions Page 1
Sample Paper 1 Solutions

ECONOMICS (030)
Class XII Session 2022-23
Time: 3 Hours Max. Marks: 80
General Instructions:
1. This question paper contains two sections:
Section A – Macro Economics
Section B – Indian Economic Development
2. This paper contains 20 Multiple Choice Questions type questions of 1 mark each.
3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60 to 80 words.
5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100 to 150 words.
Section A -Macro Economics Ans :

(b) 60,000
o
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (d) All of these
1. Which of the following component(s) is/are not 3. Demand deposits include:

included in money supply? (a) Saving account deposits and current account
(a) Stock of gold with RBI deposits
(b) Currency with private individuals (b) Saving account deposits and fixed deposits
(c) Currency with business firms (c) Current account deposits and fixed deposits
(d) All of these (d) All types of deposits
Ans : Ans :
(a) Stock of gold with RBI (a) Saving account deposits and current account
deposits
2. Suppose that the Balance of Trade (BoT) of a nation,
exhibits a surplus of `30,000 crores. The import of
merchandise of the nation is half of the exports of
merchandise to the rest of the world.
The value of exports would be `______crores.
(a) 90,000
(b) 60,000
(c) 15,000
(d) 22,500 4. Which bank in India is the controller of credit?
o (a) Axis bank
The transactions recorded in the current account of (b) State Bank of India
BoP are: (c) Reserve Bank of India
(a) Export and import of services
(d) Punjab National Bank
(b) Transfers from and to abroad
(c) Export and import of goods Ans :
(d) All of these (c) Reserve Bank of India
Page 2 Sample Paper 1 Solutions CBSE Economics Class 12
5. Read the following statements carefully: in capital account.

Statement 1: Money is defined as anything that is Reason (R): Balanced BoP indicates stable economic
generally accepted as a medium of exchange and at relations with rest of the world.
the same time acts as a measure and a store of value. Alternatives:
Statement 2: Money supply is stock of money in (a) Both Assertion (A) and Reason (R) are true and
circulation in the country, at a particular point of time. Reason (R) is not the correct explanation of
In the light of the given statements, choose the correct Assertion (A)
alternative from the following: (b) Both Assertion (A) and Reason (R) are true and
(a) Statement 1 is false and statement 2 is true Reason (R) is the correct explanation of Assertion
(b) Statement 1 is true and statement 2 is false (A)
(c) Both statements 1 and 2 are false (c) Assertion (A) is false but Reason (R) is true
(d) Both statements 1 and 2 are true (d) Assertion (A) is true but Reason (R) is false
Ans : Ans :
(d) Both statements 1 and 2 are true (c) Assertion (A) is false but Reason (R) is true
8. Read the following statements carefully:

Statement 1: Balance of Payments is a systematic
6. Goods purchased for _______ purpose(s) are final record of all economic transactions that take place
goods. between one country and the rest of the world during
(a) investment (b) satisfaction of wants a given period (say a year).
Statement 2: Balance of Trade is the difference
(c) Both (a) and (b) (d) None of these
between the value of goods exported and value of
o goods imported in a given year.
Read the following figure carefully and choose the In the light of the given statements, choose the correct
correct option from the alternatives given below: alternative from the following:
(a) Statement 1 is false and statement 2 is true
(b) Statement 1 is true and statement 2 is false
(c) Both statements 1 and 2 are false
(d) Both statements 1 and 2 are true
Ans :
Alternatives: 9. Read the following statements carefully:

(a) Real Statement 1: Commercial banks are the financial
(b) Nominal institutions who accept deposits from the public and
advance loans to others.
(c) Circular
Statement 2: Reserve Bank of India is the sole
(d) Both (a) and (c) authority for issuing currency notes in India.
Ans : In the light of the given statements, choose the correct
alternative from the following:
(c) Both (a) and (b) Or (a) Real
7. Read the following statements - Assertion (A) and (c) Both statements 1 and 2 are false
Reason (R). Choose one of the correct alternatives
given below:
Assertion (A): A country always tries to balance the Ans :
BoP, i.e., balance in current account equals to balance
CBSE Economics Class 12 Sample Paper 1 Solutions Page 3
10. Read the following statements-Assertion (A) and Short Answer Questions (Q11 to Q12) 3´2=6
given below:
Assertion (A): Central bank as a banker to the 11. “Indian Rupee (`) plunged to all time low of `80.10
government, works as a custodian of cash reserves. against the US Dollar ($).”
Reason (R): The central bank acts as a clearing —The Economic Times
house for transfer and settlement of mutual claims of In the light of the above report, discuss the impact of
commercial banks. Alternatives: the situation on Indian imports.
(a) Both Assertion (A) and Reason (R) are true and Ans :
Reason (R) is not the correct explanation of The plunging of the Indian rupee to an all time low at
Assertion (A) `80.10 against US Dollar is called “depreciation” in
(b) Both Assertion (A) and Reason (R) are true and the value of Indian rupee. It may lead to a fall in Indian
Reason (R) is the correct explanation of Assertion imports as the foreign goods will become expensive/
(A) costlier for the domestic consumers. So they will now
(c) Assertion (A) is false but Reason (R) is true demand them less, i.e., imports will fall.
(d) Assertion (A) is true but Reason (R) is false
o 12. Government is incurring expenditure on “Child
Read the following statements-Assertion (A) and immunisation programme”. Does the given statement
Reason (R). Choose one of the correct alternatives mean that welfare of the people of India will increase
given below: along with increase in its GDP. Comment with reason.
Assertion (A): Banks charge a higher interest rate on o
loans than what they offer on deposits. Calculate net value added at factor cost from the
Reason (R): The difference between what is charged following:
from borrowers and what is paid to depositors is the
(ìn lakhs)
main source of income of the banks.
Alternatives: (i) Net factor income from abroad 30
(a) Both Assertion (A) and Reason (R) are true and (ii) Sales 3,500
Reason (R) is not the correct explanation of (iii) Purchase of intermediate goods 2,000
Assertion (A) (iv) Consumption of fixed capital 500
(b) Both Assertion (A) and Reason (R) are true and (v) Exports 400
Reason (R) is the correct explanation of Assertion
(vi) Indirect taxes 350
(A)
(vii) Change in stock 50
(c) Assertion (A) is false but Reason (R) is true
(d) Assertion (A) is true but Reason (R) is false Ans :
Ans : (a) Government’s spending on child immunization
programme is government’s final consumption
(a) Both Assertion (A) and Reason (R) are true and
expenditure. Hence, it will raise the Gross
Reason (R) is not the correct explanation of Assertion
Domestic Product (GDP).
(A)
(b) Such a programme like child immunization
o
improves the health of the children. It will raise
(b) Both Assertion (A) and Reason (R) are true and
the efficiency level in the long-run, as these
Reason (R) is the correct explanation of Assertion (A)
children will grow up into healthy adults with a
higher efficiency level. This will thereby increase
the welfare of the people.
o
NVAFC = ]iig + ]viig − ]iiig − ]ivg − ]vig

= 3, 500 + 50 − 2000 − 500 − 350

= `700 lakhs
Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12 the borrowings by commercial banks become
cheaper. This, in turn, compels the commercial
13. State whether the following statements are true or banks to reduce their lending rate. As a result,
false. Give reason for your answer. borrowing becomes cheaper and people will
(a) When MPC is greater than MPS, the value of thereby borrow more and, thus, spend more. This,
investment multiplier will be greater than 5. in turn, helps in reducing deflation.
(b) The value of MPS can never be negative. (b) For controlling deflation gap, the Central Bank
can reduce. CRR to ease the flow of credit.
Ans : When the Central Bank reduced CRR, the
(a) False, because when MPC > MPS, say MPC amount of deposits with the commercial banks
= 0.6 and MPS = 0.4, the value of investment gets increased. This increases the capacity of
multiplier will be greater than 2 and not greater the commercial banks to create credit. Lending
than 5, as mentioned. This is because rises and as a result investment also rises. Thus,
aggregate demand rises and the problem of
1 1
k = MPS = 0.4 = 2.5 deflation/recession can be solved.
Value of k as 2.5 is greater than 2 and not greater than
5 as stated.
(b) True, as per Keynes psychological law of
consumption, there is always positive or direct
relationship between additional saving and
additional income and it varies between 0 and 1.
We know that the sum of MPC and MPS is always 1,
i.e., MPC + MPS = 1.
For example,
if MPC = 0.9, then MPS = 1 — 0.9 = 0.1
if MPC = 0, then MPS = 1 — 0 = 1
Value of MPS can never be negative.
15. Define full employment. Can an equilibrium situation
14. Read the following text carefully and discuss briefly be reached in an economy at less than full employment
any two tools of correcting the situation of deflation/ level? Explain.
recession in the economy. o
The Reserve Bank of India (RBI) cuts Repo Rate to Explain the role of margin requirements in dealing
4.4%, the lowest in at least 15 years. Also, it reduced with the problem of excess demand.
the Cash Reserve Ratio (CRR) maintained by the Ans :
banks for the first time in over seven years. CRR for
Full employment refers to a situation where all those
all banks was cut by 100 basis points to release `1.37
who are able to work, wants to work and willing to
lakh crores across the banking system. RBI governor
work are getting the work.
Dr. Shaktikanta Das predicted a big global recession
Yes, the economy can be in equilibrium, at less than
and said India will not be immune. It all depends how
full employment level. It is a situation of deficient
India responds to the situation. Aggregate demand
demand (deflationary gap) where underemployment
may weaken and ease core inflation.
equilibrium exist.
--The Economic Times; March 27th, 2020
In the given diagram, we observe that the economy is
Ans : in equilibrium at point X and OM is the equilibrium
The two tools of correcting the situation of deflation income or output which is less than the full
in the economy are: employment income or output denoted by OF, i.e.,
(a) Repo rate refers to the rate at which central bank OM < OF. At full employment level, output is greater
lends to commercial banks for a short period. than AD, as shown by AF > BF, by the distance ‘AB’
When the central bank reduce the repo rate, which denotes a situation of “deflationary gap” or
deficient demand.
(a) Explain the ‘mixed income of self-employed’

with the help of a suitable example.
(b) Find net value added at factor cost:
(` in lakhs)
(` in lakhs)
(i) Durable use producer goods 10
with a life span of 10 years
(ii) Single use producer goods 5
(iii) Sales 20
(iv) Unsold output produced during 2
the year
(v) Taxes on production 1
Ans :
o (a) GNPFC = NDPFC + (ii) + (iii)
The margin requirement of a loan refers to the
= 120 + 60 + ( - 10 )
difference between the value of the security offered
for loan and the value of the loan granted. = 120 + 50 = `170 crores
During excess demand situation (when AD > Y at (b) Non-monetary exchanges’ refer to activities like
the level of full employment), the central bank raises services of family members provided.
the margin requirements so that the borrowers are These activities are not evaluated in monetary terms,
now given less money in the form of loan against i.e., are not paid for, so they may be left out from
the mortgaged assets. Thus, credit gets reduced the estimation of national income due to the non-
and aggregate demand falls. This helps in reducing availability of data.
the problem of excess demand, which thereby gets But the fact is that these activities do contribute
checked. to the welfare of the people. Since Gross Domestic
Product (GDP) may not account for such activities,
it may be underestimated. This, thus, is a limitation
of the Gross Domestic Product (GDP), as an index
of welfare.
Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12
o
(a) “Mixed Income is related to the income of the
16. (a) Calculate GNPFc from the given data: self-employed persons, who use their own factors
of production like own labour, land, capital and
(` in crores)
entrepreneurship to produce goods and services.
(i) Indirect tax 50 The income generated by these self owned factors
(ii) Consumption of fixed capital 60 are thus a mixture of wages, rent, interest and
(iii) Net factor income received (—) 10 profit. Thus they are known as ‘mixed income of
from abroad self-employeds’.
(iv) NDPFC 120 For example, a person X opens his coaching
(v) Net current transfers paid to 30 centre in his own premises. He himself teaches the
rest of the world students and his wife and other family members help
(vi) Subsidies 25 in administrative work of the institute. Person X
(b) “Non-monetary exchanges are not included in the used his own savings in buying furniture and other
estimation of National Income.” Do you agree essentials for the centre.
with the above statement? Give reasons. Now, the coaching centre starts functioning
o smoothly and he is able to earn an amount of `80,000
per month. This income of `80,000 is the “mixed (iii) Primary deficit, during the period of April
income” generated by the self-employed person X. to November 2021 turned up at nearly half
Self-owned factors of production are usually used in of the level it had reached during April to
household enterprises where the production is usually November 2019.
on a small scale. (b) The government under Ujjwala Yojana is
(b) providing free LPG kitchen gas connection to
families ‘below the poverty line’. This is to help
NVAFC = (iii) + (iv) — (ii) — (v) — *Depreciation the poor people with a clean fuel for cooking
= 20 + 2 — 5 — 1 — 1 purposes. This will improve their eyesight and
health. Through this yojana, the government
= 22 — 5 — 1 — 1
is trying to boost up ‘social welfare’. This step
= `15 Lakh will also boost up the morale of the poor. Their
Cost of the Fixed Capital good productive efficiency will get enhanced, which
*Depreciation = Life Span will have a favourable impact on the national
= 10
10
=1 income. The government is trying to fulfil the
objective of reducing inequalities in the income
17. (a) Interpret the given data on the basis of fiscal and distribution.
primary deficit.
Section B -Indian Economic Development
Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10
18. _______ are the institutional sources of agricultural

credit.
(a) Commercial Banks
(b) The government under “UJJWALA Yojana” is
providing free LPG connections to the families (b) Cooperative Credit Societies
‘below the poverty line’. What objective the (c) Both (a) and (b)
government is trying to fulfil through the (d) Neither (a) nor (b)
government budget and how? Explain.
Ans :
Ans : (c) Both (a) and (b)
(a) Given data on the basis of fiscal and primary
deficit :
19. Demonetisation is the ______ policy wherein the
(i) Fiscal deficit during the period of April to
legal status of a currency unit is cancelled and new
November has followed mixed trend over
one comes into circulation.
the last three years. It was `8.1 lakh crore in
(a) Legal
2019, `10.8 lakh crore in 2020 and `7.0 lakh
(b) Social
crore in 2021.
(ii) Primary deficit also followed similar trend (c) Political
as it was `4.7 lakh crore in 2019, `6.9 lakh (d) Economic
crore in 2020 and `2.4 lakh crore in 2021. o
The Britishers introduced the railways in: institutions working for expansion of rural credit.
(a) 1860 Statement 2: National Bank for Agriculture and Rural
(b) 1850 Development (NABARD) was established on 12th
(c) 1880 July 1982.
In the light of the given statements, choose the correct
(d) 1870
Ans : (a) Statement 1 is false and statement 2 is true
(d) Economic Or (b) 1850 (b) Statement 1 is true and statement 2 is false
20. ______ campaign aimed at industrialising the China (d) Both statements 1 and 2 are true
on a large scale. Ans :
(a) Great Proletarian Cultural Revolution
(b) Commune System
(c) Great Leap Forward
(d) None of these
Statement 1: The emergence of Self-Help Groups
o (SHGs) ensured the reduction in the fissures of the
Which of the following countries initiated its process formal credit system.
of economic reforms in the year 1991? Statement 2: The borrowings from SHGs mainly
(a) Russia confined to consumption purposes by its members.
(b) China In the light of the given statements, choose the correct
(c) Pakistan alternative from the following:
(d) India (a) Statement 1 is false and statement 2 is true
Ans :
(c) Great Leap Forward Or (d) India
Ans :
21. Arrange the following events of Pakistan in
chronological order and choose the correct alternative: 24. Read the following statements-Assertion (A) and
(i) Nationalisation of Capital goods Reason (R). Choose one of the correct alternatives
(ii) First Five Year Plan given below:
(iii) Fertility Rate in Pakistan was 3.7 Assertion (A): Major policy initiatives (land reforms
(iv) Agriculture grew at the rate of 4% and green revolution) helped India to become self-
Choose the correct alternative: sufficient in foodgrains production.
(a) (iv), (ii), (i), (iii) Reason (R): The proportion of people depending on
(b) (iv), (i), (ii), (iii) agriculture did not decline as expected after the Green
(c) (ii), (iv), (i), (iii) Revolution.
Alternatives:
(d) (ii), (i), (iv), (iii)
Ans : Reason (R) is not the correct explanation of
(d) (ii), (i), (iv), (iii) Assertion (A)
(A)
Statement 1: National Bank for Agriculture and Rural
Development (NABARD) is the apex body which (c) Assertion (A) is false but Reason (R) is true
coordinates the functioning of different financial (d) Assertion (A) is true but Reason (R) is false
Ans : (c) A - (i)

Reason (R) is not the correct explanation of Assertion 27. _______protocol was initiated to control ozone
(A) depletion.
(a) United Nations
25. Read the following statements-Assertion (A) and (b) Montreal
Reason (R). Choose one of the correct alternatives (c) Kyoto
given below: (d) None of these
Assertion (A): Human capital treats human beings as o
a means to an end (increase in productivity). Which one of the following is not a non-institutional
Reason (R): Human Capital Formation decreases by source of credit?
way of investments in education and health. (a) Relatives
Alternatives:
(b) Moneylenders
Reason (R) is not the correct explanation of (c) Land Development Bank
Assertion (A) (d) Traders and commission agents
(b) Both Assertion (A) and Reason (R) are true and Ans :
(b) Montreal
(A)
o
(c) Assertion (A) is false but Reason (R) is true (c) Land Development Bank
Ans :
26. From the set of events/systems given in Column I

and corresponding relevant fact given in Column II,
choose the correct pair of statement:
Column I Column II
Short Answer Questions (Q28 to Q29) 3´2=6
A. Capital goods (i) industry which can
industry produce machine
tools 28. “Green Revolution enabled the government to procure
sufficient food grains to build its stocks that could be
B. Zamindari System (ii) the interest of the
used during times of shortage.” Do you agree with the
‘zamindars’ was not
above statement? Give reason.
only to collect rent.
C. Demographic (iii) after 1935, the Ans :
transition second stage of 28. It is a correct and well accepted statement. This
transition began is because a good proportion of the rice and wheat
D. Life expectancy (iv) was very low - 52 produced during the Green Revolution was sold in
years the market by the farmers (marketed surplus). As
an outcome, the price of foodgrains fell and the low
Alternatives: income groups benefited from this, because as they
(a) B - (ii) spent a large percentage of their income on food.
(b) C - (iii) Not only that the green revolution enabled the
(c) A - (i) government to procure sufficient foodgrains in order
(d) D - (iv) to build its ‘buffer stocks’, which could be used during
times of food shortages, in order to ease the situation
Ans :
29. “Industrial Policy Resolution of 1956 (IPR 1956) Ans :

formed the basis of the Second Five Year Plan.” (i) We know that in 2011-12, there were about 473
Elaborate. million workers in India. There were about 30
o million workers in formal sectors.
Explain the two forms of protection from imports. (ii) Out of 30 million formal sector workers, only 6
Ans : million, i.e., only about 21% were women and
Indeed IPR 1956 formed the basis of the Second rest 24 millions were men.
Five Year Plan, which was known as the “Industrial (iii) Similarly in informal sector, 310 million workers
Plan”. IPR 1956 classified the industries into three were men and 133 million workers were women.
categories: (iv) So in both formal and informal sector women
(i) Category I included industries which would be were in disadvantageous situation as compare to
owned exclusively by the state. men.
(ii) Category II included industries in which the
private sector could supplement the efforts of the
state sector, but the sole responsibility for starting
new units rested in the hands of the state.
(iii) Category III included the remaining industries 31. Explain the focus of the economic policies pursued
which were to be in the private sector, but they by the colonial government in India. Analyse the
were kept under state control through a licensing impact of these policies.
system. o
o How did the government ensure that the small farmers
Protection from imports took two forms: also benefit from the Green Revolution as the rich
(a) Tariffs were a tax on imported goods, which made farmers?
these goods relatively expensive. As a result,
Ans :
discouraged their consumption.
(b) Quotas referred to the quantity of goods which Focus of the economic policies pursued by the
could be imported. colonial government in India.
(i) During the British rule, the economic policies
Both these forms aimed to restrict imports pursued by the colonial government in India
and thereby protect the domestic firms from were mainly concerned with the protection and
foreign competition. As per the protection policy, promotion of the economic interests of their
it was assumed that if the domestic industries were home country, at the cost of the development of
protected they would learn to compete, against the the Indian economy.
goods produced by the developed economies, with (ii) Indian economy was transformed into a supplier
the passage of time. of raw materials and at the same time a consumer
of finished industrial products from Britain. It
remained an ‘agrarian’ economy under the British
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12
rule burdened with surplus labour.
30. Interpret the given chart in context of Employment as (iii) Agricultural productivity was low leading to the
per 2011-12. “stagnation” in the agricultural sector.
(iv) Commercialisation of agriculture compelled the
farmers to produce cash crops in place of food
crops.
(v) In the field of ‘industry’ too, India could not
develop a sound industrial base.
Impact of these Policies
(i) The colonial government systematically de-
industrialised India with a two-fold motive.
First to reduce India to a mere exporter of
raw materials for the development of modern
industries in Britain. Secondly to convert India
into a huge market for the finished products of workforce.

these industries. (ii) Agriculture is not a major source of employment
(ii) Ultimately this led to the decline of the indigenous in urban areas. Very few urban workforce are
handicraft industries without replacing them by a employed in the primary sector (7%).
modern industrial base.
(iii) There were hardly any capital goods industry to
promote industrialisation in India.
(iv) Foreign trade was mainly oriented to feed the
Industrial Revolution in Britain.
(vi) Infrastructural facilities called for an upgradation,
lack of adequate health facilities, frequent
occurrence of natural calamities and famines
further tortured the helpless Indian masses.
o
The new agricultural strategy implied use of better
and improved inputs of agriculture which required
more capital. Green Revolution would have benefited
only the rich farmers if the government had not Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12
played an important role in ensuring that the small
farmer also gains from the new technology. The 33. “Micro-credit programmes are playing vital role in
government provided loans at low rate of interest. meeting credit requirements of the poor.” Elaborate.
The fertilisers and high yielding varieties of seeds o
were also subsidised for the small farmers. Explain the principal role of human capital formation
in accelerating the rate of economic growth.
32. Study the following table showing distribution by Ans :
workforce by Industry, 2011-12 and analyse the
trend of the workforce on the basis of industry and The habit inculcation of thrift and efficient utilization
residence. of financial resources requires to be enhanced among
Distribution of Workforce by Industry, 2011-12 the farmers. Self-Help Groups (SHGs) have emerged
to promote thrift in small proportions by a minimum
Industrial Category Place of Residence contribution from each member.
Rural Urban From the money thus pooled credit is given to needy.
Primary Sector 64.1 6.7 This to be repaid in small installments at reasonable
rates of interest. Such kind of credit provision is
Secondary Sector 20.4 35.0
termed as a ‘micro-credit programme’. SHGs have
Tertiary Sector 15.5 58.3 also contributed in the women empowerment. They
Total 100.0 100.0 have, as a matter of fact, emerged to fill up the gap in
the formal credit system, thus playing a vital role in
Ans :
meeting credit requirements of the poor. An example
On the basis of the table on “Distribution of of ‘Kudumbashree’ stands testimony to the success of
workforce” by industry provided, we infer: such programme.
(i) Primary sector in the main source of employment o
in rural India, where about 64% of the population Human capital formation, by way of education,
depends on it for their livelihood. health along with its other indicators like on-the
(ii) About 20% of the rural workers are employed in job training, job market information and migration,
the secondary/industrial sector. definitely enhance an individual’s income-generating
(iii) Service sector/tertiary sector provides capacity. This in turn contributes to increased labour
employment to about 16% of rural workers. productivity, which stimulates the innovative and
On the other hand, in the Urban areas people are creative ability of the human beings so as to easily
mainly engaged in the service sector (58%). take to the new and recent technologies.
(i) Secondary sector employs 35% of urban
It is proven empirically, that increase in human capital Ans :

causes economic growth, is rather a vague statement. (a) A Special Economic Zone is an area in which
This is so because the human capital growth in business and trade laws are different from the rest
developing countries has turned out to be faster than of the country. These are intended to function as
the growth of per capita real income. zones of rapid economic growth by using tax and
In a developing country with large population like business incentives to attract foreign investment
India, there is a strong belief that trained and educated and technology.
people become an asset in accelerating the economic
The two cities in which Special Economic
growth and facilitating the social change in the
Zones were started in China in 1980 are small
direction so desired.
cities of Shenzhen and Zhuhai.
(b) The economic reforms were initiated in China in
34. Read the following text carefully and answer the 1978. The local governments have been allowed
given questions on the basis of the same and common to offer tax incentives to attract foreign investors
understanding: and to develop their own infrastructure without
Special Economic Zones (SEZs) are intended to the approval of central government under the
function as zones of rapid economic growth by Special Economic Zones.
using tax and business incentives to attract foreign
investment and technology. The first four special
economic zones were created in 1980 in southeastern
******
coastal China and consisted of what were then the
small cities of Shenzhen, Zhuhai, and Shantou in
Guangdong province and Xiamen (Amoy) in Fujian
province. In these areas, local governments have been
allowed to offer tax incentives to foreign investors
and to develop their own infrastructure without
the approval of the central government. Business
enterprises have made most of their own investment,
production and marketing decisions, and foreign
ownership of such ventures has been legalised.
Though some of them began as little more than
small towns, the new SEZs soon attracted foreign
investment and became boom towns, with rapidly
expanding light and consumer goods industries
and growing population. Encouraged by the zones’
success, the Chinese government in 1984 opened 14
larger and older cities along the coast to foreign trade
and investment. In 1988, Hainan Island was made
a separate province and a special economic zone,
and in 1990 the Pudong area within the Shanghai
municipality became a special economic zone with
policies even more flexible than those already in force
in the original four Special Economic Zones (SEZs).
(a) What are Special Economic Zones (SEZs)? Name
any two cities in which special economic zones
were started in China in 1980.
(b) When were economic reforms initiated in China?
What autonomy was given to local government
for motivating foreign investors in China under
Special Economic Zones?

ECONOMICS (030)
Section A -Macro Economics (a) `15,000 crore

(b) `25,000 crore
(c) `21,000 crore
(d) `13,000 crore
1. Which of the following items will not be included Ans :

while calculating national income by income method? (c) revenue
(a) Profit o
(b) Scholarship (d) `13,000 crore
(c) Royalty
(d) Wages and Salaries
Ans :
3. Read the following statements-Assertion (A) and
(b) Scholarship Reason (R). Choose one of the correct alternatives
given below:
2. Government expenditure on mid-day meal scheme Assertion (A): Market price is the difference between
running in government (state-run) schools is a factor cost and net subsidies.
expenditure in government budget. Reason (R): Depreciation is added to net investment
(a) normal (b) capital to convert into gross investment.
(c) revenue (d) Any of these Alternatives:
o (a) Both Assertion (A) and Reason (R) are true and
Suppose, following data is presented, for an imaginary Reason (R) is not the correct explanation of
economy: Assertion (A)
Particulars (ìn crore) Reason (R) is the correct explanation of Assertion
Fiscal deficit 12,000 (A)
Revenue deficit 9,000 (c) Assertion (A) is false but Reason (R) is true
Primary deficit 5,000 (d) Assertion (A) is true but Reason (R) is false
Revenue receipts 6,000
Ans :
Non-debt capital receipts 10,000
On the basis of given data, the value of capital
expenditure will be:
(A)
4. Read the following statements carefully: (d) None of these

Statement 1: The value of money multiplier is inverse
Ans :
of Reserve Ratio.
Statement 2: The process of money creation ends (b) JM Keynes
when initial deposits get equal to money creation. o
In the light of the given statements, choose the correct (d) None of these
(a) Statement 1 is false and statement 2 is true 7. Two friends Mira and Sidhi were discussing the
(b) Statement 1 is true and statement 2 is false exchange rate systems.
(c) Both statements 1 and 2 are false ‘Under this system, the exchange rates are determined
(d) Both statements 1 and 2 are true by the market forces of demand and supply. However,
deliberate efforts are made by the competent authority
Ans : to keep the exchange rates within a specific range’.
(b) Statement 1 is true and statement 2 is false The above-mentioned statement was given by Sidhi.
Identify the type of exchange rate system was she
talking about?
(a) Floating Exchange Rate
Statement 1: Domestic product can be more than
national product. (b) Fixed Exchange Rate
Statement 2: Consumption of fixed capital is added to (c) Managed Fixed Exchange Rate
gross domestic income to obtain national income. In (d) Managed Floating Exchange Rate
the light of the given statements, choose the correct
Ans :
(a) Statement 1 is false and statement 2 is true (d) Managed Floating Exchange Rate
(c) Both statements 1 and 2 are false 8. Observe the given figure carefully and choose the
(d) Both statements 1 and 2 are true correct option from the alternatives given below:
Ans :
These are the objectives of:

(a) Foreign Policy
(b) Monetary Policy
(c) Fiscal Policy
6. According to which economist, national income can (d) All of these
be determined even below the full employment level?
(a) JB Say Ans :
(b) JM Keynes (c) Fiscal Policy
(c) Haroon Kurtz
(d) Adam Smith 9. Which of the following is/are non-durable good(s)?
o (a) Bread
Aggregate demand can be increased by: (b) Milk
(a) selling government securities by RBI (c) Neither (a) nor (b)
(b) increasing bank rate (d) Both (a) and (b)
(c) increasing cash reserve ratio
o 12. Where are ‘borrowings from abroad’ recorded in the

Goods purchased for the_____purpose are final Balance of Payments Accounts? Give reasons.
goods. o
(a) Investment in firm Name the broad categories of transactions recorded
(b) Satisfaction of wants in the ‘current account’ of the Balance of Payments
(c) Neither (a) nor (b) Accounts.
(d) Both (a) and (b) Ans :
Ans : All transactions related to borrowings from abroad by
private sector, government etc. are recorded on the
(d) Both (a) and (b) positive side of capital account. They cause inflow of
o foreign currency but they are a liability on us. Those
(d) Both (a) and (b) transactions between the residents of a country and
the rest of the world which cause a change in the
10. Read the following statements-Assertion (A) and assets or liabilities of the residents of the country or
Reason (R). Choose one of the correct alternatives its government are recorded under capital account.
given below: o
Assertion (A): All coins are issued by Ministry of Current account of the Balance of Payments Accounts
Finance in India. records the following transactions:
Reason(R): All currency notes except `1 note are (a) Exports and imports of goods
issued by the RBI. (b) Exports and imports of services
Alternatives: (c) Factor income receipts from abroad and factor
(a) Both Assertion (A) and Reason (R) are true and payments to abroad
Reason (R) is not the correct explanation of
(d) Transfers from and to abroad
Assertion (A)
(A)
Ans :
(A)

11. What is Balance of Payments account? Where are the

borrowings from abroad recorded in it and why? 13. Read the following text carefully and explain the
relevant function of the Central Bank indicated here.
Ans : The Reserve Bank of India imposed a penalty of `25
Balance of Payments account is a record of a country’s lakh on Chhattisgarh Rajya Sahakari Bank Maryadit,
sources and uses of foreign exchange. Borrowing Raipur, for non-compliance with certain provisions
from abroad is recorded in ‘Loans’, subcomponent of of the ‘Reserve Bank of India (Know Your Customer
the capital account. This is so, because, the capital (KYC)) Directions, 2016’. The penalty comes after
account shows all the inflows and outflows of capital. the statutory inspection of the bank conducted by
In this given case capital is inflowing from R.O.W. to NABARD concerning the bank’s financial position as
India. So it is included in the capital account. of March 31, 2020.
The Inspection Report pertaining thereto and
examination of all related correspondence revealed, Primary deficit in a government budget, is that part of
inter alia, that the bank had failed to put in place a fiscal deficit which indicates borrowing requirements
system of periodic review of risk categorization of to cover up the shortfall in receipts on account of
customers, RBI said. expenditure other than the interest payments. This
Ans : deficit indicates that how much is the government
borrowing under compulsion of interest payments.
The function of Central Bank (RBI) indicated here is Primary Deficit = Fiscal Deficit — Interest Payments
supervisor to commercial banks. It acts as a banker o
and supervisor to commercial banks in various ways. Fiscal deficit refers to the excess of total expenditure
Some of them are: over total receipts (excluding borrowings) during the
(a) It provides financial assistance to banks by financial year.
discounting their bills and through loans and Fiscal deficit = Total Expenditure — Total Receipts
advances against approved securities. (excluding borrowings)
(b) It supervises, regulates and controls the activities Larger fiscal deficit implies greater borrowings by the
of commercial banks. government. Fiscal deficit should not be allowed to
(c) It provides the commercial banks with centralised rise unabated (not beyond 3% of GDP). High fiscal
clearing and remittance facilities. deficit indicates fiscal indiscipline. It is a situation
(d) The commercial banks are required to maintain when the growth of GDP is low, unemployment is
a certain percentage of deposits with the Central high and revenue is low. As a result, the economy
Bank. The sole aim of these reserves is to enable witnesses stagnation and economic slowdown.
the Central Bank to provide assistance in times of
financial crisis.
14. An economy is in equilibrium. Calculate Marginal Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12
Propensity to Save from the following:
National Income = `1,000 crores
16. (a) Calculate National Income from the following
Autonomous Consumption = `100 crores data:
Investment Expenditure = `200 crores (ìn crores)
Ans : (i) Net domestic capital formation 220
National Income = 1,000 crores (given) (ii) Consumption of fixed capital 70
(iii) Private final consumption 1,200
Autonomous Consumption = 100 crores (given)
expenditure
Investment Expenditure = 200 crores (given) (iv) Net current transfers to abroad ( - ) 30
= C + MPC ]Yg + I
Y (v) Net imports 40
1,000 = 100 + MPC (1,000) + 200 (vi) Net factor income to abroad 10
− − (vii) Subsidies 50
= 1000 100 200
MPC 1000
(viii) Government final 200
= 700 = 0.7
1000 consumption expenditure
MPS = 1 — MPC = 1 — 0.7 = 0.3 (ix) Indirect tax 240
(x) Net change in stocks ( - )20
15. Explain ‘primary deficit’ in a government budget.
(b) Distinguish between stocks and flows. Give
What does it indicate?
examples.
o
o
Explain the concept of fiscal deficit in a government
(a) Interpret the recent growth of agriculture and
budget. What does it indicate?
allied sectors and also state the causes behind the
Ans : same.
higher rate of 4.3%.

(iii) The agriculture and allied sectors grew at a
positive growth rate of 3.6 per cent during
2020-21.
(iv) This became possible due to good monsoon
and various government measures to
enhance credit availability, improve
investments, create market facilities,
promote infrastructure development in the
agriculture sector and increase provision of
quality inputs to the sector.
(v) It has further helped agriculture to achieve
and improved the growth rate to 3.9 per cent
in 2021-22.
(b) GVAFC = Sales + (iv) — (v) + (iii)
= 180 + 15 — 100 + 10
= `105 lakhs
(b) Calculate ‘Gross Value Added at factor cost’ from
the following data:
(`lakhs)
(i) Sales 180
(ii) Rent 5
(iii) Subsidy 10
(iv) Change in stock 15
(v) Purchase of raw materials 100
(vi) Profit 25
Ans :
(a) National Income/NNPFc 17. Distinguish between APS and MPS. Can the value
= (iii) + (viii) + (i) — (v) — (ix) + (vii) — (vi) of APS be negative? If yes, when? Justify with an
example.
= 1,200 + 200 + 220 — 40 — 240 + 50 — 10
= `1,380 crores Ans :
(b) ‘Stock’ refers to any economic variable which is (a) APS is the proportion of income saved whereas
measured at a point of time. It does not call for MPS refers to the proportion of change in savings
a time dimension. Whereas ‘Flow’ refers to any to the change in income.
economic variable which is measured during a Total Savings
S
period of time. (b) APS = Total Income = Y
It always calls for a time dimension. For example Change is Savings
∆S
where as MPS = Change in Income = ∆
capital is a stock variable and capital formation/ Y
investment is a flow variable.
o (c) Yes, the value of APS can be negative at very
(a) (i) The agriculture and allied sector was growing low levels of income, when C > Y. For example,
at higher rate of 6.8% in 2016-17 and remain if at an Income Level of `1,000, Consumption
almost some in 2017-18, i.e., 6.6%. Expenditure is `1,200, then Savings are — `200.
(ii) In 2018-19, the growth rate steeply decrease So, APS =− 0.2
and came down to 2.6% only but in very
next year, i.e., 2019-20 it start growing at
Section B -Indian Economic Development (c) kharif

(d) Both (a) and (b)
o
_______ sector is providing alternate livelihood
options to 70 million small and marginal farmers.
18. India’s rank based on Human Development Report (a) Livestock
2017 is _______. (b) Fisheries
(a) 130 (b) 141 (c) Pisciculture
(c) 151 (d) 121 (d) Agro-processing
Ans : Ans :
(a) 130 (c) kharif
o
19. Read the following statements carefully: (a) Livestock
Statement 1: Diversification in agriculture means
shift of workforce to non-farm sector and change in 22. Which entrepreneurial activity is taken by the women
cropping pattern. in rural households?
Statement 2: Diversification is important to provide (a) Bee-keeping
sustainable livelihood option and to control disguised (b) Poultry
unemployment. (c) Both (a) and (b)
(d) None of these
(a) Statement 1 is false and statement 2 is true o
Banning the use of chlorofluorocarbon compounds
and other chlorine and bromine compounds is called:
(c) Both statements 1 and 2 are false (a) Montreal Protocol
(d) Both statements 1 and 2 are true (b) Chipko Movement
Ans : (c) Apiko Movement
(d) Both statements 1 and 2 are true (d) None of these
Ans :
(a) Bee-keeping
o
(a) Montreal Protocol

20. The ‘Operation Flood’ programme was successfully choose the correct pair of statement:
implemented in: Column I Column II
(a) 1970\ (b) 1995
A. Fiscal policy (i) Government’s taxation
(c) 1892 (d) 1982 and public expenditure
Ans : policy
(a) 1970 B. Direct taxes (ii) taxes on incomes of
group of people
C. Outsourcing (iii) an important outcome
21. There is more employment opportunities in agriculture
of privatisation
in _______ season.
(a) zaid D. GATT was (iv) to administer bilateral
formed in 1948 agreements
(b) rabi
Alternatives: Integrated GST (IGST).

(a) B - (ii) Reason (R): Central GST (CGST) and State GST
(b) D - (iv) (SGST) will apply to all transactions of goods and
(c) C - (iii) services.
Alternatives:
(d) A - (i)
(d) A - (i) Assertion (A)
24. Arrange the following events of India in chronological
(A)
order and choose the correct answer:
(i) Growth of GDP of India was 5.7% (c) Assertion (A) is false but Reason (R) is true
(ii) Agricultural output growth was 2.3% (d) Assertion (A) is true but Reason (R) is false
(iii) Life expectancy at birth was 68.3 o
(iv) First Five Year Plan Read the following statements-Assertion (A) and
Choose the correct alternative: Reason (R). Choose one of the correct alternatives
(a) (ii), (iv), (iii), (i) given below:
(b) (iv), (i), (ii), (iii) Assertion (A): The growth rate of rice has not kept
(c) (iv), (ii), (i), (iii) pace with the growth rate of wheat.
Reason (R): Green Revolution has failed to increase
(d) (iv), (ii), (i), (iii)
the production of rice substantially in the rainfed
Ans : areas of Eastern India.
(b) (iv), (i), (ii), (iii) Alternatives:
Assertion (A).
25. Out of the following statements, which one is correct? Reason (R) is the correct explanation of Assertion
(i) Pakistan ranks high in human development index (A).
as compared to India. (c) Assertion (A) is false but Reason (R) is true
(ii) Life expectancy is higher in Pakistan as compared (d) Assertion (A) is true but Reason (R) is false
to India.
(iii) China’s performance in providing sanitation is Ans :
better than India. (d) Assertion (A) is true but Reason (R) is false Or
(iv) Pakistan’s GDP per capita is higher than India. (b) Both Assertion (A) and Reason (R) are true and
Alternatives: Reason (R) is the correct explanation of Assertion
(a) Only (iii) (A).
(b) (i) and (ii)
(c) (i) and (iii) 27. Read the following statements carefully:
(d) (ii) and (iv) Statement 1: The headquarter of ASEAN is situated
in Shanghai.
Ans :
Statement 2: BRICS is headquartered in Zakarta.
(a) Only (iii) In the light of the given statements, choose the correct
26. Read the following statements—Assertion (A) and (a) Statement 1 is false and statement 2 is true
Reason (R). Choose one of the correct alternatives (b) Statement 1 is true and statement 2 is false
given below: (c) Both statements 1 and 2 are false
Assertion (A): GST consists of three components (d) Both statements 1 and 2 are true
such as Central GST (CGST), State GST (SGST), and
Ans : Demonetisation emphasises the government’s

(c) Both statements 1 and 2 are false determination to penalise the illicit activities and
the associated wealth. Through demonetisation the
government wanted to reduce the levels of corruption.
Short Answer Questions (Q28 to Q29) 3´2=6 It is an attempt to crack down on black money showing
that tax evasion will no longer be tolerated/accepted.
28. In context of the given image, give reason why India o
become a favourable destination for outsourcing. GST is the “single comprehensive indirect tax” on
Also, state some services outsourced to India. supply of goods and services right from manufacturer
or service provider to the consumer.
The system of GST as compared to the old tax system
(i) has simplified the multiplicity of taxes on goods
and services.
(ii) the laws, procedures and rates of taxes across the
country are also now standardised.
(iii) It has also facilitated the freedom of movement of
goods and services.
(iv) It has created a common market in the country.
The three categories of GST are CGST, SGST and
IGST.
Ans :
(i) Outsourcing is contracting out some activities to
a third party which were earlier performed by the
organisation.
(ii) India has become one of the favourable
destinations for outsourcing since India has
skilled manpower available at low wage rate. Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12
(iii) Some of the services outsourced to India are
Voice-based Business Processes (BPO), record 30. Elaborate the economic reforms in India in the light
keeping, teaching, banking services, and clinical of “Social justice and welfare”.
advices. o
“The benefit of being a member of the WTO is limited
29. In your opinion why did the government resort to the for countries like India.” Explain, why?
measure of “demonetisation”? Ans :
o
It is held that the economic crisis that erupted in the
Define ‘GST’. According to you, how good is a
early 1990’s had been a result of the deep-rooted
system of GST as compared to the old tax system?
inequalities in Indian society. The economic reform
State its categories.
policies initiated as a response to the crisis, led to
Ans : further aggravation of the inequality in the society.
The government resorted to the measure of The reforms have led to the increase in the income
demonetisation to curb: and quality of consumption of only the high income
(a) corruption groups. This led to the growth being concentrated in
(b) counterfeiting some select areas only like in the service sector like
telecommunication, information technology, finance,
(c) terrorism
travel, real estate, trade etc. This growth was at the
(d) the accumulation of black money generated by cost of vital sectors like agriculture and industry,
income not declared to the tax authorities.
the main sources of livelihood to a large number of extracted beyond the rate of their regeneration. If
people in the country. there is a disequilibrium (demand being more than
Thus, the reforms in general and globalisation supply), the environment fails to replenish itself and
in particular have compromised the welfare and it will lead to environmental crisis. Thus, to maintain
identity of poor in the country. The market-driven a healthy environment, the carrying capacity of the
globalisation has led to the widening of the economic environment must be valued and respected.
disparities among the people.
o 32. Answer the following questions on the basis of the
The benefits of being a member of the WTO is limited following data.
for developing countries like India because: (a) Comment upon the Maternal Mortality Rate
(a) Major volume of international trade occurs among India and China.
between the developed countries. Thus, the (b) Life expectancy at birth among these two
benefit to developing nations is limited. countries.
(b) The developing economies are forced to open up Country Maternal Mortality Life Expectancy
their markets for the developed countries but not Rate (per lakh births) at birth (years)
allowed access to the markets of the developed
India 174 68.3
countries.
China 27 76
(c) Many developing countries exports continue to
face significant barriers in rich country markets. Ans :
Often the products in which developing countries (a) The given data shows that Maternal Mortality
are competitive are the ones that confront Rate (MMR) is very high in India (174) in contrast
protection. to China (27) almost India’s MMR is more than 6
(d) While liberalisation in trade of manufactured times of China.
goods has seen rapid progress, industrialised This is because of better health care for
countries have resisted demand to open markets expectant mothers in China, where they gave
for agricultural goods which developing nations birth to one child only for quite sometime, as per
export. the ‘one-child norm’.
Whereas in India because of large number of
children the mothers suffer from ill-health. Due to
lack of proper medical care, poverty and under-
nourishment many women die during pregnancy
or at child birth.
(b) Life expectancy at birth is also higher/better for
China (76 years) in contrast to India’s 68 years.
This is because of good health of people in China
in contrast to India which suffers more from ill-
health and undernourishment.

31. ‘If the rate of resource extraction exceeds the rate of
regeneration, it leads to reduction in carrying capacity
33. Trace the relationship between human capital
of the environment.’ Discuss the rationale of the given
formation and economic growth.
statement with valid reasons.
o
Ans : (a) ‘A skilled worker like software professional
The environment is able to perform its functions generates more income than an unskilled worker.’
uninterruptedly so long as the demand for these Why?
functions is within the carrying capacity of the (b) Mention the vital functions of environment.
environment. This means that the resources are not
Ans : 34. Read the following text carefully and answer the
Human capital formation plays the following role in given questions on the basis of the same and common
increasing the rate of economic growth: understanding:
(a) When existing human resource is further Ozone depletion, gradual thinning of earth ozone
developed by becoming more educated and layer in the upper atmosphere caused by the release
healthy, human capital formation takes place. of chemical compounds containing gaseous chlorine
This adds to the productive power of the country or bromine from industry and other human activities.
by increasing the efficiency of the workers. The thinning is most pronounced in the polar regions,
especially over Antarctica. Ozone depletion is a
(b) Investment in human capital formation yields
major environmental problem because it increases
higher returns in future by yielding larger output.
the amount of ultraviolet radiation that reaches
(c) It improves the social outlook of the workers and earth’s surface, which increases the rate of skin
helps to increase mobility of labour. cancer, eye cataracts and genetic and immune system
(d) It raises the standard of living of people by damage. The Montreal Protocol, ratified in 1987,
increasing their incomes. was the first of several comprehensive international
(e) The society gains in many indirect ways because agreements enacted to halt the production and use of
the advantages of a more educated or a healthier ozone-depleting chemicals. As a result of continued
population spreads to those also who themselves international cooperation on this issue, the ozone
are not directly educated or given health care. layer is expected to recover over time.
(f) It results in higher productivity of healthier and (a) What is ozone layer depletion? Why is it a major
educated people which in turn help in accelerating environmental problem?
economic growth. (b) What has been the result of ozone depletion?
o Ans :
(a) A skilled worker generates more income than an
unskilled worker mainly because the productivity (a) Ozone layer depletion is the gradual thinning of
of an educated and skilled person is higher than the earth’s ozone layer in the upper atmosphere
an unskilled one. A skilled worker also commands caused due to release of chemical compounds
higher earnings or gainful employment. This is containing gaseous bromine or chlorine from
because they cannot be substituted with another industries and human activities. Ozone depletion
since, it takes years to generate a manpower is a major environmental problem because it
which is skilled in a particular field. On the other increases the amount of ultraviolet radiation that
hand, an unskilled worker like a rickshaw puller reaches earth’s surface, which increases the rate
can be easily substituted and such workers easily of skin cancer, eye cataracts and genetic and
compromise on lesser earnings. immune system damage.
(b) Due to the depletion of ozone layer, the ultraviolet
(b) The vital functions of environment are:
radiation is coming to earth directly and causing
(i) It supplies renewable and non-renewable damage to the living organisms. For example,
resources.
(i) It causes skin cancer in humans.
(ii) It assimilates waste.
(ii) It lowers the production of phytoplankton
(iii) It sustains life by providing genetic and
and affects other aquatic organisms.
biodiversity.
(iii) It influences the growth of terrestrial plants.
(iv) It provides aesthetic services like scenery
etc.
******

ECONOMICS (030)
Section A -Macro Economics (b) Both Assertion (A) and Reason (R) are true and
(A)
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (c) Assertion (A) is false but Reason (R) is true
Ans :
Statement 1: The value of the multiplier varies
directly with MPC. (d) Assertion (A) is true but Reason (R) is false
Statement 2: Higher the MPC, the higher will be
the value of the multiplier and lower the MPC, the
smaller will be the value of multiplier.
Statement 1: APC is the ratio of consumption
(a) Statement 1 is false and statement 2 is true Y
expenditure to total income, i.e., APC = C
Statement 2: MPC is the ratio of change in
consumption to change in income, i.e., MPC = ∆ ∆C
Y
Ans : alternative from the following:
(d) Both statements 1 and 2 are true (a) Statement 1 is false and statement 2 is true
Reason (R). Choose one of the correct alternatives (d) Both statements 1 and 2 are true
given below: Ans :
Assertion (A): Consumption and investment are the
two components of aggregate demand in a closed
economy.
Reason (R): Aggregate demand curve always start 4. The biggest driver of economic growth is:
from origin with a positive slope. (a) Gross fixed capital formation
Alternatives: (b) Inventory investment
(a) Both Assertion (A) and Reason (R) are true and (c) Consumption demand
Reason (R) is not the correct explanation of (d) None of these
Assertion (A)
o
_______is crucial for revenue collection. 7. Choose the correct alternatives to be filled in given
(a) Net value added blanks A, B and C.
(b) National Income
(c) Nominal GDP
(d) Gross value added
Ans :
(c) Consumption demand
o
(c) Nominal GDP
5. Which of the following statements is correct?

(i) Supply of money is a stock concept.
(ii) Supply of money does not include stock of money
held by the government.
(iii) Supply of money includes the stock of money by
the banking system of a country.
(a) A - Government budget, B - Revenue receipts, C
(a) (i) and (iii)
- Capital receipts
(b) (i), (ii) and (iii)
(b) A - Revenue receipts, B - Capital receipts, C -
(c) (ii) and (iii) Government budget
(d) (i) and (ii) (c) A - Capital receipts, B - Revenue receipts, C -
o Government budget
_______bank nurtures the market for government (d) A - Capital receipts, B - Government budget, C -
securities in India. Revenue receipts
(a) Central bank
(b) Commercial banks Ans :
(c) World bank (a) A - Government budget, B - Revenue receipts, C
(d) All of these - Capital receipts
Ans :
(d) (i) and (ii)
o
(a) Central bank
6. Two friends discussed the recent changes made in

the taxation system by the Government in the year
2017 and commented, “this revolutionary tax exhibits 8. Read the following statements-Assertion (A) and
a unified system of taxation while subsuming all the Reason (R). Choose one of the correct alternatives
other taxes and making the previously cumbersome given below:
process of taxes easy.” Which tax they are discussing Assertion (A): Banks charge a higher interest rate on
and one quality that particular tax possesses? loans than what they offer on deposits.
(a) Corporate tax, burden cannot be shifted Reason (R): The difference between what is charged
(b) Income tax, burden can be shifted from borrowers and what is paid to depositors is their
(c) Value-added tax, burden can be shifted main source of income.
(d) Goods and Services tax, burden can be shifted Alternatives:
(d) Goods and Services tax, burden can be shifted Assertion (A)
Reason (R) is the correct explanation of Assertion (a) `750 crore
(A) o
(c) Assertion (A) is false but Reason (R) is true (d) `30 crore
Ans : Short Answer Questions (Q11 to Q12) 3´2=6
Reason (R) is the correct explanation of Assertion (A) 11. ‘Many large Multinational Corporations (MNCs)
have recently shifted their investments from China
9. Read the following statements carefully: and have started their production in India, thereby
Statement 1: Goods and Services Tax is the recent tax boosting the Make in India plans of the Government’.
introduced by the Government of India. Presuming other factors being constant, discuss the
Statement 2: Goods and Services Tax was introduced effects of the given statement on Foreign Exchange
on 1st April 2017. rates with reference to the Indian Economy.
In the light of the given statements, choose the correct Ans :
Investments by large Multinational Corporations
(MNCs) in India will ensure greater inflow of foreign
(b) Statement 1 is true and statement 2 is false exchange, leading to an increase in the supply of
(c) Both statements 1 and 2 are false foreign currency. This situation may result into
(d) Both statements 1 and 2 are true excess supply of foreign currency in the economy
at the prevailing foreign exchange rate. As a result,
Ans :
a new equilibrium rate of foreign exchange will be
(b) Statement 1 is true and statement 2 is false determined which will be lower than the prevailing
foreign exchange rate, leading to appreciation of
10. Suppose, following data is presented, for an imaginary domestic currency.
economy:
Autonomous Consumption = `100 crore
Marginal Propensity to Consume = 0.60
Investment = `200 crore
Identify which of the following is the correct value of 12. ‘Exchange rate of US$ rose considerably in India.’
national income. Explain the impact of this statement on Indian exports
(a) `750 crore and analyse its repercussion on the general masses.
o
(b) `800 crore
State the components of the current account of
(c) `900 crore Balance of Payments.
(d) `600 crore
Ans :
o
Suppose, following data is presented, for an imaginary The price of US $ has risen considerably in India.
economy: This means, the value of rupee, in terms of US
National Income = `600 crore dollar has fallen. The deliberate rising of the price
Autonomous Consumption = `150 crore of foreign currency in terms of domestic currency by
Marginal Propensity to Consume = 0.70 the government is called “devaluation” of domestic
Identify which of the following is the correct value of currency.
investment. Indian exports become cheaper and as a result their
(a) `50 crore demand increases and more foreign exchange pours
in. More exports mean more employment generation,
(b) `60 crore
which in turn will increase the income and standard
(c) `40 crore of living of the masses, who will thus become better
(d) `30 crore off.
o (i) Both centre and states levy GST across the value
Components (or items of transactions) of current chain simultaneously.
account: (ii) Centre levies and collects CGST and states levy
(a) Visible items: Exports and imports of goods such and collect the SGST on all transactions within a
as tea, jute etc. state.
(b) Invisible items: (iii) The input tax credit of CGST would be available
(i) Exports and imports of services such as for discharging the CGST liability on the output
shipping, insurance, banking etc. at each stage.
(ii) Transfer receipts and payments such as (iv) Similarly, the credit of SGST paid on inputs
gifts, donations etc. would be allowed for paying the SGST on output.
(iii) Income receipts and payments such as o
investment income and wages and salaries The government budget can be used to bring in
etc. economic stability. Economic stability refers to the
minimisation of fluctuations in prices (i.e., control of
inflationary and deflationary trends) in the economy.
Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12 Appropriate taxation, subsidies and public expenditure
policies may be used for this purpose. When there is
13. Read the following text carefully and explain the inflation, government can reduce its own expenditure
relevant function of the money indicated here. and through GST reduce aggregate demand and
It was virtually impossible to store surplus value in inflationary pressure thereby. When there is deflation,
the barter economy. The discovery of money has the government can increase its own expenditure. It
eliminated this difficulty. With the help of money, can also reduce tax and give subsidies to encourage
people can store surplus purchasing power and use it spending by the people, thus increasing aggregate
whenever they wish to. Savings in the form of money demand and reducing deflationary pressure.
are not only secure but the possibility of it being
disrupted is very low. Besides, money can be carried
around and is portable. By facilitating accumulation
of money, money has become the only basis of
promoting capital formation.
Ans :
The function of money being highlighted/indicated
here is ‘store of value’. A store of value is the function
of an asset that can be saved, retrieved and exchanged
at a later time and be predictable used when retrieved.
The significance of money as a ‘store of value’ is that
money can be stored for use in future. One can use
15. India’s GDP contracted 23.9% in the April-June
one’s present income in future, because money comes
quarter of 2020-21 as compared to same period of
in convenient denominations and it is also easily
2019-20, suggesting that the lockdown has hit the
portable.
economy hard”.
— Hindustan Times, 1st September 2020
14. How is GST administered in India? State and discuss any two fiscal measures that may
o be taken by the Government of India to correct the
Explain the role of government budget in fighting situation indicated in the above news report.
inflationary and deflationary tendencies.
Ans :
Ans :
The situation suggests that aggregate demand is less
Keeping the federal structure of India, there are two than aggregate supply. Following two fiscal measures
components of GST, i.e, Central GST (CGST) and may be taken to control it:
State GST (SGST). (a) Decrease in taxes: To curb the situation, the
government may decrease the taxes. This may (a) Calculate Net National Product at Market Price
increase the purchasing power in the hands of the from the following data:
general public. This may increase the aggregate
demand in the economy to bring it equal to the (` in thousand crores)
aggregate supply. (i) Compensation of employees 250
(b)
Increase in government expenditure: The (ii) Mixed income of self-employeds 600
government may also increase its expenditure. (iii) Profit 80
This may increase the purchasing power in the (iv) Interest 40
hands of the general public which in turn may
(v) Rent 30
increase the aggregate demand in the economy to
bring it equal to the aggregate supply. (vi) Net factor income to abroad (—) 10
(vii) Net exports 15
(viii) Consumption of fixed capital 20
(ix) Net indirect taxes 10
(x) Net current transfers to abroad 8
(b) Explain how the following should be treated
while estimating national income:
(i) Free medical facilities by the employer
(ii) Income arising out of the sale of shares
Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12 Ans :
(a) GDPMP by Income Method
16. (a) Calculate GDP at market price by Income Method: = (i) + (iii) + (xiv) + (viii) + (xii) — (ix)
(` in crores) = 120 + 140 + 50 + 40 + 45 — 10
(i) Compensation of employees 120 = `385 crores
(ii) Exports 25 (b) Good are classified into final goods and
(iii) Mixed Income of the self- 140 intermediate goods on the basis of ‘the end-
employed use’. If goods are purchased for consumption
(iv) Imports 30 or investment, they would be classified as final
goods. For example,
(v) Interest on national debt 5
(i) Milk purchased by a household is for
(vi) Private final consumption 255 consumption so it is a final good.
expenditure (ii) Machine purchased for use in a factory is for
(vii) Gross fixed capital formation 65 investment purpose so it is a final good.
(viii) Consumption of fixed capital 40 When a good is purchased for resale or for using it
(ix) Subsidies 10 completely in the production during the year, it is
(x) Government’s final consumption 35 classified as intermediate good, such as raw material
expenditure purchased for producing a good.
o
(xi) Change in stocks 20
(a) NNPMP = (i) + (ii) + (iii) + (iv) + (v) + (ix) — (vi)
(xii) Indirect tax 45
(xiii) Net factor income from rest of the (—) 10 = 250 + 600 + 80 + 30 + 40 + 10 — (-10)
world = `1,020 thousand crores
(xiv) Rent, interest and profit 50 (b) (i) Free medical facilities by the employer are
‘part of employer’s contribution towards
(b) Explain the basis of classifying goods into final social security scheme’, which is a part of
goods and intermediate goods, with the help of compensation of employees so it will be
suitable examples. included in the estimation of NI.
o (ii) Any income arising out of the sale of shares,
bonds etc. will not be included as the buying Section B -Indian Economic Development
and selling of these shares/bonds is not
directly related to the production of goods
and services. (In case of any commission or Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10
brokerage charged by the agent, it should be
treated as productive income, and thereby 18. Three-tire system of rural co-operative credit societies
included in National Income.) is:
(a) Central Co-operative Banks
17. Interpret the given shown trend in capital expenditure. (b) State Co-operative Banks
Also state reason why government has relied on it (c) Primary Agricultural Credit Societies (PACS)
after Covid-19 disruptions. (d) All of these
o
Before introducing new technology, a firm provides
the basic skills to the workers regarding its usage.
Which of the following sources of human capital
formation is being highlighted here?
(a) Expenditure on information
(b) Study programme for adults
(c) Investment in education
(d) On-the-job training
Ans :
(d) All of these
o
(d) On-the-job training
Ans :
(i) The share of revenue and capital expenditure in
total expenditure followed a wavering trend.
(ii) The share of capital expenditure was around 12%
in 2014-15, around 14% in 2015-16 and around
14.5% in 2016-17 indicating a rising trend in its
share in total expenditure. 19. In Pakistan, about_____per cent of people work in
(iii) The share of capital expenditure in the year agriculture.
2017-18 was about 12% and in the year 2018- (a) 39
19 was about 13% indicating decreasing trend as (b) 43
compare to previous years. (c) 41
(iv) Government has focused on improving the quality (d) 47
of expenditure in both 2020-21 and 2021-22 BE. o
(v) As a proportion of total expenditure, capital In______, economic reforms were initiated in
expenditure has been estimated to increase from Pakistan.
12.1 per cent in 2020-21 PA to 15.9 per cent in (a) 1965
2021-22 BE.
(b) 1978
(vi) The higher capital expenditure with a focus on
infrastructure spending in 2021-22 BE will have (c) 1952
a multiplier effect on the ongoing economic (d) 1988
recovery. Ans :
(c) 41 (a) 1970

o (b) 1892
(d) 1988 (c) 1995
(d) 1982
20. ‘Since independence, India has witnessed a o
considerable fall in the Infant Mortality Rate in India. Data on unemployment in India can be obtained
Identify which of the following may not be one of the from_______
reasons for the fall in the Infant Mortality Rate? (a) National Sample Survey Organisation
(i) Improvement in health facilities over the years
(b) Directorate General Employment of India
(ii) Improvement in educational standards over the
years (c) Reports of Census of India
(iii) Fall in standard of living of the population of the (d) All of these
nation over the years Ans :
(iv) Technological expansion over the years
(a) (iii) and (iv) (a) 1970
o
(b) (i) and (ii)
(d) All of these
(c) only (iii)
(d) (ii) and (iv)
Ans : Statement 1: The production of a diverse variety
(c) only (iii) of crops rather than one specialized crop is called
diversification of crop production.
Statement 2: The ‘Golden Revolution’ was a period
of very high productivity in horticulture.
21. Read the following statements-Assertion (A) and alternative from the following:
Reason (R). Choose one of the correct alternatives (a) Statement 1 is false and statement 2 is true
given below: (b) Statement 1 is true and statement 2 is false
Assertion (A): Privatisation process leads to a change (c) Both statements 1 and 2 are false
in management with a change in ownership. (d) Both statements 1 and 2 are true
Reason (R): Change in management is not a
necessary condition for the process of privatization. Ans :
Alternatives: (d) Both statements 1 and 2 are true
Assertion (A) 24. Read the following statements-Assertion (A) and
given below:
Assertion (A): Pakistan shifted its policy orientation
(A)
in late 1970s and 1980s.
(c) Assertion (A) is false but Reason (R) is true Reason (R): A variety of regulated policy framework
(d) Assertion (A) is true but Reason (R) is false after independence lead to slow growth of Pakistan.
Ans : Alternatives:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Reason (R) is not the correct explanation of Assertion Assertion (A)
(A)
22. The ‘Operation Flood’ programme was successfully (A)
implemented from the year_______. (c) Assertion (A) is false but Reason (R) is true

Ans : (c) Both statements 1 and 2 are false
25. Identify the correct pair from Column I and Column

II and choose the correct alternative:
Column I Column II
A. Objective of (i) Equal distribution
planning
B. MRTP Act (ii)
Protection of large
scale industries
C. Second five year (iii) 1956-1961
plan Short Answer Questions (Q28 to Q29) 3´2=6
D. Full employment (iv) A situation of zero
unemployme 28. Observe the given figure carefully and answer the
Alternatives: question that follows:
(a) C - (iii)
(b) A - (i)
(c) D - (iv)
(d) B - (ii)
Ans :
(a) C - (iii)
26. About per cent of female workforce is employed in

the primary sector in India.
(a) 57
(b) 67 What was the offer before green revolution and why
(c) 77 Indian farmers were not ready for the same offer after
(d) 47 green revolution?
Ans :
Ans :
The offer before green revolution under agreement
(a) 57
was PL480’ as mentioned in the given figure. Under
this, Indians relied on food crops (specially wheat)
27. Read the following statements carefully: supplies from the US against rupee payments. Later,
Statement 1: Great Leap Forward (GLF) campaign this measure was considered as a folly.
was initiated in 1968 in China. After green revolution which came with the use
Statement 2: In India, maternal mortality rate is higher of HYV seeds, food production in India not only
than Pakistan. increased several times, infact India become self-
In the light of the given statements, choose the correct sufficient in food production.
29. Highlight the positive contributions made by the
(b) Statement 1 is true and statement 2 is false British in India.
(d) Both statements 1 and 2 are true o
What was the two-fold motive behind the systematic station or the port. This was to send these to the far
deindustrialisation affected by the British in pre- away country—England or other foreign destinations.
independent India? The introduction of railways by the British in 1850
Ans : also contributed to ‘economic drain’ during the
colonial period.
Some of the positive contributions made by the Thus, under the British, the economic policies of the
British in India were: government were more concerned with the production
(i) Introduction of railways enabled the people to and protection of British economic interests rather
undertake long-distance travel. This facilitated than with the need to develop the economic condition
the breaking of the geographical and cultural of the colonised country and its people.
barriers.
(ii) British rulers also developed water transport and
introduced the air transport in 1932 by way of
establishing Tata Airlines in 1932 and thereby
inaugurated the aviation sector in India. 31. Elucidate the functions of Central Pollution Control
(iii) In 1837, the British introduced the modern postal Board (CPCB) to address the environmental concerns
system. The expensive electric telegraph system in India.
was introduced in India, which was useful for the o
purpose of maintaining law and order. Thus, the “Indiscriminate felling of trees led to environmental
postal services served a useful public purpose. problems.” Do you agree? Give reason to justify your
o answer.
The two-fold motive behind the systematic
Ans :
deindustrialisation of India was:
(i) First, to reduce India to the status of a mere (i) The Central Pollution Control Board (CPCB) was
exporter of important raw materials for the set up by the government in 1974, to address two
upcoming modern industries in Britain. major environmental concerns in India — water
(ii) Second, to convert India into a big market for the and air pollution.
finished products of those industries, in order to (ii) This was followed by the establishment of the
ensure the maximum advantage accruing to their state level boards to address the environmental
home country, Britain. concerns at the state level.
(iii) These boards provide technical assistance to the
respective governments in promoting cleanliness
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 of streams and wells by prevention, control and
reduction of water pollution, and also to improve
30. ‘Under the colonial regime the real motive behind the quality of air and prevent air pollution in the
the development of infrastructure was to meet country.
various colonial interests.’ Accept/Refute the above (iv) They carry out and sponsor investigation
statement. Give reason in support of your answer. and research about problems of water and air
pollution.
Ans :
(v) Mass awareness programmes are also organised
It is well-known fact that under the colonial regime the by them with the help of media.
real motive behind the development of infrastructure (vi) These boards collect, collate and disseminate
was to meet various colonial interests. technical and statistical data w.r.t water pollution.
Infrastructure like railways, water transport, ports, o
posts and telegraphs etc. did develop but only to serve Yes, certainly indiscriminate felling of trees has
various colonial interests rather than to provide basic led to destruction of forest cover. Trees are natural
amenities to the people of India. Roads that were consumers of carbon dioxide — one of the greenhouse
built served primarily the purpose of mobilising the gases whose built-up in the atmosphere contributes
to global warming. Destruction of trees pumps into
army within India on one hand and transferring raw
the atmosphere even more carbon dioxide, alongwith
materials from the countryside to the nearest railway
methane, another major greenhouse gas. Once forests
have been cut down, essential nutrients are washed (c) Technological progress in the economy should be
out of the soil all-together. This leads to “soil erosion” input-efficient and not input consuming.
which makes the land unusable and can, in turn, lead (d) Renewable resources should be extracted on a
to disastrous flooding since there is no soil to soak up sustainable basis.
the rain. (e) Rate of depletion of non-renewable resources
should be lesser than the rate of creation, i.e.,
32. On the basis of the following data answer the their usage should be prudently made.
following questions. (f) Inefficiencies which crop up from pollution
should be speedily checked upon.
Country Urbanisation Infant Mortality Rate
(Per 1,000 live births) (g) LPG as a clean fuel and gobar gas be used in rural
areas.
India 33 38
(h) Usage of CNG in urban areas as a ‘green fuel’
Pakistan 39 66
for vehicles especially in public transport system,
(a) Comment on the Infant Mortality Rate among would go a long way to check air pollution.
India and Pakistan. o
(b) ‘Pakistan is more urbanised than India.’ Do you During the post-reform period, there has been a
agree? decline in the number of workers employed in the
Ans : formal sector. As the new jobs are found mostly in
the informal sector and the nature of jobs is mostly
(a) Infant Mortality Rate is very high in Pakistan casual.
(66) as compared to India (38). This is because
In India, the distribution of workforce in the last
of large sized families and leading to more
four decades (1972-2012) shows that people have
undernourished children and the poor health of
the mothers. moved from regular salaried employment (formal
(b) Indeed Pakistan is more urbanised as 39% of employment) to casual wage work. The process of
the people living in urban areas in Pakistan in movement from regular salaried employment to casual
contrast to 33% living in urban areas in India. wage work is called ‘casualisation of workforce.’ The
quality of employment has been deteriorating.
Since the late 1970’s many developing countries
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 like India have started paying more attention to
enterprises and workers in the informal sector, as
33. ‘We have a moral obligation to hand over the planet employment in the formal sector is not growing.
earth in good order to the future generation’. Do you But workers and enterprises in the informal
agree with the above statement? Suggest any five sector do not get regular income, and also do not have
measures to achieve the above obligation. any protection from the government. Lately owing to
o the efforts of the International Labour Organisation
‘The reform process initiated in the early 1990s
(ILO), the Indian government has taken the initiative
resulted in a decline in the number of workers
to modernise the informal sector enterprises and to
employed in the formal sector.’ Critically analyse.
provide social security measures to the workers in the
Ans : informal sector.
Yes, indeed we strongly agree to have a moral
obligation to hand over the planet earth in good order
to the future generation.
Some suggestive measures to achieve the above
obligation are:
(a) Human population be limited to a level within the
carrying capacity of the environment.
(b) Resource depletion should be minimal and its
utilisation be optimal.
34. Read the following text carefully and answer the (b) The two principal causes behind environmental
given questions on the basis of the same and common degradation are:
understanding: (i) Population rise: Rising population is one
India’s land is undergoing degradation or of the major causes for degradation of the
desertification. In 2011-2013, it stood at 29.3 per environment as it adds to the burden on
cent of the total land, representing an increase of natural resources, leading to environmental
0.57 per cent (which is 1.87 million hectares in area) crisis.
compared with 2003-2005, according to a report- (ii) Consumption levels: It has been observed
cum-atlas by ISRO’s Space Applications Centre. that the developing and developed nations
Soil erosion due to water and wind, and degradation have witnessed affluent consumption levels
of vegetation cover were the main processes that in the past, brining disequilibrium in the
has led to land degradation. Almost 90 per cent of demand and supply of the natural resources,
the states experienced a rise — notably Delhi and pushing the world to the threshold of the
the northeastern states — in land degradation in environmental crisis. (or any other valid
2011-2013 compared with 2003-2005 while four point).
states showed slight decreases in land degradation.
Reclaiming degraded lands will require a strict
land-use policy and better watershed management
initiatives, say experts. ******
Land degradation can exacerbate climate change
and threaten agricultural productivity, water quality,
biodiversity, sustainable development, and the living
conditions of humans and wildlife, among other
effects. Globally, a third of our land is degraded,
affecting 3 billion people, and it is expected to worsen
with rising demand for food.
(a) What is land degradation? State the factors
responsible for land degradation.
(b) State and discuss any two principal causes of
environmental degradation.
Ans :
(a) Land degradation is the reduction or loss of
the biological or economic productivity and
complexity of rain-fed cropland, irrigated
cropland, or range, pasture, forest or woodlands
resulting from natural processes, land uses or
other human activities. Land degradation is due
to the activities of human hands which loses all
the fertility and quality of soil.
Some of the factors responsible for land
degradation are:
(i) Loss of vegetation due to deforestation
(ii) Unsustainable fuel wood and fodder
extraction
(iii) Shifting agriculture
(iv) Encroachment into forest lands
(v) Forest fires and overgrazing
(vi) Non-adoption of adequate soil conservation
measures

ECONOMICS (030)

1. Which out of the following is a monetary measure to

correct deficient demand?
(a) Reduce government spending
(b) Lowering margin requirements
(c) Increase government spending
3. The two key constituents of aggregate demand
(d) None of these
are________.
Ans : (a) Investment and growth
(b) Lowering margin requirements (b) Consumption and Investment
(c) Both (a) and (b)
2. Read the following statements-Assertion (A) and (d) Neither (a) nor (b)
Reason (R). Choose one of the correct alternatives o
given below: Which of the following is not a reason for excess
Assertion (A): Fiscal deficit shows a better position of demand?
the government expenditure in comparison to budget (a) Deficit financing
deficit. (b) Fall in the propensity to consume
Reason (R): Fiscal deficit reflects borrowings (c) Rise in aggregate demand
requirement of the government.
(d) Increase in investments
Alternatives:
Reason (R) is not the correct explanation of (b) Consumption and Investment
Assertion (A) o
(b) Both Assertion (A) and Reason (R) are true and (b) Fall in the propensity to consume
(A) 4. Suppose you are a member of the Advisory Committee
(c) Assertion (A) is false but Reason (R) is true to the Finance Minister of India’. The Finance
Minister is concerned about the rising revenue deficit
in the budget.
Which of the following measures can be used to given below:

control the rising revenue deficit of the government? Assertion (A): Average Propensity to Consume can
(a) Increase taxation be greater than one.
(b) Reduce the burden of subsidy Reason (R): Consumption can be greater than income
(c) Reduce government administrative expenses in an economy.
Alternatives:
(d) Any of these
o Reason (R) is not the correct explanation of
Which of the following is the implication of revenue Assertion (A)
deficit?
(i) A high revenue deficit shows fiscal indiscipline.
(ii) It shows wasteful expenditure of government on
(A)
administration.
(iii) It implies that government is dissaving. (c) Assertion (A) is false but Reason (R) is true
(a) (i), (ii) and (iii) (d) Assertion (A) is true but Reason (R) is false
(b) (i) and (ii) Ans :
(c) (ii) and (iii) (b) Both Assertion (A) and Reason (R) are true and
(d) (i) and (iii) Reason (R) is the correct explanation of Assertion (A)
Ans :
(d) Any of these 7. Read the following statements carefully:
o Statement 1: When the consumption expenditure
(a) (i), (ii) and (iii) is more than the income, the value of APS will be
negative.
Statement 2: If Marginal Propensity to Save (MPS) is
equal to zero, the value of investment multiplier will
be not defined ( 3 ).
5. Read the following statements carefully: (c) Both statements 1 and 2 are false
Statement 1: Sector which transforms one physical (d) Both statements 1 and 2 are true
good into another physical good is tertiary sector. Ans :
Statement 2: Consumption of fixed capital refers to
fall in the value of fixed assets due to normal wear (d) Both statements 1 and 2 are true
and tear and foreseen obsolescence.
In the light of the given statements, choose the correct 8. The following information is given for an imaginary
alternative from the following: country:
(a) Statement 1 is false and statement 2 is true (all figures in `lakh)
(b) Statement 1 is true and statement 2 is false (i) Durable use producer goods with a life 10
(c) Both statements 1 and 2 are false span of 10 years
(d) Both statements 1 and 2 are true (ii) Single use producer goods 5
Ans : (iii) Sales 20
(a) Statement 1 is false and statement 2 is true (iv) Unsold output produced during the 2
year
(v) Taxes on production 1
Identify the correct value of NVAFC from the given
options.
(a) `10 lakh Column I Column II

(b) `20 lakh A. Excess (i) When AD is exceeds
(c) `15 lakh demand AS at the full
(d) `25 lakh employment level of
o income
Read the following figure carefully and choose the B. Inflationary (ii) Ratio of change
correct option from the alternatives given below: gap in consumption
expenditure to change
in income
C. Autonomous (iii) When AD less than AS
consumption at the full employment
level of income
D. Marginal (iv) Consumption
Propensity to expenditure planned
Save to be incurred during a
given period
Alternatives : Alternatives:
(a) Real (a) C - (iii) (b) A - (i)
(b) Circular (c) D - (iv) (d) B - (ii)
(c) Nominal
Ans :
(d) Either (a), (b) or (c)
(b) A - (i)
Ans :
(c) `15 lakh
o Short Answer Questions (Q11 to Q12) 3´2=6
(c) Nominal
11. Explain “Bankers” bank function of the Central Bank.
9. Read the following statements carefully: o
Statement 1: Excess supply is the situation under What do you know about the following?
which aggregate demand exceeds aggregate supply at (a) Legal tender
the full employment level. (b) Fiat money
Statement 2: Excess demand is the situation under (c) High powered money
which aggregate demand falls short of aggregate
supply at full employment level. Ans :
In the light of the given statements, choose the correct The Central Bank acts as a banker and supervisor to
alternative from the following: commercial banks in various ways. Some of them are:
(a) Statement 1 is false and statement 2 is true (a) It provides financial assistance to banks by
(b) Statement 1 is true and statement 2 is false discounting their bills and through loans and
(c) Both statements 1 and 2 are false advances against approved securities.
(d) Both statements 1 and 2 are true (b) It supervises, regulates and controls the activities
of commercial banks.
Ans : (c) It provides the commercial banks with centralised
(c) Both statements 1 and 2 are false clearing and remittance facilities.
(d) The commercial banks are required to maintain
a certain percentage of deposits with the Central
Bank. The sole aim of these reserves is to enable
10. Identify the correct pair from the following Column I financial crisis.
and Column II. o
(a) Legal tender refers to the money which has the Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12
power to discharge debt obligations and a creditor
cannot refuse to accept it in return for his credit. 13. Explain the ‘problem of double counting’ in the
(b) Fiat money refers to the money that is under the estimation of national income with the help of an
fiat or order from the government to act as money. example. How can this problem be avoided?
(c) High powered money refers to the currency o
created by the Central Bank (RBI), which serves What are ‘non-monetary exchanges’? Explain with
as the basis of bank money. suitable examples how they are a limitation of the
GDP as an ‘indicator of welfare’.
Ans :
Problem of ‘double-counting’ refers to the counting
of the value of output of a good more than once. It
leads to overestimation of national income, which
will then not be a true indicator of economic growth
of a country.
Suppose a farmer produces wheat worth `2,000. He
12. Read the given text carefully and answer the questions sells this wheat to the baker who converts it into
that follow: bread and sells it to the grocer for `4,000. The grocer
Money was historically an emergent market sells the bread to the consumer for `4,400. The total
phenomenon that possess intrinsic value as a output of the 3 producers is `10,400 but this is not the
commodity; nearly all contemporary money systems value of actual output, because it includes the value
are based on unbacked fiat money without use of wheat three times and the value of bread two times.
value. Its value is consequently derived by social This definitely will lead to overestimation of national
convention, having been declared by a government or income. There are two ways to avoid it.
regulatory entity to be legal tender; that is, it must be (a) Take the value added instead of value of total
accepted as a form of payment within the boundaries output. Let us explain this with the help of a
of the country, for “all debts, public and private”, in schedule based on the above example.
the case of the United States dollar. Contexts which
erode public confidence, such as the circulation of (i) (ii) (iii) (iv)
counterfeit money or domestic hyperinflation, can Producer Va l u e Intermediate Value Added (ii)
cause good money to lose its value. o f Consumption — (iii)
(a) What is money? output or
(b) State the components of money supply. (Value of Final
Ans : output)
Farmer 2,000 ---- 2000
(a) ‘Money supply’ refers to the stock of money in
the country at a particular point of time. Baker 4,000 2000 2000
(b) The components of money supply are: Grocer 4,400 4000 400
(i) Currency with the public outside the banks. Total 10,400 6000 ΣVA/NI = 4, 400
Currency includes coins and currency notes.
These notes are called ‘paper money’. On the basis of this above table, we find that the sum
Currency is also known as fiat money. total value added by the three producers — Farmer,
(ii) Demand deposits with the banks. Demand baker and grocer is `4,400 (`2,000 + `2,000 + `400)
deposit is any deposit on which a cheque and this is the value which is to be counted while
can be written. These deposits are known estimating national income (as it does not include
as ‘demand deposits’ because the amount in double counting).
such deposits is payable on demand. (b) Take the value of final products only. We
Both these are directly usable for carrying out already know these products are purchased
transactions at will. for consumption/investment or both. The total
value-added is nothing else but the value of final
products only. burden of a tax and liability to pay falls on different

Value of Final Product = Value of output — persons, then it is an “indirect tax”.
Intermediate consumption An example of direct tax is ‘Income Tax.’
o An example of indirect tax is ‘Goods and Services
‘Non-monetary exchanges’ refer to activities like Tax’ (GST).
services of family members provided to each other.
There are many goods and services contributing to
economic welfare but not included in GDP (Non-
Monetary Exchanges). They are left out from the
estimates of NI, on account of practical difficulties Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12
of measurement, like services of housewives and
other family members, own-account production etc.
16. (a) On the basis of given figures interpret India’s
These are left out due to non-availability of data and
performance in BoP and foreign exchange
also because of the problem of their valuation. Thus,
reserve.
to depend only on GDP as such, would result in an
underestimation of economic welfare.
14. Find Gross Value Added at Market Price from the

given data:
(`Lakh)
(i) Depreciation 20
(iv) Domestic sales 200
(v) Net change in stocks (—)10
(vi) Exports 10
(vii) Single use producer goods 120
Ans :
GVAMP = (ii) + (iv) + (iii) — (v)

= 200 + 10 + (-10) — 120
= `80 Lakhs
15. Read the given text carefully and explain the basis
of classifying taxes into direct and indirect tax with
examples.
To run a nation judiciously, the government needs to
collect tax from the eligible citizens; paying taxes to
the local government is an integral part of everyone’s
life, no matter where we live in the world. Now, taxes
can be collected in any form such as state taxes,
central government taxes, direct taxes, indirect taxes,
and much more. For your ease, taxation is divided into
two categories, viz. direct taxes and indirect taxes.
This segregation is based on how the tax is being paid
to the government.
Ans :
(b) Distinguish between depreciation of a currency
When the burden of a tax and its liability to pay falls and devaluation of a currency.
on the same person, then it is a “direct tax”. When the
Ans : (c) To the left of point B, CC curve is higher than

(a) (i) Despite all the disruptions caused by the the 45° line, which denotes income. This implies
global pandemic, India’s balance of payments savings are negative (or dissaving) to the left of
remained in surplus throughout the last two point B, in the diagram.
years. (d) To the right of point B, CC curve is lower than
(ii) This allowed the Reserve Bank of India the 45° line, this implies C < Y and savings are
to keep accumulating foreign exchange positive.
reserves, which stands at US$634 billion on (e) By plotting the distance between the CC curve
31st December 2021. and 45° line at different levels of income just
(iii) This is equivalent to 13.2 months of imports below the upper part we can derive the saving
and higher than the country’s external debt. curve SS. Since the CC curve is a straight line,
(iv) As of end-November 2021, India was the the derived savings curve (SS), must also be a
fourth largest foreign exchange reserves straight line. For this, we are required to locate
holder in the world after China, Japan, and only 2 points.
Switzerland.
(b) “Devaluation” of domestic currency is a
phenomenon of the fixed exchange rate system,
because it is the government which decides
when to change the existing exchange rate.
Whereas “Depreciation” of domestic currency
is a phenomenon of the flexible exchange rate
system. Under this system, the exchange rate
is determined by the free play of the forces of
demand and supply of foreign exchange in the
foreign exchange market.
(f) Plot a perpendicular from point B on the

consumption curve, intersecting the OX axis, at
17. Draw a hypothetical propensity to consume curve and point D, which must be on the OX axis, because
from it derive the propensity to save curve. Explain savings is zero when Y = C.
the steps involved. (g) Plot OS on the lower part of OY axis as equal to
o OC. This gives us point S, from where the saving
Explain the ‘Consumption Function’ with the help of curve will start.
a schedule and diagram. (h) Joining points S and D and extending the straight
Ans : line upwards we derive the savings curve ‘SDS’.
o
The steps involved in the derivation of the propensity
Consumption function shows the relationship between
to save curve from the propensity to consume curve
consumption and income.
are:
(a) We can find savings at different levels of income C = = C + bY
by taking the vertical distance between the This equation states that there is a direct relation
consumption curve (CC) and the 45° line. between consumption and the level of income. As
(b) At point B in the diagram, income and the level of income increases, consumption also
consumption expenditure are equal Y = C, i.e., increases but the increase in consumption is less than
savings are zero. the increase in income.
The concept of consumption function can be further change was held in Japan.
explained by following consumption schedule and Statement 2: Global warming refers to the destruction
curve: of ozone in the ozone layer, due to presence of
Income Consumption (` crores) chlorine from man-made chlorofluorocarbons and
0 50 other forces.
100 100
200 150 (a) Statement 1 is false and statement 2 is true
300 200 (b) Statement 1 is true and statement 2 is false
400 250 (c) Both statements 1 and 2 are false
500 300 (d) Both statements 1 and 2 are true
Ans :
20. What is the full form of PPP in terms of Gross

Domestic Product?
(a) Purchasing Power Price
(b) Purchasing Power Parity
(c) Public Private Partnership
(d) None of these
Ans :
The above table and diagram show that as the income (b) Purchasing Power Parity
increases, consumption also increases but the increase
in consumption is less than increase in income. 21. Read the following statements carefully:
Statement 1: Sarva Siksha Abhiyan (SSA) was
Section B -Indian Economic Development launched in 2000 to ensure 5 years of primary
education for all children in the age group of 6-14
Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10 years by 2007 and 8 years of schooling by 2010.
Statement 2: National Programme for Education of
18. In which of the following areas, Pakistan has an edge Girls at Elementary Level was launched in 2003,
over India? under SSA, for providing additional support for
(i) Export of software after economic reforms education of under-priviliged girls at the elementary
(ii) Number of Phd’s produced in science and level.
engineering every year In the light of the given statements, choose the correct
(iii) Percentage of undernourished children alternative from the following:
(a) (i) and (iii) (a) Statement 1 is false and statement 2 is true
(b) (ii) and (iii) (b) Statement 1 is true and statement 2 is false
(c) only (iii) (c) Both statements 1 and 2 are false
(d) (i) and (ii) (d) Both statements 1 and 2 are true
Ans : Ans :
(c) only (iii) (d) Both statements 1 and 2 are true
22. Which of the following are major fish producing

19. Read the following statements carefully: states in India?
Statement 1: In 1997, a UN conference on climate
(i) Odisha (a) Anti-rightist Movement

(ii) Gujarat (b) Great Leap Forward
(iii) Maharashtra (c) Four Pests Campaign
(iv) Andhra Pradesh
(d) Great Proletarian Cultural Revolution
(a) (i), (ii) and (iii) (b) (i), (ii) and (iv)
(c) (i), (iii) and (iv) (d) (ii), (iii) and (iv) Ans :
o (d) All of these
Surplus population engage in agriculture can be o
employed in: (b) Great Leap Forward
(a) Fisheries (b) Horticulture
(c) Animal husbandry (d) Any of these
Ans :
(d) (ii), (iii) and (iv) 25. Match the situations given in Column I with their
o respective implications given in Column II and
(d) Any of these choose the correct alternative:
Column I Column II
23. Read the following statements-Assertion (A) and A. White (i) It is also known as the
Reason (R). Choose one of the correct alternatives revolution Neel Kranti Mission
given below: B. Blue revolution (ii) It was found by MS
Assertion (A): Pakistan shifted its policy orientation Swaminathan
in late 1970s and 1980s. C. Golden (iii) It is also known as
Reason (R): A variety of regulated policy framework revolution Operation Flood.
after independence lead to slow growth of Pakistan. D. Green (iv) It is related to increased
Alternatives: revolution production of honey and
(a) Both Assertion (A) and Reason (R) are true and horticulture.
Reason (R) is not the correct explanation of Alternatives:
Assertion (A) (a) A - (iii), B - (iv), C - (ii), D - (i)
(b) Both Assertion (A) and Reason (R) are true and (b) A - (iii), B - (i), C - (ii), D - (iv)
Reason (R) is the correct explanation of Assertion (c) A - (iii), B - (ii), C - (i), D - (iv)
(A)
(d) A - (iii), B - (i), C - (iv), D - (ii)
(d) A - (iii), B - (i), C - (iv), D - (ii)
Ans :
given below:
24. China is moving ahead of India and Pakistan is true Assertion (A): International monetary fund was set
for ______ indicator. in 1944.
(a) HDI ranking Reason (R): To promote international monetary
(b) GDP per capita cooperation through a permanent institution which
(c) Proportion of population below poverty line provides machinery for consultation and collaboration
(d) All of these on international monetary problems.
Alternatives:
o
A campaign in China in 1958 where people were
encouraged to set up industries in their backyard was
Assertion (A)
named as:
Reason (R) is the correct explanation of Assertion Steps taken towards privatisation in 1991 were:
(A) (a) Reduction in number of reserved public sector
(c) Assertion (A) is false but Reason (R) is true units from 17 to 4.
(d) Assertion (A) is true but Reason (R) is false (b) Disinvestment in public sector undertakings by
selling the shares of PSUs into private hands.
o
(c) Increase in the share of private sector in total
Read the following statements-Assertion (A) and
investment.
(d) Corporatisation of a public department with some
given below:
operational and managerial autonomy.
Assertion (A): Second Five Year Plan emphasise on
o
the establishment of heavy industries.
Fiscal Reforms introduced under the new economic
Reason (R): Third Five Year Plan introduced the
policy were:
concept of import substitution as a strategy of
(a) Both direct and indirect taxes were reduced.
industrialization. Alternatives:
(b) Reduced expenditure on administration and
subsidies on food, fertilizers and exports.
(c) To encourage tax payers, many procedures were
Assertion (A)
simplified.
(A)
Ans :
(A) 29. Interpret the given picture on account of economic
o reforms of 1991.
27. Which duty has been removed to increase the

competitive position of Indian goods in the
international markets?
(a) Custom duty
(b) Import duty
(c) Export duty
(d) None of these
Ans :
Ans :
(c) Export duty
The given picture indicates the concept of
‘globalisation’ which means integrating the economy
Short Answer Questions (Q28 to Q29) 3´2=6 of a country with the world economy. Under this
process, goods and services along with capital, labour
and resources can move freely from one nation
28. Give the steps taken towards ‘Privatisation’ in 1991. to another. The thrust of globalisation has been to
o increase the domestic and external competition
State the fiscal reforms introduced under the New through extensive application of market mechanism
Economic Policy in 1991. and facilitating dynamic relationship with the foreign
Ans : investors and suppliers of technology.
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 o

The main features of Indian Economy on the eve of
30. Answer the following questions on the basis of the independence were:
following data: (a) The Indian Economy was colonial in character
in the sense that it had developed an industrial
Country Annual Growth of Sex Ratio
structure and a trade pattern that served only the
Population (%)
interests of its colonial master.
India 1.2 929 (b) The economy was neither wholly feudalistic nor
Pakistan 2.1 947 capitalistic. It was a mixed economy which could
(a) Comment upon the annual population growth be called “semi-feudal.”
rate in India and Pakistan. (c) Economy remained largely stagnant during the
(b) Comment upon the Sex Ratio in both the above British Rule. For a period of about 100 years
countries. during the British rule, the rate of growth in per
capita income was about 5% per annum.
Ans : (d) Indian economy had become a depreciated
(a) On the basis of the given data, we find that economy. This was because to meet the
the annual population growth rate in Pakistan requirements of production, machinery and
standing at 2.1% is the reciprocal of the annual equipment were used very intensively, resulting
population growth rate in India at 1.2%. in high degree of wear and tear, i.e., depreciation.
Pakistan’s population growth rate is higher than
India’s because of high fertility rate and large
sized families.
(b) India has a lower sex ratio (929) as compared
32. What activities you would suggest to generate
to Pakistan (947) which is real issue of major
employment in rural areas?
concern for the demographers in India.
Ans :
31. What do you mean by globalisation? Give its main Suggestions for increasing employment opportunities
features. in rural areas are:
o (a) Employment can be generated by development
Highlight the main features of Indian economy on the of non-farm activities like reclamation work,
eve of independence. machine repair, rural transport services, creation
Ans : of public assets, construction etc.
(b) Diversification of activities
Increasing interaction of the domestic economy (c) Development of village handicraft and cottage
with the other countries of the world is termed as industries as these have a larger potential for
“Globalisation”. The main features of Globalisation absorbing labour force
are: (d) Encouraging the informal sector (or any other
(a) With the introduction of globalisation, foreign relevant suggestion).
investors can now directly invest in India. To
promote this, a Foreign Investment Promotion
Board (FIPB) has been set up. Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12
(b) New technology and management expertise
is also brought along with Foreign Direct
33. Why is the world faced with an environmental crisis?
Investment (FDI). Indian industries can now
o
make technology agreements with the foreign
Provide any three suggestions to improve agricultural
suppliers of technology. Government has started
marketing.
granting automatic approval in certain selected
industries. Ans :
(c) On account of globalisation, there is unrestricted (a) The rising population of the developing countries
flow of goods and services, technology and and the affluent consumption and production
expertise between India and the rest of the world. standards of the developed nations have put a
huge stress on the environment in terms of its In India, people migrate from rural to urban areas
functions of supplying resources and assimilating mainly due to poverty, high population pressure on
wastes. the land, lack of basic infrastructural facilities like
(b) Many resources are becoming extinct since healthcare, education, etc. Apart from these factors,
their use is beyond the carrying capacity of the natural disasters such as flood, drought, cyclonic
environment leading to an environmental crisis. storms, earthquake, tsunami, wars and local conflicts
(c) In earlier times, the demand for environmental also give extra push to migrate. On the other hand,
resources and services was much less than their there are pull factors which attract people from
supply. Due to urbanisation, increased demand rural areas to cities. The most important pull factor
for goods and services has led to advanced for majority of the rural migrants to urban areas is
industrialisation. This has caused pollution the better opportunities, availability of regular work
which is more than the absorptive capacity of the and relatively higher wages. Better opportunities
environment. for education, better health facilities and sources
(d) The rate at which the resources are extracted by of entertainment, etc., are also quite important pull
man has been more than the rate of regeneration factors.
of the resources, causing serious environmental Hence, migration is a response to the uneven
problems. distribution of opportunities over space. People tend
o to move from place of low opportunity and low safety
To improve the agricultural marketing following to the place of higher opportunity and better safety.
suggestions are provided: This, in turn, creates both benefits and problems
(a) Creating orderly and transparent marketing for the areas, people migrate from and migrate to.
conditions for regulation of markets. Consequences can be observed in economic, social,
(b) Providing physical infrastructural facilities cultural, political and demographic terms.
like roads, railways, godowns, cold-storage, (a) Explain, why in India people mainly migrate
warehouses etc. from rural to urban areas?
(c) Co-operative marketing to help in realising fair (b) Explain, how expenditure on migration is a
price for the farmer’s product. source of human capital formation?
(The success mantra of the milk co-operatives at Ans :
Anand in Gujarat stands a testimony to the important
role of co-operatives in an economy but in the recent (a) In India, people migrate from rural to urban
past, the co-operatives have received a setback.) areas mainly due to poverty, high population
(d) Policy instruments like pressure on the land, lack of basic infrastructural
(i) assurance of Minimum Support Price (MSP) facilities like healthcare, education, etc. Better
for agricultural products. opportunities for education, better health facilities
(ii) Maintenance of Buffer Stocks of wheat and and sources of entertainment, etc., are also quite
rice by FCI. important pull factors for migration in India from
(iii) Distribution of the essential food grains rural to urban areas.
and sugar through the system of Public (b) People migrate from one place to another in
Distribution, i.e., P.D.S. search of jobs that fetch them higher salaries.
Unemployment leads to rural-urban migration
34. Read the following text carefully and answer the whereas technically qualified persons (like
given questions on the basis of the same and common engineers, doctors) migrate to other countries
understanding: People, generally are emotionally because of higher salaries and better standard
attached to their place of birth. But millions of people of living that they may get in such countries.
leave their places of birth and residence. There could Migration in both the cases involves cost of
be variety of reasons. These reasons can be put into transport, higher cost of living and psychic cost
two broad categories, i.e., push factor, these cause of living in a strange socio culture setup.
people to leave their place of residence or origin; and But, the enhanced earning in the new places outweigh
pull factors, which attract the people from different the costs of migration and hence, expenditure on
places. migration is a source of human capital formation.

ECONOMICS (030)
Section A -Macro Economics 3. ‘Gifts and remittances to abroad’ are recorded on the:
(a) Debit side of Current Account
(b) Credit side of Current Account
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (c) Credit side of Capital Account
(d) Debit side of Capital Account
1. Under the Balance of Payments structure of a o
nation, the two main categories of accounts for the Excess of export of goods over import of goods is
classification of the transactions are ______ and called
_______. (a) Surplus in Balance of Payments
(i) current account
(b) Surplus in Balance of Trade
(ii) unilateral transfer account
(iii) capital account (c) Neither (a) nor (b)
(iv) loan account (d) Either (a) or (b)
Identify the correct alternatives from the following: Ans :
Alternatives:
(a) (iii) and (iv) (a) Debit side of Current Account
o
(b) (iv) and (i)
(b) Surplus in Balance of Trade
(c) (i) and (iii)
(d) (i) and (ii)
Ans :
(c) (i) and (iii)
2. Which out of the following items is not included in

money supply of a country?
(a) Demand deposits
(b) Coins and Currency
Statement 1: Accommodating items of trade are
(c) Time deposits undertaken in order to maintain the balance in the
(d) All of these BoP account.
Ans : Statement 2: Accommodating items are net
consequences of autonomous transactions that are
(c) Time deposits undertaken to correct disequilibrium in autonomous
items of BoP.
In the light of the given statements, choose the correct 7. Read the following statements carefully:
alternative from the following: Statement 1: In India, SLR and CRR are fixed by the
(a) Statement 1 is false and statement 2 is true commercial banks themselves.
(b) Statement 1 is true and statement 2 is false Statement 2: Secondary deposits of a commercial
(c) Both statements 1 and 2 are false bank are always less than its primary deposits.
Ans : (a) Statement 1 is false and statement 2 is true
(d) Both statements 1 and 2 are true (b) Statement 1 is true and statement 2 is false
5. Aggregate demand can be increased by: (d) Both statements 1 and 2 are true
(a) increasing cash reserve ratio o
(b) increasing bank rate Read the following statements-Assertion (A) and
(c) selling government securities by Reserve Bank of Reason (R). Choose one of the correct alternatives
India given below:
Assertion (A): Central bank, as a banker to the
(d) None of these
government, works as a financial adviser.
o Reason (R): Government borrows internally from
If the Marginal Propensity to Consume is greater banks and the general public.
than Marginal Propensity to Save, the value of the Alternatives:
multiplier will be: (a) Both Assertion (A) and Reason (R) are true and
(a) less than 2 Reason (R) is not the correct explanation of
(b) equal to 2 Assertion (A)
(c) equal to 5 (b) Both Assertion (A) and Reason (R) are true and
(d) greater than 2 Reason (R) is the correct explanation of Assertion
(A)
Ans :
(d) None of these
o
(d) greater than 2 Ans :
6. The following information is given for an imaginary o
country: (d) Assertion (A) is true but Reason (R) is false
(` in crores)
(i) Imports of goods 400
(ii) Export of goods 340
(iii) Shipping 3 8. Read the following statements-Assertion (A) and
(iv) Travel tourism, etc. 5 given below:
(v) Interest, dividends, profits 50 Assertion (A): Import of goods and services reflects
(vi) Unilateral transfers 40 demand of foreign currency. Reason (R): Import of
The value of Balance of Trade would be goods and services shows inflow of foreign exchange.
(a) ` (-) 40 crores Alternatives:
(b) ` 60 crores (a) Both Assertion (A) and Reason (R) are true and
(c) ` 40 crores Reason (R) is not the correct explanation of
Assertion (A)
(d) ` (-) 60 crores
Ans : Reason (R) is the correct explanation of Assertion
(d) ` (-) 60 crores (A)
(c) Assertion (A) is false but Reason (R) is true Ans :

(d) Assertion (A) is true but Reason (R) is false (b) 0.6
Ans :
9. Choose the correct alternatives to be filled in given

blanks A, B and C.
11. It is stated that “amalgamation of many central

and state taxes into a single tax called ‘Goods and
Services tax (GST)’ would facilitate a common
national market.” Do you agree with the statement?
Justify your answer.
Ans :
Yes, it is very rightly stated that the amalgamation of
many central and state taxes into a single tax called
Goods and Services Tax (GST) would facilitate a
common national market. GST is intended to make
India a “single market” economy.
GST will be a comprehensive indirect tax on the
manufacture, sale and consumption of goods and
services throughout India, to replace taxes levied by
the Central and State governments.
(a) A - Export of goods, B - Gifts, remittances and (a) The government through GST wants to build a
grants, C - Net non-factor income stable tax regime, so as to address the concerns of
(b) A - Gifts, remittances and grants, B - Export of the Indian industry and foreign investors.
goods, C - Net non-factor income (b) Under GST, the states and the centre will collect
(c) A - Net non-factor income, B - Export of goods, identical rates of taxes on goods and services.
C - Gifts, remittances and grants (c) The simplicity of the tax should lead to easier
(d) A - Export of goods, B - Net non-factor income, administration and enforcement.
C - Gifts, remittances and grants (d) Free movement of goods from one state to
another, without stopping at state borders, would
Ans : contribute to their smooth flow.
(d) A - Export of goods, B - Net non-factor income, (e) Reduction in unnecessary paper work involving a
C - Gifts, remittances and grants lot of time, would be an added advantage.
10. Suppose in a hypothetical economy, the income rises 12. State whether the following statements are true or
from `5,000 crores to `6,000 crores. As a result, the false. Support your answer with reason.
consumption expenditure rises from `4,000 crores (a) Taxation is an effective tool to reduce the
to `4,600 crores. Marginal propensity to consume in inequalities of income.
such a case would be_______. (b) Revenue deficit increases when government fails
(a) 0.8 (b) 0.6 to recover loans forwarded to different nations.
(c) 0.4 (d) 0.2 o
On the basis of given figure, answer the questions that sales will go down followed by a decrease in its
follow: production. So,
(a) It will lead to a fall is Gross Domestic Product.
(b) It will lead to an increase in welfare because the
ban will save the people from the harmful effects
of tobacco on their health. This may in turn be
helpful in maintaining good health which will
boost up their productive efficiency in the long
run.
o
(a) Government’s spending on child immunization
programme is government’s final consumption
expenditure. Hence, it will raise the Gross
Domestic Product (GDP).
(b) Such a programme like child immunization
improves the health of the children It will raise
the efficiency level in the long-run, as these
children will grow up into healthy adults with a
(a) Interpret the above trends of GST collections. higher efficiency level. This will thereby increase
(b) When was GST implemented in India? the welfare of the people.
Ans :
(a) The given statement is true. Generally, the
government collects higher taxes from the rich
people and spends it on the welfare of the poor.
Thereby, reducing the inequalities of income.
(b) The given statement is false, because recovery of
loans is a capital receipts. It does not affect the
revenue receipts or revenue deficit.
o
(a) Over the last four years, GST revenues have
steadily grown. The year-average of monthly
GST collection has increased from 0.9 lakh crore
in 2017-18 to 1.19 lakh crore in 2021-22 (upto 14. Explain the role of the Reserve Bank of India as the
december). “lender of last resort”.
(b) GST was implemented on 1st July, 2017 in India. Ans :
The commercial banks are in need of funds in
emergency. This happens in times when banks
suffer the ‘crisis of confidence’ of its depositors. The
depositors start fearing that the bank may run out
13. Suppose a ban is imposed on consumption of tobacco. of its cash reserves. So they start withdrawing their
Examine its likely effects on (a) gross domestic deposits beyond the limit the bank can afford at a
product and (b) welfare. time. It is in such a crisis that the central bank acts as
o a ‘lender of the last resort’. It comes to the rescue of
Government spends on child immunisation the commercial banks and advances necessary credit/
programme. Analyse its impact on Gross Domestic loan against eligible securities. Thus, in this way the
Product and welfare of the people. central bank helps the commercial banks to cope up
Ans : with the crisis.
If a ban is imposed on consumption of tobacco, its
15. In an economy, investment expenditure is increased (vii) Net exports (—) 100
by `400 crores and marginal propensity to consume
(viii) Net indirect taxes 1,500
is 0.8. Calculate total increase in income and savings.
(ix) Net factor income to abroad 60
Ans :
(x) Consumption of fixed capital 120
1 1
(a) k =
1 − MPC
=
1 − 0.8 Ans :
= 1 =5
0.2 (a) NDP at Factor Cost = (ii) + (v) — (vi) — (vii)
∆ Y
k = ∆I
— (iv) — (viii) + (iii)
5 = ∆Y or NVAFC = 2,000 + 100 — 200 — 1000
400
∆Y `2000 crores
= — 50 — 150 + 20
(b) ∆S = MPS # ∆Y = `720 crores

= 0.2 # 2000 (b) Transfer payments should not be included in the
estimation of National Income because these are

= `400 crores
unilateral transfers against which no good/service
is provided in return. e.g. old-age pension,
Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12 donation etc. hence these are unproductive
payments.
o
16. (a) Calculate Net Domestic Product at Factor Cost
(a) Real Income is calculated on the basis of the
from the given data:
formula:
(` in crores)
Real Income = NoPrice
minal Income #
Index 100
(i) Net factor income to abroad 30
(ii) Sales 2,000 (b) National Income = (i) + {(ii) + (iii) + (iv)}
(iii) Subsidies 20 + (v) — (ix)
(iv) Consumption of fixed capital 50 = 2,000 + {800 + 300 + 250}
(v) Closing stock 100 + 7,000 — 60
(vi) Opening stock 200 = 2,000 + 1,350 + 700 — 60
(vii) Intermediate costs 1,000 = `10,290 crores
(viii) Indirect tax 150
(b) Transfer payments should not be included in the
estimation of National Income? Do you agree?
Give reason in support of your answer.
o
(a) Given nominal income, how can we find real
-
income?
(b) Calculate National Income:
(` in crores) 17. Discuss the working of the adjustment mechanism in
(i) Compensation of employees 2,000 the following situations.
(a) Aggregate demand is greater than aggregate
(ii) Profit 800
supply.
(iii) Rent 300
(b) Ex-ante investment are lesser than Ex-ante
(iv) Interest 250 savings.
(v) Mixed income of self- 7,000
employed Ans :
(vi) Net current transfers to abroad 200 (a) When Aggregate Demand (AD) is greater than
Aggregate Supply (AS), buyers are planning to (b) Statement 1 is true and statement 2 is false
buy more goods and services than what producers (c) Both statements 1 and 2 are false
are planning to produce. This will lead to a fall (d) Both statements 1 and 2 are true
in planned inventories below the desired level.
The producers in turn will produce more and this Ans :
will raise the level of income, i.e., AS, till AD (d) Both statements 1 and 2 are true
becomes equal to AS.
(b) Exante investments are lesser than Exante
20. Arrange the following events of China in chronological
Savings, i.e., (I<S) means buyers are planning
order and choose the correct alternative:
to buy lesser output as to what producers are
(i) Special Economic Zones
planning to produce. This will lead to a rise in
(ii) Great Proletarian Cultural Revolution
planned inventories above the desired level. As
(iii) Great Leap Forward Campaign
a result, the producers will cut down production,
(iv) Economic reforms were initiated
leading to a fall in the income till savings become
Choose the correct alternative:
equal to investment.
(a) (iii), (ii), (iv), (i)
(b) (iv), (i), (ii), (iii)
Section B -Indian Economic Development (c) (iv), (ii), (i), (iii)
(d) (ii), (iv), (iii), (i)
Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10 Ans :
(a) (iii), (ii), (iv), (i)
18. In______, the Great Proletarian Cultural Revolution
was introduced in China.
(a) 1985
(b) 1965
(c) 1995
(d) 1975
o
In______, the Special Economic Zones (SEZs) were
set up in China. 21. Read the following statements-Assertion (A) and
(a) 1979 Reason (R). Choose one of the correct alternatives
(b) 1972 given below:
(c) 1982 Assertion (A): Rural development in India is of key
significance.
(d) 1975
Reason (R): Nealry two-third of population in India is
Ans : dependent on agriculture.
(b) 1965 Alternatives:
o (a) Both Assertion (A) and Reason (R) are true and
(a) 1979 Reason (R) is not the correct explanation of
Assertion (A)
Statement 1: SAARC stands for South Asian
(A)
Association for Regional Cooperation.
Statement 2: ASEAN stands for Association of South- (c) Assertion (A) is false but Reason (R) is true
East Asian Nations. (d) Assertion (A) is true but Reason (R) is false
In the light of the given statements, choose the correct Ans :
(a) Statement 1 is false and statement 2 is true (b) Both Assertion (A) and Reason (R) are true and
Reason (R) is the correct explanation of Assertion (A) o

Identify the option which is/are not true in the context
22. Read the following statements carefully: of demographic condition of India during the British
Statement 1: Seasonal workers are the worst affected rule ?
by seasonal unemployment in India. (i) High Birth Rate
Statement 2: Population is the total number of people (ii) Low Death Rate
who reside in a particular locality at a particular point (iii) Low Infant Mortality Rate
of time. (iv) High life expectancy
In the light of the given statements, choose the correct (a) (i) and (iii)
alternative from the following: (b) (i) and (ii)
(a) Statement 1 is false and statement 2 is true (c) (i), (ii) and (iii)
(b) Statement 1 is true and statement 2 is false (d) (ii), (iii) and (iv)
(c) Both statements 1 and 2 are false Ans :
(b) Kerala and West Bengal
Ans : o
(d) Both statements 1 and 2 are true (d) (ii), (iii) and (iv)

and corresponding relevant fact given in column II,
choose the correct pair of statement: 25. Read the following statements—Assertion (A) and
Column I Column II Reason (R). Choose one of the correct alternatives
A. The growth rate of (i) 1995 given below:
agriculture sector Assertion (A): The growth rate of population of
decelerated to about 3% Pakistan is lowest as compared to India and China in
per annum. 2017-18.
Reason (R): China adopted one child policy to control
B. A major change occurred (ii) after 1989
population in the year 1979.
when India adopted social
Alternatives:
banking.
C. A thrift and credit society (iii) 1995 Reason (R) is not the correct explanation of
was started in Kerala. Assertion (A)
D. By March end more than (iv) 2010 (b) Both Assertion (A) and Reason (R) are true and
seven lakh SHG’s been Reason (R) is the correct explanation of Assertion
credit linked. (A)
Alternatives: (c) Assertion (A) is false but Reason (R) is true
(a) C - (iii) (b) A - (i)
(c) D - (iv) (d) B - (ii)
Ans :
Ans :
(a) C - (iii)
26. A person got two job offers, one from Mumbai while
24. States where land reforms were successful on account other from Chennai. Before deciding which one
of they being committed to the policy of ‘land to the to opt, he go through the cost and benefit analysis.
tiller’ are: Which source of human capital formation he takes
(a) Punjab and Kerala into account?
(b) Kerala and West Bengal (a) Expenditure on Training
(c) Andhra Pradesh and West Bengal (b) Expenditure on Education
(d) Kerala and Andhra Pradesh
(c) Expenditure on Migration It is true that subsidies were needed to encourage

(d) Expenditure on Health farmers because
o (a) Subsidies provide an incentive to use the new
The apex body which coordinates the functioning HYV technology for the farmers in general and
of different financial institutions working for the small farmers in particular.
expansion (b) Subsidies are needed to encourage the farmers
of rural credit is: to test the new technology, as farming in India
(a) Regional Rural Banks continues to be a risky business.
(c) Provision of subsidies tries to reduce the
(b) NABARD
inequality between the rich and the poor farmers
(c) Commercial Banks and facilitates equity to some extent.
(d) Self-help Groups (d) But as far as possible the government should take
Ans : steps to ensure that the benefits of subsidies reach
the poor farmers in the right earnest.
(c) Expenditure on Migration o
o Cottage and small scale industries certainly occupy a
(b) NABARD very important place in the development of the Indian
economy. This is on account of the following factors:
27. Which of the following is not true for small scale (a) These industries are labour intensive and thus
industries? generate more employment per unit of production.
(a) SSI is capital intensive and therefore, increases (b) These industries make use of local resources thus
productivity. better and fuller utilisation takes place.
(b) SSI is labour intensive and therefore, employment (c) These industries are helpful in reducing regional
oriented. imbalances in industrialisation.
(c) SSI shows locational flexibility and is therefore, (d) These industries also supplement the income of
equality oriented. those people who do not get sufficient income
from agriculture and allied activities.
(d) SSI needs small investment and is therefore,
equity oriented.
29. Interpret the given picture on account of World Trade
Ans : Organisation (WTO).
(a) SSI is capital intensive and therefore, increases
productivity.
28. “Subsidies were needed to encourage farmers.” Ans :

Discuss the importance of subsidies in relevance to The given picture indicates India’s and WTO
the Indian farmers. relationship and as an important member, India has
o been in the frequent of framing fair global rules,
“Small scale and cottage industries are important in regulations and advocating the interest of developing
the development of Indian economy.” Elaborate. world. India has taken responsible steps to liberalize
Ans : trade by removing quantitative restrictions on imports
and reducing tariff rates. There is also an ongoing of the large sized families and poverty prevalent
debate between scholars about whether India should in Pakistan. In India, the percentage is high too at
be a member of WTO or not and as per some Scholars, 39%.
there is no use for a developing country like India to
be a member of WHO since:
31. Elaborate any four positive contributions made by
(a) Major volume of international trade occurs
Britishers in India.
among developed nations.
o
(b) Developing countries are being cheated as they
Throw light on the ‘economic drain’ during the
are forced to open up their markets for developed
colonial period.
countries on the other hand are not allowed to the
markets of developed countries. Ans :
The colonial regime made some positive contributions
too in India by way of:
(a) Introduction of railways and other means of
transport facilitated the breaking of the cultural
and geographical barriers. These means proved
very useful in handling natural calamities like
famines etc.
(b) Commercialisation of agriculture widened the
outlook of the self-sufficient farmers, who started
looking beyond for profit-making.
(c) Introduction of money as a medium of exchange
replaced the traditional system of barter. This
encouraged large scale of production based on
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 specialisation.
(d) Last but not the least, the British also left a legacy
30. Answer the following questions on the basis of the of ‘well-run’ administration in the country.
following data: o
(a) Comment upon the People Below Poverty line During the colonial period there was economic drain,
among the three countries. i.e., drain of Indian wealth, by way of the following
(b) Comment upon the percentage of Undernourished facts.
Children among China and Pakistan. (a) Large export surplus generated by the foreign
Country People Below Undernourished trade during the colonial period was primarily for
Poverty Line (%) Children (%) bearing the expenses of the war fought by Britain.
It was also used to maintain its administrative
India 37 39
set up. This came at a huge cost to country’s
China 32 9 economy, as it was not used in any developmental
Pakistan 44 45 activity of India. Many essential commodities, in
Ans : turn like foodgrains, kerosene etc. were in scarce
supply in the domestic market.
(a) The given data shows that percentage of people (b) Commercialisation of agriculture promoted the
living below the poverty line is maximum in cultivation of cash crops like indigo etc. at the
Pakistan (44%), followed by India (37%) and cost of food crops. This was the vested move of
China comparatively has the least (32%) of its the Britishers to benefit largely by using these
people who are poor. cash crops in their industries as raw materials in
(b) Comparing the undernourished children among Britain.
India, China and Pakistan, we notice the (c) Competition from machine-made goods from
percentage of undernourished children is just 9% Britain led to the decline of world famous
in China, denoting healthy children there, because Indian handicrafts. This brought about massive
of small sized family. In contrast in Pakistan the unemployment, poverty and misery in the
percentage is very high at 45%. This is because
country. concerns at the state level.

(d) Introduction of railways by the British also (c) These boards provide technical assistance to the
contributed to economic drain during the colonial respective governments in promoting cleanliness
period. Railways facilitated in turning India into of streams and wells by prevention, control and
a large market for the finished products of British reduction of water pollution, and also to improve
industries. the quality of air and prevent air pollution in the
country.
32. Discuss the importance of credit in rural development. (d) They carry out and sponsor investigation
and research about problems of water and air
Ans : pollution.
Farmers need money to buy additional land, (e) Mass awareness programmes are also organised
implements and tools, fertilisers and seeds, paying by them with the help of media.
off old debts, personal expenses like marriage, death, (f) These boards collect, collate and disseminate
religious ceremonies, etc. Since the gestation between technical and statistical data w.r.t water pollution.
crop sowing and realisation of income after sale of o
agricultural produce is very long, farmers need to (a) The main causes of backwardness of Indian
take credit. agriculture are as follows:
The Indian farmer borrows year after year, and is in (i) Rich farmers own large amount of land,
no condition to pay off debts taken at high rates of whereas poor farmers own small pieces
interest. This has created a class of landless labourers of land. Some are landless cultivators too.
who are in a debt trap. It is, thus, essential to solve the Size of farms are further reducing due to
problem of rural indebtedness by giving the farmers fragmentation and sub-division of land
credit at cheaper rates of interest and easy pay-back holdings.
options. (ii) Farmers do not have proper irrigation
facilities. Indian agriculture is heavily
dependent on rain for water, which is not
reliable.
(iii) Adequate facilities for agricultural
marketing are not available. Poor farmers
do not have transport facility. Middleman
also exploit farmers by following corrupt
policies and by buying the produce at a very
low price.
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 (b) The three challenges facing the Indian education
system are:
33. Elucidate the function of Pollution Control Board in (i) The major challenge in the area of education
India to address the environmental concerns in India. is to bring all Indian children in the age
o group of 6-14 years under the purview of
(a) Give any three causes of backwardness of Indian school education.
agriculture. (ii) Per capita education expenditure differs
(b) Give any three challenges facing Indian education across the states. This in turn leads to
system. variation in educational opportunities and
attainments across the states. Further, this is
Ans : contrary to the purpose of equity (regional
(a) The Central Pollution Control Board (CPCB) was equality).
set up by the government in 1974, to address two (iii) ‘Education for All’ still seems to be distant
major environmental concerns in India - water dream. This is because of the fact that
and air pollution. no doubt the literacy rates have gone up
(b) This was followed by the establishment of the relatively but the absolute numbers of
state level boards to address the environmental illiterates in India is still very high.
34. Read the following text carefully and answer the

given questions on the basis of the same and common
understanding:
Blessed with a varying climate and soil conditions,
India has adopted growing of diverse horticultural
crops such as fruits, vegetables, tuber crops, flowers,
medicinal and aromatic plants, spices and plantation
crops. These crops play a vital role in providing
food and nutrition, besides addressing employment
concerns. Horticulture sector contributes nearly one-
third of the value of agriculture output and six per
cent of Gross Domestic Product of India. India has ******
emerged as a world leader in producing a variety of
fruits like mangoes, bananas, coconuts, cashew nuts
and a number of spices and is the second largest
producer of fruits and vegetables. Economic condition
of many farmers engaged in horticulture has improved
and it has become a means of improving livelihood
for many unprivileged classes. Flower harvesting,
nursery maintenance, hybrid seed production and
tissue culture, propagation of fruits and flowers and
food processing are highly remunerative employment
options for women in rural areas.
(a) Differentiate how the term ‘Golden Revolution’
is different from ‘Green Revolution’?
(b) How horticulture as an alternative source of
employment improves the economic condition of
farmers?
Ans :
(a) The combined use of HYV seeds and increased
use of fertilizers and developed irrigation facilities
increased the production of rice and wheat. This
increase in the production of food grains is known
as Green Revolution. It led to increase in the
production especially of rice and wheat. On the
other hand, the rapid growth in the production of
the horticulture crops such as fruits, vegetables,
flowers etc. is known as Golden Revolution. It led
to the increase in production of fruits, vegetables,
flowers, aromatic plants, spices etc.
(b) Economic condition of many farmers engaged
in horticulture has improved and it has become
a means of improving livelihood for many
unprivileged classes. Flower harvesting, nursery
maintenance, hybrid seed production and tissue
culture, propagation of fruits and flowers and food
processing are highly remuneration employment
options for women in rural area as well.

ECONOMICS (030)
Section A -Macro Economics o

_______is not a component of operating surplus.
(a) Compensation of employees
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (b) Interest
(c) Rent
1. Identify which of the following bank does not interact (d) Royalty
directly with the general public?
(a) Union Bank of India Ans :
(b) State Bank of India (d) All of these
(c) Reserve Bank of India o
(a) Compensation of employees
(d) Bank of India
Ans :
(c) Reserve Bank of India
2. A company located in India receives a loan from a Reason (R). Choose one of the correct alternatives
company located abroad. How is this transaction given below:
recorded in India’s Balance of Payments Account? Assertion (A): Currency with public is the part of
(a) Debit side of the current account money supply in India.
(b) Credit side of the capital account Reason (R): Money supply means money available
(c) Credit side of the current account with producers of money.
Alternatives:
(d) Debit side of the capital account
(b) Credit side of the capital account Assertion (A)
3. ______method(s) can be used to calculate the
(A)
National Income.
(a) Expenditure method (c) Assertion (A) is false but Reason (R) is true
(b) Income method (d) Assertion (A) is true but Reason (R) is false
(c) Value-added method Ans :
(d) All of these (d) Assertion (A) is true but Reason (R) is false
5. Read the following statements carefully: Ans :

Statement 1: State Bank of India acts as the lender of (d) Both (a) and (b)
last resort in India.
Statement 2: Reserve Bank of India is the central
bank of India. 8. Which of the following functions is not performed by
In the light of the given statements, choose the correct Central Bank?
alternative from the following: (a) Lender of last resort
(a) Statement 1 is false and statement 2 is true (b) Accepting deposits of general public
(b) Statement 1 is true and statement 2 is false (c) Banker’s Bank
(c) Both statements 1 and 2 are false (d) Currency authority
(d) Both statements 1 and 2 are true o
Supply of money refers to:
Ans : (a) currency held in the government account
(a) Statement 1 is false and statement 2 is true (b) currency held by Reserve Bank of India (RBI)
(c) currency held by the public
6. Foreign exchange transactions which are independent (d) currency held by the public and demand deposits
of other transactions in the Balance of Payments with commercial banks
Account are called:
(a) Capital transactions Ans :
(b) Current transactions (b) Accepting deposits of general public
(c) Accommodating transactions o
(d) currency held by the public and demand deposits
(d) Autonomous transactions
with commercial banks
o
Equilibrium in Balance of Payments is achieved
when the net value of all the receipts and payments is: 9. Read the following statements carefully:
(a) positive Statement 1: Primary deposits are the initial deposits
with the commercial banks.
(b) negative
Statement 2: Demand deposits are not included in the
(c) zero money supply of the country.
(d) None of these In the light of the given statements, choose the correct
(d) Autonomous transactions
o
(c) zero (c) Both statements 1 and 2 are false
Ans :

Statement 1: BoP deficit is a situation when exports of
a country are more than its imports.
Statement 2: BoP surplus means that a country’s
7. The condition(s) for an institution to become a bank imports are more than its exports. In the light of the
is/are: given statements, choose the correct alternative from
(a) Advancing loans the following:
(b) Accepting deposits (a) Both statements 1 and 2 are false
(c) Neither (a) nor (b) (b) Both statements 1 and 2 are true
(c) Statement 1 is false and statement 2 is true incentives to the exporters, export promotion will take
(d) Statement 1 is true and statement 2 is false place, which will bring in more foreign exchange.
This can in turn be utilised for purchasing our import
Ans : items and also adding to our foreign exchange
(a) Both statements 1 and 2 are false reserves. Thus, incentives for promoting exports play
a very vital role in influencing favourably the foreign
exchange situation, i.e., by building our foreign
Short Answer Questions (Q11 to Q12) 3´2=6 exchange reserves and also footing our import bill.
11. Calculate ‘value of output’ from the following data:

(` in lakhs)
(i) Net value added at factor cost 100 Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12
(ii) Intermediate consumption 75
(iii) Excise duty 20 13. Explain how the following measures can be used to
(iv) Subsidy 5 correct the excess demand situation?
(a) Bank Rate
(v) Consumption of fixed capital 10
(b) Cash Reserve Ratio
Ans : o
What is marginal propensity to consume? How is it
Value of Output = (i) + (v) + (iii - iv) + (ii)
related to marginal propensity to save?
= 100 + 10 + 20 - 5 + 75
Ans :
= `200 lakhs
(a) To correct the excess demand situation, bank
rate can be raised by the Central Bank and
12. Distinguish between devaluation and depreciation of commercial banks will then be compelled to
domestic currency. raise their lending rates. As a result, borrowing
o will become expensive so the demand for loans is
How does giving incentives for exports influence likely to fall. As a result, aggregate demand (AD)
foreign exchange rate? Explain. will get reduced in the economy.
Ans : (b) To correct excess demand, Cash Reserve Ratio
should be increased so that the funds available
Under the fixed exchange rate system, it is the
for credit creation with commercial banks get
government which decides when to change the
reduced. This will further reduce their credit
existing foreign exchange rate. The deliberate raising
creation capacity. Borrowing from banks falls,
of the price of the foreign currency in terms of
thus AD falls and excess demand gets checked.
domestic currency by the government is known as
“devaluation” of domestic currency. O
Whereas, under the flexible exchange rate system, the Marginal Propensity to Consume (MPC) is the ratio
change in foreign exchange rate in terms of domestic of change in consumption to change in income.
currency is determined by the free play of the market ∆C
forces of demand and supply of foreign exchange Symbolically, MPC = ∆ Y
in the foreign exchange market. When the price of whereas Marginal Propensity to Save (MPS) is the
foreign currency in terms of domestic currency rises ratio of change in savings to change in income.
in the foreign exchange market on account of the ∆S
Symbolically, MPS = ∆ Y
forces of demand and supply of foreign exchange, it The value of MPC always lies between 0 and 1, i.e.,
is called “depreciation” of domestic currency. 0 < MPC < 1, whereas The value of MPS depends on
o the value of MPC. If MPC = .90, then MPS = 0.10.
Exports are one of the major source of earning foreign Relationship between MPC and MPS. The sum of
exchange. In other words, exports are the major MPC and MPS is always equal to one. Symbolically,
source of supply of foreign exchange. So, by giving MPC + MPS = 1
14. Explain the equilibrium level of national income with to the expected level, they start producing less.
the help of Saving and Investment Curves. So, AS starts falling and continues to fall till AD
Ans : equals AS once again.
The equilibrium level of income is determined at a

point where savings and investment are equal, i.e., S
= I. The given table and diagram illustrates the idea:
Income Consumption S a v i n g Investment
(Y) (C) (S) = Y − C (I) (` crores)
0 50 - 50 100
100 100 0 100
200 150 50 100
300 200 100 100 16. Calculate (a) GDP at market price (b) GNP at factor
400 250 150 100 cost from the following data.
(` in crores)
(i) Intermediate consumption
(a) Primary Sector 500
(b) Secondary Sector 400
(c) Tertiary Sector 300
(ii) Value of output:
(a) Primary Sector 1000
(b) Secondary Sector 900
(c) Tertiary Sector 70
(iii) Compensation of employees 400
(iv) Net factor income from abroad (—)20
(v) Consumption of fixed capital 40
(vi) Net indirect taxes 10
The given table and diagram shows that the (vii) Net current transfers to abroad (—)15
equilibrium level of income is `300 crores and at this o
point S = I, i.e., `100 = `100. (a) Find net national product at market price:
(` Crores)
15. Explain all the changes that will take place in an
economy when aggregate demand is not equal to (i) Personal taxes 200
aggregate supply. (ii) Wage and salaries 1,200
Ans : (iii) Undistributed profit 50
When AD is not equal to AS (AD # AS) two situations (iv) Rent 300
are to be assessed. (v) Corporation tax 200
(i) Suppose AD > AS. As a result, the producers find (vi) Private income 2,000
their inventories falling faster than expected. To (vii) Interest 400
maintain the inventory level, producers produce (viii) Net indirect tax 300
more. Thus, AS starts rising and continues to rise
(ix) Net factor income to abroad 20
till AD equals AS once again.
(ii) Suppose AD < AS. As a result, producers find (x) Profit 500
that the inventories start piling up, above the (xi) Social security contributions by 250
expected level. To bring down the inventories employers
(b) Find net value added at market price: 17. Giving reasons, categorise the following into revenue
and capital expenditure.
(` Lakhs)
(a) Subsidies
(i) Fixed capital good with a life span 15
(b) Grants given to state governments
of 5 years
(c) Repayment of loans
(ii) Raw materials 6
(d) Construction of school building
(iii) Sales 25
(iv) Net change in stock (—)2 Ans :
(v) Taxes on production 1 (a) Expenditure on subsidies is revenue expenditure
as it does not lead to any creation of assets or
Ans : reduction in liabilities.
(b) Expenditure on grants given to state governments
(a) GDPMP = Value of Output
is revenue expenditure as it does not lead to any
- Intermediate consumption creation of asset or reduction in liabilities.
-] i g
(ii) (c) Repayment of loans is capital expenditure
because it reduces the liabilities.
= (1,000 + 900 + 700)
(d) Expenditure on construction of school building is
- (500 + 400 + 300) capital expenditure because it leads to creation of
= 2,600 - 1,200 an asset for the school.
= `1,400 crores
(b) GNPFC = GDPMP - (vi) + (iv) Section B -Indian Economic Development
= 1,400 - 10 + (-20)
= 1,400 - 10 - 20 Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10
= `1,370 crores
18. The scheme of “Micro Finance” is extended through:
o (a) NABARD
(a) NNPMP,= (ii) + (xi) + (iv) + (vii) + (x) - (ix) + (b) Self-Help Groups
+ (viii) (c) Regional Rural Banks
= 1,200 + 250 + 300 + 400 + 500 (d) Land Development Banks
- 20 + 300 Ans :
= `2,930 crores (b) Self-Help Groups
(b) NVAMP = (iii) + (iv) - (ii) - *Depreciation
= 25 + (-2) - 6 - 3 = `14 Lakhs 19. Identify the correct pair from the following Column
Cost of the fixed capital good
I and Column II and choose the correct alternative:
*Despreciation
=
Life span Column I Column II
15 =

=
5 3 A. Self-employed (i) Own and operate a
workers business to earn their
livelihood.
B. Casual wage (ii) They are not hired on
workers permanent basis.
C. Regular salaried (iii) They get wages on
workers casual basis.
D. Formal sector (iv) They work only in
workers private sector
(a) C - (iii) (b) D - (iv) (b) Statement 1 is true and statement 2 is false
(c) A - (i) (d) B - (ii) (c) Both statements 1 and 2 are false
Ans : (d) Both statements 1 and 2 are true
(c) A - (i) Ans :

20. _____refers to the stock of skill, ability, expertise,
education and knowledge embodied in the people. 23. _____five year plan recognised the importance of
(a) Human capital human capital in India.
(b) Human resource (a) Third (b) Seventh
(c) Physical capital (c) Sixth (d) Eighth
(d) None of these o
The Environment Protection Act was passed in:
Ans :
(a) 1990 (b) 1988
(a) Human capital (c) 1986 (d) 1984
Ans :
21. Observe the given figure carefully and answer the
question that follows: (b) Seventh
o
(c) 1986
24. Economic reforms were initiated in______in China.

(a) 1978 (b) 1988
(c) 1965 (d) 1975
o
Pakistan announced its first five year plan in
(a) 1954 (b) 1956
(c) 1949 (d) 1951
Wagah Border is not only a tourist place but also used
Ans :
for trade between______and______.
(a) India; Pakistan (a) 1978 Or (b) 1956
(b) India; China
(c) India; Russia 25. Arrange the following events of China in chronological
(d) China; Pakistan order and choose the correct alternative:
Ans : (ii) Great Proletarian Cultural Revolution
(a) India; Pakistan (iii) Commune System
(iv) Establishment of People’s Republic of China
(a) (iv), (i), (ii), (iii)
Statement 1: ganic farming is helpful in off-season
crops. (b) (iv), (iii), (ii), (i)
Statement 2: ganic farming helps in sustainable (c) (ii), (iv), (iii), (i)
development. (d) (ii), (iv), (i), (iii)
Ans :
(a) Statement 1 is false and statement 2 is true (b) (iv), (iii), (ii), (i)
26. India announced the New Economic Policy after business and large majority of the farmers are so poor
agreeing to the conditions of: that they cannot afford the required inputs without
(a) World Bank subsidies.
(b) Reserve Bank of India It is held that the discontinuation of the subsidies will
(c) International Monetary Fund lead to further widening of the gap between rich and
poor farmers. This will violate the goal of equity.
It is further said that subsidies largely benefited the
o fertilizer industry and the big farmers only. Thus,
Along with the World Bank and_____, WTO is the the best policy would be to ensure that only the poor
third economic pillar of worldwide dimensions. farmers reap the benefits of subsidies in the economy.
(a) International Monetary Fund (IMF) o
(b) International Economic Association (IEA) The process of globalisation along with liberalisation
(c) International Funding ganisation (IFO) and privatisation policies has indeed produced some
(d) International Development Bank (IDB) negative results for India.
Globalisation is considered to be a strategy of the
Ans : developed countries to expand their markets in the
(d) Both (a) and (b) rest of the world. This has compromised with the
o welfare and identity of the poor people, who are the
(a) International Monetary Fund (IMF) affected lot. The market-driven globalization has
widened the disparities in economic terms between
27. GST stands for_____. the nations and the people.
(a) Goods and Sales Tax In the Indian context, it has widened the gap between
the rich and the poor and the growth has concentrated
(b) Goods and Simple Tax
only in some selected areas in the service sector like
(c) Goods and Services Tax telecommunication, information and technology,
(d) None of these real estate and trade. This has happened at the cost
Ans : of agriculture and industry —the two vital sectors,
which provide livelihood to a large number of people
(c) Goods and Services Tax in the country. Hence, globalisation led to the lopsided
development of the economy.
29. Elaborate one hurdle faced by the land ceiling

legislation.
Ans :
Land ceiling, the policy to promote equity in the
agricultural sector faced many hurdles like the big
landlords challenging the legislation in the courts.
Short Answer Questions (Q28 to Q29) 3´2=6 This leading to delay in its implementation. The
delay caused was used to register their land in the
28. “The government should continue with agricultural name of close relatives. This was done to escape from
subsidies.” Do you agree? Give reason in support of legislation. Not only that, a lot of loopholes in the
your answer. legislation, were also exploited by the big landlords,
o in order to retain their land.
“Globalisation has produced some negative results
for India.” Explain. Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12
Ans :
Yes, it is agreed upon that the government should 30. “Inward looking trade strategy’ adopted by India in
continue with agricultural subsidies. This is due to the first seven plans basically aimed at substituting
the fact that in India farming continues to be a risky imports with domestic products.” Discuss.
Ans : (a) Slow rate of economic growth: The actual growth

In the first seven plans, the trade in India was rate always lies far below the rate targeted
characterised by an ‘inward looking trade strategy’. It in the five decade of planning. Employment
is the strategy based upon ‘import substitution’. Under opportunities created under the plans could not
it, the imports were to be substituted with domestic keep balance with the additions to the labour
products. This way the government protected the force.
domestic industries from competition from abroad. (b) Population explosion: The rapid increasing rate
Protection from imports was carried out in two forms of population growth has been another cause of
- tariffs and quotas. increasing unemployment in the country. It has not
‘Tariffs’ referred to the tax imposed on goods imported. been possible to generate so many employment
Due to this, the imported goods became more costly, opportunities to absorb the large growing labour
thereby their consumption got discouraged. force.
‘Quotas’ referred to the quantity of goods that could (c) Slow growth of industry: Due to shortage
be imported. of capital and lack of modern and advanced
In a nutshell, the effect of tariffs and quotas was technology, industrial sector could not gain its
import restriction on one hand and protecting the momentum and could not generate sufficient
domestic producers from competition from abroad. employment opportunities in the country.
Protection was based on the assumption that the (d) Defective planning: It is one of main causes of
domestic industries protected will learn to compete unemployment. There is a wide gap between
with the foreign industries in the course of time. demand and supply of labour. No plan had
formulated any long-term scheme for removal of
unemployment.
31. Give any three benefits of solar power.
o
Mention any three limitations of organic farming.
Ans :
The three benefits of solar power are:
(a) Virtually maintenance free
(b) Relatively easy to install
(c) Solar panels can provide plentiful power during
the long hours of summer sun Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12
o
The three limitations of organic farming are:
(a) It has been observed that the yield from organic 33. What is rural development? “Co-operative marketing
farming is much less than modern agricultural is considered as the third aspect of government
farming and the goods produced organically initiative.” Explain.
command a higher price. o
(b) Small and marginal farmers may not adapt to Analyse the distribution of workforce by the industrial
this type of farming due to lack of awareness sectors in India.
and limited choice of alternate production in off- Ans :
season. Rural development, a comprehensive term, essentially
(c) Organic produce may have blemishes and a refers to a plan of action for the development of rural
shorter shelf life. areas lagging behind in socio-economic development.
‘Co-operative Marketing’ in realising fair price for
32. “Existence of widespread unemployment in India is farmers’ products is the third aspect of the government
the cumulative result of many causes.” Explain any initiative to improve the marketing aspect in the
four main causes of unemployment in India. field of agriculture. The success story of milk co-
Ans : operatives in transforming the social and economic
scene of Gujarat stands a testimony to the role of co-
The causes of unemployment problem in India are: operatives.
Unfortunately, the co-operatives have received a investment, primarily from companies in Hong Kong
setback in the recent past on account of absence of and Taiwan. At the same time, China promoted its
a proper link between the marketing and processing, socialist market economy concept. The changes
co-operatives alongwith inefficient financial brought an entrepreneurial boom that resulted in the
management. emergence of huge numbers of entrepreneurs and
o venture businesses within China.
While analysing the distribution of workforce by the (a) What was open-door policy? Why was it initiated
industrial sectors in India, it is observed that in China?
• Primary sector is the main source of employment (b) How did the policy of open-door helped Chinese
for most of the workers in India. economy? Also, name the areas established by
• Only about 24% of workforce is employed in the the Chinese government for foreign investment.
secondary sector.
• About 27% of the workers earn their living by Ans :
working in the service sector. (a) Open-door policy was the policy of active
• About 64% of the workforce in rural India introduction of foreign capital and technology
depends upon the primary sector with only while maintaining its commitment to socialism
20% of the rural workers being employed in the for achieving economic growth. The aim of
manufacturing sector and about 16% of the rural this policy was to rebuild Chinese economy
workers being employed in the service sector. and society that were devastated by Cultural
• In the case of urban workers about 60% are Revolution. It was initiated under the leadership
employed in the service sector and 35% of of Deng Xiaoping.
the urban workforce being employed in the (b) The open-door policy brought an entrepreneurial
secondary sector. boom in the Chinese economy that resulted in the
• Distribution of workforce by industrial sectors emergence of huge numbers of entrepreneurs and
also shows substantial shift from farm work to venture businesses within China.
non-farm work. Some of the areas established by the Chinese
government for foreign investment are special
economic zones, open coastal cities, the economic
34. Read the following text carefully and answer the and technology development zones, the delta open
given questions on the basis of the same and common zones, etc.
understanding:
The reform and open-door policy of China began
with the adoption of a new economic development ******
strategy at the Third Plenary Session of the 11th
Central Committee of the Chinese Communist
Party (CCPCC) in late 1978. Under the leadership
of Deng Xiaoping, the Chinese government began
to pursue an open-door policy, in which it adopted
a stance to achieve economic growth through the
active introduction of foreign capital and technology
while maintaining its commitment to socialism.
The obvious aim of this policy shift was to rebuild
its economy and society that were devastated by the
Cultural Revolution. The government subsequently
established a number of areas for foreign investment,
including the special economic zones, open coastal
cities, the economic and technology development
zones, the delta open zones, the peninsula open zones,
the open border cities, and the high-tech industrial
development zones. The establishment of these zones
provided the trigger for massive inflows of foreign

ECONOMICS (030)
Section A -Macro Economics (a) 1st April to 31st March
4. Sector which transforms one physical good into

Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 another physical good is called:
(a) Tertiary sector
1. Balance of Trade refers to balance of export and (b) Primary sector
import of: (c) Secondary sector
(a) Invisible items
(d) Any of these
(b) Visible items
o
(c) Neither (a) nor (b) _______are the variables whose magnitude is
(d) Both (a) and (b) measured over a period of time.
Ans : (a) Flows
(b) Stocks
(b) Visible items
(c) None of these
(d) Any of these
2. Which of the following sources of receipts in
government budget increases its liabilities? Ans :
(a) Direct taxes (c) Secondary sector
(b) Borrowings o
(c) Indirect taxes (a) Flows
(d) Disinvestment
Ans :
(b) Borrowings
5. A change from $1 = `60 to $ 1 = `70 implies_______
of Indian rupee.
3. A Government budget is prepared for a fiscal year (a) revaluation
running from:
(b) appreciation
(a) 1st April to 31st March
(c) depreciation
(b) 1st January to 30th April
(d) None of these
(c) 1st April to 31st December
(d) 1st January to 31st December Ans :
Ans : (c) depreciation
6. Identify the correct pair from the following Column I 7. Dividends received from Public Sector Undertakings
and Column II: (PSUs) are a part of the government’s______.
(a) Capital receipts
Column I Column II
(b) Capital expenditure
A. Indian investors (i) Current account of
borrowing from the BoP (c) Tax receipts
abroad (d) Non-tax revenue receipts
B. Indian investors (ii)Capital account of Ans :
leading abroad the BoP
(d) Non-tax revenue receipts
C. Foreign investment (iii)Current account
in India of the BoP on the
credit side 8. The incidence of tax refers to______.
(a) Who ultimately bears the money burden of the
D. Transfers from and (iv) Capital account of
tax
to abroad the BoP
(b) Growth of taxation
Alternatives: (c) Way in which a tax is collected
(a) C - (iii) (c) A - (i)
(d) Level and rate of taxation
(b) D - (iv) (d) B - (ii)
o Ans :
Identify the correct pair from the following Column I (a) Who ultimately bears the money burden of the tax
and Column II:
Column I Column II 9. Read the following statements-Assertion (A) and
A. Autonomous (i) A situation when the Reason (R). Choose one of the correct alternatives
transactions value of imports of given below:
goods is greater than Assertion (A): Government should reduce subsidies
export of goods to curb revenue deficit.
Reason (R): Providing subsidies on a LPG cylinder is
B. Current account (ii) are dependent on other
a part of revenue expenditure.
of the BoP transactions
Alternatives:
C. Fixed Exchange (iii) is notified by the (a) Both Assertion (A) and Reason (R) are true and
Rate government Reason (R) is not the correct explanation of
D. Trade Surplus (iv) records changes in Assertion (A)
foreign investments (b) Both Assertion (A) and Reason (R) are true and
Alternatives: Reason (R) is the correct explanation of Assertion
(a) C - (iii) (A)
(b) D - (iv) (c) Assertion (A) is false but Reason (R) is true
(c) A - (i) (d) Assertion (A) is true but Reason (R) is false
(d) B - (ii) Ans :
Ans : (b) Both Assertion (A) and Reason (R) are true and
(d) B - (ii) Reason (R) is the correct explanation of Assertion (A)
o
(a) C - (iii) 10. Read the following statements carefully:
Statement 1: The Goods and Services Tax (GST) is a
direct tax.
Statement 2: Direct tax is called direct tax because it
is collected from the buyers of goods.
(a) Statement 1 is false and statement 2 is true currency. As a result, demand for exports rises,
(b) Statement 1 is true and statement 2 is false leading to an increase in supply of foreign
(c) Both statements 1 and 2 are false exchange.
o
Components (or items of transactions) of current
o account of the BoP are:
Read the following statements carefully: (a) Visible items:
Statement 1: Recovery of loans, borrowing and • Exports and imports of goods such as tea, jute
disinvestment etc. are the examples of revenue etc.
receipts. (b) Invisible items:
Statement 2: The receipts which neither create any • Exports and imports of services such as shipping,
liability nor lead to any reduction in asset are called insurance, banking etc.
revenue receipts. • Transfer receipts and payments such as gifts,
In the light of the given statements, choose the correct donations etc.
alternative from the following: • Income receipts and payments such as investment
(a) Statement 1 is false and statement 2 is true income and wages and salaries etc.
Ans :
o
11. The nominal GDP of a country is `180 crores and

price index is 120. Find the real GDP. Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12
Ans :
13. What is the sum of expenditure on consumption
Real GDP = Nominal GDP #
Price Index 100 and investment in an economy called? State its
components.
= 180 # 100 = `150 crores
120 o
Define ‘APC’. Among APC and MPC, whose value
12. Why does the demand for foreign currency falls and can be zero and why? Explain.
supply rises, when its price rises? Explain. Ans :
o
State the components of the current account of Sum of expenditure on consumption and investment
balance of payments account. in an economy is called “aggregate demand” of an
economy. Its components are:
Ans : (a) Private consumption expenditure (C): The
• When price of foreign exchange rises, imports planned expenditure on final products purchased
become costlier, so the demand for imports will by the households during a period of time.
fall. As a result demand for foreign currency This demand denoted by ‘C’ is affected by the
falls. disposable income of the households.
• When price of foreign exchange rises, domestic (b) Investment Expenditure (I): The planned
goods become cheaper for the foreign buyers, as expenditure on new capital goods purchased by
they can now buy more from one unit of foreign the producers during a period of time. It includes
expenditure on inventories, fixed capital assets 15. Explain the role of Open Market Operations in
like machines etc. and residential construction. reducing deflationary gap.
(c) Government Expenditure (G): The planned Ans :
expenditure of the general government on
providing free services to the people like law and Open market operations refers to the buying and
order, education, defence, roads etc. selling of government securities by the Central Bank
(d) Net Exports: The planned net expenditure by in the open market to the public. The Central Bank can
foreigners on the goods and services produced in reduce deflationary gap by purchasing securities from
the country during a period of time. the public. It makes money payments to the public.
o As a result, money flows out of the Central Bank and
APC refers to the proportion of income spent upon finds its way into the commercial banks through the
buyers of these securities, who have accounts in these
consumption. It is C Y . Out of the two, (APC and banks. Deposits with commercial banks increase
MPC), the value of MPC can be zero. This is so
which in turn raises their lending capacity. This
when the entire addition to income is saved and not
brings about a rise in the borrowings for consumption
consumed at all. Value of MPC cannot be greater
and investment purposes. Consequently aggregate
than one but at the most be equal to one. It is equal
demand rises and the deflationary gap gets reduced.
to one if the entire addition to income is spent on
consumption. On the other hand, APC can not be
zero, because some minimum level of consumption
expenditure is essential for survival. Value of APC
can be greater than one, when the income level is very
low and consumption expenditure can not fall below
a minimum level for survival.
14. Giving reasons, state whether the following statements

are true or false: Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12
(a) There is an inverse relationship between the value
of marginal propensity to save and investment
16. (a) Calculate GDPMP from the given data:
multiplier.
(b) When the value of average propensity to save is (` in crores)
negative, the value of marginal propensity to save (i) Net factor income to abroad 10
will also be negative. (ii) Indirect tax 240
Ans : (iii) Net exports 40
(a) True, there is an inverse relationship between (iv) Private final consumption 1200
the value of MPS and Investment multiplier. We expenditure
know that higher the value of MPS, the lower is (v) Consumption of fixed capital 70
the value of multiplier and vice-versa. (vi) Opening stock 20
1 (vii) Closing stock 10
k = MPS
For example : (viii) Net current transfers to abroad (—) 30
If MPS = 0.10, then (ix) Subsidies 40
1 1 (x) Net domestic capital formation 220
k = MPS = 0.10 = 10
If MPS = 0.20, then (xi) Government final consumption 200
1 1 expenditure
k = MPS = 0.20 = 5
(b) False, as the value of MPS will not be negative (b) Explain how shall the payment of electricity bill
and its value varies from zero to one and is never by a school be treated while estimating National
negative. Income.
o
(a) Calculate ‘Net domestic Product at Factor Cost’ and vice versa.
from the given data: For example, suppose the LRR is 0.2 and initial
deposit is `1,000.
(` in crores)
(i) Net factor income to abroad 30 Credit multiplier = 01.2 = 5 ,
1
(ii) Sales 2000 as credit multiplier = LRR
(iii) Subsidies 20 Total credit creation = 5 # `1,000 = `5,000.
(iv) Consumption of fixed capital 50 Whereas, suppose LRR is 0.5 and initial deposits is
(v) Net current transfers to abroad (—) 10 `1,000
(vi) Closing stocks 100 Credit multiplier = 01.5 = 2

(vii) Opening stocks 200 Total credit created = 2 # 1,000 = `2,000
(viii) Intermediate costs 1000 Thus with the same initial deposit total credit creation
decreases with an increase in the value of credit
(ix) Indirect tax 150
multiplier.
(b) What treatment is assigned to the ‘Payment of
Interest on borrowings’ by general government.
Ans :
(a) GDPMP = (iv) + (xi) + (x) + (iii) + (v) Section -Indian Economic Development
= 1,200 + 200 + 220 + 40 + 70
= `1,730 crores
(b) Payment of electricity bill by a school will be
treated as an intermediate expenditure, which is 18. Arrange the following events of India in chronological
not included in estimation of NI. So it will be order and choose the correct alternative:
excluded. (i) First Five Year Plan
o (ii) Pakistan was ahead of India in its growth of GDP.
(iii) 29% of India’s workforce was absorbed in the
(a) NDPFC = (ii) + (vi - vii) - (viii) - ix + (iii) - (iv)
service sector.
= 2000 + 100 - 200 - 1000 - 150 + 20 - (iv) India became independent
50 Choose the correct alternative:
(a) (iv), (i), (iii), (ii)
= `720 crores
(b) (ii), (iv), (iii), (i)
(b) Payment of interest on borrowings by the
general government is treated as a payment for (c) (ii), (iv), (i), (iii)
unproductive borrowing. So it is not included is (d) (iv), (i), (ii), (iii)
estimation of NI. It is considered as a transfer Ans :
payment.
(d) (iv), (i), (ii), (iii)
17. Define Credit Multiplier. What role does it play in
determining the credit creation power of the banking 19. The Eleventh Central Committee of the Communist
system? Use a numerical illustration to explain. Party of China shift its ideology from political
movement to_________.
Ans : (a) self-sufficiency
Credit Multiplier measures the amount of money that (b) human development
the banks are able to create in the form of deposits (c) economic development
with every initial deposit. The credit creation by
(d) None of these
the commercial banks depends on credit multiplier,
as it is inversely related to LRR. Higher the credit Ans :
multiplier the higher will be the total credit created (c) economic development
20. In 1997, a UN conference on climate change was held 22. From the set of events/systems given in Column I
in_______. and corresponding relevant fact given in Column II,
(a) India choose the correct pair of statement:
(b) Japan Column I Column II
(c) China A. Protection (i) Policy based on the notion
(d) Germany policy that developing countries
o cannot compete with the
Workers who are on permanent pay-roll of their developed countries so
employer are called: they should be protected.
(a) Casual workers B. Tariff (ii) A subsidy on imports
(b) Regular workers C. Quotas (iii) Specify the quantity
(c) Self-employed workers of goods which can be
(d) None of these exported.
Ans : D. World Trade (iv) Was founded in 2015,
Organisation to establish a rule based
(b) Japan (WTO) trade regime
o
(b) Regular workers Alternatives:
(a) D - (iv) (b) C - (iii)
(c) B - (ii) (d) A - (i)
21. Observe the given figure carefully and answer the
question that follows: Ans :
(d) A - (i)
23. In Pakistan, nationalisation of capital goods industry

took place in_______.
(a) 1980s
(b) 1950s
(c) 1960s
(d) 1970s
Ans :
(d) 1970s
Poultry has the____share of total livestock in India. 24. Read the following statements carefully:
(a) second largest Statement 1: Rural development is the process of
(b) largest social and economic growth of rural areas.
(c) third largest Statement 2: Agriculture credit means credit for
farming.
(d) None of these
(b) largest (a) Statement 1 is false and statement 2 is true
Ans :
25. Details about the population of British India were first Reason (R) is not the correct explanation of
collected in_______. Assertion (A)
(a) 1891 (b) Both Assertion (A) and Reason (R) are true and
(b) 1871 Reason (R) is the correct explanation of Assertion
(c) 1901 (A)
(d) 1881 (c) Assertion (A) is false but Reason (R) is true
o (d) Assertion (A) is true but Reason (R) is false
Major contribution to the GDP of the country on the Ans :
eve of independence was from:
(a) Secondary sector (c) Assertion (A) is false but Reason (R) is true
(b) Tertiary sector
(c) Primary sector
(d) Both (b) and (c)
Ans :
(d) 1881
o
(c) Primary sector
26. National Bank for Agriculture and Rural Development

(NABARD) was set up in: 28. “During the British rule in India, India’s population
(a) 1982 witnessed the worsening profile of India’s population
of the time”. Analyse the factors responsible for it.
(b) 1980
o
(c) 1983 Analyse the main causes of India’s agricultural
(d) 1981 stagnation during the colonial period?
o Ans :
_______is the branch of agriculture which deals with
breeding, rearing and caring of farm animals. It is absolutely a correct statement on account of the
(a) Horticulture following factors:
(a) It was the wide-spread poverty that prevailed
(b) Fisheries
in India during the British rule in India which
(c) Pisciculture contributed to the worsening profile of India’s
(d) Livestock farming population of the time.
Ans : (b) Life expectancy was very low (at that time 32
years), on account of many water and air-borne
(a) 1982 diseases largely prevalent at that time in India.
o (c) Overall mortality rate was very high, especially
(d) Livestock farming the infant mortality rate was alarming. This
was on account of the fact that the public health
27. Read the following statements-Assertion (A) and facilities were very inadequate.
Reason (R). Choose one of the correct alternatives o
given below: The main cause of India’s agricultural stagnation
Assertion (A): In 1982, India adopted social banking during the colonial period were the various systems
approach. of land settlement introduced during this period.
Reason (R): Moneylenders were charging high rate • The zamindari system, in particular, was
of interest from poor people and manipulate their responsible for the agricultural stagnation. It
account. was the large number of zamindars, who did
Alternatives: not do anything to improve the condition of the
(a) Both Assertion (A) and Reason (R) are true and cultivators and thereby the cultivation.
• Commercialisation of agriculture further all the farmers can pool their milk produced, on the
aggravated the plight of Indian agriculture basis of different grading and the same is further
and the Indian cultivators. This was because processed and thereby marketed to urban centres
food crops were being substituted for cash through co-operatives. The farmers are assured of fair
crops, which were to be ultimately used by the price along with income from the supply of milk to
British industries. On account of the extreme the urban areas. As a matter of fact, milk production
poverty prevalent, the cultivators neither had the in the country has increased more than eight times
resources, nor technology or any incentive to between 1951-2014 and more than ten times between
invest in agriculture. 1951-2016.
An emulating example of State of Gujarat, is a success
29. Explain the policy of ‘land to the tiller’ and its benefits. story in the implementation of milk co-operatives.
Ans :
31. Distinguish between:
The ownership of land provides incentives to the (a) Bilateral trade and Multilateral trade
tiller of the land to invest in making improvements,
(b) Tariff barriers and Non-tariff barriers
provided sufficient capital is made available to them.
They took more interest since they made profit from Ans :
the increased output which was not shared by anyone. (a) Bilateral trade and multilateral trade: Bilateral
The importance of ownership in providing incentives trade refers to the trade of goods and services
to farmers is illustrated by the carelessness with which between two countries whereas multilateral trade
farmers in the former Soviet Union used to pack fruits refers to the trade of goods and services between
for sale. Rotten fruits were packed along with fresh more than two countries.
fruits in the same box since it did not affect them if (b) Tariff barriers refer to all the restrictions on
the goods were not sold. In the absence of ownership, imports by a government in the form of taxes,
there was no incentive for the farmers to be efficient. whereas Non-tariff barriers refer to all the
This was reflected in the poor performance of the restrictions on imports by a government in the
agricultural sector in the Soviet Union. form other than the taxes. They mainly include
restrictions both on quality and quantity of goods
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 imported.
30. What is the need for diversification? 32. Interpret the result of forest area as per 2022.
o
Explain the system of “Operation Flood”.
Ans :
The need for diversification arises on account of a
greater risk involved in depending wholly solely on
farming for livelihood. This is based on the fact that
most of the agricultural activities are based on the
Kharif season. During the Rabi season most of the
farmers face difficulty in finding gainful employment.
So to save them from poverty on account of
unemployment there is a dire need to rely on allied
activities (like livestock, poultry, fisheries etc.) non-
farm employment and other emerging alternatives
of livelihood like Information Technology (IT).
These activities can help by playing a critical role in
achieving sustainable development and food security.
o
The system of “Operation Flood” is a system where
Ans : Why was economic growth low in Pakistan after

• Forest area refers to the area recorded as forest in reform period?
government records and is also called “recorded (b) What were the reasons of re-emergence of poverty
forest area”. in Pakistan?
• The given figure shows that Russia, Brazil, Ans :
Canada, USA and China were the top five largest
countries by forest area in 2020. (a) Pakistan initiated its economic reforms in
• While India was the tenth largest country by 1988. The reforms were introduced in Pakistan
forest area in 2020. to reduce domestic financial imbalances and
external debts. The economic growth was low
in Pakistan after reform period because their
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 dependence on foreign loans was growing and
increasing difficulty in paying back the foreign
33. Read the following text carefully and answer the loans because of dependence on foreign exchange
given questions on the basis of the same and common earnings through highly volatile agricultural
understanding: products and remittances from Pakistani workers
Pakistan adopted economic stabilisation and structural in the Middle east.
reform policies in 1988 in an effort to reduce domestic (b) The reasons of re-emergence of poverty in
financial imbalances and external deficits. However, Pakistan were:
there have been problems with the implementation of (i) Pakistan failed to bring about stable
these policies, in terms of consistency and sequencing. institutional reforms in agriculture.
The period 1988-1996 was characterised by repeated Accordingly, performance in the agricultural
attempts to stabilise the economy amid weak efforts sector remained volatile depending on the
at structural reforms. Since policy measures were not climatic conditions.
able to achieve their objectives, the Pakistan economy (ii) For its foreign exchange requirements,
continued to be trapped in a vicious circle of poverty, Pakistan relied largely on remittances from
low growth, low savings, and low investment, which abroad and agricultural exports. A setback
further hampered growth and poverty alleviation. to these sources of foreign exchange caused
Economic difficulties worsened as a financial crisis a corresponding setback to the process of
hit Pakistan at the end of May 1988. Reserves growth.
plummeted from $1.2 billion to about $0.6 billion, and (iii) Lack of political stability in Pakistan
default seemed imminent. The crisis was triggered involved huge public expenditure on the
by the country’s testing of nuclear devices on 28 maintenance of law and order.
May 1998 amid threats of economic sanctions from (iv) Pakistan was incurring huge expenditure
the United States and other countries. Unjustifiably, on building a competitive defence system,
fearing capital outflows, the government froze all slashing it resources for growth and
foreign currency accounts. As a natural response, development.
private sector remittances also practically ceased,
cutting off about $2.5 billion in inflows projected
for that fiscal year. Commercial bank short-term
lending to the government and State Bank of Pakistan
(SBP) dropped drastically. Two sources of foreign
exchange borrowing-official sources and private
transfers-which had remained seemingly insensitive
to changes in economic fundamentals, now due to
political reasons (in the case of official inflows) and
poor decisions by the government (in case of foreign
currency accounts) suddenly dried up and precipitated
a financial crisis.
(a) When did Pakistan initiate its economic reforms?
34. Discuss how the use of Information Technology can

help in rural development of India.
o
Give the four vital functions of environment - “the
total planetary inheritance”.
Ans :
Use of IT in Indian agriculture: The challenge here is
to build cost-effective IT based systems to improve
the living standards of Indian rural population.
• If farmers can plan their crop according to the
need that is likely to generate in future then
the gap between the demand and supply can
be bridged. Information technology assists in
making database available to such farmers with
regard to the returns, the market is likely to
generate by the time the crops are ready. This
would minimise the uncertainty of the farmers.
• The quality and quantity of crops can be
increased manifold if the farmers are made
aware of the latest equipments, technologies and
resources. Internet is a user-friendly medium,
which provides a platform for easy exchange of
information on a global level.
• Issues like weather forecast, crop treatment,
fertilisers, pesticides, storage conditions etc. can
be well administered, if expert opinion is made
available to the farmers.
• With the help of information technology, the
crutches of middlemen can be done away with
and the farmers can get a clear vision about the
market, latest technologies and hence channelise
their potential accordingly. This would make
them self-sufficient and yield planned crops with
a ready market.
o
The four vital functions of environment- ‘the total
planetary inheritance are’:
(a) It supplies both kind of resources-renewable
like trees in the forests etc. and non-renewable
resources like fossil fuel.
(b) It assimilates waste.
(c) It sustains life by providing bio-diversity.
(d) It also provides aesthetic services like scenery
etc.
******

ECONOMICS (030)
Section A -Macro Economics (d) None of these

o
______bank controls the banking and monetary
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 structure of India.
(a) Reserve Bank of India
1. ______is exercised through discussions, letters and (b) State Bank of India
speeches to banks. (c) Punjab National Bank of India
(a) Moral suasion (d) Oriental Bank of Commerce
(b) Selective credit control
Ans :
(c) Margin requirement
(d) Open market operation (b) On the basis of deposits
o
Ans : (a) Reserve Bank of India
(a) Moral suasion
2. Fees of government college is a revenue receipt

because:
(a) It increases assets of the government.
(b) It creates liabilities of the government.
(c) It neither creates any liability nor reduces any
asset of the government.
4. Read the following data carefully and choose the
(d) It neither creates any asset nor reduces any correct option from the alternatives given below:
liability of the government.
Particulars Farmer Baker
Ans :
Total production 100 200
(c) It neither creates any liability nor reduces any Intermediate goods used 0 50
asset of the government.
Value added 100 —
3. Banks create credit: (a) 200 (b) 100
(a) On the basis of assets (c) 150 (d) 50
(b) On the basis of deposits Ans :
(c) On the basis of securities
(c) 150
5. Read the following statements carefully: 8. Read the following statements-Assertion (A) and
Statement 1: Activity resulting in benefits to others is Reason (R). Choose one of the correct alternatives
called a “positive externality”. given below:
Statement 2: ‘Pollution created by factories/vehicles’ Assertion (A): The monetary policy is a policy
is an example of negative externality. formulated by the central bank.
In the light of the given statements, choose the correct Reason (R): The policy involves measures taken to
alternative from the following: regulate the supply of money, availability, and cost of
(a) Statement 1 is false and statement 2 is true credit in the economy.
(b) Statement 1 is true and statement 2 is false Alternatives:
(c) Both statements 1 and 2 are false (a) Both Assertion (A) and Reason (R) are true and
Assertion (A)
Ans : (b) Both Assertion (A) and Reason (R) are true and
(d) Both statements 1 and 2 are true Reason (R) is the correct explanation of Assertion
(A)
6. Identify the correct pair from the following Column I (c) Assertion (A) is false but Reason (R) is true
and Column II: (d) Assertion (A) is true but Reason (R) is false
Column I Column II Ans :

A. Expenditure on (i) Capital (b) Both Assertion (A) and Reason (R) are true and
collection of taxes expenditure Reason (R) is the correct explanation of Assertion (A)
B. Expenditure on (ii) Revenue
scholarships expenditure
C. Expenditure on (iii) Revenue
purchasing computers expenditure
D. Expenditure on (iv) Revenue
building a bridge expenditure
Alternatives:
(a) D - (iv) (b) C - (iii)
9. Goods purchased for the satisfaction of wants
(c) B - (ii) (d) A - (i)
are_______.
Ans : (a) Consumption goods
(c) B - (ii) (b) Capital goods
(c) Final goods
7. Read the following statements carefully: (d) None of these
Statement 1: Milk purchased by a tea stall is o
‘intermediate good’. Total addition of capital goods to the existing stock
Statement 2: Bus purchased by a school is a final of capital during the given year is known as_______.
good. (a) Gross costs
In the light of the given statements, choose the correct (b) Depreciation
alternative from the following: (c) Net investment
(d) Gross investment
(c) Both statements 1 and 2 are false Ans :
(d) Both statements 1 and 2 are true (a) Consumption goods
o
Ans : (d) Gross investment
10. From the given data of an imaginary economy, find during deficit and foreign currencies are purchased
the value of consumption expenditure: during surplus. When the official reserves increase
(i) Autonomous Consumption = `150 crore or decrease, it is called “overall balance of payments
(ii) Marginal Propensity to Consume = 0.75 surplus or deficit” respectively.
(iii) National Income = `1,000 crore Official Reserve Transactions help to adjust the deficit
(a) `900 crore and surplus in balance of payments.
(b) `700 crore o
(c) `850 crore There is an inverse relation between foreign exchange
and the demand for foreign exchange. Higher the
(d) `800 crore
foreign exchange rate, the lower the demand for
o foreign exchange and lower the foreign exchange rate,
From the given data of an imaginary economy, find higher the demand for foreign exchange. At a lower
the value of national income: price of US dollar, India is ready to buy more goods
(i) Autonomous Consumption = `200 crore from USA. This raises the demand for US dollars.
(ii) Marginal Propensity to Consume = 0.70
(iii) Investment = `700 crore
(a) `4,000 crore
(b) `3,000 crore
(c) `1,000 crore
(d) `2,000 crore
Ans :
(a) `900 crore
o
(b) `3,000 crore
So, lower the price of US dollars, higher is the

demand for US dollars and vice versa. Graphically,
the demand curve of foreign exchange is downward
sloping signifying the inverse relation between foreign
exchange rate and demand for foreign exchange.
Short Answer Questions (Q11 to Q12) 3´2=6 In the figure, at price OP, the demand for foreign
exchange is OF. At a lower price OP0, the demand is
11. What are official reserve transactions (ORT)? Explain OF1, i.e., higher. At a higher OP1, demand for foreign
their importance in the Balance of Payments Account. exchange is OF0, i.e., lower.
o [Note: Diagram is not asked in the question but given
Explain why there is a rise in demand for foreign for understanding purpose.]
exchange when its price falls.
Ans : 12. What is depreciation of Rupee? What is its likely
impact on Indian imports and how?
The transactions carried by the monetary authority of
a country, which cause changes in official reserves, Ans :
are termed as “Official Reserve Transactions” (ORT). When the exchange rate rises, the value of domestic
These transactions are carried through purchase or currency, such as rupee in case of India, falls. It is
sale of currency in the exchange market for foreign “depreciation of rupee”. It makes imports expensive
currencies or other assets. The reserves are drawn as to import one unit of foreign currency worth of
by selling foreign currencies in exchange market goods and services, the domestic purchaser have to
part with more rupees. Since the imports become Ans :

costly on account of the depreciation of rupee, so they The function of money indicated in the given text
(imports) are likely to fall. is ‘medium of exchange’. Money acts as medium
of exchange as it facilitates exchange through a
Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12 common medium, i.e., currency. With money as
a medium, the two components of a transaction
namely, sale and purchase can be easily separated. In
13. Suppose in the budget, the government proposed to other words, money eliminates the need for double
raise the excise duty on cement. It also proposed to coincidence of wants for an exchange to take place
raise the income tax on individuals earning more than and can be performed independently of each other.
rupees one crore per annum. Moreover, money has widened the domain and scope
(a) Identify and explain the type of taxes proposed of market. Today, market is no more limited to a
by the government. specific geographical location. This can be verified
(b) Was the objective only to earn revenue for the by the increasing popularity of online transactions.
government? Hence, it can be concluded that money has infused
(c) What possible welfare objective could the commercialisation, which has raised the overall level
government be considering? of economic activities and has made production
market oriented.
Ans :
(a) (i) Excise duty levied on cement is an indirect
tax, as the liability to pay and incidence of
this tax lies on different persons. It is a tax 15. “Economists are generally concerned about the rising
imposed on the manufacturing stage but Marginal Propensity to Save (MPS) in an economy.”
its incidence is shifted to the consumers of Why so? Explain.
cement. o
(ii) Income tax is a direct tax as the liability to Explain all the changes that take place in an economy,
pay and the incidence of the tax lies on the when AD is not equal to output.
same person. Ans :
(b) No, the objective of the government budget is not
Economists are justified in being concerned about the
only to earn revenue for the government but also
rising MPS in the economy, as rising MPS would be
to achieve its welfare motive.
at the cost of falling MPC. This is a cause of grave
(c) It aims to narrow down the gap between the rich
concern, as the proportion of additional income going
and the poor, i.e., it wants to move towards an
to consumption falls. Thus, fall in consumption will
egalitarian society, to help the poor in the society.
have an adverse impact on the economy, culminating
So, the proceeds from the tax paid can be utilised
in a fall in the equilibrium level of income in the
for helping the poor (have-nots). Inequality in
economy.
income will be narrowed down, in the larger
o
interest of the poor.
When AD is not equal to output (Y) (AD # Y) two
situations are to be assessed.
14. Read the following text carefully and discuss briefly (a) Suppose AD > Y, as a result, the producers find
the relevant function of the money indicated here. their inventories depleting faster than expected.
Right from the beginning, money has been To maintain the inventory level, producers
performing the various important functions in the produce more. Thus, output starts rising and
society. Money facilitates transactions of goods and continues to rise till AD equals Y once again.
services. Producers sell their goods to wholesalers. (b) Suppose AD < Y, as a result, producers find
Wholesalers, in turn, sell their goods to the retailers that the inventories start piling up above the
and the retailers sell these goods to the consumers. expected level. To bring down the inventories to
In the same way, all sections of society sell their the expected level, they start producing less. So,
services for money and with that money, buy goods output starts falling and continues to fall till AD
and services which they need. equals Y once again.
Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12 = 150 + 250 + 640 + 1,000 - 30

= `2,010 crores
16. (a) From the following data, calculate National (b) Generally it is considered that an increase in the
Income by Income Method: Gross Domestic Product (GDP) of any economy
(India in this case) ensures increase in welfare of
(` in crores)
the people of the country. However, this may not
(i) Interest 150 always be correct.
(ii) Rent 250 Some of the prime reasons for the same are:
(iii) Government final consumption 600 (i) Unequal distribution and composition of GDP
expenditure (ii) Non-monetary transactions in the economy which
(iv) Private final consumption 1,200 are not accounted for in GDP
expenditure (iii) Occurrence of externalities in the economy (both
positive and negative)
(v) Profits 640
o
(vi) Compensation of employees 1,000
(vii) Net factor income to abroad 30
(viii) Net indirect taxes 60
(ix) Net exports (—) 40
(x) Consumption of fixed capital 50
(xi) Net domestic capital formation 340
(b) “India’s GDP is expected to expand 7.5% in (a) (i) Value Added by firm A
2019-20: World Bank” —The Economic Times
= Sales by firm A + Closing stock of firm A
Does the given statement mean that welfare of people
of India increase at the same rate? Comment with - Opening stock of firm A - Purchases from firm
reason. B by firm A
o
= 300 + (60 - 75) - 120
(a) On the basis of the following data about an
economy which constitutes of only two firms, = `165 lakhs
find out Value added by firms A and B. (ii) Value Added by firm B
= Sales by firm B + Closing stock of firm B
(` in lakhs)
(i) Sales by firm A 300 - Opening Stock of firm B - Purchases from firm
(ii) Purchases from firm B by firm A 120 A by firm B - Purchases from firm A by firm
(iii) Purchases from firm A by firm B 180 = 600 + (105 - 135) - 180
(iv) Sales by firm B 600 = `390 lakhs
(v) Closing stock of firm A 60 (h) Real GDP = 200
(vi) Closing stock of firm B 105 Nominal GDP = 210
(vii) Opening stock of firm A 75
Real GDP = Nominal GDP #
100
(viii) Opening stock of firm B 135 Price Index
210
(ix) Indirect taxes by both firms 90 200
=
Price Index 100
#
(b) If the Real Gross Domestic Product is `200 and Price Index = 210
200 # 100 `105
=
the Nominal Gross Domestic Product is `210,
calculate the Price Index (base = 100). 17. Briefly explain the concept of under-employment
Ans : equilibrium with the help of diagram. How does
an increase in investment help in achieving full
(a) NI/NNPFC by the Income Method:
employment equilibrium?
NNPFC = (i) + (ii) + (v) + (vi) - (vii)
Ans :
Keynes believed that an economy can be in Section B -Indian Economic Development

equilibrium at a less than full employment level. It
is a normal situation and called ‘underemployment
equilibrium’ situation. Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10
When at the level of full employment (OF), AD is
less than Y, the deficiency in AD is called `deficient 18. Read the following statements carefully:
demand’. It is shown by the distance AB in the Statement 1: Cultural Revolution in China is also
diagram. Economy is in equilibrium at point X which known as Great Leap Forward Cultural Revolution.
denotes “underemployment equilibrium” because Statement 2: In cultural revolution, students and
AD = Y at this point. OQ is the equilibrium output, professionals were sent to work and learn from the
which is less than the full employment level of output foreign countries.
OF, i.e., QF denotes “idle-capacity” available for In the light of the given statements, choose the correct
utilisation. An increase in AD the investment will alternative from the following:
affect output and, thus, employment through increase (a) Statement 1 is false and statement 2 is true
in productive capacity. (b) Statement 1 is true and statement 2 is false
Ans :
19. Name the state which is held as a success story in the

efficient implementation of milk cooperatives.
(a) Gujarat
(b) Maharashtra
(c) Andhra Pradesh
(d) Punjab
Ans :
(a) Gujarat
With increase in investment activity, production 20. When did regional rural banks initiated in India?
will increase from OQ to OF More production will (a) 1975 (b) 1970
generate more jobs and more employment will (c) 1985 (d) 1980
increase the national income. So, from a state of
underemployment equilibrium (point X), the increase Ans :
in investment will help in achieving full employment (a) 1975
equilibrium
(AD = Y at the level of full employment). 21. Arrange the following events of China in chronological
order and choose the correct alternative:
(i) Great Leap Forward Campaign
(ii) First Five Year Plan
(iii) Great Proletarian Cultural Revolution
(iv) Introduction of Economic Reforms
(a) (ii), (i), (iii), (iv)
(b) (iv), (i), (ii), (iii)
(c) (ii), (iv), (iii), (i)
(d) (iv), (ii), (i), (iii)
Ans : 24. Observe the given picture carefully and answer the
(a) (ii), (i), (iii), (iv) question that follows:
22. In Pakistan, most of the foreign exchange earnings

come from:
(i) Sustainable export of manufactured goods
(ii) Remittances from Pakistani workers working in
Middle East
(iii) Export of highly volatile agricultural goods
(a) (i) and (iii)
(b) (i) and (ii)
(c) (i), (ii) and (iii)
(d) (ii) and (iii) Roadside vending is an increasing variety of_____
unemployment.
Ans : (a) informal
(d) (ii) and (iii) (b) formal
(c) Neither (a) nor (b)
Ans :
(a) informal
choose the correct pair of statement:
25. National Bank for Agriculture and Rural Development
Column I Column II (NABARD) was set up in______.
A. Agrarian (i) An economy with about (a) 1981 (b) 1980
Economy 50% of the country’s (c) 1983 (d) 1982
population earning their
o
living from agriculture.
Diversification of growth process can be achieved
B. Export (ii) During the British through the development of______sector.
Surplus regime, India’s imports (a) Industrial
exceeded its exports.
(b) Agricultural
C. Mortality (iii) Annual number of
(c) Service
Rate deaths per 100 people
(d) None of these
D. Occupational (iv) Distribution of
Structure workforce as per their Ans :
occupation (d) 1982
Alternatives : o
(a) B-(ii) (b) A-(i) (a) Industrial
(c) D-(iv) (d) C-(iii)
o 26. Read the following statements-Assertion (A) and
India enterned the______stage of demographic Reason (R). Choose one of the correct alternatives
transition after the year 1921. given below:
(a) second (b) fourth Assertion (A): In order to attract foreign investors,
(c) fourth (d) third Special Economic Zones (SEZs) were set up.
Reason (R): SEZ is a geographical reason that has
Ans : economic laws different from the country’s typical
(c) D-(iv) Or (a) second economic laws. Usually, the goal is to increase foreign
investment.
Alternatives: Short Answer Questions (Q28 to Q29) 3´2=6

Reason (R) is not the correct explanation of 28. Explain the concept of ‘Privatisation’. Throw light on
Assertion (A) the “different status designated to the Public Sector
(b) Both Assertion (A) and Reason (R) are true and enterprises (PSEs)”.
Ans :
(A)
(c) Assertion (A) is false but Reason (R) is true Privatisation refers to shedding the ownership or
management of a government owned enterprise. It is
done in two ways:
o (i) By withdrawing the government from the
Read the following statements-Assertion (A) and ownership and management of public sector
Reason (R). Choose one of the correct alternatives companies.
given below: o
Assertion (A): Pakistan received finance from western (ii) By outright sale of public sector companies.
nations and remittances from emigrants to the middle To improve efficiency, inject professionalism and
countries. enable them to compete more effectively in the global
Reason (R): This helped the country in stimulating liberalised environment, the government identified
economic growth. the Public Sector Enterprises (PSE’s) as `Maharatnas,
Alternatives: Navratnas and Miniratnas’. These were given greater
(a) Both Assertion (A) and Reason (R) are true and operational and managerial autonomy in order to take
Reason (R) is not the correct explanation of various decisions to run the company efficiently and
Assertion (A) thereby increase their profit. In fact the granting of
(b) Both Assertion (A) and Reason (R) are true and ‘status’ brought about better performance of these
Reason (R) is the correct explanation of Assertion companies.
(A)
Ans :
Or (b) Both Assertion (A) and Reason (R) are true and
29. Explain the ‘Permit license raj’.
o
27. Read the following statements carefully: Explain the ‘policy of protection’ in industries.
Statement 1: Brudtland Commission emphasises on
adoption of techniques which help in sustainable Ans :
development. To begin with the need to procure a license to start an
Statement 2: Appiko movement took place in the industry was misused by the big industrial houses. A
Himalayas. big industrialist would get a license not for starting a
In the light of the given statements, choose the correct new firm but for preventing competitors from starting
alternative from the following: new firms.
(a) Statement 1 is false and statement 2 is true • The excessive regulation of ‘permit license raj’
(b) Statement 1 is true and statement 2 is false permitted certain firms from becoming more
(c) Both statements 1 and 2 are false efficient.
• More time was spent by the industrialists in
obtaining a license or lobby with the others,
Ans : rather than on improving their product.
(b) Statement 1 is true and statement 2 is false o
• Policy of protection in industries facilitated the unit with the maximum investment allowed of
development of indigenous industries. rupees ten crore.
• This policy protected the domestic industries • SSI are considered to be more labour-intensive
from foreign competition. Protection from so they generate more employment.
imports took two forms, that of tariffs and quotas. • SSI cannot compete with large industrial firms.
• It was based on the belief that industries • SSI were given special concessions like lower
of developing countries could not face the rate of interest on loans and lower excise duty,
competition from goods produced by the etc.
industries of developed countries. o
• Agricultural diversification is helpful for farmers
in the sense that the big risk which they face in
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 solely depending upon farming for livelihood
gets reduced.
30. Answer the following questions on the basis of the • Diversification towards new areas is also
following data: necessary to provide productive sustainable
Comment on the (a) Infant Mortality Rate (IMR) in options to the livelihood of the rural masses.
Pakistan • Diversification provides supplementary and
(b) Percentage of Undernourished Children among gainful employment during off-season.
the given two countries. • Diversification in agriculture thereby enhances
the income level of rural people. Hence, it helps
Country IMR (Per 1000 Undernourished to overcome poverty.
live births) Children%
China 9 9
Pakistan 66 45
Ans :
(a) Infant Mortality Rate (IMR) is the highest in
Pakistan at 66 (per 1000 live births) in contrast to
9 in China. The sex ratio is low and biased against
females. Preference for a son prevails which leads
to the above problem in Pakistan.
(b) Undernourished children in Pakistan are very
high (45%) as compared to China (9%). This is
because of high level of poverty and large sized
32. Analyse the growth of GDP and changing structure
families.
of employment.
Mothers are undernourished during pregnancy so
the children also suffer from malnutrition even Ans :
after birth. During the period of 1950-2010, Gross Domestic
Whereas in China because of the ‘One-child’ Product (GDP) of India grew at a positive rate and
norm for a long time the children are healthy and was higher than the rate of employment growth.
better nourished. During this period the employment grew at the rate of
not more than 2% whereas fluctuations were always
31. Mention any four features of small scale industries. noticed in the field of growth of GDP.
o • There had been a disheartening development in
How is agricultural diversification helpful for the late 1990’s as the employment growth started
farmers? Explain. declining and reached to the level it witnessed in
the early stages of planning.
Ans :
• Another important observation of this period
Four features of small scale industries are: was the widening gap between the growth of
• Small Scale Industries (SSI) are an industrial GDP and employment. This implies that in India
we have been able to produce more goods and depleted water resources and increased flooding
services without generating employment. This throughout much of the surrounding areas.
phenomenon refers to “jobless growth”. (a) What was Chipko Movement? How were
• Distribution of workforce by the industrial villagers depended upon forest for their survival?
sectors shows the following changes in the (b) How have people tried to prevent indiscriminate
structure of employment. cutting of trees? Discuss the two movements
• A substantial shift was noticed from farm work started by them for achieving the objective.
to non-farm work. Like during 1972-73 about
74% of workforce was engaged in primary Ans :
sector and in 2011-12, this proportion declined (a) Chipko Movement was the non-violent, social
to about 50%. and ecological movement by rural villagers,
• Share of secondary and service sector increased particularly women in India in the 1970s,
from 11% to 24% and 15% to 27% respectively, aimed at protecting trees and forests slated for
during the same period. government-backed logging. The villagers were
• The movement of people from self-employment depended heavily on the forests for subsistence-
and regular salaried employment to casual wage both directly, for food and fuel and indirectly
work has been the other noticeable feature for services as water purification and soil
(1972-2012). But self-employment continues stabilisation.
to be the major employment provider. The (b) The people have tried to prevent indiscriminate
above movement is known as Vasualisation cutting of trees through a silent revolution. Chipko
of workforce’, which leads to their high and Appiko are two such movements. The seeds
vulnerability. of Chipko-popularly known as the ‘tree huggers’-
were sown in the early 1980s in northern India
and the forests of the Himalayas. The villagers
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 hugged the trees, saving them by interposing their
bodies between them and the contractors’ axes.
33. Read the following text carefully and answer the In India, the Chipko movement which has been
given questions on the basis of the same and common active since 1973 is one of the most successful
understanding: examples of people-orientated environmental
Chipko Movement, also called Chipko Andolan, restoration in parts of the Himalayan region. The
non-violent social and ecological movement by main aim of this movement, in which women play
rural villagers, particularly women, in India in the a key role, is tree protection and plantation. Like
1970s, aimed at protecting trees and forests slated the Chipko movement, the Appiko movement
for government-backed logging. The movement was launched to save the tropical forests of the
originated in the Himalayan region of Uttarakhand Western Ghats. This simple non-violent action
(then part of Uttar Pradesh) in 1973 and quickly spread became popular and people have joined this
throughout the Indian Himalayas. The Hindi word movement spontaneously.
chipko means “to hug” or “to cling to” and reflects the
demonstrators’ primary tactic of embracing trees to
impede loggers. The interior roads built for the conflict
attracted many foreign-based logging companies that
sought access to the region’s vast forest resources.
Although the rural villagers depended heavily on the
forests for subsistence-both directly, for food and fuel,
and indirectly, for services such as water purification
and soil stabilisation-government policy prevented
the villagers from managing the lands and denied
them access to the lumber. Many of the commercial
logging endeavours were mismanaged, and the clear-
cut forests led to lower agricultural yields, erosion,
34. “Global CO2 levels hit new record in 2017.” of capital and lack of modern and advanced
— The United Nations technology, industrial sector could not gain its
momentum and could not generate sufficient
(a) Why is the world faced with an environmental employment opportunities in the country.
crisis? (d) Agriculture still a seasonal occupation: Even
(b) Why do environmental problem emerge in recent after approximately 70 years of independence,
times? agriculture in India, still does not have access
o to adequate irrigation facilities, rendering it to
“Existence of widespread unemployment in India is be a seasonal occupation. Because of this, the
the cumulative result of many causes.” Explain any workforce engaged in farming activities remain
four main causes of unemployment in India. unemployed for 3-4 months in a year.
Ans :
(a) Global warming is an average increase in the
******
temperature of the atmosphere near the earth’s
surface, which can lead to changes in global
climate patterns. The causes of environmental
crisis are:
• Rapid growth of world population placing
increasing demand on scarce resources is
degrading the global ecosystem.
• Carbon emission has greatly increased over the
past 200 years.
(b) The problem of environmental crisis has emerged
in recent times because discovered coal, factories
and motor vehicles, leading to more of carbon
dioxide in the environment. Increased population
wants to live with refrigerators, televisions and
motor vehicles with air conditioning. This puts
tremendous pressure on government all over
the world to provide more and more electricity.
Most electricity is produced by burning coal and
other fossil fuels. Thus, the greatest advances in
humanity’s capacity to harness energy and meet
its own ends has led to environment crisis in
recent times.
o
The causes of unemployment problem in India are:
(a) Slow rate of economic growth: The actual growth
rate always lies far below the rate targeted
in the five decade of planning. Employment
opportunities created under the plans could not
keep balance with the additions to the labour
force.
(b) Population explosion: The rapid increasing rate
of population growth has been another causeof
increasing unemployment in the country. It has not
been possible to generate so many employment
opportunities to absorb the large growing labour
force.
(c) Slow growth of industry: Due to shortage

ECONOMICS (030)
Section A -Macro Economics alternative from the following:

Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (c) Both statements 1 and 2 are false
1. Which out of the following items is not included in
money supply of a country? Ans :
(a) Demand deposits (b) Statement 1 is true and statement 2 is false
(b) Coins and Currency
(c) Time deposits 4. Read the following statements carefully:
(d) None of these Statement 1: The significance of money as a ‘medium
of exchange’ is that money can be stored for use in
Ans : future.
(c) Time deposits Statement 2: The ‘Unit of Account’ function means
that monetary unit is treated as the standard unit for
2. What will be the value of total deposits if initial quoting prices or borrowing and lending activities etc.
deposit is `500 crores and LRR is 10%? In the light of the given statements, choose the correct
(a) `4,000 alternative from the following:
(b) `4,500
(c) `4,500
(d) `5,000
Ans :
Ans :
(d) `5,000

Statement 1: A bank is a financial institution whose 5. ______exchange rate is officially declared by the
demand deposits are widely accepted as money for government.
making payments and has the power to create money. (a) Floating
Statement 2: Central bank is a financial institution (b) Fixed
which accepts deposits from the public and advances (c) Managed floating
loans to others. (d) None of these
or or
Identify which of the following are the sources of (a) Capital loss
demand for foreign currency.
(i) Import of goods and services 8. Identify the correct pair from the following Column I
(ii) For making investments abroad and Column II:
(iii) Export of goods and services
(iv) Grants and donation Column I Column II
(a) (i) and (iii) A. Investment by (i) Credit side of
(b) (i) and (ii) Apple phones in current account of
(c) (ii) and (iv) India BoP
(d) (iii) and (iv) B. Remittances to (ii) Debit side of
relative staying current account of
Ans : abroad BoP
(b) Fixed C. Export of software (iii) Debit side of
or to Germany current account of
(b) (i) and (ii) BoP
D. Import of (iv) Capital account of
6. In order to encourage investment in the economy, the Machinery from BoP
Central Bank may_______. France
(a) increase cash reserve ratio Alternatives:
(b) reduce cash reserve ratio (a) B - (ii) (b) A - (i)
(c) increase bank rate (c) D - (iv) (d) C - (iii)
(d) sell government securities in open market
Ans :
Ans : (a) B - (ii)
(b) reduce cash reserve ratio
given below:
Assertion (A): Rent received by an Indian real
estate company from Google in New York would be
recorded on credit side of capital account.
Reason (R): Capital account of BoP records all those
7. Foreign embassies in India are a part of India’s: transactions, between residents of a country and rest
(a) Geographical territory of the world, which causes a change in the assets
or liabilities of the residents of the country or its
(b) Economic territory
government.
(c) Both (a) and (b) Alternatives:
(d) None of these (a) Both Assertion (A) and Reason (R) are true and
or Reason (R) is not the correct explanation of
Unforseen obsolescence of fixed capital assets during Assertion (A)
production is: (b) Both Assertion (A) and Reason (R) are true and
(a) Capital loss Reason (R) is the correct explanation of Assertion
(b) Income loss (A)
(c) Consumption of fixed capital (c) Assertion (A) is false but Reason (R) is true
(d) None of these (d) Assertion (A) is true but Reason (R) is false
Ans : Ans :
(a) Geographical territory (c) Assertion (A) is false but Reason (R) is true
10. Demonetisation aimed at_______.

(a) To curb counterfeiting
(b) To curb corruption
(c) To curb the high denomination notes for illegal
activities
(d) All of these
or
Which of the following is not a function of the Central Ans :
Bank?
(a) Banking facilities to public (a) GNPMP = (i) + (iv) + (ii)
(b) Lending to commercial banks = 25,215 + 40 + 1,575
(c) Lending to government = `26,830 crores
(d) Banking facilities to government
(b) NNPFC = (i) + (iv) - (iii)
Ans : = 25,215 + 40 - 1,000
(d) All of these = `24,255 crores
or or
(a) Banking facilities to public The given picture indicates that foreigners do have
share in our economy on the account of factor income
earned by them included in domestic income of our
economy. We know that
Domestic income = National income — Net factor
Short Answer Questions (Q11 to Q12) 3´2=6 income from abroad
Domestic income = National income — [Factor
11. Name the broad categories of transactions recorded income from abroad — Factor income to abroad]
in the ‘capital account’ of the Balance of Payments Domestic income = National income — Factor
Accounts. income from abroad + Factor income to abroad
Hence above identity prove that domestic income
Ans :
includes the factor income earned by foreigners in
Capital account of the Balance of Payments Accounts our economy.
records the following transactions:
(a) Borrowings from and to abroad
(b) Investments from and to abroad
(c) Decrease and increase in foreign exchange
reserves Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12
12. Calculate (a) GNPMP and (b) NNPFC from the 13. Explain the concept of ‘Break-even point’ with the
following data. help of a diagram.
(` in crores) Ans :
(i) GDPFC 25,215 The point of intersection of the consumption curve
(ii) Net indirect taxes 1,575 CCl and the 45° line is called the “break-even point”.
(iii) Depreciation 1,000 It is shown by point ‘B’ in the diagram as C = Y, and
savings are zero at this point.
(iv) Net factor income from abroad 40
Y=C+S
or
Interpret the picture on account of domestic and C =Y—S
national income. S =Y—C
Ans :
The saving function is:
S = - C + ^1 - bh Y
-
Here C is called the intercept and it represents the
amount of savings done when there is zero level of
income. Savings is negative at zero level of income
because at zero level of income, consumption is
positive. Negative savings is nothing but dissaving,
this means that at zero level of income there is
dissaving of amount - C .
At the break-even point there are neither savings nor

dissavings as Y = C.
• To the left of point B, C > Y, i.e., dissavings are
there.
• To the right of point B, Y > C, i.e., savings take
place.
The coefficient ( 1 - b ) measures the slope of the

savings function. The slope of the savings function
gives the increase in savings to per unit increase in
income. This is known as marginal propensity to
14. Distinguish between average propensity to consume save (MPS). Since b, i.e., MPC is less than one, it
and average propensity to save. What is the relation follows that (1 - b), i.e., MPS is positive. Savings is
between the two? an increasing function of income. The given figure
illustrates the idea. Y denotes income.
Ans :
[Note: Diagram is not asked, but given for
• Average Propensity to Consume (APC) is the understanding purpose only.]
ratio of total consumption to total income, i.e., or
C
APC = Y whereas Average Propensity to Save The components of aggregate demand are:
(APS) is the ratio of total savings to total income, i.e., Aggregate demand represents the planned expenditure
S on final goods and services in an economy during a
APS = Y
• The relationship between APC and APS is as period of time.
follows: There are four components of aggregate demand
(AD):
APC + APS = 1
(a) Private Consumption Expenditure (C): It is the
APC = 1 - APS most important component of aggregate demand.
APS = 1 - APC It refers to the total amount of expenditure
incurred by the households on the purchase of
final goods and services to satisfy their wants.
15. Explain the components of savings function
(b) Investment Expenditure (I): It refers to the
S = - C + ^1 - bh Y .
expenditure incurred by the private firms on
or
the purchase of capital goods such as plant and
Explain the components of aggregate demand.
equipment, construction work, etc.
(c) Government Expenditure (G). It refers to the (iii) Sales 25

expenditure incurred by the government on the
purchase of final goods and services. The level (iv) Net change in stock (—)2
of government expenditure is determined by the (v) Taxes on production 1
government’s policy. or
(d) Net Exports: Net exports is the difference (a) Calculate National Income:
between exports and imports. It shows the
effect of domestic spending on foreign goods (` crores)
and services (Imports) and foreign spending on (i) Corporation tax 100
domestic goods and services (Exports). (ii) Private final consumption 900
expenditure
(iii) Personal income tax 120
(iv) Government final consumption 200
expenditure
(v) Undistributed profits 50
(vi) Change in stocks (-) 20
(vii) Net domestic capital formation 120
Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12 (viii) Net imports 10
(ix) Net indirect tax 150
16. (a) Calculate Gross National Product at Factor Cost (x) Net factor income from abroad (-) 10
from the following data by the Income Method: (xi) Private income 1,000
(` in crores) (b) Explain the treatment assigned to the contribution

to provident fund by an employee.
(i) Private final consumption 1,000
expenditure Ans :
(ii) Net domestic capital 200
(a) GNPFC by Income Method
formation
(iii) Profits 400 = (iii) + (iv) + (v) + (viii) + (vii) + (x)
(iv) Compensation of employees 800 = 400 + 800 + 250 + 150 + 60 + (-10)
(v) Rent 250 = `1650 crores
(vi) Government final 500 (b) NVAMP = (iii) + (iv)
consumption expenditure - (ii) - *Depreciation
(vii) Consumption of fixed capital 60 = 25 + (-2) - 6 - 3
(viii) Interest 150 = `14 Lakhs
(ix) Net current transfers from rest (—) 80 Cost of the fixed capital good
*Depreciation = Life span
of the world
(x) Net factor income from (—) 10 = 15 = 3
5
abroad or
(xi) Net exports (—) 20 (a) National Income/NNPFC
(xii) Net indirect taxes 80 = (ii) + (iv) + (vii) - (viii) + (x) - (ix)
(b) Find out Net Value Added at market price: = 900 + 200 + 120 - 10 + (-10) - 150
= `1,050 crores
(` Lakhs) (b) Contribution to PF by the employees is paid out
(i) Fixed capital good with a life 15 from the compensation of employees, thus it is
span of 5 years not considered separately in NI calculation. This
(ii) Raw materials 6 is to avoid its double counting.
17. How can the instrument of government budget in an (a) only (ii)
economy be used for proper allocation of resources (b) only (iii)
and economic stability? (c) (i) and (ii)
Ans : (d) (iii) and (iv)
(a) Indeed, the government, through its budget, can Ans :
be instrumental to promote proper allocation of
resources in the economy. This could be done by (d) National Bank for Agriculture and Rural
promoting the development of remote backward Development
regions in the economy, left out from the orbit of or
development till so far. It can offer incentives to (b) only (iii)
the private sector like tax concessions, subsidies
to lure them to start their projects in these areas, 19. Arrange the following events of China in chronological
in the interest of the masses. This will promote order and choose the correct alternative:
the march towards a better and equitable (i) Special Economic Zones
distribution of resources to remove imbalances in (ii) Introduction of Economic Reforms
the economy. (iii) First Five Year Plan
(b) Instrument of government budget can also be used (iv) Great Leap Forward campaign
for bringing economic stability in the economy. Choose the correct alternative:
Government can control large scale fluctuations (a) (iv), (iii), (ii), (i)
in prices which lead to uncertainties. Government (b) (ii), (iv), (iii), (i)
can control these fluctuations through its taxation (c) (ii), (iv), (i), (iii)
and expenditure policy. During inflation, it can
(d) (iv), (ii), (i), (iii)
raise its revenue and reduce its expenditure.
During period of deflation, it can give tax Ans :
concessions and subsidies to encourage spending (a) (iv), (iii), (ii), (i)
and also increase its own expenditure.
Section -Indian Economic Development
18. Which of the following is the apex body of rural

finance in India?
(a) Reserve Bank of India
(b) Regional Rural Bank
(c) Land Development Bank
(d) National Bank for Agriculture and Rural 20. During the colonial period life expectancy was:
Development (a) 32 years
or (b) 68 years
Identify the incorrect statement(s) from the following: (c) 54 years
(a) Human capital represents enhanced labour (d) 50 years
productivity. or
(b) Investment in human capital enhances efficiency General Agreement on Trade and Tariff (GATT) was
and skills, implying economic growth. established in 1948 with ______ member countries as
(c) Human capital is separable from its owner. global trade partners.
(d) Human capital treats human beings as a means to (a) 22 (b) 23
an end. (c) 20 (d) 21
Ans : (d) Assertion (A) is true but Reason (R) is false

(a) 32 years Ans :
or
(b) 23

21. Observe the given image carefully and answer the
Statement 1: Work Participation Rate (WPR) is a
question that follows:
measure of proportion of the country’s unemployed
people.
Statement 2: The formula to calculate worker
population ratio is total number of workers of divided
by population multiply by 100.
Ans :
Dam construction work is a ________ way of

employment generation by the government.
(a) hidden
(b) indirect
(c) direct
(d) None of these
24. As per NSSO data, in the year 2011-12, the rate of
Ans : unemployment among youth males in urban areas
(c) direct was:
(a) 30%
22. Read the following statements-Assertion (A) and (b) 25%
Reason (R). Choose one of the correct alternatives (c) 19%
given below: (d) 16%
Assertion (A): Great Proletarian Cultural Revolution or
was started in the year 1966 in China. India adopted social banking and multi-agency
Reason (R): It aimed at industrialising the country on approach to meet the needs of rural credit after:
a massive scale. (a) 1969
Alternatives: (b) 1972
(c) 1967
Assertion (A) (d) 1968
Reason (R) is the correct explanation of Assertion (d) 16%
(A) or
(c) Assertion (A) is false but Reason (R) is true (a) 1969
25. Read the following statements carefully: choose the correct pair of statement:
Statement 1: G-8 was initially formed in 1970 with
Column I Column II
four member countries.
Statement 2: SAARC was formed on the proposal of A. India had about 473 million (i) 2012-13
Zia-ur-Rahman, the President of Bangladesh. strong workforce
In the light of the given statements, choose the correct B. People moved from self- (ii) 1974-2015
alternative from the following: employment to casual
(a) Statement 1 is false and statement 2 is true wage work
(b) Statement 1 is true and statement 2 is false C. India started paying (iii) Late 1975
(c) Both statements 1 and 2 are false attention to enterprises in
(d) Both statements 1 and 2 are true the informal sector
D. A study showed about 1/3rd (iv) Late 1950s
Ans : of agriculture workers
(a) Statement 1 is false and statement 2 is true in India as ‘disguised
unemployed’
26. Read the following statements-Assertion (A) and Alternatives:
Reason (R). Choose one of the correct alternatives (a) C - (iii)
given below:
(b) D - (iv)
Assertion (A): All the three countries have started
planning their development strategies in similar (c) A - (i)
ways. India announced its first five-year plan in 1951, (d) B - (ii)
Pakistan announced in 1956, and China announced Ans :
in 1953.
Reason (R): Till 1980s, all three countries had similar (b) D - (iv)
growth rates and per capita incomes.
Assertion (A) 28. “The British intended to achieve their colonial
interests through their policies of infrastructure
development in India.” Do you agree? Give their
main objectives.
(A)
(c) Assertion (A) is false but Reason (R) is true Ans :
(d) Assertion (A) is true but Reason (R) is false Yes, indeed the British intended to achieve their
colonial interest through their policies of infrastructure
Ans : development in India.
(a) Both Assertion (A) and Reason (R) are true and The main objective behind development of
Reason (R) is not the correct explanation of Assertion infrastructure in India by the British was to serve their
(A) colonial interests.
(a) The roads were built to be used for mobilising the
army within India.
(b) Roads were also used to carry out raw materials
from one part of the country to another.
(c) Waterways were used to send raw material to far
off places like Britain.
(d) The railways were developed to promote
commercialisation of Indian agriculture which
27. From the set of events/systems given in Column I adversely affected the self-sufficiency of the
and corresponding relevant fact given in Column II, village economy in India.
29. How does a socialist society answer the three Industry 30 43

questions, related to What, How and For Whom?
Services 53 48
or
Give any three goals of the Five Year Plans in India. Total 100 100
Ans : Ans :
A socialist society answers the three questions (a) In China, as per the normal course of development,
related to “What, How and For Whom” through the agriculture is contributing the least (9%) and
government, which as a central body, decides what Industry and Service sector contribute highly to
goods are to be produced according to the needs of its GDP at 43% and 48% respectively. In India,
the people. It is assumed that the government knows agriculture contributed the least 17% followed by
what is good for the people of the country. Individual industry at 30% and services at 53%.
consumers are not given much importance. Thus it is (b) In both the countries services sector is emerging
the government which acts as the deciding authority the major player of development as it contributes
on how goods are to be produced and how they should the most to GDP - 53% (India) and 48% (China).
be distributed. But in China, Industry has also a significant
or contribution in GDP, i.e., 43%.
(a) Growth as a goal of the Five Year Plans in India
refers to the increase in the country’s capacity to 31. “Eliminating subsidies will violate the goal of equity.”
produce the output within the country. A steady Accept/Refute. Give reason in support of your answer.
increase in the Gross Domestic Product (GDP) of
a country is a good indicator of economic growth. Ans :
It is necessary to produce more output, i.e., the Yes, it is accepted that the elimination of subsidies will
size of the cake of GDP should be big, so as to definitely violate the goal of equity. In other words, it
enjoy a richer life. will increase the inequality between the rich and the
(b) Modernisation: Adoption of new technology is poor farmers. This is because most of the farmers in
called “modernisation”. But it is a wide term as India are poor and it will be very difficult for them to
it also includes changes in the social outlook like afford the required inputs without subsidies. Rather
giving recognition to the talent of women in the they will become further poor.
work place etc. Instead of eliminating subsidies it should be ensured
(c) Self-reliance refers to reducing imports of those that their benefit reaches the right hands, i.e., the poor
goods which can be produced in the country itself. farmers. It should be strictly and seriously seen that
It was considered necessary in order to reduce our the subsidies should not benefit fertilizer industry
dependence on imported food supplies, foreign and the big farmers only, but the poor farmers should
technology and foreign capital. enjoy the benefit of subsidies exclusively as they are
intended to be meant for them.
32. Explain the ‘Operation Flood’.
30. Answer the following questions on the basis of the or
following data: “Horticulture sector contributes to nearly one-third of
(a) Comment upon the contribution to GDP the value of agricultural output.” Substantiate.
sectorwise in India and China during 2014-2015. Ans :
(b) Which sector is a major player in both the Between 1951 - 2016 milk production in the country
countries? increased more than ten times, mainly on account of
the successful implementation of ‘Operation Flood’.
Sectoral contribution to GDP(%) in 2014-15
This is a system in which all the farmers can pool
Sector Contribution to GDP their milk produced according to different grading
India China and it is then processed and marketed to the urban
Agriculture 17 9 centres through ‘Co-operatives’. Fair price and
income is assurred to the farmers from the supply of
milk to urban markets. Gujarat state is a success story change is discussed frequently now, it has been
in the efficient implementation of milk co-operatives, occurring since the industrial revolution. Climate
which in turn is being emulated by many other states. change affects everyone and the ramifications are
or visible by the variation in temperatures and an
It is true to say that the horticulture sector contributes increase of intense natural disasters. It contributes
to nearly one-third of the value of agricultural output. to even broader problems like loss of biodiversity in
• It contributes 6% to the GDP of India. Horticulture our food systems. What’s more, the negative impacts
crops like fruits, vegetables, flowers, spices and are likely to affect those who are already the most
plantation crops play a vital role in providing vulnerable. An additional concern is pollution and its
food and nutrition. influence on public health. Research shows that black
• India has emerged as a world leader in producing carbon is making dangerous bacteria harder to kill
a variety of fruits, spices and is considered to and resistant to antibiotics. Moreover, black carbon
be the second largest producer of fruits and increases risks of heart attacks, strokes and even lung
vegetables. cancer.
• It has improved the economic condition of large (a) “Opportunity cost of negative environment
number of farmers engaged in horticulture and impact are high.” Explain.
has been a means to improve livelihood of the (b) “Environmental problems are new to this century.”
many unprivileged ones. Not only that it has Justify the statement with valid arguments.
also provided highly remunerative employment
options for women in rural areas like bee- Ans :
keeping, food processing, tissue culture ... etc., (a) Negative environmental impact has long-term
which they are taking as an entrepreneurial opportunity costs involved. When the rate of
activity. resource extraction is higher than that of its
renewal, many resources get exhausted or
become on the verge of extinction. As a result,
we are forced to invest too much in exploration of
alternate resources. The environmental pollution
results in bad quality of air and water which
results in many diseases; like asthma and cholera.
Prevention and treatment of these diseases
involved huge cost to the society. Thus, it can
be said that the opportunity costs of negative
environmental impact are high.
(b) In earlier times, the demand for environmental
resources and services was much less than their
supply. Due to rapid urbanisation, increased
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 demand for goods and services has led to
advanced industrialisation. This has caused
33. Read the following text carefully and answer the pollution, which is more than the absorptive
given questions on the basis of the same and common capacity of the environment. The rate at which
understanding: the resources are extracted by man has been more
From political leaders to grassroot activists, just than the rate of regeneration of the resources,
about everyone has an opinion on environmental thereby causing serious environmental problems.
issues. While view points may differ, there is no So, we can say that environmental problems are
denying that the environment affects everyone of us. new to this century.
Environmental issues are defined as harmful effects
to earth and its natural systems due to the actions 34. Explain the various types of unemployment.
of humans. Although climate change can also occur or
from natural causes, human behaviour has led to an Discuss any four sources of human capital formation
increase in greenhouse emissions. While climate in India.
Ans : growth in human well-being.

The various types of unemployment are: (c) On-the-job-training. During the course of
(a) Open unemployment refers to that situation development, an economy has to absorb new
wherein although the worker is willing to work technology and develop productivity. On-the-
and has the necessary ability to work yet he does jobtraining enhances labour productivity by
not get the work. He remains unemployed for full developing their abilities and skills and forms a
time and fails to get any work, casual or full time. part of human capital formation.
(b) Structural Unemployment. This type of (d) Migration. Migration is a source of human capital
unemployment occurs due to structural changes formation, leading to higher returns in future.
in the economy like change in technology, change People migrate in search of better employment
in the pattern of demand etc. opportunities and higher earnings. Migration
(c) Disguised unemployment is typical of Indian involves cost of transportation and higher cost
agriculture where more people are working of living in migrated places which are generally
on a piece of farm than are required. They do more developed than the place where people
not contribute to productive work and when migrate from. However, the enhanced earnings
withdrawn, do not result in a fall in output. outweigh the costs of migration.
(d) Seasonal unemployment is found primarily in (e) Information. People take important decisions
agriculture sector where people do not get work regarding their consumption and investment. The
for all the months in the year due to the seasonal important principle to recognise is that the value
character of agriculture. During this time, they of the benefits from the decisions exceeds the
may move to urban areas in search of casual value of the costs. With the lack of information,
employment. people might take wrong decisions and
(e) Cyclical unemployment is caused due to periodic insufficient scarce resources might not be used
rise and fall in trade cycle patterns of an economy, properly. Thus, it is necessary to make decisions
like boom, depression, recovery etc. regarding investments for efficient utilisation of
(f) Frictional unemployment occurs due to the resources—natural and human and for higher
mobility of labour across different occupations. returns in future. In this sense, expenditure on
The productive period lost in between one job information is regarded as a source of human
to another is termed as a period of frictional capital formation.
unemployment. 
or
The main sources of human capital are:
(a) Investment in education. Education is an
important source of human capital formation.
(i) It generates technical skills and creates
manpower, well suited for improving labour
productivity and thus, sustaining rapid
economic development.
(ii) Education also tends to bring down birth
rate, bringing a decline in population growth
rate.
(iii) Education also results in social benefits.
Thus, investment in education leads to
higher returns in future.
(b) Investment in health. Health is a human capital
asset owned by the person. The way an employee
makes investment in improving his skills to
make himself employable, he also invests in his
health to increase his worth in the labour market.
Earnings potential is influenced directly by

ECONOMICS (030)
Section A -Macro Economics 3. Identify the correct pair from the following Column I
and Column II:
Column I Column II
A. At the Break Even (i) Equals National
point Income
B. If MPC is equal to (ii) Value of k is
Statement 1: Demonetisation was the step taken by the
one infinity
Government of India in order to tackle the problems
of corruption, black money, terrorism and circulation C. Value of aggregate (iii) Depends upon
of fake currency in the Indian Economy. demand the investment
Statement 2: Demonetisation has ensured improved D. Consumption in the (iv) C >Y
tax compliance in India over the period of time. economy
In the light of the given statements, choose the correct Alternatives:
alternative from the following: (a) C - (iii)
(b) A - (i)
(c) D - (iv)
(d) B - (ii)
Ans :
Ans :
(d) B - (ii)
2. Suppose in a hypothetical economy, the income rises

from `5,000 crores to `6,000 crores. As a result, the
consumption expenditure rises from `4,000 to `4,600
crores. Marginal Propensity to Consume in such a
case would be:
(a) 0.4 (b) 0.8
(c) 0.6 (d) 0.2 4. Import of goods and services raises the_______of
foreign exchange.
Ans : (a) Demand (b) Supply
(c) 0.6 (c) Neither (a) nor (b) (d) Both (a) and (b)
or
Surplus in Balance of Payment (BoP) arises when: (c) -1,000 crores

(a) Autonomous payments > Autonomous receipts (d) -2,000 crores
(b) Autonomous receipts > Autonomous payments or
(c) Accommodating receipts > Accommodating Identify the incorrect statement with reference to
payments Balance of Payments.
(d) Accommodating payments > Accommodating (a) Export of machinery is recorded in capital
receipts account.
(b) Current account records Exports and Imports
Ans :
transactions of a nation.
(a) Demand (c) Current account records all such transactions,
or which do not impact asset or liability status of a
(b) Autonomous receipts > Autonomous payments country.
(d) Transfer of funds to the relatives abroad, entered
5. Read the given chart carefully and choose the correct on debit side of current account.
option from the alternatives given below:
Ans :
(c) Working Note:
BoT/Trade balance = X - M
= `5,000 - `6,000
= (-) `1,000 crores
or
(a) Export of machinery is recorded in capital account.

given below:
Assertion (A): Acquisition of a domestic (Indian)
company by a foreign (Australian) company will be
recorded on the credit side of Balance of Payment
Account.
Reason (R): It leads to outflow of foreign exchange
from the domestic economy.
Alternatives:
(a) Import Reason (R) is not the correct explanation of
(b) Export Assertion (A)
(c) Net Import (b) Both Assertion (A) and Reason (R) are true and
(d) Net Export Reason (R) is the correct explanation of Assertion
(A)
Ans : (c) Assertion (A) is false but Reason (R) is true
(d) Net Export (d) Assertion (A) is true but Reason (R) is false
Ans :
6. If the value of export of goods of a country is `5,000
crores and the value of import of goods is `6000 (d) Assertion (A) is true but Reason (R) is false
crores, then trade balance will be:
(a) 1,000 crores
(b) 2,000 crores
8. Gifts and remittances to abroad are recorded on Short Answer Questions (Q11 to Q12) 3´2=6
the______side and_____account in BoP Account.
(i) debit (ii) credit 11. Explain how the allocation of resources can be
(iii) current (iv) capital influenced in the government budget through taxes,
(a) (i) and (iv) (b) (ii) and (iv) expenditure and subsidies.
(c) (i) and (iii) (d) (ii) and (iii) Ans :
Ans : Government can, through the budget, influence
(c) (i) and (iii). allocation of resources via the market mechanism,
with the help of taxes, subsidies and by direct
participation in production. Production units which
9. Read the following statements-Assertion (A) and produce harmful products like liquor, cigarettes, pan
Reason (R). Choose one of the correct alternatives masala etc. can be heavily taxed. Tax concessions
given below: and subsidies should be given to encourage those
Assertion (A): Current account transactions bring a production units which produce products that are
change in capital stock of a country. useful for the masses. Government can also directly
Reason (R): ‘Make in India’ will increase inflow of produce goods and services which are normally
foreign exchange. ignored by the private sector, on account of lack of
Alternatives: enough profit from their production.
Assertion (A)
(A)
Ans :
10. ______is not a function of the central bank. 12. What is the difference between Revenue Budget and
(a) Providing banking facilities to the public Capital Budget?
(b) Lending to the government or
(c) Lending to the commercial banks Explain how the government can use its budgetary
(d) Providing banking facilities to the government policy in reducing the inequality of income in the
or country.
Number of times the total deposits would be of the Ans :
initial The revenue budget consists of revenue receipts of
(a) Bank Rate the government and the expenditure met from such
(b) Legal Reserve Ratio revenues. The revenue receipts includes tax revenue
(c) Cash Reserve Ratio and non-tax revenue. Whereas the capital budget
(d) Statutory Liquidity Ratio consists of capital receipts and capital expenditure of
the government. Capital receipts are the receipts of the
Ans : government which create liability or reduce financial
(a) Providing banking facilities to the public assets. They include market borrowing, foreign debts,
or repayment of loans and advances. Capital expenditure
(b) Legal Reserve Ratio refers to the expenditure of the government, which
leads to creation of assets or reduction in liabilities.
or 14. How is Real Gross Domestic Product (GDP) different

Government’s budget can certainly help in reducing from Nominal Gross Domestic Product (GDP)?
the inequalities of income. This objective can be Explain using a numerical example.
achieved by adopting two fiscal measures. or
(a) Government can levy higher rate of tax on the Interpret the given picture on account of GDP and
income and property of the rich and also on the Welfare.
luxurious goods consumed by them. This measure
will reduce their disposable income.
(b) Government can spend more amount on welfare
maximization, like providing free services to the
poor like free education, health facilities etc. By
adopting these measures, government can try to
narrow down the gap between the rich and the
poor.
13. Read the following text carefully and explain the

relevant function of the Central Bank (RBI) indicated
here. Ans :
Reserve Bank of India (RBI) on Friday said it has
imposed a penalty of `5.72 crore on Federal Bank Read GDP is the market value of the final goods and
for deficiencies in regulatory compliance. A penalty services produced within the domestic territory of a
of `70 lakh has also been imposed on Bank of India country, during an accounting year, as estimated at
for non-compliance with certain provisions of Know the base year prices.
Your Customer (KYC) norms and instructions on Nominal GDP is the market value of the final goods
<compliance function in banks> issued by RBI, it and services produced within domestic territory of a
said in a statement. country, during an accounting year, as estimated at
About Federal Bank, RBI said the bank failed to the current year prices.
ensure that no incentive (cash or non-cash) was paid Real GDP = Nominal GDP #
Price index 100
to its staff engaged in insurance broking/corporate
Let Real GDP = `240, Price Index = 120
agency services by the insurance company, according
to a separate statement. Nominal GDP = Real GDP # Price Index
100
Ans : = 240 # 120 = `288
100
The function of central bank (RBI) indicated here is or
supervisor to commercial banks. It acts as a banker If GDP of any country increases, it will not necessarily
and supervisor to commercial banks in various ways. increased the welfare as a consequence. Because rise
Some of them are: in GDP may be concentrated in few hands. In an
(a) It provides financial assistance to banks by economy, all people do not earn the same amount of
discounting their bills and through loans and income. Some earn more and some earn less. In other
advances against approved securities. words, there is unequal distribution of income. In such
(b) It supervises, regulates and controls the activities case, welfare may not increase as GDP increases.
of commercial banks.
(c) It provides the commercial banks with centralised
clearing and remittance facilities.
(d) The commercial banks are required to maintain
a certain percentage of deposits with the Central
Bank. The sole aim of these reserves is to enable
financial crisis.
15. Explain the ‘AD = AS’ approach of the theory of expenditure on new capital assets by the producers
income determination. Use diagram. What changes during a period of time. It includes expenditure
take place in the economy when AD > AS? on inventories, fixed capital like machinery,
Ans : residential construction, etc.
(c) Government expenditure: It is the planned
National income is determined when AD = AS. In consumption expenditure of the government on
the given diagram, equilibrium is at point E, where providing free services to the people like roads,
the AD curve is intersected by the 45° line. The police, defence etc.
equilibrium income is denoted by OQ. (d) Net exports (X—M): It refers to the planned net
expenditure by the foreigners on the products
produced in the country during a period of time.
or
Derivation of the savings curve from consumption
curve:
We can find savings at different income levels
by taking the vertical difference between the
consumption curve and the 45° line. In the given
diagram, at point B, income and consumption
expenditure are equal. Thus, savings at OQ is zero.
To the left of point B, consumption expenditure curve
is higher than the 45° line. This means savings are
negative on incomes less than OQ level. To the right
of point B, consumption expenditure curve is lower
• When AD > AS, this will lead to a fall in than the 45° line, i.e., expenditure is less than the 45°
inventories with the producers, who will in line, i.e., the consumption expenditure is less than
turn produce more to reach the desired level of income at income levels higher than OQ and savings
inventories. This raises AS, till it becomes equal are positive.
to AD once again. For deriving the savings curve from the consumption
curve, we draw a perpendicular from point B on the
Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12 consumption curve, intersecting the X axis on the
lower part of the diagram, at point B, which must be
on X axis, because savings are zero.
16. Why is AD curve also called C + I curve? What are its Take OC of the Y axis on the lower part of the
components? Explain. diagram as equal to OC on the Y axis of the upper
or part of the diagram. This gives point - C from where
Show graphically the derivation of savings function the savings curve will start Now, joining points - C
from consumption function. and B and extending the straight line upwards, we get
Ans : the savings curve - CBSl
In two sector economy, AD curve is also called C+I
curve because it gives the value of final demand
in an economy which is nothing but a sum of final
consumption demand (C) and final investment
demand (I).
Its components are:
(a) Private consumption expenditure: It refers to
the planned expenditure on final output by
the households during a period of time. It is
determined by the disposable income of the
households.
(b) Investment expenditure: It refers to the planned
17. (a) Define externalities. Give an example of negative (c) Political instability
externality. What is its impact on welfare? (d) All of these
(b) On the basis of the following data about an
economy which constitutes of only two firms A Ans :
and B. find out the Value-added by Firm A and (d) All of these
Firm B.
(` in crores) 19. Identify the correct pair from Column I and Column
(i) Sales by Firm A 300 II and choose the correct alternative:
(ii) Purchases from Firm B by 120 Column I Column II
Firm A A. Apni Mandi (i) It is in Pune.
(iii) Purchases from Firm A by 180 B. Rythu Bazars (ii) These are the fruit
Firm B markets in Andhra
(iv) Sales by firm B 600 Pradesh.
(v) Closing Stock of Firm A 60 C. Hadaspur Mandi (iii) It is in Punjab,
(vi) Closing Stock of Firm B 105 Haryana and
(vii) Opening Stock of Firm A 75 Rajasthan.
(viii) Opening Stock of Firm B 135 D. Uzhavar Sandies (iv) These are farmers
markets in
(ix) Indirect taxes by both Firms 90
Maharashtra
Ans : Alternatives:
(a) Externalities refer to the benefits (or harms) a (a) C - (iii)
firm or an individual causes to another for which (b) D - (iv)
it is not paid (or penalised). Example of negative (c) A - (i)
externality is river polluted by an oil refinery. (d) B - (ii)
Negative externality like the one mentioned
reduces welfare through negative/harmful effect Ans :
on the health of the people, due to pollution. (d) B - (ii)
(b) Value-added by
Firm A = (i) + (v - vii) - (ii)
= 300 + 60 - 75 - 120
= `165 crores
Value-added by
Firm B = (iv) + (vi - viii) - (iii)
= 600 + 105 — 135 — 180
20. Arrange the following events of Pakistan in
= `390 crores
chronological order and choose the correct alternative:
(i) Nationalisation of capital goods
Section B -Indian Economic Development (ii) Initiation of reforms
(iii) Pakistan got independence
(iv) Announcement of First Five Year Plan
Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10 Choose the correct alternative:
(a) (ii), (iv), (i), (iii)
18. As per scholars, what was the reason of fall in GDP (b) (iv), (iii), (ii), (i)
growth rate in 2015-17 in Pakistan? (c) (iii), (iv), (i), (ii)
(a) Reform process (d) (iii), (ii), (i), (iv)
(b) Corruption or
In context of the given image, identify the correct (c) Assertion (A) is false but Reason (R) is true
option: (d) Assertion (A) is true but Reason (R) is false
or
Read the following statements-Assertion (A) and
given below:
Assertion (A): Competition Act 2002 came into force
and MRTP Act was repealed.
Reason (R): MRTP Act was too restrictive and
curtailed fair competition in the market.
Alternatives:
(a) A - India; B - China; C - Pakistan Assertion (A)
(b) A - Pakistan; B - India; C - China (b) Both Assertion (A) and Reason (R) are true and
(c) A - China; B - India; C - Pakistan Reason (R) is the correct explanation of Assertion
(d) A - India; B - Pakistan; C - China (A)
Ans :
(c) (iii), (iv), (i), (ii)
or Ans :
(d) A - India; B - Pakistan; C - China (b) Both Assertion (A) and Reason (R) are true and
21. Nations are forming regional and global economic or
groupings for: (b) Both Assertion (A) and Reason (R) are true and
(a) to understand developmental processes of their Reason (R) is the correct explanation of Assertion (A)
neighbouring nations
(b) strengthening their own economies
(d) Both (a) and (b) 23. Read the following statements-Assertion (A) and
Ans : given below:
(d) Both (a) and (b) Assertion (A): Animal husbandry is the part of
diversification of productive activities in rural area.
Reason (R): It provides stable employment
22. Read the following statements-Assertion (A) and opportunities in off season.
Reason (R). Choose one of the correct alternatives Alternatives:
given below: (a) Both Assertion (A) and Reason (R) are true and
Assertion (A): New Economic Policy (NEP), 1991 Reason (R) is not the correct explanation of
was focussed on liberalization, privatization and Assertion (A)
globalization.
Reason (R): The policy was necessitated because of
the crisis situation in the economy in 1991.
(A)
Alternatives:
(a) Both Assertion (A) and Reason (R) are true and (c) Assertion (A) is false but Reason (R) is true
Reason (R) is not the correct explanation of (d) Assertion (A) is true but Reason (R) is false
Assertion (A) Ans :
(A)
24. ______started the journal ‘Sankhya’. 27. Read the following statements carefully:
(a) Dadabhai Naoroji Statement 1: Employment is an activity which enables
(b) PC Mahalanobis a person to earn means of living.
(c) RC Desai Statement 2: There is a problem of unemployment in
India due to overpopulation.
(d) VKRV Rao
or alternative from the following:
The motive of British Government behind de- (a) Statement 1 is false and statement 2 is true
industrialisation was:
(i) To get raw material from India at cheap rate
(ii) To sell British manufactured goods in Indian (c) Both statements 1 and 2 are false
market at high prices (d) Both statements 1 and 2 are true
(iii) To focus on development of agriculture Ans :
(iv) To get finished products from India at cheap rate
(a) Only (iii) (d) Both statements 1 and 2 are true
(b) (i) and (ii)
(c) Only (iv) Short Answer Questions (Q28 to Q29) 3´2=6
(d) (ii) and (iv)
Ans : 28. How are small scale industries distinguished from
large scale industries?
(b) PC Mahalanobis or
or What were the drawbacks of the licensing policy
(b) (i) and (ii) followed by the government before 1991?
Ans :
Statement 1: India has an edge over Pakistan in health Small scale industries are distinguished from the
facilities and skilled manpower. large scale industries on the basis of the maximum
Statement 2: Pakistan has an edge over India in investment allowed on the fixed assets of a unit, the
reducing the proportion of population below poverty number of workers employed and the use of energy.
line. This definition of a small scale industry changes from
In the light of the given statements, choose the correct time to time.
alternative from the following: In 1950, a small scale industrial unit was one which
(a) Statement 1 is false and statement 2 is true invested a maximum of rupees five lakhs. At present,
the maximum investment allowed is ten crores.
or
(c) Both statements 1 and 2 are false The Licensing Policy before 1991 discouraged
(d) Both statements 1 and 2 are true small entrepreneurs to set up new enterprises. It also
Ans : encouraged favouritism and corruption. It benefited
only the big industrial houses. The need to obtain
(b) Statement 1 is true and statement 2 is false a license to start an industry was misused by some
industrial houses. The big industrial houses would
26. By May 2019, nearly______crore women in India get a license not for starting a firm but to prevent
have become member in_____lakh women SHGs. competitors from starting new firms. The excessive
(a) 4, 44 regulation of what came to be called permit license
(b) 2, 34 raj prevented certain firms from becoming more
(c) 7, 64 efficient.
(d) 6, 54
Ans :
(d) 6, 54
29. It is believed by some of the economists that ‘once the sector, India was able to raise its rate of growth during
technology is found profitable and is widely adopted, 1980-2015, while China and Pakistan stagnated with
subsidies should be phased out’. Accept/Refute the their service sector growth. Thus, India’s growth is
above statement. mainly contributed by the service sector. During this
Ans : period, Pakistan and China have shown deceleration
in all three sectors.
It is true that subsidies do provide an incentive for
adoption of the new HYV technology by farmers in
general and small farmers in particular. 31. What role can the government play in human capital
But subsidies should be phased out only after the formation in India?
technology is found profitable and widely adopted or
i.e., after they have served the purpose. How is agricultural diversification helpful for
• Subsidies indeed are a huge burden on farmers? Explain.
government finances. They (like fertiliser and Ans :
pesticide subsidy) at times result in over use of Both education and health have been considered
resources, which in turn can prove harmful to important means for human capital formation. The
the environment. Sometimes subsidies provide provision of basic education and health facilities has
an incentive for wasteful use of resources. been accepted as a goal in all societies.
• Subsidies should be provided only for the benefit It is important that these facilities be made available
of the poor farmers and not for the big and rich free for the poor classes who cannot afford them in
farmers, so as to attain the goal of equity and not order to ensure better skills and health of manpower.
violate it. However, the private sector will not be forthcoming
in making large investments in areas non-profitable
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 or free distribution of such services. Hence, the
government has an important role to play to ensure
their availability.
30. Comment upon the trend of output growth in different or
sectors from 1980-2015 among India, China and • Agricultural diversification is helpful for farmers
Paksitan. in the sense that the big risk which they face in
Country 1980-90 solely depending upon farming for livelihood
gets reduced.
Agr.iculture Industry Service
• Diversification towards new areas is also
India 3.1 7.4 6.9 necessary to provide productive sustainable
China 5.9 10.8 13.5 options to the livelihood of the rural masses.
Pakistan 4 7.7 6.8 • Diversification provides supplementary and
gainful employment during off-season.
• Diversification in agriculture thereby enhances
Country 2011-15 the income level of rural people. Hence, it helps
Agriculture Industry Service to overcome poverty of the farmers.
India 2.3 5 8.4
China 4.1 8.1 8.4 32. Elucidate the role played by the industrial sector in
Pakistan 2.7 3.4 4.4 India.
Ans :
Ans :
It is commonly stated that poor countries can progress
In the last four decades, the growth of agriculture only in the light of a good industrial sector. This is
sector, which employs the largest proportion of because of the following reasons:
workforce in all the three countries, has declined. • Industrial sector provides employment which is
In the industrial sector, China has maintained a more stable in nature in contrast to employment
near double-digit growth rate whereas for India and in agriculture.
Pakistan growth rate has declined. In case of service
• It also promotes modernisation and overall environment.

prosperity. As a matter of fact a reversal of supply demand
• On account of the above, the Five Year Plans relationship exists for environmental quality. This
laid a lot of emphasis on industrial development. implies that these days not only the demand for
This was because at the time of independence environmental resources and services has increased
the number and variety of industries was very manifold but their supply is scarce due to the overuse
narrow and was restricted largely to cotton and misuse of these resources. As an outcome
textiles and jute industry. So the country was in pollution and waste generation have taken a serious
dire need of expanding the industrial base, with turn today. These call for immediate and urgent
a variety of industries, in order to grow. attention to avoid an environmental and economic
crisis.
or
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 The given flow chart shows the distribution of male
and female workers in the formal and informal sector
33. Compare the traditional approach with the recent in the country.
approach towards environment. • There are about 473 million workers (310 + 133)
or in the country, out of which 30 million workers
Study the following chart showing the workers in are in the formal sector and 70 million are in the
formal and informal sectors and analyse the trend of informal sector.
the two variables from 2011-12. • About 6% people are employed in the formal
sector and the rest 94% are employed in the
informal sector.
• Out of 30 million formal sector workers, only
6 million, that is, only about 21 per cent are
women and the rest 24 million are men, that is,
79 percent.
• In the informal sector, male workers account for
69 per cent (310 million) of the workforce and
the female workers account for just 31 percent
(133 million).
Ans :
While comparing the traditional approach with the
recent approach towards environment we observe that
in the early traditional days, i.e., before rapid surge
in population and before industrialisation took place
the demand for environmental resources and services
was much less in relation to their supply.
This implied that pollution was within the absorptive 34. Read the following text carefully and answer the
capacity of the environment. Rate of resource given questions on the basis of the same and common
extraction was also less than the rate of regeneration understanding:
of these resources. As a result, the environmental The term ‘sustainable development’ was used by
problems did not arise. the Brundtland Commission (1987) which coined
But with the advent of industrial revolution the what has become the most often-quoted definition
population explosion took place. As a result the of sustainable development “development that meets
demand for resources both for production and the needs of the present without compromising the
consumption purposes crossed/exceeded the rate ability of future generations to meet their own needs.”
of the regeneration of the resources. This put Sustainable development does not focus solely on
immense pressure on the absorptive capacity of the environmental issues. The United Nations 2005
World Summit Outcome Document refers to the four
‘interdependent and mutually reinforcing pillars’ of of pest control like the ones based on plant
sustainable development as including: economic products like neem trees are proving quite
development, social development and environmental useful. Also, there is widespread awareness
protection. The fourth pillar is indigenous people about various animals and birds which help
and culture. Proponents of Sustainable Development in controlling pests. Like snakes are one of
argue that it provides a context in which overall the prime group of animals which prey upon
sustainability is improved where cutting edge Green rats and various other pests. Owls, peacocks
development is unattainable. For example, a cutting and lizards also play an important role in
edge treatment plant with extremely high maintenance preying upon vermin and pests.
costs may not be sustainable in regions of the world
with fewer financial resources. Sustainability requires
that human activity only use nature’s resources at
a rate, which they can be replenished naturally.
Inherently, the concept of sustainable development is
intertwined with the concept of carrying capacity.
(a) What is sustainable development? Does
sustainable development solely focus on
environment? Why?
(b) Explain any two strategies for sustainable
development in India.
Ans :

(a) The development that meets the needs of the
present generation without compromising the
ability of future generations to meet their own
needs is known as sustainable development.
Sustainable development does not solely focus
on environment as it has four pillars to focus on
including environmental protection, economic
development, social development and indigenous
people and culture.
(b) The two strategies for sustainable development in
India are:
(i) Biocomposting: Farmers had over a period
of last five decades totally neglected the use
of compost and completely switched over
to chemical fertilisers, which adversely
affected the productive land and water
bodies. But now in large numbers, the
farmers have again started using compost
made from organic wastes of various kinds.
Earthworms can convert organic matter into
compost faster.
(ii) Biopest Control: Due to the green revolution,
more and more use of chemical pesticides
for higher yield led to the contamination of
food products, like milk, meat and fish, soil,
water bodies and even ground water were
polluted with pesticides. But now efforts
are being made to bring in better methods

ECONOMICS (030)
Section A -Macro Economics Reason (R) is the correct explanation of Assertion

(A)
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (d) Assertion (A) is true but Reason (R) is false
Ans :
Statement 1: A tax system that is progressive applies (d) Assertion (A) is true but Reason (R) is false
higher tax rates to higher levels of income.
Statement 2: A regressive tax is one where the average 3. Read the following figure carefully and choose the
tax burden decreases with income. correct pair from the alternatives given below:
Ans :

given below:
Assertion (A): Highway and road works announced
in Kerala, Tamil Nadu, West Bengal and Assam in
budget 2021.
(a) A - Revenue expenditure; B - Fiscal deficit
Reason (R): Such announcement will increase
revenue expenditure of the government. (b) A - Revenue expenditure; B - Fiscal budget
Alternatives: (c) A - Capital budget; B - Revenue expenditure
(a) Both Assertion (A) and Reason (R) are true and (d) A - Revenue expenditure; B - Capital budget
Ans :
Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and (d) A - Revenue expenditure; B - Capital budget
4. Read the following statements-Assertion (A) and alternative from the following:
Reason (R). Choose one of the correct alternatives (a) Statement 1 is false and statement 2 is true
given below: (b) Statement 1 is true and statement 2 is false
Assertion (A): Buying foreign goods is expenditure (c) Both statements 1 and 2 are false
from our country and it becomes the income of that
foreign country.
Reason (R): The purchase of foreign goods or Ans :
imports decreases the domestic demand for goods (a) Statement 1 is false and statement 2 is true
and services in our country.
Alternatives:
(a) Both Assertion (A) and Reason (R) are true and 7. On the basis of the given bars, identify the percentage
Reason (R) is not the correct explanation of change in the collection of GST in February 2019-20
Assertion (A)
(A)
Ans :
(A)
(a) Negative (b) 8.5%
5. A large fiscal deficit implies______. (c) 8.10% (d) 8.20%
(a) Large amount of borrowings
(b) Very small amount of savings Ans :
(c) Small amount of borrowings (a) Negative
(d) No borrowings
or
While financing a deficit, under which measure
government can print more currency?
(a) Disinvestment
(b) By issuing bonds
(c) Deficit financing
(d) None of these
8. Flow of Goods and Services and factors of production
Ans : across different sectors in a barter economy is known
(a) Large amount of borrowing as:
or (a) Monetary Flow
(c) Deficit financing (b) Circular flow
(c) Capital Flow
6. Read the following statements carefully: (d) Real flow
Statement 1: Balance of Payment (BoP) is a narrower or
concept. Final goods refer to those goods which are used either
Statement 2: Balance of Trade refers to the net for ______or for_______.
difference between export and import of goods. (a) consumption; resale
In the light of the given statements, choose the correct (b) consumption; investment
(c) resale; further production Short Answer Questions (Q11 to Q12) 3´2=6
(d) resale; investment
Ans : 11. “Foreign Institutional Investors (FIIs) remained net
seller in the Indian capital markets over the last few
(d) Real flow weeks”. —The Economic Times
or State and discuss the likely effects of the given
(b) consumption; investment statement on foreign exchange rate with reference to
the Indian Economy.
9. Current account is in ‘Balance’ when______. Ans :
(a) Receipts on current account < payments on
current account Selling of securities by Foreign Institutional Investors
(FIIs) in Indian capital market will lead to fall in
(b) Receipts on current account > payments on
the supply of foreign currency in the economy.
current account
This situation might lead to excess demand of
(c) Receipts on current account = payment on current foreign currency at the prevailing foreign exchange
account rate. As a result, a new equilibrium rate of foreign
(d) None of these exchange will be determined which will be higher
or than the prevailing foreign exchange rate, leading to
Other things remaining the same, when foreign depreciation of domestic currency.
currency becomes cheaper, the effect on national
income is likely to be: 12. Calculate intermediate consumption from the
(a) Negative following:
(b) Positive
(c) No effect (` in lakhs)
(d) Positive and negative both (i) Value of output 2,000
(ii) Depreciation 40
Ans :
(iii) Subsidy 10
(c) Receipts on current account = payment on current (iv) Sales tax 30
account
(v) Net Value Added at factor cost 1,600
or
(a) Negative or
If the Real GDP is `300 and Nominal GDP is `330,
calculate the Price Index (base = 100).
Statement 1: If in an economy, the estimated receipts Ans :
of the government during a year are lesser than the Intermediate consumption
estimated expenditure, the budget will be called
= (i) - [(v) + (iv) - (iii) + (ii)]
deficit budget.
Statement 2: Revenue expenditure is the expenditure = 2,000 - [1,600 + 30 - 10 + 40]
which either creates any asset or reduces any liability. = `340 lakhs
alternative from the following: Real GDP = Nominal GDP #
Price Index 100
(b) Statement 1 is false and statement 2 is true
(b) Statement 1 is true and statement 2 is false 300 = Price330
Index 100
#

Price Index = 330
300 # 100
= `110
Ans :
13. Explain the concept of ‘Excess demand’ with the help

of a diagram.
Ans :
Excess demand refers to a situation where aggregate
demand exceeds output at full employment level of
income. It is graphically denoted by ‘inflationary
gap’. It is inflationary because it sets in motion the
AD forces that cause inflation.
We observe that at the full employment income (OF),

aggregate demand is bF and output is aF. This implies
aggregate demand (bF) is less than output (aF) at full
employment level by the distance ‘ab’ which denotes
deflationary gap.
or
• One fiscal measure to be taken by the government
to correct the deflationary gap is to increase the
government’s expenditure which will directly
increase aggregate demand and thereby help in
correcting the deflationary gap.
• A monetary measure to correct the deflationary
gap could be lowering down the CRR. This
will thereby increase funds available for credit
Explaining it with the help of a diagram. We notice creation with the commercial banks. On account
that at the level of full employment AF denotes of this, their credit creation capacity rises,
aggregate demand and BF denotes output. leading to an increase in the borrowings from
Thus, AF - BF = AB, which denotes the inflationary the banks and aggregate demand rises.
gap (Excess Demand) at the level of full employment. • Another monetary measure could be lowering
down the Bank Rate, so that borrowings by
commercial banks from the Central Bank
becomes cheaper, so they will now borrow more
and pass on these funds at a lower rate of interest
14. Explain the concept of ‘deficient demand’ with the to the borrowers to increase the AD and thereby
help of a suitable diagram. correct the deflationary gap.
or
Explain any one fiscal and two monetary measures to
correct the deflationary gap. 15. Explain the concept and working of multiplier with
the help of a suitable schedule.
Ans :
Ans :
Deflationary gap is conceptually denoted by ‘Deficient
Demand’. It refers to a situation when AD is less than (a) Multiplier is a measure of the effect of a change
output at full employment income level. in investment on national income. If investment
We can prove it graphically with the help of a diagram. is increased by `5 crores and as a result increase
In the given diagram, point X denotes the point of in income over time is `15 crores.
equilibrium and OM denotes the equilibrium output. The value of multiplier is
Full Employment income is denoted by OE DY = 15 =
DI 5 3
(b) Analysing how the multiplier works, we have used for saving, i.e., DS = `100 crores. This proves
to remember that the operation of the multiplier that national income increases in several rounds and
is based on an important fact that ‘one person’s this increase stops when D I = DS . In the given case
expenditure is another person’s income’. increase in national income stops when D I = DS
Let us suppose that we are given D I = ` 100 crores i.e., `100 crores is equal to `100 crores.
and MPC = 0.80.
Let us understand the operation of the multiplier with
the help of the following schedule:
16. (a) Distinguish between stock and flow variables

with suitable examples.
(b) Calculate Gross Domestic Product at factor cost
Explanation: from the following data:
First Round Increase:
Investment means expenditure on producer goods, so (Z in
an investment of `100 crores raises the income of the crores)
producers of these goods by `100 crores. (i) Gross national product at 3,750
Second Round Increase: factor cost
Given that MPC = 0.8, people spend 80% of
(ii) Compensation of employees 2,000
increase in income, i.e., `80 crores (100 # 0.8) on
consumption. This raises the income of the producers (iii) Net exports (—)50
of consumer goods by `80 crores. This is the second (iv) Profit 700
round increase. It is equal to 80% of the first round (v) Net domestic capital formation 1,000
increase. Total increase in income at the end of second (vi) Opening stock 150
round, stands at `180 crores (100 + 80). (vii) Closing stock 200
Third Round Increase:
(viii) Gross fixed capital formation 1,050
Given that MPC = 0.8, people again spend 80% of
`80 crores, i.e., `64 crores on consumption. This (ix) Interest 600
leads to another increase in the income of `64 crores (x) Rent 400
of the producers of consumer goods. This is the third (xi) Factor income from abroad 20
round increase and the total increase in income at the
or
end of this round is `244 crores (100 + 80 + 64).
Explain the precautions that should be taken while
All Rounds of Increase:
estimating national income by value added method.
We observe that in this way national income goes on
increasing round after round. But the increase in each Ans :
round is restricted to 80% of the increase in previous (a) Stock refers to any economic variable which is
round. The absolute increase goes on becoming measured at a point of time. It does not call for
smaller and smaller with every successive round and a time dimension. Whereas ‘Flow’ refers to any
a time comes when no more increase is possible, i.e., economic variable which is measured during a
increase in income is reduced to zero. period of time. It always calls for a time dimension.
On the basis of the above schedule we infer that, the For example capital is a stock variable and capital
overall DY = `500 crores, which is partially used for formation/investment is a flow variable.
consumption, i.e., DC = `400 crores and partially
(b) NDPFC = (ii) + (iv) + (ix) + (x)
= 2,000 + 700 + 600 + 400 regulates the banking sector. It also plays an important
= `3,700 role in India’s development story by supporting
the government in its developmental projects and
GDPFC = NDPFC (by Income Method) + CFC policies.
*CFC = GDCF - NDCF Ans :
= (GFCF + D Stock) - NDCF The two functions of central bank (RBI) are:
= [1,050 + (200 - 150)] - 1,000 (a) The Central Bank is the sole authority for the issue
= 1,100 - 1,000 of currency in the country. Notes issued by it are
circulated as legal tender money. It has its issue
= `100 department which issues notes and coins. Coins
GDPFC = NDPFC + CFC are manufactured in the government mint but they
= 3,700 + 100 are put into circulation through the central bank.
While issuing currency notes, a minimum fixed
= `3,800 crores amount of gold and foreign currencies is kept by
or the Central Bank. The monopoly of issuing notes
The precautions that should be taken in estimating vested in the central bank ensures uniformity
national income by the value added method are: in the notes issued, which helps in facilitating
(a) Take the value added/value of final output by exchange and trade within the country. By having
each production unit instead value of output, in a monopoly of note issue, the central bank can
order to avoid the ‘problem of double-counting’. restrict or expand the supply of cash according to
(b) Include the value of ‘own-account production’ in the requirements of the economy.
the measurement of NI. It includes the: (b) The central bank also acts as a banker to the
(i) Imputed value of ‘production for self- Government. As the banker to the Government,
consumption,’ which can be estimated and the central bank provides a large number of
thereby included. routine banking functions to the government
(ii) Services provided by owner- occupied like maintaining the balances, arranging and
houses should be imputed and thereby managing funds of the government and so on.
included. It also holds the surplus cash reserves of the
(iii) Imputed value of the free services produced government. Central bank also acts as a financial
by the general government and private non- advisor to the government as well.
profit institutions serving households should
be included.
(c) Do not include the sale of second-hand goods,
because they are not produced in the current year,
and their value has already been included when
they were sold for the first time. However the
value of the services rendered by the commission
agents involved in the transaction, must be
included.
Section B -Indian Economic Development
17. Read the following text carefully and discuss briefly
the relevant function of the Central Bank, indicated.
The Reserve Bank of India (RBI) is the central bank Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10
of India whose primary function is to manage and
govern the financial system of the country. It is a 18. Jobless growth leads to unemployment because:
statutory body established in the year 1935 under the (a) GDP growth is slow
Reserve Bank of India Act, 1934. The central bank (b) Labour refuses to migrate
regulates the issue and supply of the Indian rupee. It (c) Growth is due to technology
also looks after the central government’s money. The
(d) Labour is very expensive
central bank plays the role of the bankers’ bank and
or 2019-20. How will it affect the economy?

Due to the recent efforts of which international body (a) Economic strengthening of rural areas
the Indian government, initiated the modernization of (b) Financial inclusion of people
informal sector? (c) Growth of MSMEs and agriculture sector become
(a) WTO faster
(b) World Bank (d) All of these
(c) G-20
Ans :
(d) International Labour ganisation
(b) honey
Ans : or
(c) Growth is due to technology (d) All of these
or
(d) International Labour ganisation 22. From the given image, it is clear that outsourcing
from India is not always an advantage for developed
19. Sex ratio of India in (2015) was_______. countries. Select the reason(s) for the same.
(a) 947
(b) 950
(c) 941
(d) 929
Ans :
(d) 929

Statement 1: Rythu Bazar is a fruit market in Gujarat.
Statement 2: Uzhavar Sandies is a farmers market in
Andhra Pradesh.
alternative from the following: (a) Leads to managerial interference
(a) Statement 1 is false and statement 2 is true (b) Leads to unemployment in their country
(b) Statement 1 is true and statement 2 is false (c) Neither (a) nor (b)
(c) Both statements 1 and 2 are false (d) Both (a) and (b)
(d) Both statements 1 and 2 are true Ans :
Ans : (d) Both (a) and (b)
21. Along with horticultural crops, golden revolution

caused an increase in the production of_______.
(a) milk
(b) honey
(c) livestock
23. Whose estimates of national income were considered
(d) dry fruits
very significant?
or (a) RC Desai
Small Finance Banks had mobilised deposits of
(b) Dadabhai Naoroji
82,488 crores and extended credit of 90,576 crores
to small and marginal farmers and Micro, Small and (c) VKRV Rao
Medium Enterprises (MSMEs) by the end of FY (d) William Digby
or (b) D - (iv)
The Tata Iron and Steel Company (TISCO) was (c) A - (i)
incorporated in_______. (d) B - (ii)
(a) 1870
(b) 1807 Ans :
(c) 1930 (d) B - (ii)
(d) 1907
Ans : Statement 1: Environment is able to perform its
(c) VKRV Rao functions easily as long as the demand on these
or functions is within its carrying capacity.
(d) 1907 Statement 2: The Environment (Protection) Act was
in passed 1990.
given below:
Assertion (A): In 1982, India adopted social banking (b) Statement 1 is true and statement 2 is false
approach. (c) Both statements 1 and 2 are false
Reason (R): Moneylenders were charging high rate (d) Both statements 1 and 2 are true
of interest from poor people and manipulate their
Ans :
account.
Alternatives: (b) Statement 1 is true and statement 2 is false
Reason (R) is the correct explanation of Assertion 27. Read the following statements-Assertion (A) and
(A) Reason (R). Choose one of the correct alternatives
(b) Both Assertion (A) and Reason (R) are true and given below:
Reason (R) is not the correct explanation of Assertion (A): Disguised unemployment is present
Assertion (A) in India.
(c) Assertion (A) is true but Reason (R) is false Reason (R): Agricultural productivity at the margin
(d) Assertion (A) is false but Reason (R) is true is close to zero.
Alternatives:
Ans : (a) Both Assertion (A) and Reason (R) are true and
(d) Assertion (A) is false but Reason (R) is true Reason (R) is not the correct explanation of
Assertion (A)
25. From the set of events/systems given in Column I (b) Both Assertion (A) and Reason (R) are true and
and corresponding relevant fact given in Column II, Reason (R) is the correct explanation of Assertion
choose the correct pair of statement: (A)
Column I Column II
A. Economic reforms in (i) 1988
China Ans :
B. Great Leap Forward (ii) 1968 (b) Both Assertion (A) and Reason (R) are true and
Campaign Reason (R) is the correct explanation of Assertion (A)
C. Great Proletarian Cultural (iii) B e t w e e n
Revolution 1980 - 1984
D. Special Economic Zones (iv) 1975
Alternatives:
(a) C - (iii)
Short Answer Questions (Q28 to Q29) 3´2=6 primarily benefited the wheat growing regions only.
Thus, the benefit of the Green Revolution was initially
28. Elaborate the exploitative nature of the colonial restricted to few states and the crops of wheat and rice
government in India with the help of suitable only.
examples. OR
Ans : The Industrial Policy was used to promote regional
equality by the government.
Under the colonial government in India, the economic
(a) The industries in backward regions were given
policies were concerned only about protecting and
certain concessions such as tax benefits and
promoting British economic interest rather than with
electricity at lower tariff.
the need to develop the economy of the country and
(b) The industrial licensing policy was used to
its inhabitants.
promote industries in backward regions. It was
• Stagnation was found in the agricultural sector
easier to obtain a license in an economically
which was already burdened with surplus labour.
backward region.
• The rule of the colonial government also led to
the decline and collapse of India’s world famous
handicraft industries. Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12
• The industrial sector was crying for the
modernisation, capacity building, diversification
and vying for increased public investment. 30. The following table shows distribution of workforce
• Not only that foreign trade was oriented to feed in India for the year 1972-73. Analyse it and give
the industrial revolution in Britain. reasons for the nature of workforce distribution.
• Inadequate public health facilities, frequent Place of Workforce (in millions)
occurrence of natural calamities and famines Residence Male Female Total
converted the helpless Indians into paupers.
Rural 125 69 195
• On the infrastructure front there was urgent need
for upgradation and expansion. Urban 32 7 39
• Rampant poverty and unemployment was the
Ans :
cry of the day.
• Commercialisation of Indian agriculture, also On the basis of the information provided in the given
adversely affected the `self-sufficient’ nature of table we notice:
the village economy. (i) The total workforce in India in the year 1972-
Thus the above examples throw ample light on the 73 was 234 million that includes 195 million
exploitative nature of the colonial government in workforce of rural and 39 million of the urban
India. population. This indicates a greater involvement
of rural workforce comprising of 83 % of the
total workforce as compared to 17% of the urban
29. Why were the benefits of Green Revolution restricted workforce. This is because a majority of rural
to few states and few crops in initial stages of population was engaged in agricultural and allied
planning? sectors.
or (ii) The rural workforce comprises of 64% of the
How did the government promote regional equality in male workforce and 36% of female workforce.
industrial development? In contrast, the urban workforce comprises of
Ans : about 82% of male workforce and 18% of female
The new agricultural strategy - “Green Revolution” workforce. The participation of males in both
implied use of high yielding varieties of seeds which rural as well as in the urban areas is higher than
required reliable irrigation and financial resources to the females because of the lack of opportunities
buy better inputs. The strategy was thus restricted to available to women for acquiring education.
the more affluent states of Punjab, Andhra Pradesh Also, families often discouraged female members
and Tamil Nadu. Further, the use of HYV seeds to take up job and, consequently, women were
confined to household work only.
(iii) Comparing urban female workforce with that after the reforms. The main reason is said to be the
of the rural female workforce, we can conclude attitude of the banks. They have certainly to bring
that the females in the rural areas formed 36 % of about a change in their approach from mere lenders
the workforce, whereas, the females in the urban to institutions built upon warm/positive relationship
areas formed only 18% of the workforce. In the between themselves and the borrowers.
rural areas, despite a majority of the population At the same time the habit of thrift is to be inculcated
was engaged in farming and allied activities, alongwith the efficient utilization of financial
agricultural sector had low productivity. resources also to be enhanced among the farmers.
Consequent to the low productivity, rural people or
had low earnings that further led to widespread It is certainly possible to develop Information
poverty in the rural areas. Technology as an alternate livelihood option in the
Thus, it can be concluded by analysing the given data light of these reasons:
that Indian economy suffered from low productivity, (a) The role of IT is justified by the increased ability
acute unemployment and widespread poverty, of the governments to predict areas of food
disguised unemployment in agricultural sector and insecurity and vulnerability through its use.
low female participation rate in the workforce 30 (b) It also has a positive impact on the agriculture
years ago. sector as it spreads the information regarding
emerging technologies, their applications, prices,
31. Evaluate the role of the rural banking system in India. weather and soil conditions etc.
or (c) It also has a potential of employment generation
“Is it possible to develop Information Technology as in rural areas.
an alternate livelihood option”? Give reasons. (d) The initiative of private sector like the Sri Ratan
Tata Trust alongwith support from government
Ans : has made it possible to develop this sector as a
While evaluating the role of the rural banking system sustainable livelihood option.
in India it is observed:
• The rapid expansion of the banking system after
the green revolution had a beneficial effect on
the rural farm and non-farm output. It further
boosted the income and employment level in the
economy.
• This facilitated the farmers to utilize the banking
services and credit facilities.
• They could now procure a variety of loans for
meeting their various needs related to farm and 32. Enlist all the factors involved in the introduction of
non-farm output. the economic reforms by way of the announcement
• On account of this famines became events of the of the New Economic Policy (NEP).
distant past. Ans :
• Food security had been attained due to the Enlisting the factors involved in the introduction
abundant buffer stocks of grains being available. of the economic reforms, which culminated in the
• Excepting the commercial banks, other announcement of the New Economic Policy (NEP)
formal institutions failed to develop a culture in 1991:
of ‘deposit—mobilisation’, i.e., lending to (i) In the late 1980’s government expenditure
borrowers, who were worthwhile and also began to exceed its revenue by huge margins,
emphasised effective loan recovery. But loan i.e., a situation of deficit arose (Expenditure >
defaulting has been a grave concern in the Revenue). Borrowings to meet the expenditure
agriculture sector. Deliberate refusal of the became unsustainable.
farmers to pay back loans is said to be the reason. (ii) Income from Public Sector Undertakings (PSU)
Hence it is to be pondered as to why the expansion and was also not high to meet the growing expenditure.
promotion of the banking sector has taken a backseat (iii) Prices of many essential goods were very high.
(iv) Imports grew at a very high rate without a • Not only that the elements of infrastructure
matching growth of exports. like credit and marketing, agricultural policies,
(v) Foreign exchange reserves had declined to such a friendly towards the farmers, constant dialogue
level that was not adequate to finance imports for between farmers and state are essentially the
more than two weeks. steps required to reap the potential of the rural
(vi) Foreign exchange was insufficient to pay the sector to the optimum.
interest to international lenders. Thus in the light Success stories of rural development experiments like
of the above factors, the New Economic Policy the following shall be trend setters:
(NEP) was introduced in India. (a) Implementation of ‘Operation Flood’ in Gujarat
The government initiated a variety of reform boosted up the milk production in the country by
policies which fell under three heads-liberalisation, more than eight times (during 1951-2014).
privatisation and globalisation. (b) Tamil Nadu Women in Agriculture (TANWA) is
a project initiated in Tamil Nadu to train women
in latest agricultural techniques so as to boost
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 agricultural productivity and family income.
(c) Farm Women’s Groups are creating savings in
33. Suggest measures to make the rural areas in India their groups by acting like mini banks through
more vibrant (Include two success stories of rural micro-credit societies. It is the accumulated
development experiments carried out in India). savings which help in promoting small scale
or household activities like vermicompost,
(a) Interpret the given picture on account of current mushroom cultivation ... etc.
environmental challenges. • ‘Kudumbashree’- The poor women’s bank was
started in 1995 in Kerala, as a small savings bank
for poor women to promote their savings. Such
banks have risen to such heights to be considered
as the largest informal banks in Asia, in terms of
the savings mobilised and the participation rate.
(any two)
or
(a) The given image indicates towards the
environmental challenge of ‘deforestation’ and
‘global warming’.
Global warming is a gradual increase in the average
temperature of the earth’s lower atmosphere as a
result in the increase in greenhouse gases.
It also shows that the trees are the actual lungs
of the planet and not the industries. But with the
developmental process, these lungs are dying and
this is a wake up call for all of us.
(b) What do you mean by biocomposting? How is it (b) Biocomposting is the process of converting all
helpful in promoting sustainable development? biodegradable items into organic manure.
Biocomposting offers the benefits of resource
Ans : efficiency by creating a useful product from
organic waste. Compost has the ability to help
Indeed there is a dire need to make the rural areas in regenerate poor soils. It encourages the production
India more vibrant. of beneficial microorganisms which regenerate the
This could be done through: fertility of the soil, promoting higher yields of
• Diversification into various new fields like agricultural crops. Its costeffectiveness remedies
poultry, fisheries, vegetables and fruits ... etc. soils contaminated by hazardous waste, suppresses
• Linking up rural production centres with the plant diseases and pests. It reduces or eliminates
urban and foreign market, in order to fetch higher the need for chemical fertilizers.
returns on the investment for the products.
34. Read the following text carefully and answer the Despite power asymmetries between China and
given questions on the basis of the same and common Pakistan, the latter still has tremendous agency in
understanding: determining its own policies, even if such policies
The China-Pakistan Economic Corridor (CPEC) has come at the expense of the long-term socio- conomic
deepened the decades-long strategic relationship welfare of Pakistani citizens.
between the two nations. But it has also sparked (a) Outline and discuss any two economic advantages
criticism for burdening Pakistan with mountains of of China Pakistan Economic Corridor (CPEC)
debt and allowing China to use its debt-trap diplomacy accruing to the economy of Pakistan.
to gain access to strategic assets of Pakistan. (b) Analyse the implication of bilateral ‘debt-
The foundations of CPEC, part of China’s Belt and trap’ situation of Pakistan vis-a-vis the Chinese
Road Initiative, were laid in May 2013. At the time, economy.
Pakistan was reeling under weak economic growth.
China committed to play an integral role in supporting Ans :
Pakistan’s economy. (a) The two economic advantages of China Pakistan
Pakistan and China have a strategic relationship that Economic Corridor (CPEC) accruing to the
goes back decades. Pakistan turned to China at a time economy of Pakistan are:
when it needed a rapid increase in external financing (i) China provided financial and technical
to meet critical investments in hard infrastructure, expertise to help Pakistan build its road
particularly power plants and highways. CPEC’s infrastructure, supporting employment and
early harvest projects met this need, leading to a income in the economy.
dramatic increase in Pakistan’s power generation (ii) CPEC has led to a massive increase in power
capacity, bringing an end to supply-side constraints generation capacity of Pakistan. It has
that had made rolling blackouts a regular occurrence brought an end to supply-side constraints
across the country. in the nation, which had made blackouts a
Pakistan leaned into CPEC, leveraging Chinese regular phenomenon across the country.
financing and technical assistance in an attempt to (b) China has become famous for its ‘debt-trap
end power shortages that had paralysed its country’s diplomacy’ in recent times. Under this, China
economy. Years later, China’s influence in Pakistan provides financial and technical expertise/
has increased at an unimaginable pace. assistance to help various nations to bring them
China as Pakistan’s Largest Bilateral Creditor: under its direct or indirect influence. The first
China’s ability to exert influence on Pakistan’s and the foremost implication of the diplomacy
economy has grown substantially in recent years, is that Beijing has now become Islamabad’s
mainly due to the fact that Beijing is now Islamabad’s largest creditor. According to documents released
largest creditor. According to documents released by by Pakistan’s Finance Ministry, its total public
Pakistan’s Finance Ministry, Pakistan’s total public external debt stood at $44.35 billion in June 2013,
and publicly guaranteed external debt stood at $44.35 just 9.3 per cent of which was owed to China. By
billion in June 2013, just 9.3 per cent of which was April 2021, this external debt had ballooned to
owed to China. By April 2021, this external debt had $90.12 billion, with Pakistan owing 27.4 per cent
ballooned to $90.12 billion, with Pakistan owing 27.4 - $24.7 billion - of its total external debt to China,
per cent - $24.7 billion - of its total external debt to according to International Monetary Fund (IMF).
China, according to International Monetary Fund
(IMF).
Additionally, China provided financial and technical
expertise to help Pakistan build its road infrastructure,
expanding north-south connectivity to improve the
efficiency of moving goods from Karachi all the
way to Gilgit-Baltistan (PoK). These investments
were critical in better integrating the country’s ports,
especially Karachi, with urban centers in Punjab and 
Khyber-Pakhtunkhwa provinces.

ECONOMICS (030)
Section A -Macro Economics 2. Read the following statements carefully:

Statement 1: Demonetisation was an initiative taken
by the Government of India to curb black money,
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 terrorism and circulation of fake currency.
Statement 2: Demonetisation has lead people to shift
1. The following information is based on BoP account from cash payments to electronic payments.
for an imaginary country: In the light of the given statements, choose the correct
(` in crores) (a) Statement 1 is false and statement 2 is true
(i) Import of goods 800 (b) Statement 1 is true and statement 2 is false
(ii) Export of goods 550 (c) Both statements 1 and 2 are false
(iii) Unilateral transfers to rest of 80 (d) Both statements 1 and 2 are true
the world (Gifts, Aids, etc.)
Ans :
(iv) Capital receipts (Loan from 200
foreigners, Sale of assets to (d) Both statements 1 and 2 are true
foreigners, Receipt of capital
from foreigners) 3. Read the following statements carefully:
(v) Capital Payments (Loans to 70 Statement 1: Excess of import of goods over export of
foreigners, Buying of assets goods is known as trade deficit.
from foreigners, Payment of Statement 2: Excess of export of goods over import of
capital to foreigners) goods is known as trade surplus.
Balance on capital account will be________
of________crore.
(a) surplus, `120
(b) deficit, `130
(c) surplus, `130
(d) deficit, `120
Ans :
Ans :
(c) surplus, `130
4. Suppose in a hypothetical economy, the income rises (c) Assertion (A) is false but Reason (R) is true
from `5,000 crores to `6,000 crores. As a result, the (d) Assertion (A) is true but Reason (R) is false
consumption expenditure rises from `4,000 crores
to `4,600 crores. Marginal propensity to consume in Ans :
such a case would be: (b) Both Assertion (A) and Reason (R) are true and
(a) 0.2 (b) 0.8 Reason (R) is the correct explanation of Assertion (A)
(c) 0.6 (d) 0.4
or 7. Identify the correct pair from the following Column I
Aggregate demand can be increased by: and Column II:
(a) increasing bank rate
Column I Column II
(b) increasing cash reserve ratio
A. Devaluation of (i) Causes a desired
(c) selling government securities by Reserve Bank of
domestic currency fall in the value of
India
rupee
(d) None of these
B. Merchandise (ii) Managed Floating
Ans : Exchange Rate
(c) 0.6 C. Current account (iii) Fixed Exchange
or surplus Rate System
(d) None of these D. Depreciation of (iv) Export and Import
domestic currency of Services
5. All currencies other than the domestic currency of a Alternatives:
country are called as_______. (a) B - (ii)
(i) Foreign exchange rate (b) A - (i)
(ii) Foreign exchange (c) D - (iv)
(iii) Foreign aid
(d) C - (iii)
Identify the correct alternative from the following:
(a) (i) and (iii) Ans :
(b) (i) and (ii) (b) A - (i)
(c) Only (ii)
(d) (i), (ii) and (iii) 8. From the following functions of the Central Bank,
Ans : identify the odd one out:
(c) Only (ii)

given below:
Assertion (A): Demand curve of foreign currency is
negatively sloped.
Reason (R): If price of foreign currency increases, it
become costlier for home country.
Alternatives: (a) D (b) C
(a) Both Assertion (A) and Reason (R) are true and (c) B (d) A
Demand Deposits include_______and______.
Assertion (A)
(i) Saving account deposits
(b) Both Assertion (A) and Reason (R) are true and (ii) Fixed deposits
Reason (R) is the correct explanation of Assertion (iii) Current account deposits
(A) (iv) Post office savings

(a) (i) and (iii)
(b) (i) and (ii) 11. The single tax implemented from 1st July 2017 was
(c) (i) and (iv) likely to reduce prices of which kind of products?
(d) (ii) and (iii) Give example of any three items which are exempted
from GST and why? Give reason.
Ans :
Ans :
(c) B
or Goods and Services Tax (GST) which was
(a) (i) and (iii) implemented from 1st July 2017 is likely to reduce
the price of essential items like food items, fresh
vegetables etc.
9. ‘Import of air conditioners’ is recorded as_____item The three items exempted from the Goods and
in the current account because it does not change any Services Tax are:
liability or an asset. (a) Common salt
(a) Invisible (b) Health services
(b) Visible (c) Educational services
(c) Neither (a) and (b) All the above three items are essential items which
(d) Either (a) or (b) are consumed by the masses, so keeping the social
or welfare motive in mind, the government has exempted
Export and import of goods is also known as: them from GST.
(a) Invisible trade
(b) Visible trade 12. Government provides essential items of food grains
(c) One-sided transactions almost free to the families below the poverty line.
Which objective the government is trying to fulfil
(d) None of these
through the government budget and how ? Explain.
Ans : or
(b) Visible The Government, under Ujjwala Yojana, is providing
or free LPG kitchen gas connections to the families
(b) Visible trade ‘below the poverty line’. What objective the
government is trying to fulfil through the government
budget and how? Explain.
Ans :
10. Read the following statements carefully: By providing essential items of foodgrains almost
Statement 1: There exists an positive relationship free to the families below the poverty line, the
between the multiplier and MPS. government is trying to fulfill the budgetary objective
Statement 2: Higher the value of MPS, lower is the of ‘reducing inequality in incomes’. Government is
value of multiplier. spending on welfare maximisation by providing the
In the light of the given statements, choose the correct above mentioned facility to the poor. In this way, the
alternative from the following: government can try to narrow the gap between the
(a) Statement 1 is false and statement 2 is true rich and the poor.
or
The government under Ujjwala Yojana is providing
(c) Both statements 1 and 2 are false free LPG kitchen gas connection to families `below
(d) Both statements 1 and 2 are true the poverty line’. This is to help the poor people with
Ans : a clean fuel for cooking purposes. This will improve
their eyesight and health. Through this yojana, the
(a) Statement 1 is false and statement 2 is true government is trying to boost up ‘social welfare’.
This step will also boost up the morale of the poor.
Their productive efficiency will get enhanced, which pair of shoes. It involved cumbersome efforts. Indeed
will have a favourable impact on the national income. money has solved this problem by acting as a medium
The government is trying to fulfil the objective of of exchange, through which it works as a means of
reducing inequalities in the income distribution. payment for exchange of goods and services.
Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12 15. Explain the meaning of ‘underemployment
equilibrium’. Give two monetary measures by which
full employment equilibrium can be reached.
13. “Government incurs expenditure to popularise yoga
among the masses.” Analyse its impact on Gross Ans :
Domestic Product and welfare of the people. When Aggregate Demand (AD) and Aggregate
or Supply (AS) or output are equal at less than full
How is Real GDP different from Nominal GDP? employment level of income, then it is a situation of
Which of these is a better indicator of economic “underemployment equilibrium.” The two monetary
welfare? measures to reach full employment equilibrium are:
Ans : (i) Lowering the Bank Rate: If the Central Bank
lowers the bank rate, the commercial banks
Expenditure incurred by the government on are also forced to lower their lending rate to
popularising yoga among the masses will be a part of producers. This will, in turn, raise the demand for
Government final consumption expenditure which is loans for investment and consumption purposes,
an important component of Gross Domestic Product. as borrowing becomes cheaper. Thus AD will be
Hence, the GDP will rise. raised.
Now analysing the impact of Yoga, we find that (ii) Buying of Securities from the market by the
Yoga will definitely have a positive impact on the Central Bank (OMO’s): When the Central Bank
welfare of the people, because it will improve the purchases securities from the public, it makes
health and lifestyle of the people. So their productive money payments to the public. The money
efficiency will also increase. As a result, the level of moves out of the Central Bank and moves into
productivity will go up, alongwith more employment the commercial banks through the buyers of these
will be generated. Thus, GDP will get a boost. securities who have their accounts in these banks.
or Thus, deposits with Commercial Banks increase,
(a) Real GDP refers to the GDP at constant prices, thereby raising their lending capacity. This, in
whereas Nominal GDP refers to GDP at current turn, will raise the borrowing for consumption
prices. Out of the two real GDP is better indicator and investment purposes and thus AD will be
of ‘real growth’ in the economy. raised.
(b) Real GDP = Nominal GDP #
Price Index 100
Whereas,
Nominal GDP = Real GDP100Price Index
#
Out of the two it is not Nominal GDP but Real GDP
which can be taken as a better indicator of economic
welfare.
14. Explain the problem of double coincidence of wants Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12
faced under barter system. How has money solved it?
Ans : 16. (a) On the basis of given table, comment on the
Barter system required ‘double coincidence of wants’. performance of total consumption, private
This was an inherent difficulty faced in this system. It consumption and government consumption in
required both the parties, in the process of exchange, context or tneir recovery.
to have a common need for each others good, such as a
cobbler wanted a bag of wheat and a farmer wanted a
Components 2019-20 (1st 2 0 2 0 - 2021-22 Recovery (viii) Consumption of Fixed 400

RE) 21 (PE) (1st AE) over 2019-
20 Capital
Total Consumption 5.9 -7.3 7.0 99.2 (ix) Mixed Income of Self- 7000
G o v e r n m e n t 7.9 2.9 7.6 110.7 employeds
Consumption (x) Net Exports 1000
Private Consumption 5.5 -9.1 6.9 97.1
(xi) Operating Surplus ?
Gross Fixed Capital 5.4 -10.8 15.0 102.6
Formation (xii) Net Factor Income from 250
Exports -3.3 -4.7 16.5 111.1 Abroad
Imports -0.8 -13.6 29.4 111.8
Ans :
GDP 4.0 -7.3 9.2 101.3
• Total consumption is estimated to have grown
Source: NSO
by 7.0 per cent in 2021-22 with government
Note: RE - Revised Estimates, PE - Provisional
consumption remaining the biggest contributor
Estimates, AE - Advance Estimates
as in the previous year.
(b) From the following data, calculate Gross
• Government consumption is estimated to grow
Domestic Product at market price.
by a strong 7.6 per cent surpassing pre-pandemic
(` in crores) levels.
(i) Compensation of employees 1,000 • Private consumption is also estimated to have
improved significantly to recover 97 per cent of
(ii) Net exports (-)50 corresponding pre-pandemic level.
(iii) Profits 400 (b) GDP at Market Price
(iv) Interest 250 = (i) + (iii) + (iv) + (v) + Depreciation* + (xi)
(v) Rent 150
= 1,000 + 400 + 250 + 150 + 50 + 100
(vi) Gross national product at 1,850
factor cost = ` 1,950
(vii) Gross domestic capital 220 *Depreciation = (vii) - [(viii)+ (ix)]
formation = 220 - [150 + 20] = 220 - 170
(viii) Net fixed capital formation 150 = 50
(ix) Change in stock 20 or
(x) Factor income from abroad 30 (a) PFCE = (iii) + (iv) + (viii) - (xii)
(xi) Net indirect taxes 100
- (vii) - (vi)- (x)
or = 25000 + 200 + 400 - 250
Find the missing values of ‘Private Final Consumption
Expenditure’ and ‘Operating Surplus’ from the - 6500 - 9000 - 1000
following data: = `8850 crores
(` in crores) (b)
(i) Profits 500 Operating Surplus = (iii) - (ii)- (ix) - (xii)
(ii) Wages and Salaries 10000 = 25000 - 10000 - 7000 - 250
(iii) National Income 25000 = `7750 crores
(iv) Net Indirect Taxes 200
(v) Private Final Consumption ?
Expenditure
(vi) Gross Domestic Capital 9000
Formation
(vii) Government Final 6500
Consumption Expenditure
17. In a economy, investment increased by 1,100 and (d) (ii), (iv), (iii), (i)
as a result of it, income increased by 5,500. Had the
Ans :
marginal propensity to save been 25%, what would
have been the increase in income? (c) (ii), (i), (iv), (iii)
Ans :
20. Main intention of the British rulers behind the
1
(i) DY = D I # MPS introduction of railways in India was:
1100 (a) to break geographical and cultural barriers.
`5500 = MPS
(b) to earn profit through foreign trade.
MPS = 1100
5500
= 1 = 0.20
5 (c) to develop India’s cotton and jute industry.
(ii) Had the MPS been 25%, i.e., 0.25 then (d) cheap and rapid movement of people from one
1100 place to another.
DY = 0.25 = `4400
Ans :
Section B -Indian Economic Development (b) to earn profit through foreign trade.
18. Data on unemployment in India is obtained

from_______.
(a) Reports of Census of India
(b) Directorate General of Employment
(c) National Sample Survey ganisation (NSSO)
(d) All of these
or
How much do the “inland sources” contribute to the
total fish production in India? 21. Read the following statements-Assertion (A) and
(a) 35 per cent Reason (R). Choose one of the correct alternatives
(b) 75 per cent given below:
Assertion (A): Animal husbandry is the part of
(c) 50 per cent
diversification of productive activities in rural areas.
(d) 65 per cent Reason (R): It provides stable employment
Ans : opportunities in off season.
Alternatives:
(d) All of these
or
(d) 65 per cent
Assertion (A)
19. Arrange the following events of China in chronological Reason (R) is the correct explanation of Assertion
order and choose the correct alternative: (A)
(i) Great Leap Forward Campaign
(ii) First Five Year Plan
(iii) Economic Reforms introduced (d) Assertion (A) is true but Reason (R) is false
(iv) Great Proletarian Cultural Revolution Ans :
(a) (iv), (i), (ii), (iii)
(b) (ii), (iv), (i), (iii)
(c) (ii), (i), (iv), (iii)
22. From the set of events/systems given in Column I 24. System where farmers and industrial units were
and corresponding relevant fact given in Column II, to buy and sell fixed quantities of raw material and
choose the correct pair of statement: products on the basis of price fixed by government
was termed as:
Column I Column II
(a) Dual pricing
A. Human capital (i) Overall development
(b) Great Leap Forward
and well-being of
a nation’s human (c) Special Economic Zones
capital (d) Great Proletarian Cultural Revolution
B. H u m a n (ii) Movement of people Ans :
development in search of jobs from
(a) Dual pricing
one place to another
C. Migration (iii) Stock of nation’s
skill and expertise at 25. Read the following statements-Assertion (A) and
a particular point of Reason (R). Choose one of the correct alternatives
time given below:
Assertion (A): Globalisation means integration of
D. Physical capital (iv) Capital completely
various economies of the world leading towards the
mobile between
emergence of a cohesive global economy.
countries except
Reason (R): For globalization, the important
for trade restriction
ingredient is to facilitate the migration of human
imposed
resources.
Alternatives: Alternatives:
(a) D - (iv) (a) Both Assertion (A) and Reason (R) are true and
(b) C - (iii) Reason (R) is not the correct explanation of
(c) B - (ii) Assertion (A)
(d) A - (i) (b) Both Assertion (A) and Reason (R) are true and
Ans : (A)
(a) D - (iv) (c) Assertion (A) is false but Reason (R) is true
23. Read the following statements carefully: or
Statement 1: India has an edge over Pakistan in Read the following statements-Assertion (A) and
skilled manpower, investment in education and health Reason (R). Choose one of the correct alternatives
facilities. given below:
Statement 2: Special Economic Zones (SEZs) policy Assertion (A): In India, indirect taxes constitute a
has proved to be a boon for FDI flow in China. large share of government revenue.
In the light of the given statements, choose the correct Reason (R): Taxes are essential for development.
alternative from the following: Alternatives:
(a) Statement 1 is false and statement 2 is true (a) Both Assertion (A) and Reason (R) are true and
(b) Statement 1 is true and statement 2 is false Reason (R) is not the correct explanation of
(c) Both statements 1 and 2 are false Assertion (A)
(d) Both statements 1 and 2 are true (b) Both Assertion (A) and Reason (R) are true and
Ans : (A)
(d) Both statements 1 and 2 are true (c) Assertion (A) is false but Reason (R) is true
Ans :
(a) Both Assertion (A) and Reason (R) are true and Short Answer Questions (Q28 to Q29) 3´2=6
(A) Or (a) Both Assertion (A) and Reason (R) are 28. Answer the following questions on the basis of given
true and Reason (R) is not the correct explanation of data on employment pattern in India:
Assertion (A) Employment pattern (Status wise) 1972-2012 (in %)
Status 1972-73 2011-12
26. A campaign in China in 1958 where people were
encouraged to set up industries in their backyards was Self-employed 61.4 52.0
named as: Regular salaried employees 15.4 18.0
(a) Four Pests Casual wage labourers 23.2 30.0
(b) Great Leap Forward Total 100.0 100.0
(c) Anti-Rightist movement (a) Analyse the trend in the employment pattern on
(d) Great Proletarian Cultural Revolution the basis of the above table.
or (b) Which source is the major employment provider?
China moving ahead of India and Pakistan is true for (c) What is the above process of status movement
which indicator? termed as?
(a) HDI ranking
or
(b) GDP per capita How is agricultural diversification helpful for
(c) Proportion of population below poverty line farmers? Explain.
(d) All of these Ans :
Ans : (a) On the basis of the table provided, there is a
(b) Great Leap Forward changed trend in the employment pattern in India
or during 1972-2012. People have moved from self-
(d) All of these employment to regular salaried employment and
casual wage work as seen in the table given. The
number of people ‘Self-employed’ has decreased
from 61.4% in 1972-73 to 52% in 2011-12.
(b) “Self-employment” continues to be the major
employment provider as 52% of the people are
still self-employeds as compared to 18% in the
regular salaried category and 30% work as casual
wage labourers.
(c) The above process of status movement from self-
employment and regular salaried employment to
Statement 1: Physical capital is tangible whereas
casual wage work is termed as `casualisation of
human capital is intangible.
workforce’.
Statement 2: Physical capital includes machines,
or
equipment, instruments, etc. used in production
• Agricultural diversification is helpful for farmers
process whereas human capital includes skills,
in the sense that the big risk which they face in
abilities, knowledge etc.
solely depending upon farming for livelihood
gets reduced.
• Diversification towards new areas is also
necessary to provide productive sustainable
(b) Statement 1 is true and statement 2 is false options to the livelihood of the rural masses.
(c) Both statements 1 and 2 are false • Diversification provides supplementary and
(d) Both statements 1 and 2 are true gainful employment during off-season.
• Diversification in agriculture thereby enhances
Ans :
the income level of rural people. Hence, it helps
(d) Both statements 1 and 2 are true to overcome poverty.
29. On the basis of given image, answer the questions that colonial government had its vested interest for
follow in context to National Education Policy, 2020. reducing India to the status of mere exporter of
raw materials. This was essentially required by
the coming up modern industries in Britain.
• At the same time India was to act as a ready
market for the products of these British industries
(imports) which were sold at cheaper rates. So
the handicrafts started facing competition from
machine-made products.
• The British did not contribute significantly to
the replacement of handicraft industries by a
or
There were many causes of planning in India meeting
with limited success like:
(a) Performance of many public sector enterprises
were far from satisfactory. They were at times
unduly protected. This led to the birth of
inefficient monopolies which inflicted more harm
than good.
(b) Domestic producers, in the name of ‘self-
reliance’, were protected against the foreign
competition.
(c) The prolonged protection to domestic producers
(a) How much gross enrolment ratio is expected in as a matter of fact, killed their incentive to grow
Pre-school to Secondary Level by 2030? by way of upgrading and modernising their
(b) How much investment in education sector of products.
GDP is targeted and what is the current level of (d) Excessive government regulation came in the
investment in education sector? way of entrepreneurship.
Ans : (e) Inefficient functioning of the PSU incurred huge
losses, which lead to a drain on the nation’s
(a) 100% limited resources and failure of planning to some
(b) The targeted investment in education sector of extent. (any four)
GDP is 6%.
The current level of investment in education sector of
GDP is 4.13% (approx). 31. ‘A skilled worker like software professional generates
more income than an unskilled worker.’ Substantiate
the above statement.
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 Ans :
A skilled worker certainly generates more income than
30. ‘Colonial era was responsible for the decline of an unskilled worker mainly because the productivity
traditional handicraft industries.’ Accept/Refute the of an educated and skilled person is higher than an
above statement by giving reason. unskilled one. A skilled worker also commands a
or higher earning, or a gainful employment. This is
Enumerate the main causes of limited success of because they cannot be substituted with another
planning in India. worker, and it takes years to generate manpower which
Ans : is skilled in a particular field. On the other hand, an
• Indeed it is a well-accepted fact that it was the unskilled worker like a rickshaw puller can be easily
colonial era which brought about the decline of substituted, as such workers easily compromise on
• India’s world famous handicraft industries. The lesser earnings.
32. Write a short note on the following: Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12
(a) SAARC
(b) European Union 33. Define environment. What are its main functions?
(c) ASEAN or
(d) G-8 or G-7 Elaborate how the following factors contribute to the
Ans : environmental crisis in India:
(a) Air pollution
(a) SAARC: The South Asian Association for
(b) Water contamination
Regional Cooperation, or SAARC, proposed by
ZiaurRehman, the then-president of Bangladesh, (c) Illiteracy
was established on December 8, 1985. It is Ans :
an association of eight countries of South
‘Environment is the ‘total planetary inheritance and
Asia: Afghanistan, Bangladesh, Bhutan, India,
totality of all resources’. Environment performs four
Maldives, Nepal, Pakistan and Sri Lanka. SAARC
vital functions:
encourages cooperation in agriculture, rural
(a) It supplies resources, both renewable and
development, science and technology, culture,
nonrenewable.
health, population control, narcotics control and
(b) It assimilates waste.
anti-terrorism.
(c) It sustains life by providing genetic and
(b) European Union: The European Union (EU) is a
biodiversity.
union of twenty-seven independent states based
(d) It provides aesthetic services like scenery etc.
on the European Communities and founded
or
on 1st November, 1993 to enhance political,
(a) Air pollution has disastrous impact on human
economic and social co-operation. The formation
health and well being. So people start suffering
of EU, marked by a common market, common
from breathing or respiratory problems and their
currency,abolished passport control, and custom
productive efficiency gets lowered.
checks were also abolished at many of the EU’s
(b) Water contamination leads to the spread of
internal borders, creating a single space of
waterborne diseases like cholera, typhoid etc.
mobility for EU citizens to live, travel, work and
These diseases damage the health of the people.
invest.
As a result their productive efficiency suffers.
(c) ASEAN: Association of Southeast Asian Nations
(c) Illiteracy may lead to misuse of the resources
(ASEAN) is a political and economic organization
available. This may be because of wastage
of countries located in Southeast Asia. ASEAN
involved. As illiterate people may be ignorant
was formed on August 8, 1976 by Thailand,
about the conservation of the available scarce
Indonesia, Malaysia, Singapore and Philippines,
resources.
as a display of solidarity against communist
expansion in Vietnam and insurgency within their
borders. These countries meet annually. 34. Read the following text carefully and answer the
(d) G-8: The Group of Eight (G-8) countries consists given questions on the basis of the same and common
of Canada, France, Germany, Italy, Japan, Russia, understanding:
the United Kingdom, and the United States. Indian agricultural economy was largely subsistence
Together these countries represent about 65 per in nature before Independence. It had dismal
cent of the world economy. Now, it become group performance in the first half of twentieth century.
of 7 countries after removal of Russia from the This period witnessed severe droughts and famines.
group. During partition, about one-third of the irrigated land
in undivided India went to Pakistan. This reduced the
proportion of irrigated area in independent India. After
independence, the immediate goal of the Government
was to increase foodgrains production by switching
over from cash crops to food crops; intensification of
cropping over already cultivated land; and increasing
cultivated area by bringing cultivable and fallow green revolution also gave fillip to the development
land under plough. Initially, this strategy helped in of a large number of agro-inputs, agro-processing
increasing foodgrains production. But agricultural industries and small-scale industries. But since
production stagnated during late 1950s. To overcome green revolution was initially confined to irrigated
this problem, Intensive Agricultural District areas because of pre-requirements of assured soil
Programme (IADP) and Intensive Agricultural moisture, it led to regional disparities.
Area Programme (IAAP) were launched. But two
consecutive droughts during mid-1960s resulted in
food crisis in the country. Consequently, foodgrains
were imported from other countries.
New seed varieties of wheat (Mexico) and rice
(Philippines) known as High Yielding Varieties
(HYVs) were available for cultivation by mid-1960s.
India took advantage of this and introduced package
technology comprising HYVs, along with chemical
fertilisers in irrigated areas of Punjab, Haryana,
Western Uttar Pradesh, Andhra Pradesh and Gujarat.
Assured supply of soil moisture through irrigation
was a basic pre-requisite for the success of this new 
agricultural technology. This strategy of agricultural
development paid dividends instantly and increased
the foodgrains production at very fast rate. This spurt
of agricultural growth came to be known as ‘Green
Revolution’. This also gave fillip to the development
of a large number of agro-inputs, agro-processing
industries and small-scale industries. This strategy
of agricultural development made the country self-
reliant in foodgrain production. But Green Revolution
was initially confined to irrigated areas only. This led
to regional disparities in agricultural development
in the country till 1970s, after which the technology
spread to the Eastern and Central parts of the country.
(a) Why was Green Revolution implemented and
how did it benefit the farmers?
(b) What were the spillover benefits of Green
Revolution and how did it led to regional
disparities?
Ans :
(a) Green revolution was implemented in India to
overcome the shortage of food grain availability
in the post-independence period. Green revolution
has increased the production and productivity in
the agriculture sector which was otherwise very
low. It paid rich dividends instantly and increased
food grains production at very fast rate. It also
helped in improving the income of the farmers
by creating marketable surplus, increased
employment and output.
(b) Besides increasing the food grain production,

ECONOMICS (030)
Section A -Macro Economics (a) Both Assertion (A) and Reason (R) are true and
Assertion (A)
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (b) Both Assertion (A) and Reason (R) are true and
1. Suppose, following data is presented, for an imaginary (A)
economy: (c) Assertion (A) is false but Reason (R) is true
Autonomous consumption = `100 (d) Assertion (A) is true but Reason (R) is false
Marginal propensity to consume = 0.70
National Income = `1000 Ans :
Identify, which of the following statements is correct (d) Assertion (A) is true but Reason (R) is false
for consumption expenditure.
(a) The value of consumption expenditure would be 3. A company located in India receives a loan from a
`600. company located abroad. This transaction will be
(b) The value of consumption expenditure would be recorded on _____ side of_______.
`500. (a) debit; current account
(c) The value of consumption expenditure would be (b) credit; current account
`800. (c) debit; capital account
(d) The value of consumption expenditure would be (d) credit; capital account
`700.
Ans :
(c) The value of consumption expenditure would be
`800.

given below:
Assertion (A): At the left of Break-Even point, APC
is greater than one.
Reason (R): At the left of Break-Even point, APS is
positive. or
Alternatives: Read the following figure carefully and choose the
correct pair from the alternatives given below:
5. Aggregate demand includes_______.

(a) Investment expenditure
(b) Consumption expenditure
or
A period of falling aggregate demand is attributed to
a fall in:
(a) Investment expenditure and Net exports
(b) Household consumption expenditure and
Government consumption expenditure
Ans :
Alternatives: or
(a) A : Net income from abroad; B : Foreign direct (d) Both (a) and (b)
investment; C : Net current transfers
(b) A : Net current transfers; B : Net income from 6. Read the following statements carefully:
abroad; C : Foreign direct investment Statement 1: Bank Rate is the rate at which the central
(c) A : Foreign direct investment; B : Net current bank lends funds to the commercial banks.
transfers; C : Net income from abroad Statement 2: Cash Reserve Ratio (CRR) is the
(d) A : Net current transfers; B : Foreign direct proportion of deposits that commerical banks have to
investment; C : Net income from abroad keep as cash reserves with the central bank.
(d) credit; capital account (a) Statement 1 is false and statement 2 is true
or (b) Statement 1 is true and statement 2 is false
(d) A : Net current transfers; B : Foreign direct (c) Both statements 1 and 2 are false
investment; C : Net income from abroad
4. Read the following statements carefully: Ans :

Statement 1: Depreciation of domestic currency (d) Both statements 1 and 2 are true
encourages exports.
Statement 2: Appreciation of domestic currency 7. Read the following statements-Assertion (A) and
discourages imports. Reason (R). Choose one of the correct alternatives
In the light of the given statements, choose the correct given below:
alternative from the following: Assertion (A): Export of sugar is recorded in the
(a) Statement 1 is false and statement 2 is true capital account.
(b) Statement 1 is true and statement 2 is false Reason (R): Atmanirbhar Bharat’ will decrease
(c) Both statements 1 and 2 are false inflow of foreign exchange.
(d) Both statements 1 and 2 are true Alternatives:
(b) Statement 1 is true and statement 2 is false Assertion (A)
(A) Ans :
(c) Assertion (A) is false but Reason (R) is true (d) flow; stock
(d) Assertion (A) is true but Reason (R) is false or
(d) `195 lakh
Ans :
Statement 1: Decline in government consumption is 11. “India is taking huge leaps in the index of Ease of
responsible for the decline in the Indian economy. Doing Business; as a result many MNCs are shifting
Statement 2: The government should decrease its their production base to India.” In the light of the
expenditure to correct a situation of deficient demand. given statement, comment upon the flow of foreign
In the light of the given statements, choose the correct exchange and its likely impact on Indian economy.
alternative from the following: or
(a) Statement 1 is false and statement 2 is true ‘Devaluation and Depreciation of the currency are
(b) Statement 1 is true and statement 2 is false one and the same thing.’ Defend or refute the above
statement with valid arguments.
(d) Both statements 1 and 2 are true Ans :
India, with greater ease of doing business, may attract
Ans :
many more MNCs to shift their production base
(c) Both statements 1 and 2 are false to India, thereby increasing the inflow of foreign
exchange (say $) to the Indian economy. This increase
9. What role does the central bank play when a in Foreign Direct Investment (FDI) by MNCs will lead
commercial bank XYZ fails to meet obligation of its to an increase in the supply of foreign exchange in
depositors? India leading to a fall in the rate of foreign exchange,
(a) Issuer of currency i.e., Indian rupee (`) may appreciate. An increase in
(b) Lender of last resort FDI will also result in increase in production and
hence will generate more employment opportunities
(c) Banker to the government
in the Indian economy.
(d) None of these or
Ans : Devaluation and Depreciation of currency are not one
and the same thing. This is because devaluation refers
(b) Lender of last resort
to the fall in the value of domestic currency w.r.t.
foreign currency as planned by the government (it is
10. Savings is a______concept, whereas capital is fixed by the government) whereas depreciation refers
a_______concept. to the fall in the value of domestic currency in relation
(a) stock; stock to foreign currency w.r.t. a situation where exchange
(b) stock; flow rate is determined by the market forces of demand
(c) flow; flow and supply for foreign exchange in the international
(d) flow; stock money market. No matter both cause a fall in the
value of domestic currency.
or
If, in an economy, the value of sales is `180 lakhs
and change in stock is `15 lakh, identify the value of
output.
(a) `180 lakh
(b) `165 lakh
(c) `190 lakh
(d) `195 lakh
12. “India’s GDP is expected to expand 7.5% in 2019-20: expenditure for the economy would be `1,650 crores
World Bank” —The Economic Times and the autonomous investment is `50 crores and the
Does the given statement mean that welfare of people Marginal Propensity to Consume is 0.8. True and
of India increase at the same rate? Comment with False? Justify your answer with proper calculations.
reason. or
Ans : Explain the meaning of:
(a) Aggregate supply
Generally, it is considered that an increase in the
(b) Under-employment equilibrium
Gross Domestic Product (GDP) of a country ensures
increase in welfare of the people of that country. Ans :
However, this may not always be correct.
Some of the prime reasons for the same are: We have S = ( - ) 50 + 0.2 Y
(a) Unequal distribution and composition of GDP. Y = `2,000 crores
(b) Non-monetary transactions in the economy which Consumption Expenditure = `1,650 crores
are not accounted for in GDP. Autonomous Investment = `50 crores
(c) Occurrence of externalities in the economy (both Now, S = ( - ) 50 + 0.2 (2,000)
positive and negative).
= - 50 + 400 = 350 crores
At equilibrium level of income,
Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12 Y=C+S
2,000 = C + 350
13. (a) ‘We say that commercial banks create money,
while we also say that the central bank has the C = 2,000 - 350
sole right to issue currency.’ Justify the given = 1,650 crores
statement. As MPS = 0.2
(b) What is the likely impact of money creation by
the commercial banks on national income? MPC = 0.8
So, all the given values are correct.
Ans : or
(a) We know that money supply has two components, (a) Aggregate Supply in Macroeconomics is the value
i.e., Currency and Demand Deposits with of total final output available in the economy
commercial banks. Currency is issued by the during a period of time, say an year. It represents
Central Bank while deposits are created by the national income of the country during a given
commercial banks by lending money to the period. Symbolically, AS = Y.
people. Commercial banks create money by (b) When Aggregate Demand (AD) and Aggregate
advancing loans from its deposits. Supply (AS) are equal at less than full employment
Total money created by commercial banks level of income, it is called “under-employment
= 1 # initial deposit, where LRR is legal equilibrium”. Underemployment equilibrium
LRR refers to a situation of equilibrium when all
reserve ratio.
Commercial banks lend money mainly to resources are not fully used, as some resources
investors. In this way, commercial banks also lie idle or unutilised.
create money.
(b) When commercial banks lend money, investment 15. “Indian economy saw its worst contraction in
increases. Therefore, national income rises due decades. It is in a deep vicious cycle where demand is
to money created by commercial banks. This contracting heavily.”
rise in investment in the economy leads to rise in The Hindu; August 31st, 2020
national income through the multiplier effect. State and discuss any two monetary measures that
may be taken by the government of India to correct
14. In an economy, Savings function is given by S = the situation indicated in the above news report.
(-) 50 + 0.2 Y and Y is `2,000 crores. Consumption Ans :
The two monetary measures that may be taken by the the type of goods and services produced and not
government of India through Central Bank (RBI) to simply how much is being produced.
correct the given situation of deficient demand are: (b) Commission received from sale of second hand
(a) Decrease in bank rate. For controlling deficient goods should be included in the estimation of
demand, the central bank should decrease the national income, because it is the remuneration
bank rate. A decrease in bank rate lowers the earned by the agent for rendering productive
rate of interest and credit becomes cheaper. service. It is a productive income. The agent
Accordingly, the demand for credit expands and helps in transferring these goods from places of
aggregate demand increases. less utility to places of high utility.
(b) Purchase of government securities. For or
controlling deficient demand, the central bank
(a) GNP deflator = NoReal
minal GNP #
GNP 100
should resort to buying of government securities.
By buying the government securities, the central = 2500 # 100 = 83.33%
3000
bank injects additional purchasing power in the No, the price level has not risen between the base year
system which results in the expansion of credit. and the year under consideration. In fact, it has fallen.
As a result, aggregate demand increases. (b) (i) No, payment of interest by an individual
to a bank on a loan to buy a car will not be
included in the estimation of national income,
Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12 because it is assumed that loan is taken for
consumption purposes by the individual and
16. (a) ‘All products do not contribute equally to not for productive purpose.
economic welfare.’ Defend or refute the given (ii) Yes, the expenditure by government on
statement with valid reasons. providing free services will be included in
(b) ‘Commission received from sale of second hand the estimation of national income because
goods’ should be included/not included in the it is government’s final consumption
estimation of national income. State with valid expenditure.
reason.
or 17. (a) On the basis of given chart, interpret the trend of
(a) The value of Nominal GNP of an economy fiscal deficit as a percent of budget estimates.
was `2,500 crores in a particular year. The
value of GNP of that country during the same
year evaluated at the prices of base year was
`3,000 crores. Calculate the GNP deflator of
the year in percentage terms. Has the price level
risen between the base year and the year under
consideration?
(b) Giving reason, state how will the following be
treated in the estimation of National Income:
(i) Payment of interest by an individual to a
bank on a loan to buy a car
(ii) Expenditure by government on providing
free services
Ans :
(a) The given statement is defended as all products
do not contribute equally to economic welfare.
For example, Police services, food items, houses (b) Discuss briefly how can the government budget
etc. may contribute more to the welfare of the help in reducing inequalities of income in the
people than products like pan masala, cigarettes economy.
etc. Economic welfare would, thus depend upon
Ans : 19. Density of population is lowest in______.

(a) The data in government accounts for April to (a) Pakistan
November 2021, shows that fiscal deficit of the (b) China
Central Government at the end of November (c) India
2021 stood at 46.2 per cent of the BE compared to (d) Both (b) and (c)
135.1 per cent of the BE during the same period or
in 2020 and 114.8 per cent during the same period In China, commune system is related to ______
in 2019. sector.
(b) Government’s budget can help in reducing (a) informal (b) services
inequalities of income. This objective can be
(c) industry (d) agriculture
achieved by adopting two fiscal measures, i.e.,
(i) Government can levy higher rate of tax on Ans :
the income and property of the rich and also (b) China
on the luxurious goods consumed by them. or
This measure will reduce their disposable (d) agriculture
income.
(ii) Government can spend more amount on
welfare maximisation, like providing free 20. The major share of total education expenditure is
services to the poor like free education, taken by______.
health facilities etc. By adopting these (a) Higher education
measures, government can try to narrow (b) Technical education
down the gap between the rich and the poor. (c) Elementary education
(d) Secondary education
Ans :
(c) Elementary education

Statement 1: China introduced reforms originally
in 1978 and then subsequently in a phased manner.
Statement 2: The Great Leap Forward (GLF)
Section B -Indian Economic Development campaign took place in 1958.
Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10 alternative from the following:
Statement 1: China joined World Trade ganisation (c) Both statements 1 and 2 are false
(WTO) in the year 2005. (d) Both statements 1 and 2 are true
Statement 2: Pakistan shifted its policy orientation in Ans :
late 1970s and 1980s.
In the light of the given statements, choose the correct (d) Both statements 1 and 2 are true
(a) Statement 1 is false and statement 2 is true 22. Which of the following statement(s) is/are not true
(b) Statement 1 is true and statement 2 is false about the foreign trade in context of Indian economy
(c) Both statements 1 and 2 are false during the British rule?
(i) India became exporter of primary products and an
importer of finished consumer goods and capital
Ans : goods from Britain.
(a) Statement 1 is false and statement 2 is true (ii) India traded with many countries of the world
despite discriminatory tariff policy pursued by Ans :

the British Government. (b) Both Assertion (A) and Reason (R) are true and
(iii) India generated huge export surplus. Reason (R) is the correct explanation of Assertion (A)
(iv) Britain had a monopoly control over India’s or
foreign trade. (b) Both Assertion (A) and Reason (R) are true and
(a) (i) and (iv) Reason (R) is the correct explanation of Assertion (A)
(b) Only (ii)
(c) (ii) and (iii) 24. In India, 14 big scheduled commercial banks were
(d) (i) and (iii) nationalised in:
Ans : (a) 1949
(b) 1969
(b) Only (ii)
(c) 2000
(d) 1955
Reason (R). Choose one of the correct alternatives or
given below: The two major sources of human capital in a country
Assertion (A): Land ceiling was a land reform to are:
promote equity in the agricultural sector. (a) Investment in Education and Migration
Reason (R): Land ceiling was introduced to reduce (b) Investment in Education and Health
the concentration of land ownership in the hands of (c) Investment in Education and Information
a few. (d) Investment in Education and On-the-job Training
Alternatives:
Reason (R) is not the correct explanation of (b) 1969
Assertion (A) or
(b) Both Assertion (A) and Reason (R) are true and (b) Investment in Education and Health
(A) 25. ______service remained inadequate throughout the
(c) Assertion (A) is false but Reason (R) is true colonial regime.
(d) Assertion (A) is true but Reason (R) is false (a) Ports
or (b) Railways
Read the following statements-Assertion (A) and (c) Postal
Reason (R). Choose one of the correct alternatives (d) Law and Order
given below:
Assertion (A): The Green Revolution enabled the Ans :
government to procure sufficient amount of food (c) Postal
grains to build a stock.
Reason (R): Food availability was to be ensured in
times of food shortage.
Alternatives:
Assertion (A)
(A)
26. Read the following statements-Assertion (A) and Short Answer Questions (Q28 to Q29) 3´2=6
given below: 28. Interpret the given picture on account of current
Assertion (A): From 2014, Pradhan Mantri Jan Dhan environmental challenges.
Yojana is available to people in India to open a bank
account.
Reason (R): To facilitate the transfer of all the
benefits of government schemes and subsidies to the
accountholders directly.
Alternatives:
Assertion (A)
(A)
Ans : The given image indicates the state of confusion
(b) Both Assertion (A) and Reason (R) are true and between ‘protecting the environment’ and ‘economic
Reason (R) is the correct explanation of Assertion (A) development’.
The economic significance of the environment is
evident with the range of ecosystem that it offers.
27. From the set of events/systems given in Column I and
On the other hand, rapid industrialisation and
corresponding relevant fact given in Column II, about
urbanisation are inevitable to bring in desired levels
China, choose the correct pair of statement:
of economic development. However, these activities
Column I Column II have huge negative environmental consequences
A. Commune system (i) 1966-76 such as pollution. Thus development goals must be
pursued without affecting environment.
B. Special Economic (ii) to attract foreign
Zones investors
C. One-child norm (iii) cultivating land 29. “Subsidies provide an incentive for wasteful use
collectively of resources.” Defend the statement with valid
arguments.
D. Great Proletarian (iv) major reason for
or
Cultural Revolution low population
“India failed to develop a strong export sector.”
growth
Defend the statement with valid reasons.
Alternatives:
Ans :
(a) C - (iii)
(b) D - (iv) Prices are signals of availability of goods. Rising
prices reflect scarcity and lead to a judicious use of
(c) A - (i)
scarce resources and goods. Subsidies do not allow
(d) B - (ii) the prices to indicate the supply of a good. When
Ans : goods are available at subsidised rates, it might
result in overuse of resources without any concern
(d) B - (ii)
for scarcity. Thus, subsidies provide an incentive for
wasteful use of resources.
or
India failed to develop a strong export sector until
the mid 1980s because of its “inward looking trade
strategy”, i.e., focus on import substitution. This salaried jobs to casual wage work, it increases
policy aimed at replacing or substituting imports the percentage of casually hired workers in the
with domestic production. Protection from foreign total workforce. This phenomenon is known as
competition was the major reason why India failed to ‘casualisation of workforce’.
develop a strong export sector. It was assumed that if (b) The given statement is true, as global warming
domestic industries were protected, they would learn is caused by man-made factors such as increase
to compete in the course of time. This was for the in carbon dioxide (CO2) and other greenhouse
sake of self-reliance. gases through the burning of fossil fuels and
deforestation, which increase the amount of
carbon dioxide in the atmosphere; methane gas
released in animal waste and increased cattle
production contribute to deforestation.
or
In a developing country like India with a large section
of people still not having an access to basic education,
the government has to intervene in the field of
education.
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 • Keeping provision of basic education as a
fundamental right of the citizens, the government
30. “It is necessary to generate more employment in should provide education free of cost for the
the formal sector.” Do you agree with the above deserving citizens and those from the socially
statement? Justify. oppressed classes.
• Expenditure in the field of education incurred
Ans : by both the union and state governments has
Yes, it is necessary to generate more employment to be boosted up in order to fulfil the objective
in the formal sector because those who work in the of attaining 100% literacy and increasing the
informal sector do not get any regular income and also educational attainment of Indians.
do not get protection from the government. Workers • From 2004-05 Government of India, started
are dismissed without any compensation. Technology levying a ‘education cess’ on all union taxes.
used is outdated and they also do not maintain any The revenue from this cess is to be spend on
accounts. Workers live in slums or badly built houses. elementary education.
Those who work in the formal sector, on the other • Provision and promotion of higher education
hand, earn more than those in the informal sector and new loan schemes for students to pursue
and also enjoy social benefits. It is, thus, necessary higher education.
to generate more employment in the formal sector for
job security purposes. 32. Compare and analyse the given data of India and
China with valid arguments.
31. State, giving valid reasons, whether the following
Country People below the Infant Mortality
statements are true or false:
poverty line (%) Rate (per 1000
(a) Casualisation of workforce refers to a situation
live births)
when the percentage of casually hired workers in
the total workforce tends to rise over time. India 37 38
(b) Global warming is caused by man-made factors. China 32 9
or Ans :
Argue in favour of the need for different forms of
While comparing the performance of India and China
government intervention in education sector.
w.r.t. people below the poverty line it is observed that
Ans : in India there are 37% of people living below the
(a) The given statement is true, because when poverty line and in China 32% of people live below
people move from self-employment and regular the poverty line (as per the Human Development
Report 2016). This shows that China has less people reducing India to the status of mere exporter of
below poverty line, i.e., it is less poor than India. raw materials. This was essentially required by
Infant Mortality Rate in India is 38 per 1,000 live the coming up modern industries in Britain.
births and in China it is just 9 per 1,000 live births. • At the same time India was to act as a ready
This denotes good health of both infant and the market for the products of these British industries
mother due to the good health care in China, whereas (imports) which were sold at cheaper rates. So,
in India the IMR of 38 per 1,000 live births is quite the handicrafts started facing competition from
high denoting lack of good health care of both infant machine-made products.
and the mother, which leads to their untimely death. • The British did not contribute significantly to
the replacement of handicraft industries by a
(b) It is correct to state that Green Revolution enabled
the government to procure sufficient food grains
to build its stocks to be used during periods
of shortage. The spread of Green Revolution
technology (HYV technology) enabled India
to achieve self-sufficiency in food grains. India
was no longer at the mercy of the USA or other
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 nations to meet its food requirements. Thus, by
the late 1960s, Indian agricultural productivity
33. (a) “The colonial era was responsible for the decline had increased sufficiently to enable the country to
of traditional handicraft industries.” Discuss be self-sufficient in food grains. This indeed was
the rationale of the given statement with valid a remarkable achievement.
reasons. or
(b) “The Green Revolution enabled the government (a) While analysing the trend in the growth of GDP in
to procure sufficient food grains to build its stocks the major sectors post 1991, it has been observed
that could be used during the times of shortage.” that the growth of GDP increased from 5.6% to
Establish the rationale of the given statement 8.2%. During 2007-12, the growth of agriculture
with valid reasons. has declined, the industrial sector reported
fluctuation and growth of service sector has gone
or
up during the reform period. After 2012, there
(a) Analyse the trend in the growth of GDP in the
has been a setback in the growth rates of different
major sectors post 1991 on the basis of the data
sectors. While agriculture recorded a high growth
given below.
rate during 2013¬14, this sector witnessed a
(b) Which sector has witnessed growth higher than negative growth in the subsequent year. Service
the overall GDP growth in 2014-15? sector continued to witness a high level of
Growth of GDP and major sectors (in %) growth, higher than the overall GDP growth in
Sectors 1980-91 2007-12 2013-14 2014-15 2014-15. This sector witnessed the high growth
rate of 9.8%. The industrial sector witnessed a
Agriculture 3.6 3.2 4.2 -0.2
steep decline during 2013-14 from 7.4% to 5.0%
Industry 7.1 7.4 5.0 7.0 but began to show a positive growth in 2014-15
Services 6.7 10.0 7.8 9.8 (7%).
Total 5.6 8.2 6.6 7.4 (b) It is the service sector which grew at 9.8%, higher
Source: Economic Survey for various years than the overall GDP growth (7.4%) in 2014-15.
Ans :
34. Read the following text carefully and answer the
• Indeed, it is a well-accepted fact that it was the
given questions on the basis of the same and common
colonial era which brought about the decline of
understanding:
India’s world famous handicraft industries. The
Human development is a process of enlarging the range
colonial government had its vested interest for
of people’s choices, increasing their opportunities for
education, healthcare, income and empowerment

and covering the full range of human choices from a
sound physical environment to economic, social and
political freedom.
Thus, enlarging the range of people’s choices is
the most significant aspect of human development.
People’s choices may involve a host of other issues,
but, living a long and healthy life, to be educated and
have access to resources needed for a decent standard
of living including political freedom, guaranteed
human rights and personal self-respect, etc. are
considered some of the non-negotiable aspects of the
human development. 
Concerted efforts were made to look at development
critically at various times in the past. But, most
systematic effort towards this was the publication
of the First Human Development Report by United
Nations Development Programme (UNDP) in 1990.
Since then, this organisation has been bringing out
World Human Development Report every year. This
report does not only define human development, make
amendments and changes its indicators but also ranks
all the countries of the world based on the calculated
scores. According to the Human Development Report
1993, “progressive democratisation and increasing
empowerment of people are seen as the minimum
conditions for human development”. Moreover, it
also mentions that “development must be woven
around people, not the people around development”
as was the case previously.
(a) The concept of human development is different
from that of human capital. How?
(b) What are the important aspects of human
development?
Ans :
(a) Human capital considers education and health
as a means to increase labour productivity. On
the other hand, human development considers
education and health as being integral to human
well-being because only when people are
educated and healthy, they will be able to make
better choices.
(b) Enlarging the range of people’s choices,
increasing their opportunities for education,
health care, income and empowerment and
covering the full range of human choices from a
sound physical environment to economic, social
and political freedom are the significant aspects
of human development.

ECONOMICS (030)
Section A -Macro Economics 3. Read the following statements carefully:

Statement 1: There is an inverse relationship
between the value of marginal propensity to save and
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 investment multiplier.
Statement 2: When the value of average propensity to
1. From the following, identify the correct statement save is negative, the value of marginal propensity to
regarding inflationary gap. save will also be negative.
(i) It raises the level of output. In the light of the given statements, choose the correct
(ii) It does not change the level of output. alternative from the following:
(iii) It raises the general price level. (a) Statement 1 is false and statement 2 is true
(a) (i) and (iii) (b) Statement 1 is true and statement 2 is false
(b) (i) and (ii) (c) Both statements 1 and 2 are false
(c) (i), (ii) and (iii) (d) Both statements 1 and 2 are true
(d) (ii) and (iii) Ans :
Ans : (b) Statement 1 is true and statement 2 is false
(d) (ii) and (iii)

Statement 1: Decrease in demand for foreign currency
leads to currency depreciation.
Statement 2: Capital account is a part of Balance of
Trade.
alternative from the following: 4. Welfare affected by factors like income is_____
(a) Statement 1 is false and statement 2 is true welfare, whereas the welfare affected by factors like
(b) Statement 1 is true and statement 2 is false pollution is called______welfare.
(c) Both statements 1 and 2 are false (a) non-economic; non-economic
(d) Both statements 1 and 2 are true (b) economic; non-economic
(c) economic; economic
Ans :
(d) non-economic; economic
(c) Both statements 1 and 2 are false or
If, in an economy, the value of GNPMP is `17,450 (c) Both (a) and (b)
crores; Depreciation is `2,400 crores and NIT is ` or
3,300 crores, identify the value of NNPFC (b) Increase
(a) `17,450 crores
(b) `10,150 crores 7. Observe the given figure carefully and choose the
(c) `12,350 crores correct pair from the alternatives given below:
(d) `11,750 crores
Ans :
(b) economic; non-economic
or
(d) `11,750 crores
5. Identify the correct pair of items from the following

Column I and Column II:
Column I Column II
A. Exports of (i) Debit item in the
merchandise Current Account of BoP
B. A gift from (ii) Credit item in the
foreigner Capital Account of BoP Alternatives:
(a) A : Medium of Exchange; B : Standard of Deferred
C. Imports of (iii) Debit item in the
Payment; C : Secondary Functions; Functions
services Current Account of BoP
(b) A : Standard of Deferred Payment; B : Medium of
D. Lending (iv) Debit item in the
Exchange; C : Primary Functions; D Functions
abroad Capital Account of BoP
(c) A : Standard of Deferred Payment; B : Medium of
Alternatives: Exchange; C : Secondary Functions; Functions
(a) C - (iii) (d) A : Medium of Exchange; B : Standard of Deferred
(b) D - (iv) Payment; C : Primary Functions; D Functions
(c) A - (i)
Ans :
(d) B - (ii)
(d) A : Medium of Exchange; B : Standard of Deferred
Ans : Payment; C : Primary Functions; D Functions
(a) C - (iii)
6. A period of deceleration leads to______. Reason (R). Choose one of the correct alternatives
(a) Fall in investment demand given below:
(b) Fall in consumption demand Assertion (A): If aggregate demand is more than
(c) Both (a) and (b) aggregate supply at any given level of income, it is
not equilibrium level of income.
(d) None of these
Reason (R): Equilibrium level of income is the
or situation where investment is equal to savings.
Keynes stated that as the income of the households Alternatives:
increases their consumption expenditure will_____. (a) Both Assertion (A) and Reason (R) are true and
(a) Decrease Reason (R) is not the correct explanation of
(b) Increase Assertion (A)
(c) Remain constant (b) Both Assertion (A) and Reason (R) are true and
(d) None of these Reason (R) is the correct explanation of Assertion
(A)
Ans :
(c) Assertion (A) is false but Reason (R) is true (a) Statement 1 is false and statement 2 is true
(d) Assertion (A) is true but Reason (R) is false or
Ans : Reason (R) is not the correct explanation of Assertion
(b) Both Assertion (A) and Reason (R) are true and (A)

9. An Indian company sells machinery to Zambia.
This transaction will be recorded on______side
of________. 11. State giving valid reasons, whether the following
(a) credit; current account statements are true or false:
(a) Current account is a part of Balance of Trade.
(b) debit; current account
(b) External assistance is recorded in Balance of
(c) debit; capital account
Payments account.
(d) credit; capital account
or
Ans : Distinguish between fixed exchange rate and flexible
(a) credit; current account exchange rate.
Ans :
10. Read the following statements carefully: (a) The given statement is false, as Balance of Trade
Statement 1: State Bank of India is the main source of is a part of current account and not the other way
money supply in India. round.
Statement 2: Issuing coins and one rupee note is not a (b) The given statement is true, as “external
function of Reserve Bank of India. assistance” is an important source of loans, which
In the light of the given statements, choose the correct are a part of capital account and thereby Balance
alternative from the following: of Payments Account. So, it is recorded in the
(a) Statement 1 is false and statement 2 is true BoP Account.
(b) Statement 1 is true and statement 2 is false or
(c) Both statements 1 and 2 are false • Fixed exchange rate is the rate officially fixed by
the government, whereas flexible exchange rate
is determined by the interaction of the forces of
or demand and supply of foreign exchange.
Read the following statements-Assertion (A) and • Fixed exchange rate does not vary with changes
Reason (R). Choose one of the correct alternatives in the demand and supply of foreign currency
given below: and only the government has the power to change
Assertion (A): Money Multiplier refers to the process it, whereas flexible exchange rate is determined
of creation of credit by the commercial banks. to the changes in demand and supply of foreign
Reason(R): Money creation by commercial banks currency in the foreign exchange market.
raises the National Income. • There is official intervention in the case of
Alternatives: fixed exchange rate whereas there is no official
(a) Both Assertion (A) and Reason (R) are true and intervention in the flexible exchange rate.
Assertion (A)
(A)
Ans :
12. State with valid reasons, which of the following Total money/deposit creation
statement is true or false: 1
= Initial deposit # LRR
(a) Commission received from the sale of second-
hand goods is included in the estimation of
national income. 14. In an economy, the consumption function is given
(b) Employer’s contribution to social security as C = 100 + 0.5 Y. Show that in this economy as
schemes is included in the estimation of national income increases, APC will decrease with the help of
income. a numerical example.
or
Ans : (a) Define ‘Investment Multiplier’ and give its
(a) The given statement is true, as the commission relationship with MPS.
received from the sale of second-hand goods (b) Define ‘Involuntary unemployment’. Is it taken
is earned by the agent for rendering productive into account while determining the labour force
services. of the country?
(b) The given statement is true, as employer’s
Ans :
contribution to social security schemes is a
productive income as it is being paid to the Given that the consumption function in an economy
employees for their contribution to the current is C = 100 + 0.5Y.
flow of goods and services. To prove that in this economy as income increases
APC will decrease, we will take the help of a
numerical example given below:
Income (Y) Consumption (C) C
APC = Y
^C = 100 + 0.5Yh
13. (a) Define money.
0 100 ––
(b) Explain the process of deposit creation by a
commercial bank, using an hypothetical example. 100 100 + 0.5 ]100g = 150 150 =
100 1.5
Ans : 200 100 + 0.5 ]200g = 200 200 =
200 1.0
(a) Money is defined as anything which is generally Hence, on the basis of the above numerical example, it
accepted as a medium of exchange and also acts is proven that APC will decrease as income increases.
as a measure and store of value. or
(b) While explaining the process of deposit creation (a) Investment Multiplier is defined as the ratio of
by a commercial bank we assume that all the change in income due to change in investment.
money that goes out of bank is ‘redeposited’ into Symbolically,
the bank. It can be explained with the help of an
hypothetical example. Investment Multiplier ( k ) = D DI
Y
Let the Legal Reserve Ratio (LRR) be 20% The value of multiplier varies inversely with
and suppose there is a fresh deposit of `10,000. MPS. Higher the MPS, the smaller will be the
As required, the given bank will keep 20%, size/value of multiplier and lower the MPS, the
i.e.,`2,000 as cash and lend the remaining `8,000 larger will be the size/value of the multiplier. The
to the borrowers. As per the assumption, those relationship can be expressed as ]k g = MPS1
who receive the payment (`8,000 in this case), put (b) Involuntary unemployment refers to that part of
the money back into the bank. In this way, bank the labour force of the country which is able to
receives a fresh deposit of `8,000. It will again work and prefers to work, but it is out of work,
keep 20%, i.e., `1,600 as cash and lend `6,400. due to no fault of its own. Yes, involuntary
The money will again come back to the given unemployment is taken into account while
bank leading to a fresh deposit of `6,400. This way determining the labour force of the economy.
money goes on multiplying and ultimately, total
money creation (or deposit creation) is `50,000,
i.e., five times the initial deposit (`10,000).
15. While the economy is showing signs of shedding its GDP 4.0 -7.3 9.2 101.3
lockdown inertia, long-term drivers of growth such
Source: NSO
as consumption and investment are still in jeopardy.
Note: RE - Revised Estimates, PE - Provisional
It will not revive unless there is a pick up in consumer
Estimates, AE - Advance Estimates
and business sentiments.
(b) ‘Should payment for which no service is rendered
Hindustan Times, October 2nd, 2020
in return’ be included/excluded in the estimation
State and discuss any two fiscal measures which can
of national income. State with valid reason.
be taken by the Government of India to correct the
above situation. or
Suppose GDP of Nation C was `4,000 crores in
Ans : 2018-19, when GDP of Nation D in the same year
The given situation suggests that there is a situation was ` 2,40,000 crores. If GDP of Nation C rises to
of ‘deflation’, i.e., Aggregate Demand is less than `8,000 crores in 2019-20 and GDP of nation D rises
Aggregate Supply/output in the economy. In order to to `4,00,000 crores in 2019-20.
correct/control the given situation, the government Compare the rate of change of GDP of nations C and
can take the following two fiscal measures: D taking 2018-19 as the base year.
(a) Increase in government spending: The Ans :
government may increase its expenditure, which
in turn will increase the purchasing power in the (a) Investment, as measured by Gross Fixed Capital
hands of the public. As a result this will lead to an Formation (GFCF) was growing at 5.4% in the
increase in the aggregate demand of the economy year 2019-20, then followed downward trend
which will then be brought equal to the aggregate because of COVID-19 led lockdown and its
supply/output of the economy. growth rate came down to ( - )10.8% in the year
(b) Decrease in taxes: The government can also 2020-21. Since then it is expected to see strong
decrease the taxes in the economy, so as to growth of 15 per cent in 2021-22 and achieve
increase the purchasing power in the hands of the full recovery of pre-pandemic level (recovery of
public. This will increase the aggregate demand 102.6% over 2019-20).
in the economy, which will then be brought equal (b) No, the payment for which no service is rendered
to the aggregate supply/output of the economy. in return should not be included in the estimation
Thus, the situation of deflation will be controlled. of national income, because such payments are
called “transfer payments”. They are unilateral
transfers and unproductive payments e.g., gifts,
Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12 donation, old age pension etc.
or
16. (a) On the basis of given table, comment on the Year " 2018-19 2019-20 Growth Rate of GDP
performance of Gross Fixed Capital Formation Nation . (Base (`) Change in GDP
=
Base Year GDP 100
#
as a measure of Investment. Year)
(`)
Components 2019-20 2020-21 2021- Recovery C 4000 8000 4000 # =
(1st RE) (PE) 22 (1st over 2019-20 crores crores 4000 100 100%
AE)
D 240000 400000 160000 # =
Total 5.9 -7.3 7.0 99.2 crores crores 240000 100 66.67%
Consumption
Government 7.9 2.9 7.6 110.7 On the basis of the above working, we infer that
Consumption Nation C has registered a GDP growth rate of 100%,
Private 5.5 -9.1 6.9 97.1 thereby has performed better than Nation D on the
Consumption GDP growth rate front. This is so because Nation D
Gross Fixed 5.4 -10.8 15.0 102.6 has registered GDP growth rate of about 67%.
Capital
Formation
Exports -3.3 -4.7 16.5 111.1
Imports -0.8 -13.6 29.4 111.8
17. (a) Elaborate how the “allocation of resources” can 2018, India was ranked at 180th position.
be influenced in the government budget through Statement 2: China has the highest life expectancy.
taxes, expenditure and subsidies. In the light of the given statements, choose the correct
(b) Giving reason, classify the following items as alternative from the following:
revenue expenditure and capital expenditure: (a) Statement 1 is false and statement 2 is true
(i) Subsidies (b) Statement 1 is true and statement 2 is false
(ii) Repayment of Loan (c) Both statements 1 and 2 are false
Ans : (d) Both statements 1 and 2 are true
(a) Government can through the budget influence Ans :
allocation of resources with the help of taxes,
expenditure and subsidies.
Production units which produce harmful
products like cigarettes, liquor etc. can be heavily 20. Read the following statements-Assertion (A) and
taxed. On the other hand, tax concessions and Reason (R). Choose one of the correct alternatives
subsidies should be given to encourage those given below:
production units which produce products useful Assertion (A): Rapid expansion of banking system
for the masses. had a positive effect on rural farm and non-farm
Government can also directly produce goods output, income and employment.
and services (thereby increase its expenditure) Reason (R): The institutional credit arrangement
which are normally ignored by the private sector continues to be inadequate as they have failed to
enterprises due to lack of enough profit and longer cover the entire rural farmers of the country.
waiting period. Alternatives:
(b) (i) Expenditure on ‘subsidies’ is revenue (a) Both Assertion (A) and Reason (R) are true and
expenditure as it neither leads to any Reason (R) is not the correct explanation of
reduction in liability nor an increase in assets. Assertion (A)
(ii) Expenditure on ‘repayment of loan’ is (b) Both Assertion (A) and Reason (R) are true and
capital expenditure as it leads to a reduction Reason (R) is the correct explanation of Assertion
in liability. (A)
Section B -Indian Economic Development (d) Assertion (A) is true but Reason (R) is false
Ans :
Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10 (a) Both Assertion (A) and Reason (R) are true and
(A)
18. Which among the following is a process that involves
the assembling, storage, processing, transportation,
packaging, grading and distribution of different
agricultural commodities across the country?
(a) Agricultural Management
(b) Agricultural Banking
(c) Agricultural Diversification
(d) Agricultural Marketing
Ans : 21. ______was the notable estimator whose national
(d) Agricultural Marketing income and per capita income estimates during the
colonial period were considered very significant.
(a) RC Desai (b) VKRV Rao
Statement 1: As per the Human Development Report, (c) Dadabhai Naoroji (d) William Digby
Ans : or
(b) VKRV Rao (c) (i) and (ii)
22. Urbanisation was the highest in______. 24. Arrange the following events of China in chronological
(a) Russia order and choose the correct alternative:
(b) India
(ii) Great Proletarian Cultural Revolution
(c) China (iii) Commune System
(d) Pakistan (iv) Establishment of People’s Republic of China
or Choose the correct alternative:
In 2015-17, due to_____GDP growth rate declined in (a) (ii), (iv), (iii), (i)
China. (b) (ii), (iv), (i), (iii)
(a) Slowdown in global market (c) (iv), (i), (ii), (iii)
(b) Rising propensity to save (d) (iv), (iii), (ii), (i)
(c) Corruption
Ans :
(d) All of these
(d) (iv), (iii), (ii), (i)
Ans :
(c) China 25. Read the following statements-Assertion (A) and
or Reason (R). Choose one of the correct alternatives
(d) All of these given below:
Assertion (A): In the first seven five year plans, trade
in India was characterised by an ‘inward looking
trade strategy’ which is called ‘import substitution’.
Reason (R): The policy’s aim was to protect the
domestic industries from foreign competition in the
form of tariffs and quotas.
Alternatives:
23. Life expectancy during the colonial period was______ Reason (R) is not the correct explanation of
years. Assertion (A)
(a) 32 (b) 69 (b) Both Assertion (A) and Reason (R) are true and
(c) 48 (d) 56 Reason (R) is the correct explanation of Assertion
(A)
or
The motive of British Government behind de- (c) Assertion (A) is false but Reason (R) is true
industrialisation was: (d) Assertion (A) is true but Reason (R) is false
(i) To get raw material from India at cheap rate Ans :
(ii) To sell British manufactured goods in Indian
market at high prices (b) Both Assertion (A) and Reason (R) are true and
(iii) To focus on development of agriculture Reason (R) is the correct explanation of Assertion (A)
(iv) To get finished products from India at cheap rate
(a) (ii) and (iv) 26. Read the following statements carefully:
(b) (ii) and (iii) Statement 1: National Bank for Agricultural and Rural
(c) (i) and (ii) Development (NABARD) was established in 1980.
Statement 2: Credit provisions made by Self Help
(d) Only (iv)
Groups (SHGs) to its different members is known as
Ans : macro-credit programme.
(a) 32 In the light of the given statements, choose the correct
(a) Statement 1 is false and statement 2 is true Short Answer Questions (Q28 to Q29) 3´2=6
(c) Both statements 1 and 2 are false 28. “The traditional handicraft industries were ruined
(d) Both statements 1 and 2 are true under the British rule.” Accept/Refute the above
or statement by giving reasons.
Read the following statements carefully: or
Statement 1: SHGs help borrowers to overcome the Were there any positive contributions made by the
problem of lack of collateral. British in India? Discuss.
Statement 2: SHGs develop leadership abilities Ans :
among poor and the needy people.
In the light of the given statements, choose the correct The given statement is accepted/defended because it
alternative from the following: was the British who destroyed the institution of Indian
(a) Statement 1 is false and statement 2 is true handicrafts and did not care to provide an alternate
source of employment. The decay of these industries
was a major cause of “poverty” of rural people
(c) Both statements 1 and 2 are false who derived additional income from handicrafts.
(d) Both statements 1 and 2 are true The restrictive policies of the colonial government
Ans : reduced India to an exporter of raw materials and
cash crops to serve their vested interests.
(c) Both statements 1 and 2 are false or
or On the eve of independence, road transport, railways,
(d) Both statements 1 and 2 are true water transport, posts and telegraphs were reasonably
developed by the British to serve indeed their own
27. From the set of events/systems given in Column I and colonial interest. This led to commercialisation of
corresponding relevant fact given in Column II, about Indian agriculture, which adversely affected the self-
Pakistan, choose the correct pair of statement: sufficiency of the village economy in India. As such
they hardly made any positive contribution in India.
Column I Column II They rather drained the once rich and prosperous
A. Nationalisation (i) 1970s Indian economy in every possible manner.
of capital goods
industries
29. Interpret the given picture on account of current
B. Medium-term (ii) 1953 environmental challenges.
Development Plan
C. Reforms were initiated (iii) 1960s
D. Declining growth rate (iv) 41% people
work in
agriculture
Alternatives:
(a) D - (iv)
(b) C - (iii)
(c) B - (ii)
(d) A - (i)
Ans :
Ans :
• The given image indicates the problem
(d) A - (i) of ‘deforestation’ caused by economic
development.
• Deforestation involves the permanent destruction
of indigenous forests and woodlands.
• It refers to cutting, clearing and removal of
rainforest, where land is thereafter converted to • Production of fisheries has increased

non-forest use. considerably.
• Deforestation is rising at such a rapid scale that • Horticulture has also emerged as a successful
it has totally disturbed the ecological balance of sustainable livelihood option which requires to
the country. be encouraged further.
• The per capita forestland in the country is only or
0.06 hectare against the requirement of 0.47 The government has been taking many steps towards
hectare to meet basic needs. the development of rural markets like:
(a) Regulation of markets to create orderly and
transparent marketing conditions. This step has
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 benefited both the farmers and the consumers, by
and large.
30. State, giving valid reasons, whether the following (b) Provision of physical infrastructure facilities like
statements are true or false: roads, godowns, warehouses etc.
(a) Unemployment is the reason for the rural-urban (c) Co-operative marketing focussing on fair prices
migration in India. for farmer’s products. It is the success of milk co-
(b) Human capital formation gives birth to innovation, operatives, which stands a testimony to the role
invention and technological improvements. of co-operatives.
(d) Adoption of policy instruments like:
Ans : (i) Assurance of ‘Minimum Support Price’ for
(a) The given statement is true, as being unemployed, agricultural products
people (rural-urban) migrate in search of jobs (ii) Maintenance of Buffer Stocks of wheat and
which will fetch them higher salaries than what rice by Food Corporation of India
they could get in their native places. No matter (iii) Distribution of food grains and sugar
migration involves high cost of living but the through ‘Public Distribution System’
enhanced earnings in the new place outweigh the
cost involved. 32. Compare and analyse the given data of India and
(b) The given statement is true. Human Capital China with valid arguments.
Formation (investment in education/health) not
only increases the productivity of the available Country Annual Growth Gender Ratio
human resources but also stimulates innovations Rate of Population (per 1000
and creates ability to adopt and adapt to the new (2015) males)
technologies. India 1.2% 929
China 0.5% 941
31. Explain the role of non-farm employment in
Ans :
promoting rural diversification.
or The given data in the table provided indicates
Explain the steps taken by the government in that China was successful in arresting its annual
developing rural markets. population growth rate with the implementation of
stringent measures in 1970s like the introduction of
Ans :
‘one-child norm’. Due to this step, China was able to
Non-farm employment plays an important role in check its population growth rate at the rate of 0.5%
promoting rural diversification. It is well-known that p.a. in 2015. On the other hand, India stood almost
agriculture is already overcrowded so a large part double to China with its population growth rate of
of the labour force requires alternate employment 1.2% p.a.
opportunities in other non-farm sectors, like agro- Gender Ratio is low and biased in both the countries
processing, food processing, leather industry, tourism (at 929 and 941 respectively) due to preference for
etc. the male child. This indicates that the social dynamics
• Livestock sector provides alternate livelihood to of both the countries is similar to each other.
over 70 million small and marginal farmers.
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 or

Rapid expansion of the banking system indeed had
33. (a) ‘The Indian government has been taking steps a positive effect on rural farm and non-farm output,
for human capital formation, yet human capital income and employment, especially after the green
formation facing problems.’ Explain any three revolution. It helped the farmers to avail credit
such problems of human capital formation. facilities by way of a variety of loans for meeting
(b) ‘Education Commission 1964-66 had their productive needs. However, all is not well with
recommended that at least 6 per cent of GDP banking system.
must be spent on education.’ How far India has • Formal institutions excepting the commercial
been able to achieve the said goal? banks have failed to develop a culture of deposit
or mobilisation.
Critically evaluate the role of the rural banking system • Loan defaulting in the rural areas has been
in the process of rural development in India. chronically high. It is alleged that farmers are
deliberately refusing to pay back the loans.
Ans : • After reforms, the expansion and promotion of
(a) Problems of human capital formation in India the rural banking sector has taken a backseat.
are: • Need of the hour is that banks have to change
(i) Rapidly rising population adversely affects their approach from mere lenders to building up
the quality of human capital formation in close banking relationship with the borrowers.
developing countries. It reduces per capita • Not only that the farmers have to inculcate
availability of existing facilities. A large the habit of -thrift- and efficient utilisation of
population also requires large investment financial resources requires to be enhanced for
in education and health. This might divert rural development in India.
the scarce funds of developing countries to
production of human capital at the cost of
physical capital.
(ii) The process of human development is a long
period policy because skill formation is time
consuming. The process which produces
skilled manpower is, thus, slow.
(iii) Regional and gender inequality lowers the
human development levels.
(iv) Migration of highly skilled labour termed 34. Read the following text carefully and answer the
as “Brain Drain”, adversely affects the given questions on the basis of the same and common
economic development. understanding:
(any three) The cotton textile industry is one of the traditional
(b) Investment in education system in India has been industries of India. In the ancient and the medieval
a woeful failure. The fact of the matter is that, times, it used to be only a cottage industry. India
in 1952 we were spending a meager 0.6% of our was famous worldwide for the production of muslin,
GDP on education that rose to only about 4% in a very fine variety of cotton cloth, calicos, chintz
2014. This has fallen well short of 6% target as and other different varieties of fine cotton cloth.
proposed by the Education Commission, 1964. The development of this industry in India was due
Moreover, throughout this period the increase in to several factors. One, it is a tropical country and
education expenditure has not been uniform and cotton is the most comfortable fabric for a hot and
there has been irregular rise and fall. This shows humid climate. Second, large quantity of cotton was
the apathy of the government towards investment grown in India. Abundant skilled labour required for
in the education system. One can imagine, if the this industry was available in this country. In fact, in
recommended 6% p.a. of the GDP would have some areas the people were producing cotton textiles
been spent properly the present education system for generations and transferred the skill from one
would have reached unforeseen heights. generation to the other and in the process perfected
their skills. Initially, the British did not encourage the
development of the indigenous cotton textile industry. Raw cotton used to be brought to Mumbai port
They exported raw cotton to their mills in Manchester to be transported to England. Therefore, cotton
and Liverpool and brought back the finished products was available in Mumbai city itself. Moreover,
to be sold in India. This cloth was cheaper because Mumbai even then was the financial centre and the
it was produced at mass scale in factories in UK as capital needed to start an industry was available
compared to the cottage based industries of India. there. As a large town, providing employment
In 1854, the first modern cotton mill was established opportunities attracted labour in large numbers.
in Mumbai. This city had several advantages as Hence, cheap and abundant labour too was
a cotton textile manufacturing centre. It was very available locally.
close to the cotton producing areas of Gujarat and
Maharashtra. Raw cotton used to be brought to
Mumbai port to be transported to England. Therefore,
cotton was available in Mumbai city itself. Moreover,
Mumbai even then was the financial centre and the
capital needed to start an industry was available there.
As a large town, providing employment opportunities
attracted labour in large numbers. Hence, cheap
and abundant labour too was available locally. The
machinery required for a cotton textile mill could be
directly imported from England. Subsequently, two
more mills, the Shahpur Mill and the Calico Mill were 
established in Ahmedabad. By 1947, the number of
mills in India went up to 423 but the scenario changed
after partition, and this industry suffered a major
recession. This was due to the fact that the most of the
good quality cotton growing areas had gone to West
Pakistan and India was left with 409 mills and only
29 per cent of the cotton producing area.
(a) Where were cotton textile industries mainly
located in India? How their location and
ownership was different from that of Jute textile
industries?
(b) Why were cotton textile mills mainly located in
western parts of the country (specially Mumbai)
only?
Ans :
(a) During the second half of the nineteenth century,
modern industry began to take root in India
but its progress remained very slow. Initially,
this development was confined to the setting
up of cotton and jute textile mills The cotton
textile mills, mainly dominated by Indians,
were located in the western parts of the country,
namely, Maharashtra and Gujarat, while the jute
mills dominated by the foreigners were mainly
concentrated in Bengal.
(b) The western parts had several advantages as a
cotton textile manufacturing centre. It had cotton
producing areas of Gujarat and Maharashtra.
CBSE Economics Class 12 Sample Papers 15 Solutions Page 1
Sample Papers 15 Solutions

ECONOMICS (030)
Section A -Macro Economics in the country, India received medical equipments

from many countries.” On which account and which
side it will be recorded?
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (a) Capital account, debit side
(b) Current account, debit side
1. As a custodian of nation’s reserves, RBI keeps (c) Capital account, credit side
(a) reserves of foreign treasury bills (d) Current account, credit side
(b) reserves of foreign currencies
Ans :
(c) reserves of gold
(d) Current account, credit side
(d) All of the above
The given is an example of uni-lateral transfers
Ans : received. So, it will be recorded on the credit side of
(d) All of the above current account of BoP.
RBI is the apex financial institution of India. It is a
custodian of nation’s reserves.
It keeps reserves of foreign currencies (US $, UK
etc), gold, foreign government’s bills and bonds, SDR
(Special Drawing Rights), etc.
2. Process of credit creation by commercial banks comes

to an end when______.
(a) reserve ratio become zero 4. Statement I : SLR is increased to correct the situation
(b) money multiplier becomes zero of deflationary gap.
(c) fresh deposits with banks become zero Statement II : Higher SLR increases credit creation
capacity of commercial banks which in turn increases
(d) total money reserves become equals to initial
liquidity in the capital market.
deposit
Ans : alternative from the following
(d) total money reserves become equals to initial (a) Both statements are false
deposit (b) Both statements are true
(c) Statement I is true and Statement II is false
3. “During the outbreak of the second wave of Covid-19 (d) Statement I is false and Statement II is true
Page 2 Sample Papers 15 Solutions CBSE Economics Class 12
Ans : goods used as inputs/raw material in the process of

(a) SLR is decreased to correct the situation of production.
deflationary gap. Lower SLR increases credit creation National product refers to the total value of all the
capacity of commercial banks which in turn would goods and services produced by the residents and
increase AD and correct the deflationary gap. businesses of a country, irrespective of the location
of production.
o
5. Statement I : Repayment of loan taken from IMF will (a) Consumption of Fixed Capital = Gross Domestic
be recorded on debit side. Capital Formation – (Net Domestic Fixed Capital
Statement II : Surplus in BoP refers to a state where Formation + Inventory Investment)
debit side exceeds credit side.
In the light of the given statements, choose the correct = 3000 – (2,000 + 150)= ` 850
alternative from the following
(a) Both statements are false 7. The main cause(s) of deficit demand is/are
(b) Both statements are true (a) increase in public expenditure
(c) Statement I is true and Statement II is false (b) decrease in investment demand
(d) Statement I is false and Statement II is true (c) decrease in money supply
(d) Both (b) and (c)
Ans :
o
(c) Surplus is the situation of excess of receipts over If the value of Average Propensity to Consume (APC)
expenditures. In BoP, it happens when the balance of is 0.8 and National Income is ` 4,000 crores, the value
credit side exceeds the balance of debit side. of savings will be_______.
(a) ` 800 crores
6. Statement I : Value added and value of output are (b) ` 600 crores
identical concepts. (c) ` 200 crores
Statement II : Sum total of value added by all the
(d) ` 700 crores
producing units within the domestic territory of the
country is equal to national product. Ans :
In the light of the given statements, choose the correct (d) Deficit demand occurs due to fall in government
alternative from the following expenditure, fall in level of autonomous investment,
(a) Both statements are true fall in supply of money and credit and decrease in
(b) Both statements are false marginal propensity to consume.
(c) Statement I is true and Statement II is false o
(d) Statement I is false and Statement II is true (a) APS = 1 – APC = 1 – 0.8 = 0.2
o Savings
If gross domestic capital formation is ` 3,000, net Also, APS = National Income
domestic fixed capital formation is ` 2,000 and Savings
0.2
=
4, 000
= ` 800 crores
inventory investment is ` 150, what will be the value
of consumption of fixed capital?
(a) ` 550
(b) ` 150 8. In an economy, investment increases by ` 100 crore.
(c) ` 900 As a result, income increases by ` 250 crore and the
(d) Can’t be determined value of multiplier calculated as 2.5. On the basis
of the multiplier calculated, find out the change in
Ans : income, if investment changes by ` 750 crore.
(b) ` 150 (a) ` 1,445 crore
Value of output refers to the market value of the goods (b) ` 1,656 crore
produced while value added refers to the market value (c) ` 1,875 crore
of the goods produced minus the market value of the (d) None of these
o 10. Assertion : The value of marginal propensity to

If Marginal Propensity to Save (MPS) is 0.25 and consume can be greater than one.
initial change in investment is ` 250 crore, then the Reason : The value of marginal propensity to save can
final change in income would be_______. be negative as well.
(a) ` 500 crore Alternatives
(b) ` 3,500 crore (a) Assertion is true, but Reason is false
(c) ` 1,000 crore (b) Assertion is false, but Reason is true
(d) ` 1,200 crore (c) Both Assertion and Reason are true and Reason
is the correct explanation of Assertion.
Ans :
(d) Both Assertion and Reason are true, but Reason is
(c) Investment Multiplier = D Y not the correct explanation of Assertion.
DI
So, 2.5 = ∆ Y Ans :
750
Change in Income ( ∆Y ) = 2.5 # 750 (b) Assertion is false, but Reason is true
The value of MPC cannot be greater than one because
= ` 1,875 crore
change in consumption can never be greater than
o
change in income.
(c) ` 1,000 crore
MPS is the ratio between additional saving and
Investment Multiplier
additional income which is always positive because
1 = 1 =
(K) = MPS 0.25 4 of positive correlation between saving and income.
Change in Income
Now, we know, K = Change in Investment
= ∆Y Short Answer Questions (Q11 to Q12) 3´2=6
∆I
∆Y = K∆I = 4 ]250g = `1,000 crore
11. Suppose the GDP at market price of a country in a
particular year was ` 2,200 crore. Net Factor Income
from Abroad was ` 200 crore. The value of Indirect
taxes – Subsidies was ` 300 crore and National
Income was ` 1700 crore. Calculate the aggregate
value of depreciation.
Ans :
NNPMP =NNPFC + NIT

9. Assertion : Accommodating transactions are = 1700 crore + 300 crore = ` 2,000 crore
undertaken to make equilibrium in BoP account.
Reason : Accommodating items are also called above GNPMP =NFIA + GDPMP
the line items. = 2,200 + 200 crore = ` 2,400 crore
(a) Assertion is true, but Reason is false Depreciation =GNPMP – NNPMP
(b) Assertion is false, but Reason is true
= 2,400 crore – 2,000 crore
(c) Both Assertion and Reason are true and Reason
is the correct explanation of Assertion. = ` 400 crore
Therefore, depreciation = ` 400 crore
not the correct explanation of Assertion.
12. Name the broad categories of transactions recorded
Ans : in the capital account of the balance of payments
(a) Assertion is true, but Reason is false account.
Accommodating transactions are balancing o
transactions of BoP, so there are called as below the Give the difference between devaluation and
line items. depreciation of domestic currency.
Ans : Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12

Components of capital account of balance of
payments are 13. As per the following news published in The Economic
(i) Investments It includes investments to and from Times on 13th April, 2020
abroad in the form of Foreign Direct Investment “Monetary policy by itself may not be effective in
(FDI) and Foreign Institutional Investor (FII). mitigating the economic crisis created by the Covid
Investment from abroad is a ‘credit’ item, whereas pandemic in a demand deficient economy like India,
investment to abroad is a ‘debit’ item. according to MPC member Chetan Ghate who voted
(ii) Borrowing and Lending .It includes the for only a 50 bps points cut in repo rate against a 75
borrowings by residents from the residents of bps reduction vote by the majority. Instead he called
abroad (credit item). for wider structural reforms along with tax stimulus
And lending to the residents of foreign country for the revival of the economy from the Covid induced
(debit item) by residents of domestic country. slowdown.”
(iii) Foreign Exchange It includes the reserve of In the light of the above statement, give the meaning
foreign currency gold and Special Drawing of deficient demand. What fiscal measures would
Rights (SDRs) with the domestic country. you recommend to the Gol to correct the situation of
o deficient demand?
Differences between devaluation and depreciation of Ans :
domestic currency are
Deficient demand refers to a situation when Aggregate
Basis Devaluation Depreciation Demand (AD) is short of Aggregate Supply (AS)
Meaning Devaluation is the It occurs when corresponding to full employment in an economy.
fall in the value of the value of Following fiscal measures are recommended to
domestic currency domestic currency correct deficient demand (any three)
in relation to decreases in (i) The government should step up its expenditure on
foreign currency. relation to the public works programmes, education and public
It is planned by value of foreign welfare, subsidies to the producers, and defence
the Central Bank currency in the and law and order.
in situation, when foreign exchange (ii) The government should reduce tax burden on the
exchange rate is not market. households and the producers, so that they are left
determined by the with greater cash balances.
forces of demand (iii) The government should raise more funds from
and supply. the RBI so that there is a greater flow of liquidity
Example The government The increase in the economy. Higher liquidity implies higher
has changed the in demand or level of AD.
$/ ` exchange rate decrease in supply (iv) The government should plan a cut in public
from ` 40 to ` 45. for the foreign borrowings, so that people are left with greater
exchange causes liquidity (or cash balances). Greater cash balances
depreciation implies higher AD.
of domestic
currency. e.g. $/ ` 14. If the ratio of marginal propensity to consume and
exchanges rate is ` marginal propensity to save is 3 : 1, the value of
45 instead of ` 40 investment multiplier will be 5. True or false? Justify
due to the market your answer.
forces of demand
Ans :
and supply.
False Because, if the ratio of marginal propensity to
consume and marginal propensity to save is 3:1, then
MPC will be 0.75 and investment multiplier (K) will
be
K
= 1 (i) All the financial units are considered as a single
1 − MPC unit and named as ‘Bank’.
1 = 1 =4

=
1 − 0.75 0.25 (ii) All the transactions are channelled through the
‘Banks’.
Assume that MPS = x, So that MPC = 3x
The fraction by which commercial banks can multiply
We know MPC + MPS = 1
currency depends upon money multiplier, i.e.
3x + x =1 ( 4x = 1
K = 1
1 LRR
x = 4 = 0.25 and the amount of money created will be equal to
MPS = 0.25 Money Created = Initial Deposits # LRR 1
Now, MPC = 3 # 0.25 = 0.74 Let’s take a numerical example to understand
or MPC = 1 – MPS Suppose, banks has a initial deposit of ` 10,000 and
LRR is 20%, hence banks has to keep ` 2,000 and can
1 – 0.25 = 0.75 lend rest ` 8,000, this ` 8,000 will come to the banks
by the way of transactions causing increase in deposit
15. “Managing the government’s banking transactions by ` 8,000, again bank will lend 80%, i.e. ` 6,400 and
is a key RBI role. Like individuals, businesses and this process will continue and in the end, commercial
banks, governments need a banker to carry out their banks will be able to create credit equal to
financial transactions in an efficient and effective
Money created =10,000 # 0.120 = ` 50,000
manner, including the raising of resources from the
i.e. 5 times more than the initial deposits.
public.”
In the light of the above statement, explain the
function performed by the Central Bank.
o
Currency is issued by the Central Bank, yet we say
that commercial banks create money. Explain. How
is this money creation by commercial banks likely to
affect the national income? Explain.
Ans :
The Central Bank acts as a banker to both Central and Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12
State Governments. It carries out banking business
of the government and the government keeps its cash 16. (i) Social welfare may not increase even when real
balances on current account with the Central Bank. GDP increases. Explain.
It issues loans and advances to the government and (ii) Define the problem of double counting in the
does buying and selling of securities on behalf of estimation of national income. Discuss two
government. It also advises the government to frame approaches to correct the problem of double
monetary policy of the country to control the credit counting.
creation and money market.
Ans :
o
Yes, it is true to say that only Central Bank has the (i) Increase in GDP may not cause increase in
authority to issue currency, however commercial welfare in a situation when distribution of income
banks can create credit out of the deposits they have. becomes skewed (unequal). If, along with an
The amount of money that commercial banks can increase in GDP, the percentage of population
create, depends upon two important factors below poverty line happens to increase, it
(i) Initial level of deposits with the commercial implies a situation of deprivation on one hand,
banks. and concentration of economic power on the
(ii) Legal Reserve Ratio (LRR) which is the sum of other. It is a situation when a rising percentage of
CRR and SLR. GDP is being pocketed by a smaller percentage
Also the process of credit creation depends upon the of population. The bulk of population suffers
following assumptions poverty, while only a small segment of the society
enjoys prosperity owing to a rise in GDP. The rise Source Economic survey and CGA; RBI
in GDP is achieved at the cost of social welfare. (ii) State any three objectives of government budget.
(ii) The counting of the value of commodity more o
than once is called double counting. This leads to (i) Is the following, a revenue receipt or a capital
overestimation of the value of goods and services receipt in the context of government budget and
produced. Thus, the importance of avoiding why?
double counting lies in avoiding overestimating (a) Tax receipt
the value of domestic product. e.g. a farmer (b) Disinvestment
produces one ton of wheat and sells it for ` 400 in (ii) Can a fiscal deficit occur without a revenue
the market to a flour mill. deficit?
The flour mill sells it for ` 600 to the baker. The Ans :
baker sells the bread to a shopkeeper for ` 800.
The shopkeeper sells the entire bread to the final (i) Fiscal deficit is difference between total
consumers for ` 900. government receipts (taxes and non-debt capital)
Thus, Value of output and total expenditure. Fiscal deficit can lead to
cost-push inflation.
= 400 + 600 + 800 + 900 The government being a major player in the market
= ` 2,700 for borrowings and doing away with the practice of
Infact, the value of the wheat is counted four getting currency notes printed (since 1991) exerts
times, the value of services of the miller thrice, an upward pressure on interest rates. Higher interest
and the value of services by the baker twice. In rates increase production cost, which is passed on to
other words, the value of wheat and value of consumers, thereby leading to higher prices. Fiscal
services of the miller and of the baker have been deficit due to productive investment may have less
counted more than once. impact as it takes care of both the rise in demand
To avoid the problem of double counting, two and supply in comparison to expenditure where
methods are used productive activities do not occur.
(a) Final Output Method According to this (ii) Budget is a comprehensive statement of the
method, the value of intermediate goods expected receipts and expenditure of the
is not considered. Only the value of final government during a financial year (1st April to
goods and services are considered. In the 31st March).
above example, the value of final goods i.e. Following are the principal objectives that the
bread is ` 900. government pursues through the budget
(b) Value Added Method Another method to (a) Reallocation of Resources The government,
avoid the problem of double counting is to through its budgetary policy reallocate
estimate the total value added at each stage resources, so that social and economic
of production. In the above example, the objectives can be met.
value added at each stage of production is (b) Redistribution of Income and Wealth
400 + 200 + 200 + 100 = ` 900 Government through fiscal tools of taxation
and transfer payment brings fair distribution
17. (i) In light of the given figure, explain how fiscal of income. Equitable distribution of income
deficit has a bearing on inflationary woes? and wealth is a way to bring social justice.
(c) Economic Stability The government tries to
prevent business fluctuations and maintain
price and employment stability. Economic
stability stimulates inducement to invest
and increases the rate of growth and
development.
(d) Economic Growth The growth rate of a
country depends on the rate of savings and
investment. Therefore, the roles that are
assigned to budgetary policy in this regard
are to create conditions for increase in (a) Use of thermal power

savings and investment. (b) Use of hydel power
o (c) Use of bio-gas
(i)
(d) Use of solar power
(a) Tax Receipt It is a revenue receipt because it
does not create a liability for the government Ans :
or does not lead to reduction in any asset. (d) renewable resource
(b) Disinvestment It refers to withdrawal of o
existing investment. e.g. The Government (a) For thermal power, water is heated with the help
of India is undertaking disinvestment by of coal. As coal is non-renewable source of energy,
selling its shares in the Maruti Udyog. It so using it can not be beneficial in sustainable
is a capital receipt of the government, as it development.
reduces assets of the government.
(ii) Yes, a fiscal deficit can even without a revenue
deficit. This can be so when the capital expenditure 20. What was the treatment given by the indigo planters
of the budget is more than the capital receipts to the peasants?
other than borrowings. (a) Advancement of loans at a lower rate of Interest
In other words, it can be said that when capital (b) Peasants voluntarily agreed with the indigo
budget deficit exceed revenue budget surplus, planters to produce indigo
then a fiscal deficit can occur even though there is (c) They were paid low prices for growing indigo
no revenue deficit. (d) They were given support measures on how to
grow indigo along with a piece of land
Section B -Indian Economic Development Ans :
(c) They were paid low prices for growing indigo
18. Match ‘labour force’ with the appropriate item from

amongst the following.
(a) Employed + Unemployed
(b) Work force
(c) All educated
(d) All rural workers
21. Marketed surplus refers to______.
Ans : (a) portion of industrial produce sold in the market
(a) Employed + Unemployed (b) sale of consumer goods in the domestic market
(c) a certain proportion of both industrial and
19. Environment has many resources for us. A resource domestic produce sold in the market
that can be totally replaced or is always available (d) portion of agricultural produce sold in the market
naturally, or that is practically inexhaustible is known by farmers
as_______. o
(a) non-renewable resource The main issue(s) with protectionist or trade restrictive
(b) conventional resource policies is/are________.
(c) non-conventional resource (a) consumer sovereignty narrows down
(d) renewable resource (b) there is very less incentive for the domestic
producers to improve the quality of their products
o
_______is not used as a strategy for sustainable (c) Both (a) and (b)
development. (d) it result in huge amount of capital inflows
Ans : (c) (iii) (iv) (i) (ii)

(d) Portion of agricultural produce sold in the market (d) (iv) (ii) (i) (iii)
by farmers. Ans :
o
(c) Protectionist policies are criticised on the ground (c) (iii) (iv) (i) (ii)
that there is very less scope for domestic firms to
become more efficient and domestic consumers have 24. Statement I A worker is an individual who is doing
to purchase whatever has been produced domestically. some productive work to earn a living.
Statement II Majority of population in India is finding
22. The correct sequence explaining the commencement employment in the service sector which is growing at
of five year plans in chronological order is______. a fast pace and growing continuously.
(a) China, India and Pakistan In the light of the given statements, choose the correct
(b) India, China and Pakistan
(a) Both statements are true
(c) India, Pakistan and China
(b) Both statements are false
(d) Pakistan, China and India
o
(d) Statement I is false and Statement II is true
HDI rank of India as per the latest UNDP 2021-22
report is_______. Ans :
(a) 154th rank (a) Both Statements are true
(b) 141st rank
(c) 85th rank
25. Statement I Pakistan is ahead of India in providing
(d) 132nd rank improved sanitation facilities.
Ans : Statement II China ranks ahead in terms of
development experience with respect to India and
(b) India commenced its five year plans in 1951 while
Pakistan.
China in 1953 and Pakistan in 1956.
o
(d) According to the Human Development Report
2021-22 by UNDP, India ranks at 132nd position
among the 189 countries considered. (b) Both statements are false
(c) Statement I is false and Statement II is true
(d) Statement I is true and Statement II is false
Ans :
23. Match the following : (c) According to the latest data on Human
Column I Column II Development Indicators for 2017-19, in India and
Pakistan, around 60% of the population are using
A. Economic Development (i) Mao basic sanitation facilities.
in China
B. India’s new (ii) China
Development Policy 26. Assertion (A) China has done better than India and
Pakistan, as it is a socialist economy.
C. The Great Leap Forward (iii) 1978 Reason (R) In socialism, government can implement
D. Commune (iv) 1991 policies which are in interest of the people.
Alternatives
Codes
(a) Assertion is true, but Reason is false
A B C D (b) Assertion is false, but Reason is true
(a) (i) (ii) (iii) (iv)
(b) (ii) (i) (iv) (iii) is the correct explanation of Assertion.
(d) Both Assertion and Reason are true, but Reason is Capital Formation People spend to acquire
not the correct explanation of Assertion. information relating to the labour market, education
and health institutions, etc. Information relating to
Ans :
job opportunities and educational institutes enables
(c) Both Assertion and Reason are true and Reason people to increase their earning potential.
is the correct explanation of Assertion. Therefore, it is also a determinant of human capital
formation.
27. Assertion (A) It is imperative for Indian economy o
to undertake measures which help promote the rural The participation rate of women in the employment
development. market, for both, rural and urban areas, is quite low.
Reason (R) Almost two-third of India’s population Some of the reasons for such a low rate are given
depends on agriculture and nearly one-third of rural below
India lives under the trap of poverty. (i) India is typically a male dominated country.
Alternatives Because of this, females are accorded secondary
(a) Assertion is true, but Reason is false status and parents do not take steps to educate
them.
(ii) Even if they are educated, the social beliefs and
(c) Both Assertion and Reason are true and Reason set-up discourages them to work.
is the correct explanation of Assertion. (iii) The women are themselves not inclined to work
(d) Both Assertion and Reason are true, but Reason is as they consider house-keeping as their primary
not the correct explanation of Assertion. work.
Ans :
28. Explain how health and expenditure on information

are a source of human capital formation? 29. In light of the given figure, give the meaning of
o sustainable development and list any four strategies
Compared to women, more men are found working in towards sustainable development in India.
India. It has been observed that for every 100 urban
females, only about 15 work.
In rural areas, for every 100 rural women, only about
25 work. Why are women not working? Give any
three reasons.
o
Explain how health and expenditure on information
are a source of human capital formation?
Ans :
Health as a Source of Human Capital Formation Health
is an important source of human capital formation
because only a healthy worker can contribute towards
increasing the capital stock of the country.
A sick worker, without access to medical facilities is
compelled to abstain from work, and there is loss of
productivity.
Expenditure on Information as a Source of Human
Ans : equitable distribution of income and changes in

It refers to the development strategy to meet the needs sectoral composition in favour of secondary and
of the present generation without compromising tertiary sectors.
on the needs of the future generation. Sustainable
development aims at decreasing the absolute poverty 31. Compare and analyse the given data of India and
of the poor by providing lasting and secure livelihoods China with valid arguments.
that minimise resource depletion, environmental Annual Growth of Gross Domestic
degradation, cultural disruption and social instability. Product (%) , 1980-2017
The strategies for sustainable development in India
Country 1980-90 2015-2017
are (any four)
(i) Use of non-conventional sources of energy. India 5.7 7.3
(ii) Use of LPG and gobar gas in rural areas. China 10.3 6.8
(iii) Use of CNG as fuel in urban areas. Source Key Indicators for Asia and Pacific 2016,
(iv) Use of wind power in the areas where speed of Asian Development Bank, Philippines; World
wind is usually high. Development Indicators, 2018.
(v) Use of solar power through photovoltaic cells. Ans :
(vi) Mini hydel plants in mountainous regions.
(vii) Use of compost made from organic wastes. The given data shows that China has gained economic
strength over the years. When many developed
countries were finding it difficult to maintain a
growth rate of even 5%, China was able to maintain
near double-digit growth during the decade of 1980s.
The growth rate of China has reduced to an average
of 6.8%, over the period 2015-17. In the recent past,
India has posted a decent rise in the growth rate.
30. State whether the following statements are true or While India had maintained a reasonable growth
false, with valid argument rate of 5.7% in the decade of 1980’s, it has shown
(i) Private moneylenders are being replaced by great calibre and character in the period 2015-17 by
institutional source of credit. registering an average growth rate of 7.3%.
(ii) ‘Economic growth’ and ‘Economic Development’ Nevertheless, Indian elephant has to travel a long
means on end the same. distance before it could present itself as a real threat
Ans : to the growth story of the Chinese dragon.
(i) The given statement is true. It has been considered
necessary to replace the private moneylenders by 32. Agricultural sector appears to be adversely affected
institutional sources of credit because by the reform process. Why?
(a) The supply of credit was irregular and o
depended largely on personal relations (i) What were the objectives behind demonetisation?
between the borrower and the lender. (ii) Import restrictions were imposed in India with
(b) The moneylenders often took advantage the dual objective to save foreign exchange
of the ignorance and helplessness of the reserves and to be self-sufficient. Justify the given
cultivator to exploit him. statement with valid arguments.
(c) Since the borrower was generally illiterate, Ans :
the moneylender often resorted to downright
Due to following reasons, agricultural sector appears
cheating such as failure to record the
to be adversely affected by the reform process
repayments in full.
(i) Public investment in agricultural sector especially
(ii) The given statement is false. Economic growth
in infrastructure which includes irrigation, power,
means that there is a continuous and sustained
roads, market linkages and research and extension
rise in the GDP of the country. Economic
has been reduced in the reform period.
development means that in addition to a
(ii) The removal of fertiliser subsidy has led to
continuous and sustained rise in the GDP, there is
increase in the cost of production, which has India? What value stands violated by the Central
severely affected the small and marginal farmers. Government?
(iii) Various changes in policies like reduction in (ii) “Unemployment is related to poverty.”Comment.
import duties on agricultural products, removal o
of Minimum Support Price (MSP) and lifting of (i) What do you mean by agricultural marketing?
quantitative restrictions on agricultural products (ii) State the meaning of subsidy.
have increased the threat of international (iii) Agricultural marketing refers to the farmers’ act
competition to the Indian farmers. of bringing their produce to the market for sale’.
(iv) Export-oriented policy strategies in agriculture Is the statement correct?
have marked a shift from production for the Ans :
domestic market towards production for the
export market focusing on cash crops in lieu of (i) Government’s unwillingness to spend 6% of GDP
production of foodgrains. on education has affected this sector adversely, as
o is enumerated with the help of given statistics.
(i) The objectives behind demonetisation were as (a) In India, about 30.3 crore people are still
follows illiterate.
(a) It was an attempt to India corruption free. (b) The female literacy rate is 65.46%, which is
(b) It was expected to curb black money. quite low as compared to male literacy rate
(ii) “Import restrictions were imposed in India of 82.14%.
with the dual objective to save foreign exhange (c) There is disparity in education levels of
reserves and to be self-sufficient.” The statement urban and rural areas.
is appropriate. The arguments in favour of this The value which stands violated by the Central
statement are Government is complete disregard towards
(a) By restricting the volume of imports, foreign expert opinion.
currency will be saved for future reference. (ii) Poverty and unemployment usually go together.
(b) Domestic industries will be protected from Those who fail to get employment become a
foreign competition by restricting imports. burden on the limited family income and thus,
This will increase domestic production depress already low levels of consumption.
enabling the local producers to become self- Therefore, many programmes which aim
sufficient. at removing poverty provide employment
(c) This also helps government to regulate the opportunities to the poor like Prime Minister’s
industries. Rozgar Yojana, Swarna Jayanti Shahri Rozgar
Yojana, etc.
Most of the urban poors are either unemployed or
intermittently employed as casual labourers.
Casual labourers are among the most vulnerable
in society as they have no job security, no assets,
limited skills, sparse opportunities and no surplus
to sustain them. Poverty is therefore, closely
related to unemployment.
o
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 (i) Agricultural marketing is a process that involves
assembling, storage, processing, transportation,
packaging, grading and distribution of different
33. (i) The Education Commission in 1966, had agricultural commodities across the country. The
recommended that at least 6% of GDP should agricultural marketing system is a link between
be spent on education in India. However, even the farm and the non-farm sectors.
after 50 years of such a recommendation, the (ii) Subsidy is basically a payment made by the
government continues to spend 3-4% of GDP on government to the producers so that they charge
education. less from the consumers.
How has this affected’the education sector in (iii)
No, the statement is incorrect. Agricultural
marketing does not simply refer to the farmers’ economy model. The major conditionalities put
act of bringing their produce to the market for forward by IMF and World Bank before granting
sale. It includes all those activities/processes $7 billion loan to India were
which help them in getting maximum price for (a) Liberating trade and industry from wanted
their produce. These processes include grading, government controls and restrictions.
packaging and storing. (b) Greater role of private sector in the
functioning of an economy.
34. Read the following text carefully and answer the (c) Shifting from closed economy to an open
given questions on the basis of the same and common economy model or removal of trade barriers
understanding between India and abroad.
In the late 1980s, government expenditure began
to exceed its revenue by such large margins that
meeting the expenditure through borrowings became
unsustainable. Prices of many essential goods rose
sharply. Imports grew at a very high rate without
matching growth of exports. Foreign exchange
reserves declined to a level that was not adequate to
finance imports for more than two weeks. There was
also not sufficient foreign exchange to pay the interest
that needs to be paid to international lenders. Also, no
country or international funder was willing to lend to
India. ******
India approached to World Bank and the International
Monetary Fund (IMF), and received $7 billion a loan to
manage the crisis. India agreed to the conditionalities
of World Bank and IMF and announced to New
Economic Policy (NEP).
This new set of policy measures changed the direction
of our development strategies.
(i) What does the New Economic Policy of 1991
means in context of the Indian economy? Enlist
some reasons for its introduction?
(ii) “IMF and World Bank granted $7 billion loan to
India with a major restriction to follow a closed
economy model.” Do you agree with the given
statement? Justify
Ans :
(i) The New Economic Policy, 1991 is based on three
major principles i.e. Liberalisation, Privatisation
and Globalisation.
The chief casual factors that led to the introduction
of economic reforms in India were
(a) Mounting fiscal and BoP deficit
(b) Inflationary pressures
(c) Underperformance of the public sector
undertakings (PSUs)
(d) Depletion of the foreign exchange reserves
(ii) I do not agree with the given statement. IMF
and World Bank wanted India to follow an open

ECONOMICS (030)
Section A -Macro Economics of return.

Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (a) Both statements are true
1. Central bank as______, manages public debt of the (c) Statement I is true and Statement II is false
government. (d) Statement I is false and Statement II is true
(a) supervisor
Ans :
(b) financial advisor
(c) custodian of foreign exchange (a) Both statements are true
(d) agent
Ans :
(d) agent 4. Statement I : Increase in investment from rest of the
world decreases the exchange rate.
2. Demand deposits include______and______ Statement II : Devaluation of current items improves
(i) saving account deposits trade balance of domestic country.
(ii) fixed deposits In the light of the given statements, choose the correct
(iii) current account deposits alternative from the following
(iv) post office savings (a) Both statements are false
Codes (b) Both statements are true
(a) (i) and (iii) (c) Statement I is true and Statement II is false
(b) (i) and (ii) (d) Statement I is false and Statement II is true
(c) (i) and (iv) Ans :
(d) (ii) and (iii)
(b) Both statements are true
Ans :
(a) (i) and (iii) 5. Statement I : Money received from the sale of second
hand car will be considered while estimating national
3. Statement I: Government raises money through sale income.
of treasury bills and other securities. Statement II : Their value is already included and it
Statement II :Treasury bills are considered as risk free does not contribute to the current flow of goods and
and the return so achieved are referred as risk free rate services.
In the light of the given statements, choose the correct (b) 400
alternative from the following (c) 500
(a) Both statements are false (d) 600
(b) Both statements are true o
(c) Statement I is true and Statement II is false In an economy, the saving and investment functions
(d) Statement I is false and Statement II is true are given as
o S = – 100 + 0.2Y; I = – 30 + 0.1Y
If utensils worth ` 100 are produced with steel worth What will be equilibrium level of income?
` 50, wages paid are ` 10, depreciation of machinery (a) 600 (b) 700
is ` 0 and other material purchased is ` 10, then the (c) 1,000 (d) 900
value added in the process is
(a) ` 100 (b) ` 10 Ans :
(c) ` 40 (d) ` 50 (c) We know, Savings = Investments
Ans : – 20 + 0.2Y = 100
(d) Value of second hand goods has already been 0.2Y = 120 & Y = 600
accounted during the year of their production (when Also, Y = C + I & 600 = C + 100
these were initially produced and purchased by the
C = 500
final users).
o
o
(b) S = I
(c) Value added = Value of Output – Value of Input
– 100 + 0.2Y = – 30 + 0.1Y
=100 – (50 + 60) = 100 – 60 = ` 40
0.2Y – 0.1Y = – 30 + 100
6. The Keynesian solution to deal with a problem of 0.1Y = 70 = 700
deficient demand or to correct recessionary gap is to
(a) lower the level of taxes
(b) enhance the level of government expenditure
(c) Both (a) and (b) 8. Read the given news taken from the article “Currency
(d) None of the above caution: On the Indian rupee’s depreciation” published
o in The Hindu on 23rd July, 2022.
Suppose in a hypothetical economy, the income rises “The Indian rupee is experiencing its worst slump in
from ` 500 crores to ` 600 crores. As a result, the four years. Since the start of 2022, the currency has
consumption expenditure rises from ` 400 crores to ` depreciated by more than 7% against the U.S. dollar,
500 crores. Marginal propensity to consume in such a weakening past a historic low of 80 to a dollar mark
case would be_______ earlier this week.”
(a) 1.0 (b) 0.6 In layman terms, which of the following is the reason
(c) 0.8 (d) 0.4 for depreciation of Indian rupee?
(a) Increase in supply of US dollar and decrease in
Ans : demand of US dollar
(c) Both (a) and (b) (b) Decrease in both demand and supply of US dollar
o (c) Increase in demand of US dollar and decrease in
∆C = 500 − 400 = 100 = supply of US dollar
(a) MPC = ∆ Y 600 − 500 100 1
(d) Increase in both demand and supply of US dollar
7. Given the saving function S = – 20 + 0.2Y and Ans :
autonomous investment (I) = ` 100 million, the (c) Increase in demand of US dollar and decrease in
equilibrium level of consumption would be supply of US dollar
(a) 700
9. Assertion : A country always tries to balance the BoP, 11. Find Net Value Added at Market Price.
i.e. balance in current account equals to balance in
Items (in lakhs)
capital account.
Reason : Balanced BoP indicates stable economic (i) Fixed Capital Good with a Life 30
relation with rest of the world. Span of 5 Years
Alternatives (ii) Raw Materials 12
(a) Assertion is true, but Reason is false. (iii) Sales 50
(b) Assertion is false, but Reason is true. (iv) Net Change-in-stock (–) 4
(c) Both Assertion and Reason are true and Reason is (v) Taxes on Production 2
the correct explanation of Assertion.
(d) Both Assertion and Reason are true, but Reason is Ans :
not the correct explanation of Assertion. Net Value Added at Market Price (NVAMP)
Ans : = Sales + Net Change-in-stock – Raw Materials
(c) Balancing BoP means bringing it to the state – Depreciation on Fixed Capital Good
of equilibrium by the way of inflow or outflow of = 50 + (– 4)–12 – 6 = ` 28 lakh
currency in accommodating items. This ensures a Note Depreciation on Fixed Capital Good
stable economic condition in the economy. Value of Fixed Capital Good

= = 30 = ` 6 lakh
Life Span 5
12. Explain any three major functions of foreign exchange

market.
o
State on which side of capital account/ current account
will the following transactions be recorded and why?
(i) Interest on loan received from Nepal
10. Assertion : During periods of economic downturn, (ii) Import of mobile phones from China
central bank raises cash reserve ratio as a monetary
policy tool to stabilise the economy. Ans :
Reason : This in turn will increase the credit creation Foreign exchange market performs the following
power of the commercial banks and thus reduces the functions
level of AD in an economy. (i) Transfer Function This function implies the
Alternatives transfer of purchasing power in terms of foreign
(a) Assertion is true, but Reason is false. exchange across different countries of the world.
(b) Assertion is false, but Reason is true. It is performed through credit instruments
(c) Both Assertion and Reason are true and Reason is like bills of foreign exhange, bank drafts and
the correct explanation of Assertion. telephone transfers.
(ii) Credit Function This function allows the provision
of credit in terms of foreign exchange for the
export and import of goods and services across
Ans : different countries of world. In this function, bills
(a) During periods of recession, government lowers of exchange with maturity period of 3 months are
down CRR which in turn increases the credit creation used for international payments.
power of the commercial banks and thus increases the (iii) Hedging Function When exporters and importers
level of AD in an economy. enter into an agreement to sell and buy goods on
some future date at a rate agreed upon today, it is
called hedging. Through this function, exchange
Short Answer Questions (Q11 to Q12) 3´2=6 rate is locked for future supplies of foreign
exchage which avoid losses that might occur due
to changes in exchange rate.
o – 10 + 0 .20Y = 100

(i) It will be recorded in the credit side of current 0.20Y = 100 + 10
account of BoP, as it doesn’t affects the assets or
liabilities of the country. 0.20Y = 110
(ii) In will be recorded in debit side of current Y = 0110 =
.20 550
account of BoP, as it leads to outflow of foreign
Equilibrium level of income = ` 550 crores
currency but doesn’t affects assets or liabilities of
(ii) AD at income level ` 300 crores will be
the country.
AD = C + I
AD =10 + (1 – 0.20)(300) + 100
AD = 10 + 0.80 # 300 + 100
13. As per the following news published in The Wire on AD = 10 + 340 = ` 350 crores
18th May, 2021
“The biggest toll of the COVID-19 second wave 15. Giving a numerical example, explain the process of
is in terms of a demand shock - loss of mobility, money creation by the commercial banks.
discretionary spending and employment, besides o
inventory accumulation, while the aggregate supply Government of India has launched ‘Jan-Dhan Yojana’
is less impacted”. aimed at every household to have atleast one bank
In light of the above statement, explain the economic account due to which credit creation capacity of
implications of an increase in government expenditure banks has expanded manifold. Comment.
when the economy is in a state of depression.
Ans :
Ans :
Money creation (or deposit creation or credit creation)
During depression, the economy faces a deficient by the banks is determined by
demand situation. To correct this situation, the (i) The amount of the initial fresh deposits and
government takes various fiscal measures. Increase in (ii) Legal Reserve Ratio (LRR) i.e. the minimum ratio
government investment expenditure is the principal of deposit, legally required to be kept as cash by
instrument to correct the deficiency in demand. the banks. It is assumed that all the money that
Increase in government investment expenditure acts goes out of the banks, is re-deposited into the
as a pump priming when the inducement to invest is banks.
low, owing to deficiency of demand. Let the LRR be 20% and there is a fresh deposit of `
It breaks the vicious circle of ‘low demand -> low 10,000. As required, the banks keep 20 %, i.e. ` 2,000
inducement to invest -> low production -> low as cash. Suppose, the banks lend the remaining `
income -> low demand’. 8,000. Those who borrow, use this money for making
The economy is pulled out of the state of depression. payments. As assumed, those who receive payments,
The GDP growth accelerates in response to increase put the money back into the banks.
in AD, trigged by increase in government investment In this way, banks receive fresh deposits of ` 8,000.
expenditure. The banks again keep 20%, i.e. ` 1,600 as cash and
lend ` 6,400, which is also 80% of the last deposits.
14. The saving function of an economy is given as The money again comes back to the banks leading
to a fresh deposit of ` 6,400. The money goes on
S = – 250 + 0.25Y
multiplying in this way and ultimately total money
If the planned investment is ` 100 crores, calculate
creation is ` 50,000.
the following
Given the amount of fresh deposit and the LRR, the
(i) Equilibrium level of income in the economy.
total money creation is
(ii) Aggregate demand at income of ` 300 crores. 1
Total Money Creation = Initial Deposit # LRR
Ans : o
(i) At the point of equilibrium, With the introduction of ‘Jan-Dhan Yojana’, many
households have opened bank account. Due to this,
Saving = Investment (S = I)
primary deposits of commercial banks have increased. (b) Rent free house from an employer is included
Banks create credit on the basis of primary or initial in the estimation of national income because
deposits. Higher the primary deposits, higher is the it is a kind of wages in kind and therefore, a
credit creation capacity of commercial banks and part of compensation of employees.
vice-versa.
Now, with implementation of ‘Jan-Dhan Yojana’,
since primary deposits have increased, reserves of
bank to create credit has also increased. Therefore,
credit creation capacity of commercial banks has
increased manifold.
Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12 17. (i) In light of the given figure, explain in simple
terms the meaning of revenue, fiscal and primary
16. (i) Explain how Non-monetary exchanges’ act as a deficit.
limitation in taking GDP as an index of welfare.
(ii) Explain the treatment assigned to the following
while estimating national income. Give reasons.
(a) Family members working free on the farm
owned by the family
(b) Rent free house from an employer
Ans :
(i) Non-monetary exchanges act as a limitation
in taking GDP as an index of welfare due to
following reasons (ii) The government of a country is operating on
(a) GDP measures only economic value of the ‘Zero primary deficit’ and also follows
current productive activity of a country. ‘Re-allocation of resources as an objective of
(b) There are many activities which are not budget’. Explain the above two concepts.
evaluated in monetary terms. In India, non- o
monetary transactions are present in rural (i) Classify the following as revenue receipts and
areas where payments for farm labourers capital receipts. Justify your answer.
are made in kind rather than cash. But such (a) Profit of public sector undertakings.
transactions are not recorded. (b) Market borrowing by the government.
(c) Even while producing goods and services, (c) Income from sale of its share in public sector
lot of human cost is also involved. For undertakings.
example, sacrificing leisure hours by (ii) Distinguish between capital expenditure and
working but this is never included in total revenue expenditure of the government, with
cost. suitable examples.
(d) Therefore, GDP remains underestimated Ans :
and hence loses its appropriateness as an (i) (a) Revenue Deficit It is the excess of government
index of welfare. total revenue expenditures over total revenue
(ii) (a) Family members working free on the farm receipts during a given fiscal year.
owned by the family are engaged in the value
addition process. Revenue Deficit = Revenue Expenditure
Imputed value of their farm output is – Revenue Receipt
included in the estimation of national (Revenue Expenditure > Revenue Receipt)
income. Accordingly, income generated (b) Fiscal Deficit It is the excess of total (Revenue
by the farming family would be treated as Expenditure + Capital Expenditure)
mixed income of self-employed, which over total receipts excluding borrowings
includes compensation of labour.
(Revenue Receipt + Capital Receipt other capital receipt, because it creates a liability
than borrowings) during a given fiscal year. for the government in the form of borrowing
Fiscal Deficit = Total Expenditure – Total Receipt from public.
(Excluding borrowings) (c) Receipt/Income from sale of its share
o in public sector undertaking is a capital
= [Revenue Expenditure + Capital Expenditure] receipt, as it causes reduction in assets of the
– [Revenue Receipt government.
+ Capital Receipt (Exclude borrowings)] (ii)
o
Basis Capital Revenue
Fiscal Deficit = Borrowings Expenditure Expenditure
Fiscal deficit indicates the amount of money Meaning It is expenditure It is the
that the government will need to borrow during of government expenditure of
the financial year. A greater deficit implies more which neither government
borrowing by the government and the extent of cause increase which leads to
the deficit indicates the amount of expense for in government either increase
which the money is borrowed. assets nor cause in government
(c) Primary Deficit It is the amount of money any reduction assets or
that the government needs to borrow apart in government reduction in
from the interest payments on the previously liabilities. government
borrowed loans liabilities.
Primary Deficit = Fiscal Deficit – Interest Nature of It is a recurring It is a non-
Payment on Previous Loans expenditure. expenditure. r e c u r r i n g
(ii) Zero Primary Deficit It means that the government expenditure
has to resort to borrowing only to fulfil its earlier
Example It is spent It is spent on
commitments of interest payments. It is not
on normal acquisition of
adding to the existing loans for the purpose other
functioning of assets, repayment
than meeting its existing obligation of interest
government of borrowing and
payments.
department granting of loans
It is a sign of fiscal discipline or fiscal responsibility
and various and advances.
on the part of the government. High primary deficit,
provisions.
on the other hand, reflects fiscal irresponsibility of the
government.
Reallocation of Resources Government budget
can impact re-allocation of resources through its
budgetary policy of carrots and sticks. Carrots mean Section B -Indian Economic Development
incentives while sticks mean punishment or penalties.
In its budget, the government can decide to raise taxes
(stick) on commodities, the production of which, it Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10
wants to discourage.
On the other hand, it can offer subsidies (carrots) 18. Which of the following factors are not considered
on commodities, the production of which it likes to while constructing the HDI Index?
encourage. (a) A good environment as measured by appropriate
Such a policy is expected to shift the allocation of environment policies
resources in favour of socially desirable goods and (b) A decent standard of living as measured by GDP
services. per capita
o
(c) Long and healthy life measured by life expectancy
(i) (a) Profit of public sector undertakings is a
at birth
revenue receipt, because it neither creates
liability nor reduces assets of government. (d) Knowledge as measured by the adult literacy rate
(b) Market borrowing by government is a Ans :
(a) The HDI is calculated as the geometric mean (d) distribution of workforce among different sectors
(equally-weighted) of life expectancy, education, and of an economy.
GNI per capita, as follows
HDI = ÎHealth # IEducation # IIncomeh1/3 21. Which of the given reasons is incorrect with regard
to the introduction of Economic reforms in 1991 in
19. The economic reforms under the New Economic India?
Policy of 1991 were made so that______ (a) Depletion of the foreign exchange reserves
(a) The public would drive the economy towards (b) Persistent level of unemployment and poverty
growth and development. (c) A high level of fiscal deficit
(b) Market forces would drive the economy towards (d) Inflationary pressures
growth and development.
Ans :
(c) The government would drive the economy
towards growth and development. (b) The chief casual factors that led to the introduction
of economic reforms in India were mounting fiscal and
(d) None of the above
BoP deficit, inflationary pressures, underperformance
o of the public sector and depletion of foreign exchange
Indian Oil Corporation Limited has been granted the reserves.
status of_______.
(a) Navratnas
22. Select the correct combination between the following
(b) Miniratnas
columns
(c) Newratnas
(d) Maharatnas Column I Column II
A. Trade Barriers (i) Reduction in the value
Ans :
of domestic currency
(b) Market forces would drive the economy towards in comparison to
growth and development. foreign currencies
o as a result of market
(d) Maharatnas forces
B. Devaluation (ii) Tariff and Quota
20. ______ are voluntary organisations of workers C. Depreciation (iii) Selling part of equity
formed to promote and protect the interests of workers of PSEs to the public
through collective D. Disinvestment (iv) Deliberate downward
action adjustment of
(a) Trade unions domestic currency
(b) Labour unions with respect to
(c) Cooperative organisation foreign currencies
(d) None of the above Codes
o A B C D
Occupational structure refers to______ (a) (ii) (iii) (i) (iv)
(a) nature of different occupations (b) (ii) (iv) (i) (iii)
(b) size of labour force in a country (c) (iii) (i) (iv) (ii)
(c) number of people living in a country (d) (ii) (i) (iv) (iii)
(d) distribution of workforce among different sectors
Ans :
of an economy
(b) (ii) (iv) (i) (iii)
Ans :
(a) Trade unions
23. Statement I : Agricultural diversification implies
o
diversification of crop production and shifting of
workforce to other allied activities such as livestock, (b) The population density of an area can greatly
poultry etc. affect that area’s economy and social conditions.
Statement II : MSME sector suffered to a large extent o
in Covid-19 pandemic situation due to liquidity (d) In 1988, Pakistan adopted the model of
crunch. liberalisation, stabilisation and structural adjustment.
alternative from the following 26. Assertion : India, Pakistan and China have started
(a) Both the statements are true planning their developmental strategies in the same
(b) Both the statements are false way.
(c) Statement I is false and Statement II is true Reason : India, China and Pakistan have started
(d) Statement I is true and Statement II is false working on their developmental plans at the same
time.
Ans : (a) Assertion is true, but Reason is false.
(a) Both the statements are true (b) Assertion is false, but Reason is true.
(c) Both Assertion and Reason are true and Reason is
the correct explanation of Assertion.
24. Statement I : There is a need to bridge the skill-gap
in India in order to enhance human capital and bring
about more productive labour force.
Statement II : Skills are tangible in nature and can be Ans :
separated from its owner. (d) Both Assertion and Reason are true, but Reason is
In the light of the given statements,. choose the correct not the correct explanation of Assertion.
China announced its first five year plan in 1953.
India and Pakistan adopted similar strategies such
(b) Both statements are false as creating a large public sector and raising public
(c) Statement I is true and Statement II is false expenditure on social development. Till the 1980s all
(d) Statement I is false and Statement II is true the three countries have similar growth rate and per
capita income.
Ans :
(c) Skills are intangible in nature and cannot be
27. Assertion : Government policies have failed to
separated from its owner.
address the vast majority of vulnerable people who
are living on or just above the poverty line due to
25. _______is the population density, the ______ is the unemployment.
pressure of population on land and the more the Reason : High growth alone is not sufficient to reduce
economic problems. unemployment. Without the active participation of the
(a) Higher, lower poor, successful implementation of any programme is
(b) Higher, higher not possible.
(c) Lower, higher (a) Assertion is true, but Reason is false.
(d) Lower, lower (b) Assertion is false, but Reason is true.
o (c) Both Assertion and Reason are true and Reason is
_______marked the introduction of economic reforms the correct explanation of Assertion.
in Pakistan. (d) Both Assertion and Reason are true, but Reason is
(a) 1991 not the correct explanation of Assertion.
(b) 1978 Ans :
(c) 1980
(d) 1988 not the correct explanation of Assertion.
Ans :
Short Answer Questions (Q28 to Q29) 3´2=6 The given statement is quite appropriate with
reference to the ‘casualisation of labour’ in India.
28. Interpret the given picture and suggest any two This is because of the following disadvantages of
traditional methods for replacement of the chemical casualisation of the workforce
pesticides. (i) For casual workers, the rights of the labour are
not properly protected by labour laws.
Particularly, during pandemic times, as demand
for goods and services fell the casual workers
were left jobless, without any compensation or
support.
(ii) During the COVID-19 lockdown, millions
of casual workers lost their jobs, raising the
question of their survival. Also, additional health
expenditure added to their troubles. If such
workers had, been working under the formal
sector, it would have given them some respite in
Ans : their difficult times. Thus, this had led to increase
in the problem further.
The traditional practices that can help in controlling o
contamination without the use of chemical fertilizers, Non-farm activities can lead to rise in income of
are as follows people in rural sector in the following ways
(i) Neem trees and its by products are a natural pest- (i) Animal Husbandry : It is that branch of agriculture
controller, which have been used since ages in which is concerned with breeding, rearing and
India. The government also promoted the sale caring for farm animals. Under livestock farming
Neem coated urea as a measure of natural pest cattles, goats and fowls are the widely held
control. species.
(ii) Large variety of birds should be allowed to dwell Livestock production provides increased stability
around the agricultural areas, they can clear large in income, food security, transport and nutrition
varieties of pests including insects. for the family. Livestock sector provides alternate
livelihood option to over 70 million small farmers
including landless labourers.
(ii) Horticulture : It refers to the science or art of
cultivating fruits, vegetables, tuber crops, flowers,
medicinal and aromatic plants. These crops playa
vital role in providing food and nutrition besides
addressing employment concerns. It contributes
nearly 1/3 rd of the value of agricultural output
29. “In recent times, the Indian economy has experienced and 6% of GDP in India.
the problem of casualisation of the workforce. This (iii) Fisheries : It refers to the occupation devoted to
problem has only been aggravated by the outbreak of the catching and processing of selling of fish and
COVID-19.” other aquatic animals. The water bodies consisting
Do you agree with the given statement? Discuss any of sea, oceans, rivers etc. are considered as mother
two disadvantages of casualisation of the workforce or provider as they provide life giving source to
in the light of the above statement. the fishing community. The total fish production
o accounts for 0.8% of the total GDP. West Bengal,
“The Prime Minister urged to increase the rural Andhra Pradesh, Kerala, Gujarat, Maharashtra
income by increasing non-farm activities.” and Tamil Nadu are major fishing producing
Explain how non-farm activities can lead to rise in states.
income of people in rural sector.
Ans : Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12
30. State whether the following statements are true/false, (ii) The given data indicates that over the given
with valid arguments period, the proportion of workforce in primary
(i) Literacy rate in India have increased but so has sector has gone down significantly. Whereas, the
the absolute number of illiterates. employment share of both secondary sector and
(ii) Regional disparities in India are high and have the service sector has increased gradually.
been rising in recent years. While the share of secondary sector has gone up
Ans : by approximately 9% recently, the corresponding
figure for service sector has gone up by
(i) The given statement is true. Literacy rates have approximately 7.1%.
increased mainly because of the growth in This also shows that dependency on agriculture
educational facilities. remained high as secondary and service sector
However the absolute number of illiterates have wasn’t created enough employment.
increased because of tremendous increase in
population.
(ii) The given statement is true. There has been 32. “India is often called as outsourcing destination of
persistent investment only in some selected the world.” Discuss the prime reasons for this name
areas while some areas face little or no agrarian given to India.
transformation and the consequent lack of social o
and economic opportunities. State the meaning of import substitution.
Explain how import substitution can protect the
domestic industries.
Ans :
31. (i) Why are less women found in regular salaried Countries like India has became favourites outsourcing
employment? Give any one reason. destination in the world, due to the following reasons
(ii) Analyse the recent trends in sectoral distribution (i) Availability of Cheap Labour India is a country
of workforce in India with large population. Labour in India is available
at low wage rates. This helps foreign companies
Trends in Employment Pattern (sector-wise),
in reducing cost of operation by outsourcing their
1993 – 2012 (in %) business processes in India.
Sector 1993 – 94 1999 – 2011 – 2012 (ii) Skill and Accuracy India has a wide’pool of
2000 talent in form of educated and trained youth who
Primary 64 60.4 48.9 have required skill and can work with accuracy in
Secondary 16 15.8 24.3 business process.
(iii) Continuity and Risk Management Outsourcing
Service 20 23.8 26.8
will provide a level of continuity to the company,
Ans : while reducing the risk that a substandard level of
(i) Less woman are found in regular salaried operation would bring to the company.
employment due to the following reasons (any o
one) Import substitution refers to a policy of replacement
(a) Lack of Education Facilities Female or substitution of imports by domestically produced
education is not given due importance in goods. The domestic industries in India were not in
India and hence, majority of the woman a position to compete against the goods produced by
in India do not have the educational developed economics. The policy of import helped in
qualification and professional skills two ways
required. (i) Fixation of quotas helped in restricting the level
(b) Discouragement from Family In India, of imports.
families do not want the female member to (ii) The tariff on imported goods.
step out from the house for work especially As a result, the domestic firms could expand without
if it is for long hours, as in regular salaried fear of competition from the foreign. It is considered
employment. that if the domestic industries are protected they will
learn to compete in course of time. (b) Land Ceiling It refers to fixing the maximum
amount of land, which could be owned by
an individual.
In order to promote equity in the agriculture
sector, the government specified the
Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12 maximum limit of land that any individual
can hold.
33. (i) Discuss briefly, the rationale behind “equity (c) Consolidation of Holdings It refers to a
with growth” as planning objectives for Indian practice to allot land to the farmer at one
economy. place as a replacement for his scattered
(ii) “Institutional reforms such as land reforms has holdings here and there. Moreover, small
played a significant role in transforming Indian and scattered land is now converted into
agriculture.” Defend or refute the given statement a big piece of land, so that modern and
with valid reason. innovative technology can be applied,
o which will increase the productivity.
(i) State any two positive contributions made by the o
British in India. (i) Two positive contributions made by the British in
(ii) Comment upon any two salient features of India are
demographic conditions of India on the eve of (a) India attained self-sufficiency in food grain
Independence. production.
(iii)
What was the two-fold motive behind the (b) The Britishers brought an efficient means of
systematic de-industrialisation effected by the transportation and also developed various
British in pre-independent India? means of transport such as roads and
railways. Even though these intended to
Ans :
serve their personal benefit, yet it opened up
(i) Equity with growth improve the standard of new opportunities of growth and helped in
living of weaker sections of society and reduce the cultural unification of the country.
the inequalities. (ii) Two features of demographic condition of India
Economic growth (in term of GDP growth) are
would become a meaningless exercise if the (a) Infant Mortality Rate It refers to number of
benefits of it accrue to only a handful of people infants dying before reaching one year of age
in the society. Benefits of growth must spread per thousand in a year. The infant mortality
across larger sections of the society, so that the rate was quite alarming as it was about 218
distribution of income becomes equitable. Equity per thousand in contrast to the present infant
(in terms of equitable distribution) implies social mortality rate of 33 per thousand.
justice and economic growth must be combined (b) Extremely Low Literacy Rate On the eve of
with social justice. That is why, planning in India, independence, the overall literacy rate was
focuses not merely on economic growth, but on less than 16%. Out of this, female literacy
growth with social justice. level was at a negligible low level of 7%.
(ii) I defend the given statement. After independence, (iii)
The two fold motive of British government
the government of India took several institutional between de-industrialisation includes
land reforms to ensure transformation of Indian (a) Export of raw materials from India at cheap
agriculture such as rates to Britain.
(a) Abolition of Intermediaries The first and (b) Import of finished goods to India at high
the most important action taken by the rates from Britain.
government is the removal of intermediaries. This leads to domestic industries facing
The basis idea behind this step was that competition from British machine made industries
ownership of land would give incentives and decline of handicraft.
to the actual tillers to make improvements.
This policy brought 200 lakh tenants into
direct contact with the government.
34. Sino-Pak Friendship Corridor come at the expense of the long-term socio-economic
The China-Pakistan Economic Corridor (CPEC) has welfare of Pakistani citizens.
deepened the decades-long strategic relationship (i) Outline and discuss any two economic advantages
between the two nations. of China Pakistan Economic Corridor (CPEC)
But it has also sparked criticism for burdening Pakistan accruing to the economy of Pakistan.
with mountains of debt and allowing China to use its, (ii) Analyse the implication of bilateral ‘debt-
debt-trap diplomacy to gain access to strategic assets trap’ situation of Pakistan vis-a-vis the Chinese
of Pakistan. The foundations of CPEC, part of China’s economy.
Belt and Road Initiative, were laid in May, 2013. At Ans :
the time, Pakistan was reeling under weak economic
growth. China committed to play an integral role in (i) Economic advantages of China Pakistan
supporting Pakistan’s economy. Economic Corridor (CPEC) to the economy of
Pakistan and China have a strategic relationship that Pakistan are
goes back decades. Pakistan turned to China at a time (a) China provided financial and technical
when it needed a rapid increase in external financing expertise to help Pakistan build its road
to meet critical investments in hard infrastructure, infrastructure, supporting employment and
particularly power plants and highways. CPEC’s income in the economy.
early harvest projects met this need, leading to a (b) CPEC has led to a massive increase in power
dramatic increase in Pakistan’s power generation generation capacity of Pakistan. It has
capacity, bringing an end to supply-side constraints brought an end to supply-side constraints
that had made rolling blackouts a regular occurrence in the nation, which had made blackouts a
across the country. regular phenomenon across the country.
Pakistan leaned into CPEC, leveraging Chinese (ii) China has become famous for its ‘Debt-trap
financing and technical assistance in an attempt to Diplomacy’ in recent times. Under this, China
end power shortages that had paralysed its country’s provides financial and technical expertise/
economy. Years later, China’s influence in Pakistan assistance to help various nations to bring them
has increased at an unimaginable pace. under its direct or indirect influence.
China as Pakistan’s Largest Bilateral Creditor China’s The first and the foremost implication of the
ability to exert influence on Pakistan’s economy has diplomacy is that Beijing has now become
grown substantially in recent years, mainly due to the Islamabad’s largest creditor.
fact that Beijing is now Islamabad’s largest creditor. According to documents released by Pakistan’s
According to documents released by Pakistan’s finance ministry, its total public external debt
finance ministry, Pakistan’s total public and publicly stood at $ 44.35 billion in June 2013, just 9.3
guaranteed external debt stood at $ 44.35 billion in percent of which was owed to China. By April
June 2013, just 9.3 percent of which was owed to 2021, this external debt had ballooned to $ 90.12
China. By April 2021, this external debt had ballooned billion, with Pakistan owing 27.4 percent – $
to $ 90.12 billion, with Pakistan owing 27.4 percent 24.7 billion – of its total external debt to China,
– $ 24.7 billion – of its total external debt to China, according to the IMF. This clearly indicates
according to the International Monetary Fund (IMF). diplomacy.
Additionally, China provided financial and technical
expertise to help Pakistan build its road infrastructure,
expanding North-South connectivity to improve the
efficiency of moving goods from Karachi all the
way to Gilgit-Baltistan (POK). These investments
were critical in better integrating the country’s ports,
especially Karachi, with urban centers in Punjab and
Khyber-Pakhtunkhwa provinces.
Despite power asymmetries between China and
Pakistan, the latter still has tremendous agency in
determining its own policies, even if such policies
******

ECONOMICS (030)
Section A -Macro Economics for a fiscal year.

(a) inflow and outflow of foreign exchange to/from
the economy
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 (b) inflow and outflow of loans to/from the rest of the
world
1. Which of the following is/are not an assumption(s) of (c) income an expenditure of the government
credit creation process? (d) inflow and outflow of funds of the government
(i) Entire banking system is taken as a single unit.
(ii) All transactions.are done through banks. Ans :
(iii) There is no saving in the economy. (a) Balance of payments is the accounting record of
(a) Only (iii) (b) Only (i) all international transactions between home country
(c) Only (ii) (d) Both (i) and (ii) and residents of the rest of the world.
Ans :
4. Statement I Marginal Efficiency of Capital (MEK)
(a) There is no such assumption as of not having any has a positive relationship both with prospective yield
savings in the economy in the process credit creation. as well as supply price.
Statement II With the rise in the level of income,
Average Propensity to Consume (APC) tends to fall.
2. ‘A’ has a good that ‘B’ wants and ‘B’ has a good that alternative from the following
‘A’ wants. This is referred to as_____under barter (a) Both statements are false
system of exchange.
(a) store of value
(b) double coincidence of want
(c) unit of account
(d) None of the above Ans :
Ans : (d) The relationship between supply price of

investment, prospective yield and Marginal Efficiency
(b) Two individuals involved in the exchange under of Capital (MEK) is given by the equation
barter system must possess the good that each other Prospective Yield
wanted is known as double coincidence of wants. MEK = = Supply Price
# 100
Where, MEK = Marginal efficiency of capital
3. Balance of payments of an economy records _____ The above equation states that MEK and yield have
a positive relation, while supply price and MEK are (c) Low level of investment and low savings
negatively related. (d) Low mobilisation of savings and low level of
investment
5. Statement I Capital account records transactions Ans :
representing foreign financial assets and liabilities.
Statement II Balance of trade means the difference (d) Final goods are those which have crossed the
between exports and imports of visible material boundary line of production and are ready for use
goods. by their final users. e.g. Car used by the households,
In the light of the given statements, choose the correct machine used by the producer etc.
alternative from the following o
(a) Both statements are false (b) Low level of income and low level of investment
(c) Statement I is true and Statement II is false.
Ans :
6. Statement I : Final goods are those goods which have 7. If Marginal Propensity to Save (MPS) is 0.25 and
not yet crossed the boundary line of production. initial change in investment is ` 250 crore, then the
Statement II : Goods used as fixed assets by the final change in income would be
producers in the production of other goods and (a) ` 500 crore
services are called capital goods. (b) ` 3,500 crore
In the light of the given statements, choose the correct (c) ` 1,000 crore
(d) ` 1,200 crore
o
What will be the impact on aggregate demand, if the
(c) Statement I is true and Statement II is false government increase tax rates as it is a main source of
(d) Statement I is false and Statement II is true government’s revenue?
o (a) Remains constant
Choose the correct alternatives to be filled in given (b) Ambiguous
blanks A and B. (c) Increase
(d) Decrease
Ans :
(c) Investment Multiplier
(K) = S1 = 0.125 = 4
Change in Income
Now, we know, K = Change in Investment
= ∆Y
∆I
∆Y = K∆I = 4 ]250g = ` 1,000
crore
o
(d) Decrease
(a) Low level of investment and low level of income
(b) Low level of income and low level of investment 8. Suppose that the Balance of Trade (BoT) of a nation,
exhibits a surplus of ` 20,000 crores. an economy and thereby raising AD till such time the
The import of merchandise of the nation is half of the private investment is revived to achieve higher level
exports of merchandise to the rest of the world. of output and employment.
The value of exports would be `______crores. Alternatives
(a) 24,000 (a) Assertion is true, but Reason is false
(b) 35,000 (b) Assertion is false, but Reason is true
(c) 30,000 (c) Both Assertion and Reason are true and Reason
(d) 40,000 is the correct explanation of Assertion.
o (d) Both Assertion and Reason are true, but Reason is
If the value of export of merchandise is ` 1,500 crore not the correct explanation of Assertion.
and imports of goods are 20% more than exports, the Ans :
value of imports and trade deficit will be `______
crores and `_____crores respectively. (c) Both Assertion and Reason are true and Reason
(a) 1,200, 300 is the correct explanation of Assertion.
(b) 1,200, 3,300
(c) 1,800, 3,300 10. Assertion : During the pandemic, income of the
(d) 1,800, 300 people have fallen and as a result there has been a
reduction in aggregate demand.
Ans : Reason : According the Keynesian economics,
(d) BoT = Value of Exports – Value of Imports government should follow expansionary fiscal policy
According to question, import of goods are half implying a higher level of government expenditure
of exports and lower level of taxes.
Alternatives
So, if exports = x, then imports = 12 x
Now, BoT Surplus = 20,000 (b) Assertion is false, but Reason is true
So, 20,000 = x - 12 x (c) Both Assertion and Reason are true and Reason
1 is the correct explanation of Assertion.
2 x = 20,000 = ` 40,000 crores
o (d) Both Assertion and Reason are true, but Reason is
(d) Imports = 1,500 + 0.20 # 1,500
= 1,500 + 300 Ans :
= ` 1,800 (c) Both Assertion and Reason are true and Reason
Trade Deficit = Imports – Exports
= 1,800 – 1,500 = ` 300
11. Giving reasons, explain whether the given statements

are true or false.
(i) Current account of balance of payments account
records only export and import of goods and
services.
(ii) Foreign investments are recorded in the capital
9. Assertion : During periods of economic depression, account of balance of payments.
economy is caught in a low level equilibrium trap as o
investment in the private sector tends to slide to its What is meant by flexible exchange rate system and
bottom. fixed exchange rate systems?
Reason : The government can break the deadlock of
Ans :
low demand side factors by pumping investment into
(i) False, as current account of balance of payments higher demand (higher than the supply) leads to
account also records unilateral transfers. a rise in general price level implying a situation
(ii) True, as all kinds of foreign investments (foreign when market value of the output increases in the
direct investments and portfolio investments) economy.
are included in the capital account of balance of (ii) False. Inflationary gap is the excess of AD
payments. over and above its level required to maintain
o full employment equilibrium in the economy.
Fixed exchange rate refers to the rate of exchange Inflationary gap generates extra pressure on the
which is fixed by the central authority of the country. existing flow of goods and services at the level
It is not affected by change in demand or supply of of full employment. Accordingly, prices tend to
foreign exchange. rise but output will not increase. Output remains
Flexible exchange refers to the rate of exchange constant corresponding to full employment level
which is determined by the demand and supply of in the economy.
foreign exchange in the foreign exchange market,
with no interventions from any central authority.
12. From the information given below, find Net Value

Added at Factor Cost.
Item (` in crore)
Durable use capital goods with a life 100
span of 10 years 14. Consider the information given below
Single use producer goods 50 (i) Autonomous consumption = ` 5,000
(ii) Marginal Propensity to Save (MPS) = 0.2
Sales 200
(iii) Investment = ` 20,000
Unsold output produced during the 20 On the basis of the above informations, calculate
year (a) Equilibrium level of national income
Taxes on production 10 (b) Investment multiplier
Ans : Ans :
Net Value Added at Factor Cost (NVAFC) Given,
= Sales + Unsold output produced during the Autonomous Consumption ( C ) = ` 5,000
Marginal Propensity to Save (MPS) = 0.2
year – Single use producer goods – Depreciation on
Investment (I) =` 20,000
durable use capital goods – Taxes on production We know that, MPC = 1 – MPS =1 – 0.2 = 0.8
= 200 + 20 – 50 –10 – 10 = ` 150 crore Also, Consumption Expenditure
(C) = C + (MPC)Y
and at equilibrium level, Y = C + I
Y = C + (MPC)Y + I
13. Read the following statements carefully and write Y = 5,000 + 0.8Y + 20,000
true or false with a reason Y – 0.8Y = 25,000
(i) Excess demand raises the market value of output. 0.2Y = 25,000
(ii) Prices and output increase in a situation of
inflationary gap in an economy. ` Y = ` 1,25,000
1 = 1 =
Also, Investment Multiplier = MPS 0.2 5
Ans :
(i) True. Excess demand raises the market value
15. ‘Lack of store of value’ was a major problem under
of the output. It is so because in a situation of
barter system, but goods like diamond, gold can be
excess demand, output level remaining constant,
easily stored for future use. Then why this was not a
popular mean under barter system? (c) Purchase of uniforms for nurses by a hospital
o Ans :
Explain the ‘unit of account’ function of money. How
has it solved the related problem created by barter? (i) This is because of two reasons
(a) Export refers to the purchase of domestically
Ans : produced goods by the rest of the world.
It is true that value can be stored in the form of gold or Goods produced within the domestic
diamond for future use, however it again has certain territory of a country are to be treated as a
drawbacks such as part of GDP.
(i) Being limited in supply these were not available (b) Export receipts refer to revenue of the firms
in abundance. from the sale of its output.
(ii) These involved certain transactions cost in These are not the receipts of factor incomes
exchange of goods for such metals. from abroad which are to be in the form of
(iii) These were not liquid form of exchange, because rent, interest, profit and wages.
not everyone was able to accept it. (ii) (a) Payment of corporate tax by a firm should
(iv) Divisibility was also a problem while dealing in not be included in the estimation of national
these goods. income because it is a transfer payment by
o the firm.
‘Unit of account’ or ‘measure of value’ is the primary It is paid out income and therefore, it is
function of money. not to be separately added in the national
It refers to monetary expression of the market value income.
of goods and services. Money serves as a common (b) Purchase of machinery by a factory is
measure of value or a standard of value. Value of all included in the estimation of national
goods and services are expressed in terms of money, income because it is investment expenditure
e.g. the price of a pen as ` 5, the price of a book as ` or capital formation.
10, etc. (c) Purchase of uniforms for nursed by a hospital
The related problem of barter which this function of is not included in the estimation of national
money has solved is the problem of ‘lack of common income, because uniform is provided by the
measure of value’. hospital at the time of work.
In barter system, there was absence of a common It is to be treated as an intermediate
unit of measurement in which the value of goods and consumption.
services can be measured.
In the absence of common unit, proper valuation 17. (i) The figure given below explains the situation
was not possible. e.g. cloth is measured in metre (i.e. of mounting fiscal deficit in context of Indian
length) while milk is measured in litre (i.e. capacity), economy.
hence both cannot be measured in a single unit, Explain any three implications of large fiscal
thereby complicating the process of exchange. deficit.
But the evolution of money has solved this problem,
and now every good or service can be measured in
terms of money.
16. (i) Why are export receipts not a part of net factor
income from abroad?
(ii) Giving reasons explain how should the following
be treated in estimation of national income
(a) Payment of corporate tax by a firm
(b) Purchase of machinery by a factory for own
use Source GOI Controller General Accounts
(ii) Explain how government budget can be helpful in To curb the deflationary tendency, the government
bringing economic stabilisation in the economy. can prepare a deficit budget. A deficit budget
o is one in which estimated expenses exceed the
(i) In the context of government budget, giving estimated receipts. Such a budget increases the
reasons, explain whether the following are a money supply in the economy. With increase in
revenue receipt or a capital receipt. money supply, the purchasing power of people
(a) Interest received on the loans given to Sri- also rise, leading to an increase in the level of
Lankan government during Covid-19 aggregate demand. As aggregate demand rises,
(b) Sale of public sector undertaking the price level also rises and rate of deflation
(ii) Public expenditure is necessary for the begins to fall.
development of the country. In the light of the o
statement, explain any two significance of public (i) (a) Interest received on loans is a revenue receipt
expenditure. as loans given neither create liability nor any
Ans : reduction in assets of the government.
(b) It is a capital receipt because it leads to
(i) Following are the implications of large fiscal reduction in assets. e.g. Sale of Maruti
deficit Udyog Limited to private sector.
(a) National Debt Fiscal deficit leads to national (ii) The two significance of public expenditure are
debt as government resorts to borrowings (a) Increases Economic Growth Public
to combat the deficit. National debt is a expenditure accelerates the process of
burden on future generations. Therefore, economic growth. This is of unique
future generations inherit a economy importance particularly, in the context of
which is under high pressure of mounting developing countries like India.
borrowings. Public expenditure helps in establishing
(b) Low GDP Growth In case of large fiscal new industries. It ensures development of
deficit, a significant percentage of national public overhead cost like the construction
income is used upto pay the past debts of roads, dams, bridges, etc.
and very less is spent on infrastructural (b) Increases Economic Welfare Public
expansion, therefore, GDP growth of the expenditure increases economic welfare.
economy remains low. This happens particularly when public
(c) Crowding-out Effect High fiscal deficit expenditure is directed towards poverty
increases borrowings by the government eradication, as well as, health and education
from the money market which reduces for the poorer sections of the society. Such
availability of funds for private expenditures reduce economic divide
entrepreneurs. Shortage of funds leads to between ‘have’ and ‘have-nots’ and thereby
high rate of interest which lowers the level of promote social welfare.
investment in the economy. Thus, economy
slips into state of economic slowdown. This
is known as crowding-out effect.
(ii) Government budget can be helpful in bringing Section B -Indian Economic Development
economic stabilisation in the economy by
checking inflationary and deflationary tendencies.
To curb the inflationary tendency, the government Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10
can prepare a surplus budget. A surplus budget
is one in which estimated receipts exceed the 18. Match ‘labour force’ with the appropriate item from
estimated expenses. Such a budget reduces the amongst the following.
money supply in the economy. With a fall in the (a) Employed + Unemployed
money supply, the purchasing power of people
(b) Work force
also fall, leading to a fall in the level of aggregate
demand. As aggregate demand falls, the price (c) All educated
level or the rate of inflation also falls. (d) All rural workers
Ans : The main issue(s) with protectionist or trade restrictive

(a) Employed + Unemployed policies is/are________.
(a) consumer sovereignty narrows down
(b) there is very less incentive for the domestic
19. Environment has many resources for us. A resource
producers to improve the quality of their products
that can be totally replaced or is always available
naturally, or that is practically inexhaustible is known (c) Both (a) and (b)
as_______. (d) it result in huge amount of capital inflows
(a) non-renewable resource Ans :
(b) conventional resource
(d) Portion of agricultural produce sold in the market
(c) non-conventional resource by farmers.
(d) renewable resource o
o (c) Protectionist policies are criticised on the ground
_______is not used as a strategy for sustainable that there is very less scope for domestic firms to
development. become more efficient and domestic consumers have
(a) Use of thermal power to purchase whatever has been produced domestically.
(b) Use of hydel power
(c) Use of bio-gas
(d) Use of solar power
Ans :
(d) renewable resource
o
(a) For thermal power, water is heated with the help
of coal. As coal is non-renewable source of energy, 22. The correct sequence explaining the commencement
so using it can not be beneficial in sustainable of five year plans in chronological order is______.
development. (a) China, India and Pakistan
(b) India, China and Pakistan
20. What was the treatment given by the indigo planters (c) India, Pakistan and China
to the peasants?
(d) Pakistan, China and India
(a) Advancement of loans at a lower rate of Interest
o
(b) Peasants voluntarily agreed with the indigo
HDI rank of India as per the latest UNDP 2021-22
planters to produce indigo
report is_______.
(c) They were paid low prices for growing indigo (a) 154th rank
(d) They were given support measures on how to (b) 141st rank
grow indigo along with a piece of land
(c) 85th rank
Ans : (d) 132nd rank
(c) They were paid low prices for growing indigo Ans :
(b) India commenced its five year plans in 1951 while
21. Marketed surplus refers to______. China in 1953 and Pakistan in 1956.
(a) portion of industrial produce sold in the market o
(b) sale of consumer goods in the domestic market (d) According to the Human Development Report
(c) a certain proportion of both industrial and 2021-22 by UNDP, India ranks at 132nd position
domestic produce sold in the market among the 189 countries considered.
(d) portion of agricultural produce sold in the market
by farmers 23. Match the following :
o
Column I Column II Pakistan, around 60% of the population are using

basic sanitation facilities.
A. Economic Development (i) Mao
in China
B. India’s new (ii) China 26. Assertion : China has done better than India and
Development Policy Pakistan, as it is a socialist economy.
Reason : In socialism, government can implement
C. The Great Leap Forward (iii) 1978
policies which are in interest of the people.
D. Commune (iv) 1991 Alternatives
Codes (a) Assertion is true, but Reason is false
A B C D (b) Assertion is false, but Reason is true
(a) (i) (ii) (iii) (iv) (c) Both Assertion and Reason are true and Reason
(b) (ii) (i) (iv) (iii) is the correct explanation of Assertion.
(c) (iii) (iv) (i) (ii) (d) Both Assertion and Reason are true, but Reason is
(d) (iv) (ii) (i) (iii) not the correct explanation of Assertion.
Ans : Ans :
(c) (iii) (iv) (i) (ii) (c) Both Assertion and Reason are true and Reason
24. Statement I A worker is an individual who is doing
some productive work to earn a living.
Statement II Majority of population in India is finding
employment in the service sector which is growing at
a fast pace and growing continuously.
(b) Both statements are false 27. Assertion : It is imperative for Indian economy to
(c) Statement I is true and Statement II is false undertake measures which help promote the rural
(d) Statement I is false and Statement II is true development.
Reason : Almost two-third of India’s population
Ans :
depends on agriculture and nearly one-third of rural
(a) Both Statements are true India lives under the trap of poverty.
Alternatives
25. Statement I Pakistan is ahead of India in providing
improved sanitation facilities. (b) Assertion is false, but Reason is true
Statement II China ranks ahead in terms of (c) Both Assertion and Reason are true and Reason
development experience with respect to India and is the correct explanation of Assertion.
Pakistan. (d) Both Assertion and Reason are true, but Reason is
In the light of the given statements, choose the correct not the correct explanation of Assertion.
Ans :
(b) Both statements are false (d) Both Assertion and Reason are true, but Reason is
Ans : Short Answer Questions (Q28 to Q29) 3´2=6
(c) According to the latest data on Human
Development Indicators for 2017-19, in India and 28. ‘Farmers resort to onion distress sale’, an article
published by Orissa Post on 17th May, 2021. On institutionalised and dependence on private
account of the figure given below, give the meaning sources for credit should be eliminated.
of ‘distress sale’. Also explain any two obstacles that (ii) The general interest rate should be low. The banks
hinders the mechanism of agricultural marketing. should charge different rates for different uses.
(iii) The basis of credit should not be mortgage of
any security. Production or productivity of land
should be the basis for the approval of loans.
(iv) The conditions of repayment of loans should be
different so as to suit different circumstances.
(v) It should be ensured that finance is used for
production. Loans can also be given in the form
of goods like seeds, fertilisers, etc.
o
I defend the given statement.
With population explosion and with the advent of
industrial revolution, to meet the growing needs of
Ans : the expanding population, the demand for resources
Lack of agricultural marketing infrastructure often for both production and consumption went beyond the
forces the farmers to sell their produce at low prices rate of regeneration of the resources and the pressure
for fear of spoilage or to pay off an imminent debt. on the absorptive capacity of the environment
This is termed as distress sale. Farmers tend to suffer increased tremendously.
highly on account of these sales, because they not We are now faced with increased demand for
only get a low price for their produce, but are also environmental resources and services but their
cheated by use of false weights and are charged a high supply is limited due to overuse and misuse. Hence,
commission. the environmental issues of waste generation and
Some obstacles that hinder the mechanism of pollution have become critical today.
agricultural marketing are (any two)
(i) Faulty weighing and manipulation of accounts.
by traders which results in exploitation of farmers
when they sell their products to traders. Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12
(ii) Farmers do not have proper storage facilities to
store their produce for selling later at a better
30. State whether the following statements are true or
price. Hence, they are forced to sell even at lower
false, with valid arguments
price to save the produce from decaying.
(i) It was quintessential for a developing country
(iii)
Due to lack of knowledge about the prices
like India to pursue the goal of self-reliance on
prevailing in the markets, farmers are forced to
the eve of independence.
sell their produce at low prices.
(ii) Indian government followed inward looking trade
policy before initiation of economic reforms in
29. How does finance sector be regularised so that the 1991.
objective of rural development can be achieved?
Ans :
o
Defend or refute the statement with valid explanation. (i) The given statement is true. Self-reliance as an
“Population explosion and the advent of industrial objective of economic planning is necessary
revolution have resulted in environmental crisis.” for a developing country in order to reduce its
dependence on foreign countries especially
Ans :
for food. Promoting self-reliance increases
To achieve the objective of rural development, employment generation in an economy. Also, it
following measures related to finance can be taken is understandable that people who were recently
(any three) freed from foreign dominion should give
(i) The supply of finance should be fully importance to self-reliance.
(ii) The given statement is true. Upto 1991, Indian organisation or a country in achieving its
Government followed an inward looking trade objectives.
strategy to protect and promote domestic industry. (ii) The main objectives of liberalisation policy are
This strategy aimed at (any four)
(a) Export Promotion It is a strategy to promote (a) To increase competition among domestic
exports by making domestic industry industries.
competitive in the international market. It (b) To increase foreign capital formation and
helps a country to earn foreign exchange. improve the technology.
(b) Import Substitution It is a strategy to promote (c) To decrease the debt of the country.
domestic production of those goods which a (d) To encourage cross border trade.
country has been importing to save foreign (e) The expand the size of the market.
exchange. Since the NEP aims to achieve all the above stated
objectives, therefore it is said, that, NEP is liberal.
31. Compare and analyse the ‘women worker population o
ratio’ in rural and urban areas based on following The condition of agricultural sector at the time of
information Independence can be understood with the help of the
Worker Population Ratio in India, 2017-2018 following points
(i) Low Level of Productivity The productivity
Sex Worker Population Ratio levels were very low, at about 660 kg per hectare
Total Rural Urban for wheat and 665 kg per hectare for rice.
Men 52.1 51.7 53.0 (ii) High Degree of Vulnerability Agriculture was
greatly affected by erratic rainfall.
Women 16.5 17.5 14.2
(iii) Rift and Turmoil between Owners and Tillers
Total 34.7 35.0 33.9 The owners charged high rent from the tillers and
Ans : demanded rent even when the crops failed.
This demotivated the tillers, and agricultural
The data in the given table reveals that productivity was negatively affected.
(i) Women constitute 16.5% of the total worker (iv) Uneconomic and Fragmented Landholdings The
population in the economy. size of the landholdings was uneconomic and
(ii) The number of women workers in rural areas also the landholdings were scattered. This further
(17.5%) is relatively higher than the women affected the productivity of land adversely.
workers in urban areas (14.2%). Due to the abject
poverty in rural areas, rural women are compelled
to work more than their urban counterparts as the Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12
male member do not earn sufficient income for
family livelihood. 33. (i) What is meant by the term ‘affluence trap’?
(ii) Explain the concept of sustainable development.
(iii) Sometimes people prefer to be voluntarily
unemployed. Why?
32. (i) Define a plan. o
(ii) “The New Economic Policy is said to be liberal.” (i) “Multinational companies have not only
Comment. contributed towards the IT sector but also
o have a tremendous role to play towards rural
Discuss briefly the condition of agricultural sector at development”.
the time of independence. Justify the given statement with valid arguments.
Ans : (ii) “The opportunity costs of negative environmental
(i) Plan is a document showing detailed scheme, impacts are high”. Defend or refute the given
programme and strategy, worked out in advance statement with valid reasons.
for achieving an objective. Ans :
It is a specific action which aims to help the (i) Affluence means economic well-being. Trap is
something in which we get caught and we cannot Also, cleaning up of polluted rivers and
escape out of it. replenishing water resources require huge
Affluence trap means environmental degradation investments.
trap. With affluence or economic well-being, (b) The intensive and extensive extraction
more natural resources are used up causing of both renewable and non-renewable
environmental problems. resources has exhausted some of these
In rich countries, high level of consumption resources.
associated with high level of income is using up Huge amount of funds need to be spent on
natural resources at a fast pace. technology and research to explore new
As a consequence, these countries are getting resources.
trapped in a situation of severe environmental (c) The health costs of degraded environmental
degradation quality are also rising as decline in air and
(ii) Sustainable development refers to the water quality has resulted in increased
development strategy to meet the needs of the incidence of respiratory and water-borne
present generation without compromising on the diseases. Thus, it is clear that the opportunity
needs to the future generation. costs of negative environmental impacts are
Sustainable development aims at decreasing the high.
absolute poverty of the poor by providing lasting
and secure livelihoods that minimise resource
depletion, environmental degradation, cultural
disruption and social instability. 34. Read the following text carefully and answer the
(iii) People prefer to be voluntarily unemployed for given questions on the basis of the same and common
the below mentioned reasons (any two) understanding.
(a) They do not want to work at the wages that Comparative development of India and its neighbours
are being offered. is an important knowledge to possess as an Indian
(b) They are not willing to migrate to the place citizen.
at which job is being offered. As a rational citizen of a country, it is crucial to have
(c) They think that the job offered is below their a deep understanding of the developments in your
calibre. country. In fact, it is also very important to learn about
o the developmental processes of your neighbouring
(i) Economic reforms offered the opportunities to countries.
multinational companies to expand their functions Not only citizens but countries are also eager
all around the country. to understand the developmental system of
Many multinational companies are entering in their neighbours. This understanding enables
the rural marketing. comprehension of strengths and weaknesses of
They are doing well for the sake of farmers as yours as well as the neighbouring countries. Due to
stated below the process of globalisation, it is essential for every
(a) They are making contracts with farmers. nation to compete with developed countries.
(b) They are motivating farmers to grow Hence, it is important to study the comparative
desirable food, fruits and vegetables of the development of India and its neighbours.
desired quality. The Chinese reform process began more strongly
(c) They are providing them seeds and other and comprehensively during the 1980s. At this time,
inputs. India was in the mid-stream of a rather slow growth
(d) They are offering them pre-decided prices. process. Although the two countries (Pakistan and
(ii) I defend the given statement. The negative India) started together, Pakistan has seen a better
environmental impact has high opportunity costs result in certain areas.
as explained below However, India is better placed than Pakistan in
(a) The industrial development in past has the area of skilled manpower and research and
polluted and dried up rivers and other development institutions. It is common to find
aquifers making water an economic good. developmental strategies of a country as a model
to others for lessons and guidance for their own

development. It is particularly evident after the
introduction of the reform process in different parts
of the world.
In order to learn from economic performance of
our neighbouring countries, it is necessary to have
an understanding of the roots of their successes and
failures. It is also necessary to distinguish between
and contrast, the different phases of their strategies.
(i) “India, China and Pakistan have many similarities
in their development strategies”. Elaborate any
three points.
(ii) Mention the areas where Pakistan have performed
better than India.
Ans :
(i) India, China and Pakistan have many similarities
in development strategies which are as follows
(any three)
(a) All the three countries had started planning
their development strategies in similar ways.
India announced its Five Year Plan in 1951-
56, while Pakistan announced its First Five
Year Plan in 1956, which is called Medium
Term Plan. China announced its First Five
Year Plan in 1953.
(b) India and Pakistan adopted similar strategies
such as creating a large public sector
and raising public expenditure on social
development.
(c) Till the 1980s, all the three countries had
similar growth rates and per capita incomes.
(d) Economic reforms took place in all the three
countries. Reforms started in India in 1991,
in China in 1978 and in Pakistan in 1988.
(e) In the initial phase of reforms, all the three
countries gave more importance to public
sector though India and Pakistan allowed
private sector to function as well.
(ii) Following are the areas/aspects where Pakistan
has an edge over India
(a) Rate of urbanisation is higher in Pakistan
than India.
(b) The sex-ratio is higher in Pakistan with 943
females per thousand males, than in case of
India with 924 females per thousand males.
(c) Pakistan has lower percentage of
undernourished children than India.

ECONOMICS (030)
Section A -Macro Economics 3. Statement I :The medium term target for Consumer
Price Inflation (CPI) maintained by the RBI in context
of the Indian economy falls within the band of 3% ±
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 2%.
Statement II : When C function shoots from Y-axis, it
1. Which of the following statements do not support with indicates two arguments i.e. saving is negative when
the function of RBI as supervisor to the commercial income is zero; and consumption is positive when
banks? income is zero.
(a) Extend loans to the commercial bank. In the light of the given statements, choose the correct
alternative from the following.
(b) Inspection of operations of banks.
(c) Regulates the expansion, merger, acquisition etc.
of the bank.
(d) Formulates all rules and regulations for
commercial bank. (d) Statement I is false and Statement II is true
Ans : Ans :
(c) Regulates the expansion, merger, acquisition etc. (d) The Monetary Policy Committee (MPC) of the
of the bank. RBI has maintained a threshold inflation target of 4%
± 2% for the Indian economy.
2. Let foreign exchange rate between Indian Rupee

and US dollar is ` 40/1$ and it changes to ` 50/1$.
Which of the following is the reason of depreciation 4. The difference between narrow money and broad
of Indian currency? money is ______
(a) Increase in both demand and supply of US dollar (a) saving deposits of banks
(b) Increase in supply of US dollar and decrease in (b) time deposits with banks
demand of US dollar
(c) coins and currency
(c) Increase in demand of US dollar and decrease in
(d) only currency
supply of US dollar
(d) Decrease in both demand and supply of US dollar Ans :
Ans : (b) time deposits with banks
(c) Increase in demand of US dollar and decrease in
supply of US dollar 5. Statement I : Profits received from investments abroad
is recorded in the capital account. (b) Purchase of machinery by a producer is a capital

Statement II : Import of machines is recorded in the good, while durable goods can be used for many years
current account. e.g. Car, T.V. etc.
In the light of the given statements, choose the
alternative from the following 7. The value of Aggregate Demand at an income level
(a) Both statements are true of ` 300 crore from the given data pertaining to an
(b) Both statements are false economy equals ________
(c) Statement I is true and Statement II if false Savings function S = – 10 + 0.20Y
(d) Statement I is false and Statement II is true Planned investment = ` 100 crore
(a) ` 350 crore
Ans :
(b) ` 450 crore
(d) Profit received from investments abroad affect (c) ` 150 crore
neither the assets nor the liabilities of a country or its
(d) ` 250 crore
residents. Therefore it is recorded in current account.
o
What will happen, when AS < AD ?
6. Observe the given figure carefully and choose the (a) The producers would plan same level of
correct pair from the alternatives given below : production.
(b) To clear unwanted stocks, the producers would
plan a cut down in production.
(c) To rebuild the desire stocks, the producers would
plan greater production.
(d) Both (a) and (c)
Ans :
(a) AD = C + I
=10 + (1 – 0.20)(300)+ 100
=10 + (0.80)(300)+ 100
= 10 + 340
(a) Flow, Flow
= ` 350 crore
(b) Stock, Stock o
(c) Flow, Stock (c) To rebuild the desire stocks, the producers would
(d) Stock, Flow plan greater production.
o When AS is less than AD, flow of goods and services
Statement I : Purchase of machinery by a producer is in the economy tends to be less than their demand. As
an intermediate good. a result, the existing stocks of the producers would be
Statement II : Durable goods are used-up in a single sold out. Producers would plan greater production to
act of consumption. meet excess demand.
alternative from the following :
Ans :
(c) Flow, Stock
o
8. Suppose in a hypothetical economy, the income rises (c) Both Assertion and Reason are true and Reason
from ` 5,000 crore to ` 6,000 crore. As a result, the is the correct explanation of Assertion.
consumption expenditure rises from ` 4,000 crore
to ` 4,600 crore. Marginal propensity to consume in
10. Assertion : Managed floating exchange rate system is
such a case would be _______.
an amalgamation of fixed exchange rate and flexible
(a) 0.2
exchange rate.
(b) 0.6 Reason : Central bank can manipulate the flexible
(c) 0.8 exchange rate system.
(d) 0.4 (a) Assertion is true, but Reason is false
o (b) Assertion is false, but Reason is true
If Marginal Propensity to Save (MPS) is 0.25 and (c) Both Assertion and Reason are true and Reason
initial change in investment is ` 250 crores, then the is the correct explanation of Assertion.
final change in income would be_______. (d) Both Assertion and Reason are true, but Reason is
(a) ` 500 crore not the correct explanation of Assertion.
(b) ` 3,500 crore
Ans :
(c) ` 1,000 crore
(d) ` 1,200 crore (a) Assertion is true, but Reason is false
Under flexible exchange rate system, exchange rate
Ans : is determined by the market forces of demand and
Change in Consumption supply with no intervention of the Central Bank.
(b) MPC
=
Change in Income
600

= =
1, 000 0.6 Short Answer Questions (Q11 to Q12) 3´2=6
o
1 1
(c) K = MPS & 0.25 & 4 11. Find net value added at market price.
Also, K = ∆ Y
∆I & 4
= ∆Y
250
Contents ` (in crore)
∆Y = ` 1,000 crore Output sold (units) 800
Price per unit of output 20
Excise 1,600
Import duty 400
Net change in stock (–) 500
Depreciation 1,000
Intermediate cost 8,000
9. Assertion : Fiscal policy focuses on both the principles Ans :
of economic growth and stability.
Reason : Stability is achieved by correcting the Sales = Output Sold # Price Per Unit
situation of inflationary and deflationary gap, while = 800 # 20 = ` 16,000 crore
growth is achieved by way of lower taxation and Now, Value of Output = Sales + Change in Stock
higher subsidies to the producers.
(a) Assertion is true, but Reason is false = 16,000 + (– 500) = ` 15,500 crore
Now, GVAMP = Value of Output – Intermediate Cost
(c) Both Assertion and Reason are true and Reason =15,500 – 8,000 = ` 7,500 crore
is the correct explanation of Assertion. Hence,
(d) Both Assertion and Reason are true, but Reason is NVAMP = GVAMP – Depreciation
= 7,500 – 1,000 = ` 6,500 crore
Ans :
12. Differentiate between current and capital account of However, for a developing country like India, it is
BoP. not always desired. It would mean that US, now
o can buy less Indian goods for a dollar than before,
Giving reasons, explain whether the given statements which might cut US demand for the Indian goods
are true or false. i.e., it leads to fall in exports from India.
(i) Improvement in exchange rate of the country’s (ii) True, a rise in foreign exchange rate causes a rise
currency is always beneficial for Balance of in its supply because, there is a direct relation or
Payment (BoP). positive relation between foreign exchange rate
(ii) Rise in foreign exchange rate cause a rise in its and supply of foreign exchange.
supply. As with the rise in exchange rate, foreign currency
Ans : can buy more units of domestic good with the
same amount, therefore it leads to increase in
Difference between current account and capital supply of foreign exchange.
account of BoP is (any three)
Basic Current Capital
Account of Account of
BoP BoP
Nature of These are the These are the 13. Keynesian theory tell us that inflationary gap emerges
Transaction transactions transactions only when full employment is reached. But, in India
which do which affect we often find high rate of inflation along with high rate
not affect assets or of unemployment. How do you explain this paradox?
the assets liabilities Ans :
or liabilities position of the Keynesian theory is related to the problem of developed
position of the country. economies. In these economies, unemployment
country. occurs because of the lack of Aggregate Demand
Concept It is a flow It is a stock (AD). Lack of AD leads to a cut in planned output.
concept. concept. Accordingly, lay-off occurs and excess capacity
Formula/ Current Capital emerges. In such situations, increase in expenditure
Components Account = Account = (implying increase in AD) would lead to increase
Exports and Borrowings in planned output,without any increase in the price
Imports of and Leading level. The inflationary gap would emerge only when
Visible and from and to AD continues to rise even when excess capacity is
Invisible Items Abroad + totally exhausted and full employment is reached.
+ Unilateral Investment In developing countries like India , unemployment
Transactions to and from occurs not because of the lack of AD, but because
+ Income Abroad + of the lack of production capacity or the lack of
Received and Change in capital. Unlike developed countries, there is no
Paid to Abroad the Reserve excess capacity in less developed countries like
of Foreign India. Accordingly, price level starts rising following
Exchange increase in AD, even when there is unemployment in
Items Included It includes It includes the economy.
transactions of transactions of
revenue nature capital nature
o
(i) False, as improvement in the exchange rate of a
country’s currency implies that less rupees are
to be paid for a dollar than before. It points to
the relative strength of the Indian rupee in the
international market.
14. An economy is in equilibrium. Calculate the 1

i.e. Credit Creation = Reserve
investment expenditure from the following. National Ratio
Income = ` 800 Thus, credit creation is inversely related to the reserve
Marginal Propensity to Save = 0. 3 deposit ratio. e.g. Suppose the reserve ratio is 0.3 and
Autonomous Consumption = 100 initial deposit is ` 3,000 crores.
1
Total Credit Created = Reserve Ratio Initial
#
Ans :
Deposits
As the economy is in equilibrium
= 01.3 # 3, 000 = ` 10,000 crores
Y = AD
Now, suppose reserve ratio is increased to 0.6
i.e. Y = C + I Total Credit Created
C = C + bY 1
= Reserve Ratio Initial Deposits
#
or, Y = C + bY + I
= 01.6 # 3, 000 = ` 5,000 crores
National Income (Y) = 800
Thus, based on the above illustration, we can conclude
Marginal Propensity to Save (MPS) = 0.3
that there exists an inverse relation between reserve
Marginal Propensity to Consume
and credit creation.
(MPC) = 1 – MPS = 1 – 0.3 = 0.7 o
Autonomous consumption ( C ) = 100 ‘Standard of deferred payment’ is one of the secondary
From (i) 800 = 100 + 0.7(800) + I function of money. Deferred payments means future
payments. Money serves as the measure by which
700 = 560 + I
the value of future payments is regulated. In modern
I = 140 economic system, loans are generally given and taken
and the re-payment is generally postponed for a future
date. As with money, exact amount to be re-paid can
easily be calculated. Money is therefore, used as a
standard of deferred payments. The related problem
created by the barter system of exchange was ‘lack of
standard of deferred payments’.
In barter system, it was difficult to return value in
future in terms of goods of same quantity and quality.
Therefore, future payments regarding interest and
loans became difficult. But money has solved this
problem. Loans can be re-paid back in money and
interest payments can also be made in money.
15. “Credit creation is inversely related to the reserve
deposit ratio”. Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12
Justify the given statement, using a hypothetical
example.
16. (i) Government incurs expenditure to popularise
o
yoga among the masses. Analyse its impact
Explain the ‘standard of deferred payment’ function
on Gross Domestic Product and welfare of the
of money. How has it solved the related problem
people.
created by barter?
(ii) Explain the precautions that are taken while
Ans : estimating national income by value added
Reserve deposit ratio is the minimum reserves Which method.
a commercial bank have to maintain as per the Ans :
instructions of the Central Bank. It means that higher
(i) The expenditure incurred by the government to
the reserve deposit ratio, less credit can be created by
popularise yoga among the masses will increase
banks and vice-versa.
the government final consumption expenditure. give the meaning of fiscal deficit and explain any
With a rise in this component, the domestic income two ways to deal with such a problem.
of the country will also rise. So, the expenditure
incurred by the government to popularise yoga
will lead to an increase in the Gross Domestic
Product of the country.
This expenditure will also increase the welfare of
the people, as is enumerated below
(a) As more and more people practise yoga,
their health and immunity will improve.
This will help in increasing their working
capacity.
(b) As people’s health improve, so government’s
expenditure on the curative aspect of health
issues will decrease.
(c) People will develop a positive outlook and
their well-being will increase in general.
(ii) While using value added method for computing
national income, the following precautions
should be taken
(a) The value of intermediate goods should not
be included. (ii) Tax rates on higher income group have been
(b) Purchase and sale of second hand goods increased. Which economic value does it reflect?
should be excluded. Explain.
(c) Imputed value of self-consumed goods o
should be included. (i) Explain the role of government budget in fighting
(d) Own account production of goods should be inflationary tendencies.
included. (ii) Explain why public goods should be provided by
(e) Value of self-consumed services should not the government.
be included in the estimation of national
income. Ans :
(f) Imputed rent on the owner occupied house (i) Fiscal Deficit It is the excess of the total
is also taken into the account. expenditure, i.e. revenue and capital expenditure,
over the total receipts (excluding borrowings).
Fiscal Deficit = Total Budget Expenditure – Total
Budget Receipts (excluding borrowings)
Two measures to deal with the problem of fiscal
deficit are
(a) The curtailment of capital expenditure which
is measured in projects of capital formation
and other developmental activities.
(b) To raise revenue receipts by mobilising
resources through taxation.
(ii) The economic value that is reflected in the rise in
tax rate for higher income group is the ‘equality
and social welfare’.
17. (i) The graph given below highlights the situation The main objective of the budgetary policy of the
of gross fiscal deficit in context of the Indian government is to reduce inequalities of income
economy taken from RBI’s Bulletin on and wealth in the country. For this, it performs
‘Government Finances 2019-20: A half yearly the function of equal distribution of income and
review’. In context of the figure given below,
wealth. Ans :
Even distribution of wealth and social welfare (c) heavy export duties were imposed on the handicraft
remains the main objective of budgetary policy. products with a meagre duty on British manufactured
The government uses progressive taxation policy goods resulted in low demand for Indian handicrafts.
to reduce the inequalities of income and wealth
in the country. Government imposes high tax
rates on higher income group and low tax rates 19. _______ industries were reserved for the public sector
on lower income group. under Industrial Policy Resolution, 1956.
People with income below a certain level are not (a) 15
levied any direct tax altogether. (b) 2
On the other hand, the government spends these (c) 17
tax receipts on granting subsidies and providing (d) 21
other public services such as health and education o
to people with lower income groups. Thus, The other name of Village and Small-Scale Industries
the wealth gets redistributed and reduction in Committee set-up in 1955 is ______.
inequalities is achieved. (a) Narasimham committee
o
(b) Hussain committee
(i) To curb the inflationary tendency, the government
can prepare a surplus budget. A surplus budget (c) Lakdawala committee
is one in which estimated receipts exceed the (d) Karve committee
estimated expenses. Such a budget reduces the Ans :
money supply in the economy. With a fall in the
money supply, the purchasing power of people (c) 17
also fall, leading to a fall in the level of aggregate o
demand. As aggregate demand falls, the price (d) Karve committee
level or the rate of inflation also falls.
(ii) Public goods are goods that people urgently
need for their day-to-day living, such as parks,
roads, electricity and water supply, bridges etc.
The private sector cannot produce these goods
in sufficient quantities. Even if they are able to
produce them in sufficient quantities, they will
charge high prices for them and they will be
outside the reach of common man. 20. The main aim of ‘Great Leap Forward’ (GLF) in
Also, these goods are non-rivalrous and non- China was to ensure rapid increase of _______.
excludable in consumption. Therefore, these (a) services
goods-need to be provided by the government.
(b) exports
(c) agriculture
Section B -Indian Economic Development (d) industries
o
Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10 Introduction of Economic Reforms in China took
place in the year _______.
(a) 1988
18. The chief casual factor responsible for the decline of
(b) 1991
handicrafts industry in India was
(a) high tariff on export of raw materials from India (c) 1978
(b) high tariff on import of British goods into India (d) 1980
(c) heavy duties on Indian handicrafts products Ans :
(d) All of the above (d) industries
o 23. Statement I Self Help Groups (SHGs) have emerged

(c) 1978 to fill the gap in formed credit system.
Statement II Formal credit system in India, is not only
21. When extraction is above the rate of regeneration of inadequate but also not fully integrated with rural
the resource and the wastage are outside the absorptive social community development.
capacity of the environment, then environment fails In the light of the given statements, choose the correct
to perform its one of the vital function. What is that alternative from the following
function? (a) Both statements are false
(a) It sustains life (b) Both statements are true
(b) It provides aesthetic services (c) Statement I is true and Statement II is false
(c) It supplies resources (d) Statement I is false and Statement II is true
(d) It assimilates waste Ans :
Ans : (b) Both statements are true
(a) The environment is able to perform its functions
as long as the demand on these functions is within 24. Statement I Proportion of people below poverty line
its carrying capacity. When demand crosses is more in India with respect to Pakistan.
environment’s carrying capacity then environment Statement II Maternal Mortality Rate (MMR) is high
fails to perform its vital function of life sustenance in Pakistan with respect to China.
and this results in an environmental crisis. In the light of the given statements, choose the correct
22. State the correct combination between the following (a) Both statements are true
columns (b) Both statements are false
Column A Column B
A. 1850 (i) Establishment of
TISCO Ans :
B. 1921 (ii) Introduction of (c) Pakistan In 2011, 24.3% people were below
railways by the British poverty line in pakistan, while the ratio was 21.9%
C. 1907 (iii) First railway bridge in India.
linking Bombay with Pakistan In 2017-19 MMR in China was 29 (per one
Thane lakh births) while it was 140 (per one lakh births) in
D. 1854 (iv) The year of Great Pakistan.
Divide
A B C D 25. ______ includes quantitative aspects of per capita,
(a) (i) (ii) (iii) (iv) GDP and the quality aspects of performance in health
and education.
(b) (iii) (iv) (i) (ii)
(a) GDI (b) HDI
(c) (ii) (iv) (i) (iii)
(c) HD (d) None of these
(d) (iv) (ii) (i) (iii)
o
Ans : _______is a geographical region that has economic
(c) (ii) (iv) (i) (iii) laws different from a country’s typical economic laws.
(a) SEZ (b) GLF
(c) NEP (d) None of these
Ans :
(b) HDI
o
(a) SEZ
26. Assertion : Modernisation implies adoption of new Suggest for two measures for reducing this kind of
technology along with a change in the social and unemployment?
economic outlook.
Reason : Over the years, there have been a reduction
in the gender wage parity and in the female labour
force participation rate.
Ans : Ans :
(b) The gender-wage gap has reduced but there has The given figure reflects sugarcane industry which is
been a substantial increase in the female labour force often characterised by seasonal unemployment.
participation rate. Seasonal unemployment refers to the form of
unemployment in which a worker is employed only
during a particular season and then is laid off.
It occurs in case of agriculture, ice-cream factories,
woollens factories, etc., which have a seasonal
demand.
They have busy seasons and slack seasons. In the
off-season, there is no work and the result is seasonal
unemployment.
Following measures may be suggested to reduce
seasonal unemployment (any two)
(i) Promotion of multiple cropping, i.e. raising
more than one crop on the same piece of land in
a year by use of irrigation, facilities fertilisers,
27. Assertion : In 1970s, there was low population growth
mechanisation, etc.
in China.
(ii) Development of activities allied to agriculture
Reason : China introduced the one-child norm in late
such as animal husbandry, dairy farming,
1970s.
horticulture, etc., to provide extra employment
throughout the year.
(b) Assertion is false, but Reason is true (iii) Public investment in rural areas in such fields
(c) Both Assertion and Reason are true and Reason as irrigation, drainage, flood control, land and
is the correct explanation of Assertion. environment, improvement of rural roads,
(d) Both Assertion and Reason are true, but Reason is schools, hospitals, etc.
not the correct explanation of Assertion. (iv) Development of industries in rural areas.
Ans :
29. Defend of refute the statement with valid explanation.
“It is necessary to replace the private moneylenders
by institutional sources of credit.”
o
Short Answer Questions (Q28 to Q29) 3´2=6 According to the National Sample Survey Office’s
(NSSO’s) data, the share of regular salaried workers
in employment was on the rise in 2017-18 with respect
28. On the basis of the figure given below, explain what to 2011-12. For the year 2017-18, the proportion of
type of unemployment can this industry result in? regular salaried workers rose to 13.1% in 2017-18 for
rural areas, and 47% for urban areas. State any three Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12
reasons for this observed trend across rural-urban
areas? 30. (i) Define worker-population ratio.
Ans : (ii) Analyse the trends in sectoral distribution of
I defend the given statement. It has been considered work force in India on the basis of data
necessary to replace the private moneylenders by Trends in Employment Pattern (Sector-wise),
institutional sources of credit because (any three) 1972-2012 (in%)
(i) The supply of credit was irregular and depended Sector 1 9 7 2 - 1983 1993-94 1999- 2 0 1 1 -
largely on personal relations between the 73 2000 2012
borrower and the lender. Primary 74.3 68.6 64 60.4 48.9
(ii) The moneylenders often took advantage of the Secondary 10.9 11.5 16 15.8 24.3
ignorance and helplessness of the cultivator to
Services 14.8 16.9 20 23.8 26.8
exploit him.
Total 100.0 100.0 100.0 100.0 100.0
(iii) Since, the borrower was generally illiterate, the
moneylender often resorted to downright cheating Ans :
such as failure to record the repayments in full.
(iv) The landless tenants and farm workers, who had (i) Worker population ratio is defined as the ratio
no land to offer as security, found it difficult to between the total number of workers in a country
borrow. The loans were available on very difficult and the population in the country, multiplied by
terms, and the borrowers were often burdened 100. Symbolically,
with permanent debt. Worker Population Ratio
o Total Number of Worker s #
Total Population 100
The given data shows that the regular salaried
employees are more in urban areas than in rural areas. (ii) On the basis of the given table, we can conclude
This is due to the following reasons that the share of primary sector in employment
(i) Education and Training Regular salaried has been decreasing while that of the tertiary
employment requires certain educational sector and secondary sector is increasing.
qualifications and professional skills. Education However, it should be kept in mind that primary
and training facilities are not as good in rural sector continues to be the biggest provider of
areas as in urban areas. Therefore, chances of employment.
regular employment are higher for urban people.
(ii) Infrastructure Large companies including 31. State whether the following statements are true or
MNCs are concentrated in the urban areas due false, with valid arguments
to the presence of economic infrastructure and (i) The percentage share of agricultural sector in
availability of modern facilities like banks, the exports of the country declined in the period
transport, communication, etc. 1950-1990.
(iii) Agriculture Rural population is primarily (ii) The Gulf crisis and the collapse of Soviet Block
engaged in agricultural sector and is not willing was responsible, to a certain extent for the
to take the risk of leaving their farms for regular economic crisis of 1991.
salaried employment. This is also a reason for
Ans :
regular salaried employment to be less prevalent
in rural areas. (i) The given statement is true. The share of
agricultural sector has fallen because of the
reasons enumerated below
(a) During this period, there was substantial
growth in Indian industrial sector. With
growth in industrial sector, the domestic
demand of agricultural products increased
as they were being used as raw material in
the factories.
(b) During this period, there was a tremendous by allowing tariff free exports of raw material
increase in the population of the country. As from India (to provide for the requirements of
population grew, the domestic demand for their industries in Britain) and tariff free import
agricultural products also grew. of British industrial products (to promote British
(ii) The given statement is true. The Gulf crisis goods in India), but placed a heavy duty on
and the collapse of Soviet Block was definitely the export of handicraft products. So, Indian
responsible, to a certain extent, for the economic handicraft products started loosing their domestic
crisis of 1991, as is explained below as well as foreign markets.
Gulf Crisis US declared war with Iraq in early (ii) Competition from Machine-made Products
1991 because of Saddam Hussein’s attempt to Machine-made products from Britain were cheap
take over Kuwait. Iraq and Kuwait were our big and better in quality than the handicraft products.
suppliers of oil. With an ongoing war, ships found This competition forced many handicrafters to
it hard to reach the Persian Gulf. Also, many oil shut down their business.
wells were burnt. This led to rise in oil prices (iii) Introduction of Railways in India The Britishers
(doubling in a few months). introduced railways in India to expand the
Collapse of Soviet Block Since 1960, Soviet market of its low priced industrial products.
Union was our biggest export destination. By Consequently, the demand of high-priced
1991, it split into 15 nations (Russia, Ukraine, handicraft products started to fall, thus leading to
etc). This significantly affected our exports. With the downfall of handicraft industry.
import bill rising (Gulf crisis) and exports falling o
(collapse of Soviet Union), our foreign exchange (i) An economy is framework within which activities
position got worsened. of production, consumption, investment and
distribution are carried on by households and
firms.
(ii) Economies are classified into three types in an
economic system. These are as follows
(a) Capitalist Economy It depends upon the
market forces of demand and supply. In this
type of economy, the private sector is given
full freedom to operate and government
intervention is nil.
(b) Socialist Economy It is an economic system
in which major economic decisions are
taken by the government.
(c) Mixed Economy It is an economic system in
32. The traditional handicrafts industries were ruined which major economic decisions are taken
under the British rule. Do you agree with this view? by the Central Government authority as well
Give reasons in support of your answer. as are left to free play of the market forces.
o
(i) What do you understand by the term economy?
(ii) How are economies classified in the economic Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12
system?
Ans : 33. (i) Unemployment in India is considered to be a
The traditional handicraft industry in India enjoyed chronic problem. Why?
worldwide reputation but the British misrule in (ii) What is meant by ‘jobless growth’?
India led to the decline of Indian handicraft industry. (iii) Why have Self Help Groups (SHGs) been
The Britishers adopted the following policies to established?
systematically destroy the handicraft industry o
(i) Discriminatory Tariff Policy of the State The (i) Enlist some problems faced by farmers during the
Britishers followed a discriminatory tariff policy initial years of organic farming.
(ii)
“Human capital formation gives birth to human capital to economic growth. But we can
innovation, invention and technological see that human capital formation is related to
improvements”. Do you agree with the given economic growth in the following manner (any
statement? Support your answer with valid three).
arguments. (a) Higher Productivity of Physical Capital
Ans : Human capital increases productivity of
physical capital as specialised and skilled
(i) Unemployment in India is considered to be a workers can handle machines or techniques
chronic problem because it has been a long term better than the unskilled workers. This
phenomenon. India is facing this problem ever increased productivity and . production
since independence and has not yet been able leads to economic growth.
to solve this-problem. The absolute number of (b) Innovatives Skills Human capital facilitates
unemployed is increasing year by year. India has innovation of new methods and techniques
not been able to generate enough jobs due to lack of production and this increases the rate of
of capital and low rate of growth in the industrial economic growth in the form of increase in
sector. GDP.
(ii) It is a phenomenon which means that the Gross (c) Higher Rate of Participation and Equality
Domestic Product (GDP) of a country is rising but Human capital formation leads to a
without a corresponding increase in employment higher employment rate. With increase in
opportunities. employment, the productivity rises. Also,
This occurs when we rely more and more on increase in employment opportunities
labour – saving western technology. Such a increases the level of income and this helps
technology (using more of capital and less of in reducing inequalities of wealth.
labour) does not suit the needs and means of a (d) Brings Positive Outlook The process of
country where unemployment is an alarming human capital formation brings a positive
social challenge. There is an inherent need to outlook to the society which is different from
boost manufacturing to create jobs on a massive orthodox and traditional ways of thinking,
scale and take advantage of the global factors that hence it increases the rate of participation in
are moving in the country’s favour. the workforce leading to an increase in the
(iii) Self Help Groups (SHGs) have been set up to fill level of production and GDP.
the gap in the formal rural credit system which
has proved to be inadequate and has not been fully
integrated into the rural, social and community
development.
o
(i) The problems faced by farmers during the initial
years of organic farming are (any three)
(a) Organic farming requires inputs like
organic manure, bio-fertilisers and organic
pesticides. Though they are cheaper yet
farmers find it difficult to get them.
(b) The yield from organic farming is much less
than that of modern agricultural farming.
(c) The price of organic food is high, so it is 34. Read the following text carefully and answer the
difficult to sell them. given questions on the basis of the same and common
(d) Organic products generally have more understanding.
blemishes and shorter shelf life. The 20th century included the inception of modern
(ii) Yes, I agree with the given statement. Human family planning, which restricted the fertility of
capital is believed to be positively related to hundreds of millions of couples around the world.
economic growth though, it is difficult to establish Due to concerns about the world’s unprecedented
a relation of cause and effect from the growth of rate of population growth in the mid-20th century,
some aid agencies and international organisations passed by the National People’s Council. The Eighth
began to support the establishment of family planning Five Year Plan explicitly set a goal of reducing the
programs. natural growth rate of the country’s population to less
About 40 years later, in the mid-1990s, large- than 1.25% on average during the following decade.
scale family planning programs were active in 115 To achieve such a challenging objective, national
countries. leaders employed a “responsibility system” to induce
China’s One Child Policy (OCP) is the largest subnational or provincial officials to set high fine
among the World’s family planning programs. In the rates.
1970s, after two decades of explicitly encouraging (i) Enumerate the effects of the policy of one child
population growth, policy-makers in China began norm in China.
enacting a series of measures to curb it. The OCP (ii) Comment on the growth rate trends witnessed in
was formally initiated in 1979 and firmly established China and India in the last two decades.
across the country in 1980. Ans :
It was the first time that family planning policy
became formal law in China. Differing from birth (i) The important implications of the one child norm
control policies in many other countries, the OCP are (any three)
assigned a compulsory general ‘one-birth’ quota to (a) Low population growth.
each couple, though its implementation has varied (b) Decline in the sex ratio.
considerably across regions for different ethnicities (c) After a few decades, there will be more
at different times. The policy affected millions of elderly people in proportion to young
couples and lasted more than 30 years. people.
According to the World Bank, the fertility rate in (d) In the long-run, China will have to provide
China dropped from 2.81 in 1979 to 1.51 in 2000. more social security measures with fewer
The reduced fertility rate is likely to have affected workers.
the Chinese labour market profoundly. In 1979, the (e) It helped China in better management of
Chinese government formally initiated the OCP human capital.
to alleviate social, economic, and environmental (ii) China has the second largest GDP (PPP) of $
problems such as the high unemployment rate and 22.5 trillion, whereas India’s GDP (PPP) is $ 9.03
scarcity of land resources. trillion.
As opposed to many family planning policies in When many developed countries were finding it
other countries, the OCP was compulsory rather than difficult to maintain a growth rate of even 5%,
voluntary. As the name suggests, the policy restricted China was able to maintain near double-digit
a couple to having only one child. However, there growth for more than two decades. Its growth rate
were some exemptions. in 1980-90 was 10.3% and for 2005-2013, it was
The birth quota varied according to residence (urban/ 10.2%.
rural) and ethnicity (Han/non-Han). In the 1980-90, China was having double-digit
Since Han ethnicity is by far the largest in China, growth and India was stuck at 5.7% decadal
accounting for 93% of the population, the policy growth rate.
mainly restricted the fertility of people with Han This rate showed improvement in 2005-2013 at
ethnicity. In general, Han households in urban 7.6%, but still it was far behind China’s growth
regions were only allowed to have one child, while rate.
most households in rural areas could have a second As far as sectorwise contribution to growth is
child if their first was female (this exception is called concerned, in 2019, contribution of agriculture to
the “one-and-a-half-child policy”). Meanwhile, in GDP in China was 7% while in India it was 16%.
most regions, households of non-Han ethnicity were On the other hand, manufacturing contributes the
allowed to have two or three children, regardless of highest to GDP in China at 41%, whereas in India
gender. service sector contributes the highest at around
In March 1991, to show resoluteness, the Central 54%. Thus, China’s growth is mainly contributed
Government listed family planning among the three by the manufacturing sector and India’s growth
basic state policies in China’s Eighth Five Year Plan by service sector.
In the last two decades, the growth of agriculture
sector has declined in both the countries. In the

industrial sector, China has maintained a double-
digit growth rate, whereas for India industrial
growth rate has declined.
In the case of service sector, China has been
able to raise its rate of growth in 2005-13, while
service sector growth in India has stagnated.
******

ECONOMICS (030)

(d) Credit creation by commercial bank depends upon
the initial deposits and LRR. LRR consists of SLR
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 and CRR.
1. Which of the following gives a correct definition of 3. Choose the correct statement from given below.
the term ‘near money’? (a) Accommodating items are only recorded in
(a) Asset which has no store of value function. capital account of BoP.
(b) Asset which is a medium of exchange. (b) Import of machinery will be recorded in capital
(c) Asset which has 100% liquidity. account of BoP.
(d) Asset which fulfils the store of value function and (c) Balance of trade records the exports and imports
can be converted into a medium of exchange at a of invisible items.
short notice. (d) A surplus in BoT can rectify the deficit in BoP.
Ans : Ans :
(d) Asset which fulfils the store of value function and (a) Accommodating items are only recorded in capital
can be converted into a medium of exchange at a account of BoP.
short notice.
4. Statement I : According to the theory of Keynesian

Economics, the value of the Average Propensity to
Consume (APC) can never be zero.
Statement II : The Keynesian Aggregate Supply is
perfectly elastic before the level of full employment
is attained.
2. Credit creation by commercial banks is determined alternative from the following
by _________ . (a) Both statements are false
(a) Statutory Liquidity Ratio (SLR) (b) Both statements are true
(b) Initial deposits (c) Statement I is true and Statement II is false
(c) Cash Reserve Ratio (CRR) (d) Statement I is false and Statement II is true
(d) All of these Ans :
5. Statement I : Borrowing from the Asian Development (c) Injections

Bank by the government is an accommodating (d) None of the above
transaction.
Statement II : Buying machinery from Japan is an Ans :
accommodating transaction. (c) Expected obsolescence is the normal wear and
In the light of the given statements, choose the correct tear in fixed assets, hence included in depreciation.
alternative from the following During periods of recession, market value of assets
(a) Both statements are true decline normally, whereas when market booms,
(b) Both statements are false market value increases. Thus, it cannot be considered
(c) Statement I is true and Statement II is false as depreciating.
o
(a) Leakages
Ans :
(c) Buying machinery from Japan is an autonomous
transaction. Autonomous transactions are those which 7. In an economy, the saving and investment functions
are undertaken for profit making. are given as
S = – 100 + 0.2y
6. Statement I : Expected obsolescence is included in
depreciation. I = – 30 + 0.1y
Statement II : Fall in the market value of assets during The equilibrium level of income will be______.
the period of economic downturn is an example of (a) 600
depreciation. (b) 700
In the light of the given statements, choose the correct (c) 1,000
alternative from the following (d) 900
(a) Both statements are true o
(b) Both statements are false Which of the following is correct?
(c) Statement I is true and Statement II is false (a) APC + APS = 1
(d) Statement I is false and Statement II is true (b) APC = C/Y
o (c) MPC = 1 – MPS
Analyse the following chart carefully and answer the (d) All of these
given question
Ans :
(b) S = I
– 100 + 0.2y = – 30 + 0.1y
0.2y – 0.1y = – 30 + 100
0.1y = 70
y =700
o
(d) All of these
8. In a government budget, if ‘revenue receipts are `

100, capital receipts are ` 50 and revenue deficit is `
25, how much is the revenue expenditure?
When money moves out of the circular flow of (a) ` 50 (b) ` 75
income, it is known as________ (c) ` 100 (d) ` 125
(a) Leakages o
(b) Dividends Study the given information carefully
Union Budget of India at a glance (in 2014-15 (c) Both Assertion and Reason are true and Reason
` crore) is the correct explanation of Assertion.
(i) Tax Revenue (net to centre) 9,86,417 (d) Both Assertion and Reason are true, but Reason is
(ii) Non-Tax Revenue 1,80,714
(iii) Capital Receipts 5,96,083 Ans :
(iv) Recoveries of Loans 10,527 (c) Both Assertion and Reason are true and Reason
(v) Other Receipts 56,925
(vi) Borrowing and Other 5,28,631
Liabilities 10. Assertion : Full employment implies there is zero
(vii) Non-plan Expenditure on 11,07,781 unemployment in the economy.
Revenue Account Reason : There are certain people in the economy
who are both voluntary as well as involuntary
(viii) Of which, Interest Payment 4,27,011
unemployed and there also exist certain level of
(ix) Non-Plan Expenditure on 1,00,111 natural unemployment in an economy.
Capital Account (a) Assertion is true, but Reason is false
(x) Plan Expenditure on Revenue 4,42,273 (b) Assertion is false, but Reason is true
Account
(xi) Plan Expenditure on Capital 1,13,049 is the correct explanation of Assertion.
Account
(xii) National GDP 1,28,39,952 not the correct explanation of Assertion.
(xiii) Plan Expenditure of GDP A
Ratio Ans :
The value of ‘A’ is equal to______ (a) Assertion is true, but Reason is false
(a) 3.44% (b) 4.32% Full employment does not imply zero unemployment
(c) 0.88% (d) None of these since there always exists some natural level of
unemployment in the economy.
Ans :
(d) Revenue Deficit = Revenue Expenditure Short Answer Questions (Q11 to Q12) 3´2=6
– Revenue Receipts
25 = Revenue Expenditure – 100 11. Calculate Net National Product at Market Price from
Revenue Expenditure = 25 + 100 = ` 125 the following data
o Items ` (in crores)
(b) The variable ‘A’ is taken to represent plan
Net factor income from abroad (–) 5
expenditure as a percentage of GDP.
4, 42, 273 + 1, 13, 049 Private final consumption expenditure 100
A
=
1, 28, 39, 952 # 100 Personal tax 20
= 4.32% Gross national disposable income 170
Government final consumption 20
9. Assertion : There is an inverse relationship between expenditure
the value of investment multiplier and marginal Corporation tax 15
propensity to consume. Gross domestic capital formation 30
Reason : Saving is a leakage in the circular flow of
Personal disposable income 70
income. Greater the savings, greater the leakage and
lower the value of investment multiplier. Net exports (–) 10
(a) Assertion is true, but Reason is false Savings of private corporate sector 5
(b) Assertion is false, but Reason is true Net national disposable income 145
Ans : the market forces of demand and supply. However,

Here, excessive fluctuation is checked by the Central Bank.
Managed floating is also known as dirty floating,
NNPMP
= Private Final Consumption if a country manipulates the exchange rate by not
Expenditure + Government Final Consumption following rules and regulations.
Expenditure + Gross Domestic Capital Formation +
Net Export – Depreciation + NFIA Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12
= 100 + 20 + 30 + (– 10) – 25 + (– 5) = ` 110 crore
Depreciation = Gross National Disposable Income – 13. In an economy, if initial investments are increased
Net National Disposable Income by ` 100 crores, discuss the working of investment
= 170 – 145 = ` 25 crore multiplier presuming marginal propensity to consume
is 0.8.
Ans :
12. India’s balance of payments is in disequilibrium.
Enumerate some of the factors, which according to Investment multiplier is the ratio between change in
you, can be the causes of disequilibrium. income and the corresponding change in investment.
o There is a direct or positive relationship between
What is meant by managed floating? Marginal Propensity to Consume (MPC) and
Multiplier (K). Higher the MPC, higher will be the
Ans : value of multiplier and vice-versa.
India’s. Balance of Payments (BoP) is in
Working of Investment Multiplier
disequilibrium as payments on account of foreign
transactions exceed the receipts on account of foreign Rounds Initial Consumption Savings
transactions. Investment Expenditure
Some of the causes of disequilibrium are enumerated I 100 80 20
below (any two) II 80 64 16
(i) Inflation Changes in price and cost structure of III 64 12.8 5.2
a country’s export industries affect the volume
500 400 100
of export and the balance of payments position.
Increase in price due to higher wages and higher As shown in the table, there is additional investment
prices of raw material makes export costlier and of ` 100 crores and 80% of which is spent on
results in deficit in balance of payments. consumption i.e. ` 80 crores and ` 20 crores is saved.
(ii) Expenditure on Developing Relations Newly ` 80 crores is reinvested of which 80% is consumed
independent countries, in order to develop and if goes on like this.
relations with other countries, have to spend huge Marginal propensity to consume is 0.8
amount of money on ambassadors, missions, etc. Change in investment = ` 100 crores
This has adverse relation on balance of payments. 1
K = 1 − MPC = 1
;
(iii)
Import Services Underdeveloped countries, 1 − 0.8
1
import capital and other services from developed = =
0.2 5
countries results in deficit in BoP. Change in investment = ∆I = ` 100 crores
(iv) Demonstration Effect People of underdeveloped Investment multiplier = K = 5
countries imitate the consumption pattern of Change in income
the people of developed countries leading to an
∆Y = K # ∆I
increase in the level of imports. This increase
results in a deficit balance in the BoP account. = 5 # 100 =` 500 crores
o
Managed floating is a mixture of a flexible exchange 14. The given excerpt has been taken from the article
rate system (the float part) and a fixed exchange rate “Can barter system work in today’s India?” published
system (the managed part), wherein exchange rate is
determined in the foreign exchange market freely by
by The Times of India on 15th January, 2022. Ans :

“When COVID-19 hit in early 2020, it affected every It is an example of government expenditure,
aspect of people’s lives. Communities had to look the principle component of fiscal policy. Such
for alternative modes of survival. One approach that expenditure of government on construction of roads,
some of them took was a return to the barter system education, defence of the country are made by the
– a solution they were familiar with. People bartered government to correct the situation of excess demand
perishable goods such as vegetables, kirana stores in or deficient demand in the economy. When there is
villages provided essentials in exchange for wheat, excess demand, government expenditure is reduced
and food grains became a currency to pay children’s and when there is a deficient demand, government
tuition fees”. expenditure is increased. It is a flagship programme
In light of the given excerpt, define what you mean by the government of India. This project is an
by barter system and explain three of its limitations. investment in rural infrastructure which will unlock
Ans : the growth potential of rural India.
Before evolution of money, commodities were o
exchanged for commodities. This system of exchange Fiscal deficit is equal to the excess of all expenditures
was known as C–C economy or barter system. (capital and revenue) over the sum of revenue and
The major limitations of the C–C economy are given capital receipts, excluding borrowings. There can be
below a fiscal deficit without the revenue deficit. It can be
(i) Lack of Double Coincidence of Wants It is the explained as follows
major drawback of the barter system. It is very (i) When revenue receipts are equal to revenue
rare, when the owner of some good or service expenditure i.e., balanced revenue budget but
could find someone who wanted his goods or capital expenditure is more than capital receipts.
services and also possessed the same goods or (ii) When revenue receipts are greater than revenue
services that the first person wanted. No exchange expenditures i.e., surplus revenue budget but
was possible in the absence of double coincidence capital expenditure is more than capital receipts
of wants. and the deficit in the capital budget is more than
(ii) Lack of Common Measure of Value In barter the surplus in revenue budget.
system, there was absence of a common unit of
measurement in which the value of goods and Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12
services could be measured.
In the absence of a common unit, proper valuation
was not possible. 16. (i) Explain the circular flow of income.
(iii)
Lack of Standard for Deferred Payments (ii) Distinguish between Real Gross Domestic
Deferred payments means future payments. In Product and Nominal Gross Domestic Product.
barter system of exchange, it was very difficult to Ans :
make deferred payments in the form of goods as (i) Circular flow of income refers to the continuous
the quality of goods was subject to change. circulation of production, income generation and
expenditure involving different sectors of the
economy.
Phases of Circular Flow of Income
15. ‘Mission Develop India’ is the plan of government There are three different phases (generation,
to create basic infrastructure. It comprises of projects distribution and disposition) in circular flow of
on irrigation, roads, housing, water supply and income, as shown in the given diagram
telecommunication connectivity. (a) Production Phase In this phase, firms
Above stated example is a government expenditure produce goods and services with the help of
or government revenue. Elaborate it. Also, state the factor services.
impact of this programme on rural growth. (b) Income Phase This phase involves the flow
o of factor income (rent, wages, interest and
Can a fiscal deficit occur without a revenue deficit? profits) from firms to the households.
(c) Expenditure Phase In this phase, the income 17. (i) The figure given explains the working of a
received by factors of production, is spent ‘reverse repo rate’ in context of a given economy.
on the goods and services produced by In simple terms, explain how reverse repo
firms. rate helps in correcting the situation of ‘excess
demand’?
Income is first generated in production units,

then distributed to households and finally spent
on goods and services produced by these units to
make the circular flow complete its course. (ii) What are the elements important in the
(ii) Difference between Real GDP and Nominal GDP determination of investment?
(any three) o
(i) Explain the concept of deflationary gap and the
Basis Real GDP Nominal GDP role of ‘open market operations’ in reducing this
Price It is the value ofIt is the value of gap.
current output at current output (ii) Using a well-labelled diagram, show how saving
base year prices. at current year curve can be derived from consumption curve.
prices.
Ans :
Other name It is also known It is also known as
as GDP at GDP (i) Excess demand refers to the situation when
constant price. aggregate demand is in excess of aggregate
supply corresponding to full employment.
Rise It can increase It can rise either
Reverse repo rate is the rate of interest at which
only when when output
commercial banks can park their surplus funds
output of goods of goods and
with the central bank, for short period of time.
and services rise services rise or
To correct the situation of excess demand, reverse
in the current when current
repo rate is increased. As a follow-up action, the
year. prices rise.
commercial banks will be encouraged to increase
Reliability It is a reliable It is not a reliable their deposits with the Central Bank. This, in
index of index of economic turn, will reduce their ability to lend money.
e c o n o m i c growth. Consequently, consumption expenditure and
growth. investment expenditure will be reduced, implying
a reduction in aggregate demand, as required to
correct excess demand.
(ii) Following are the three elements important in the
determination of investment
(a) Expected Returns or Revenue An
investment is undertaken on the basis of
expected demand or expected returns to the
producers.
(b) Costs It has three components viz. cost of
purchase of equipment, cost of maintenance
of equipment (depreciation) and cost of
funds borrowed for investment.

(c) Business Expectation Bullish expectations
attract more investment. Bearish
expectations cause low investment.
o
(i) Deflationay gap is the shortfall in aggregate
demand from the level required to maintain
full employment equilibrium in the economy. It
causes deficient demand in the economy. Owing
to deficient demand, planned level of output is
reduced. Along with reduction in the level of
output, level of income and employment also
tends to reduce. The economy is driven into a
state of low level equilibrium trap. Open market
operations is the policy that focuses on increasing
and decreasing the stock of liquidity (or cash
balances) with the people as well as with the
commercial banks, through sale and purchase
of securities by the central bank. During the
situation of deflationary gap, when cash balances
need to be increased (to stimulate the level of
aggregate demand), the central banks starts
buying securities. Purchase of securities injects
purchasing power into the money market. Cash
balances of the commercial banks start picking
up. This enhances their capacity to create credit.
Flow of credit increases, leading to increase in
AD and deflationary gap is corrected. Steps taken for derivation of saving curve are
(ii) (a) At zero level of income (Y), the autonomous
consumption is OC . If we take the vertical
distance between the consumption curve, CC
and income line at zero level of income, then
OS = − OC . Hence, the saving curve starts from
the point S on the negative Y-axis.
(b) The consumption curve intersects income line
at point B. B is the break-even point where
consumption is equal to income (C = Y). At this
point, saving will be zero as all the income is
consumed. Hence, the saving curve will intersect
the X-axis (at point E) at this income level.
(c) The consumption is less than income beyond point
E. It means the excess income after consumption
is saved and hence, the saving curve moves
toward positive direction above X-axis with the
increase in the level of income.
Section B -Indian Economic Development Ans :

(a) It means utilisation of nation’s resources across
Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10 different development activities in accordance with
the national objectives.
18. Which of the following provides a correct explanation o
of rural development? (a) Land ceiling is a land reform measure which sets a
(a) Social and legal upliftment of rural areas maximum limit on the ownership of land.
(b) Social and economic upliftment of rural areas
(c) Economic and legal upliftment of rural areas 21. Arrange the given events in chronological order and
(d) Social and technical upliftment of rural areas choose the correct alternative
(i) Great Proletarian Cultural Revolution
Ans : (ii) Great Leap Forward Campaign
(b) Rural development is an ‘Action plan’ for (iii) Introduction of Economic Reforms
improving the socio-economic status of people in (iv) First Five Year Plan
rural areas. (a) (ii), (iv), (i), (iii)
(b) (ii), (iv), (iii), (i)
19. The main objective of the zamindars during the land (c) (iv), (i), (ii), (iii)
settlement system was to (d) (iv), (ii), (i), (iii)
(a) collect rent with no interest in the economic o
condition of the cultivators ________ has followed the classical development
(b) cooperate with colonial government to improve pattern of gradual shift from agriculture to
the condition of agriculture manufacturing and then to service.
(c) improve the economic condition of the cultivators (a) India
(d) improve the crop yield by making significant (b) China
contributions in technology and fertilisers usage (c) Pakistan
Ans : (d) All of these
(d) improve the crop yield by making significant Ans :
contributions in technology and fertilisers usage (d) (iv), (ii), (i), (iii)
Zamindars did nothing to improve the condition o
of agriculture and focused on the collection of rent (b) China
which caused immense misery and social tension for
the cultivators.
22. Choose the correct pair
20. ______ means designing and shaping the socio- Column I Column II
economic processes in such a way so as to achieve
A. Voluntary (i) Worker is willing
an objective.
unemployment to work but is not
(a) Economic Planning
getting work
(b) Economic Growth
B. Involuntary (ii) Worker is not
(c) Economic Process unemployment willing to work at
(d) Economic Development existing wage rate
o C. Frictional (iii) A worker is not
_______ implies setting up an upper limit of the land unemployment getting work in a
that could be owned by a landowner. particular season
(a) Land Ceiling D. Disguised (iv) Marginal
(b) Land Quota unemployment productivity of a
(c) Land Restriction worker is zero
(d) Land Fragmentation Codes
(a) C-(iii) (b) D-(iv) o

(c) A-(i) (d) B-(ii) Mercury and Lead are toxic elements that
cause_______.
Ans : (a) water pollution
(b) D-(iv) (b) noise pollution
(c) land contamination
23. Statement I : Information Technology (IT) industry is (d) air pollution
a ‘high knowledge’ based industry that has developed
rapidly in India. Ans :
Statement II : Industry that is based on high (a) Carrying capacity
knowledge does not need any significant support o
from the government nor there is much scope for (c) land contamination
outside interference.
In the light of the given statements, choose the correct 26. Assertion : India, Pakistan and China have started
alternative from the following planning their developmental strategies in the same
(a) Both statements are true way.
(b) Both statements are false Reason : India, China and Pakistan have started
(c) Statement I is true and Statement II is false working on their developmental plans at the same
time.
Ans : (b) Assertion is false, but Reason is true
(c) Statement I is true and Statement II is false (c) Both Assertion and Reason are true and Reason
24. Statement I : Institutional credit availability is (d) Both Assertion and Reason are true, but Reason is
imperative for development of rural areas. not the correct explanation of Assertion.
Statement II : Reserve Bank of India is the apex Ans :
institution in rural banking to regulate the banking
system. (d) Both Assertion and Reason are true, but Reason is
Alternatives not the correct explanation of Assertion.
(a) Both the statements are correct China announced its first five year plan in 1953.
(b) Both the statements are incorrect India and Pakistan adopted similar strategies such
as creating a large public sector and raising public
(c) Statement I is correct and Statement II is incorrect
expenditure on social development. Till the 1980s all
(d) Statement II is correct and Statement I is incorrect the three countries have similar growth rate and per
Ans : capita income.
(c) National Bank for Agricultural and Rural
Development (NABARD) is set up as an apex body 27. Assertion : Government policies have failed to
to regulate and develop rural banking. address the vast majority of vulnerable people who
are living on orjust above the poverty line due to
unemployment.
Reason : High growth alone is not sufficient to reduce
unemployment. Without the active participation of the
25. The maximum number of individual that can be poor, successful implementation of any programme is
supported by a given environmentalist known not possible.
as_____. (a) Assertion is true, but Reason is false
(a) Carrying capacity (b) Assertion is false, but Reason is true
(b) Population size (c) Both Assertion and Reason are true and Reason
(c) Biotic potential is the correct explanation of Assertion.
(d) Environmental resistance (d) Both Assertion and Reason are true, but Reason is
not the correct explanation of Assertion. related to empowerment of women, employment

of workers is of central significance. Employment
Ans :
makes the women economically independent.
(d) Both Assertion and Reason are true, but Reason is This enhances their ability as decision-makers and
not the correct explanation of Assertion. they can always strive for gender equality. It is,
therefore, required that the participation of women
(as a workforce) is raised, particularly in secondary
Short Answer Questions (Q28 to Q29) 3´2=6 and tertiary sectors of the economy.
28. The figure given below provides a snapshot of

the report published by UN WOMEN and other
associates. It asks how the United Nations system,
and each individual entity, can better support Member
States to empower women and promote women’s
leadership in disaster and climate risk governance.
On the basis of your understanding, can you comment
on the relationship between ‘Empowering women, 29. Defend or refute the following statement with valid
means employing women’. explanation.
‘Chinese structural reform process have always been
appreciated for its success with no failures’.
o
Critically evaluate various strategies that have been
adopted by the Chinese government for its growth
and development.
Ans :
I refute the given statement. Following are the failure
of structural reforms in China
(i) There was slow pace of growth and lack of
modernisation in the Chinese economy under the
Maoist rule.
(ii) Maoist vision of economic development based on
decentralisation, self-sufficiency and shunning of
foreign technology had failed.
(iii) Despite extensive land reforms, collectivisation,
the great leap forward and other initiatives, the
per capita gain in output in 1978 was the same as
it was in the mid-1950s.
o
Certain development strategies of China are discussed
below (any three)
(i) Great Leap Forward (GLF) Campaign
This campaign, initiated in 1958, aimed at
industrialising the country on a massive scale.
Ans : People were encouraged to setup industries in
their backyards. In rural areas, communes were
It is since ages that the women have suffered gender- started. Under the commune system, people ‘
discrimination. Men have been getting priority in collectively cultivated land.
matters relating to education, health, inheritance, (ii) Great Proletarian Cultural Revolution (1966-
marriage and politician. Empowerment of women 76) In 1965, Mao Tse Tung started a cultural
aims at achieving gender equality. Of all the measures revolution on a large scale. In this revolution,
students and professionals were sent to work and (c) Landlords used loopholes in the legislation
learn from the countryside. to their comparative advantage to own large
(iii)
1978 Reforms Since 1978, China began to areas of land.
introduce many reforms in phases. The reforms (d) The goal of equity was not served fully
were initiated in agriculture, foreign trade and because of serious loopholes in the
investment sector. In agriculture, lands were legislation.
divided into small plots which were allocated to
individual households.
They were allowed to keep all income from the
land after paying taxes. In later phase, reforms
were initiated in industrial sector. All enterprises
which were owned and operated by local
collectives in particular, were allowed to produce
goods.
(iv) One-Child Norm The Chinese government 31. The following table shows distribution of workforce
introduced one-child norm to check its growing in India for the year 1972-73. Analyse it and give
population. Couples were allowed to have only reasons for the nature of workforce distribution.
one child. In case, they gave birth to second child,
Place of Residence Workforce (in millions)
social assistance was stopped.
Male Female Total
Rural 125 69 194
Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 Urban 32 7 39
30. State whether the following statements are true or Ans :

false, with valid arguments : From the given table, following points can be noticed
(i) There has been a decline in growth rate of about the nature of workforce distribution:
agricultural sector during the reform period. (i) Majority of the workforce was residing in the
(ii) There were several hurdles faced by the land rural areas in India in the year 1972-73. The total
reform and the land ceiling legislation during the workforce was 233 million out of which 194
pre-reform period. million workers were from rural areas and 39
Ans : million from the urban areas. Thus, 83% of the
total workforce was rural as compared to 17% of
(i) The given statement is true. The major reasons the urban workforce. The reason for this was that
explaining the decline in growth rate of a majority of population was living in rural areas
agricultural sector during the reform period are during that period.
(any two) (ii) The rural workforce comprises of 64% of the
(a) Decline in public investment in this sector. male workforce and 36% of female workforce.
(b) Removal of fertilizer subsidy increased On the other hand, the urban workforce comprises
the cost of production which significantly of about 82% of male workforce and 18% of
affected small farmers. female workforce. This shows that participation
(c) Reduction in export duties resulted Indian of males in both rural as well as urban areas is
farmers to face international competition. higher than that of the females because of lack
(ii) The given statement is true. The major hurdles of opportunities available to women for acquiring
faced include (any two) education and also the social structure and family
(a) Big landlords registered their land in the norms which did not encourage women to work.
name of close relatives, thus escaping from (iii) Another feature of workforce distribution is the
the land ceiling legislation. difference between urban female workforce and
(b) There have been cases in which tenants rural female workforce. Females in the rural
were evicted and landlords claimed to be the areas formed 36 % of the workforce, whereas, the
actual tillers. females in the urban areas formed only 18% of
the workforce. This may be attributed to the fact industrial growth is an aggregate outcome of the
that where men are able to earn high incomes, various economic reforms that were introduced
families discourage female members from taking in phases since 1978. In the initial phase, reforms
up jobs. Earnings of urban male workers are were initiated in agriculture, foreign trade and
generally higher than rural males and so the urban investment sectors. The system of collective
families do not want females to work. farming known as Commune System was
Thus, it can be concluded by analysing the above implemented. In the later phase, reforms were
table that majority of the workforce was from the initiated in the industrial sector. During this
rural areas and there was low female participation phase, the private firms and village and township
rate in the workforce during that period. enterprises were allowed to produce goods and
services and to compete with the State Owned
Enterprises. The reforms also included dual
pricing.
The dual pricing implies that the farmers and
the industrial units were required to buy and
sell a fixed quantity of inputs and output at the
price fixed by the government and the remaining
quantities were traded at the market price. As a
32. “India, China and Pakistan have many similarities in result, the quantities traded in the market increased
their development strategies.” Elaborate. by many folds. The reforms also included setting
o up of Special Economic Zones to attract foreign
(i) Define liberty indicators. investors. Therefore, China’s rapid industrial
(ii) ‘China’s rapid industrial growth can be traced growth is attributable to the success of different
back to its reforms in 1978.’ Support the given phases of its economic reforms.
statement with valid explanation.
Ans : Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12
India, China and Pakistan have many similarities in
development strategies which are as follows 33. (i) Differentiate between a worker, non-worker and
(i) All the three countries had started planning their an unemployed person.
development strategies in similar ways. India (ii) Give two examples of overuse of environmental
announced its Five Year Plan in 1951-56, while resources.
Pakistan announced its First Five Year Plan in (iii) Give any two points of differences between
1956, which is called Medium Term Plan. China physical and human capital.
announced its First Five Year Plan in 1953. o
(ii) India and Pakistan adopted similar strategies such (i) Read the given lines taken from the article on
as creating a large public sector and raising public ‘Sustainable human development means living in
expenditure on social development. harmony with nature’ published by International
(iii) Till the 1980s, all the three countries had similar Science Council on 17th July, 2020.
growth rates and per capita incomes. “We cannot be developed unless our lives
(iv) Economic reforms took place in all the three become reconnected and in balance, cooperation
countries. Reforms started in India in 1991, in and harmony with nature.” In light of the given
China in 1978 and in Pakistan in 1988. statement, explain how development has become
o a burden on the environment?
(i) ‘Liberty indicators’ are those indicators which (ii) “Micro credit has an important role to play in
represent the degree of civil and political freedom meeting the credit requirements of the poor”.
to individuals in a country. They should also be Defend or refute the statement with valid
considered alongwith indicators of income, explanation.
health and education in the human development
index. Ans :
(ii) Yes, it cannot be denied that China’s rapid (i) A person who is actually engaged in some
economic activity is a worker while a person 34. Read the following text carefully and answer the
who is neither looking for a work nor working given question on the basis of the same and common
is a non-worker. A person, who is looking for a understanding
suitable job as per his abilities but is not finding India agreed to the conditionalities of World Bank
one, is unemployed. and IMF and announced the New Economic Policy
(ii) Examples of overuse of environmental resources (NEP). The NEP consisted of wide ranging economic
are reforms. The thrust of the policies was towards
(a) Soil degradation due to improper crop creating a more competitive environment in the
rotation and crop shifting. economy and removing the barriers to entry and
(b) Drying up of rivers due to overuse of water growth of firms. This set of policies can broadly be
from them through dams and reservoirs. classified into two groups: the stabilisation measures
(iii) Following points highlight the difference between and the structural reform measures. Stabilisation
physical and human capital (any two) measures are short-term measures, intended to
(a) Human capital generates both personal and correct some of the weaknesses that have developed
societal benefits whereas physical capital in the balance of payments and to bring inflation
generates only personal benefit. under control. In simple words, this means that there
(b) Human capital is intangible whereas was a need to maintain sufficient foreign exchange
physical capital is tangible reserves and keep the rising prices under control. On
(c) Human capital can cope up with the changing the other hand, structural reform policies are long-
technology whereas physical capital cannot. term measures, aimed at improving the efficiency
o of the economy and increasing its international
(i) Following are the some important reasons competitiveness by removing the rigidities in various
responsible for the heavy burden on nature segments of the Indian economy. The government
(a) Rise in human. population in underdeveloped initiated a variety of policies which fall under
countries. three heads viz., liberalisation, privatisation and
(b) Affluent consumption style in developed globalisation.
countries. Another reform measure taken to simplify the tax
(c) Misuse of production technology in almost structure and avoid cascading of taxes has been taken
all the countries and poor planning of in the new millennial, in particular the Goods and
development. Services Tax (GST). The genesis of the introduction
(ii) Micro-credit plays an important role in meeting of GST in the country was laid down in the historic
the credit requirements of the poor. Under micro- Budget Speech of 28th February 2006, wherein the
credit programmes farmers gets adequate credit then
at cheaper rates. Finance Minister laid down 1st April, 2010 as the
Micro-credit programme promotes thrift in small date for the introduction of GST in the country.
proportions by a minimum contribution from Thereafter, there has been a constant endeavour
each member. for the introduction of the GST in the country
From the pooled money, credit is given to the whose culmination has been the introduction of the
needy members which is repayable in small Constitution (122nd Amendment) Bill in December,
installments at reasonable, interest rates. Micro- 2014.
credit programme abandons the need of any kind (i) Justify the following statement with valid
of collateral. It has helped in the empowerment explanation
of women. “Economic reforms have restricted the role of
Public Sector Units (PSUs) in the country.”
Discuss.
(ii) On the basis of your knowledge and understanding,
can you think of some reasons how GST is
beneficial from trade and industry’s perspective.
Ans :
(i) Economic reforms have definitely reduced the
role of public sector in the Indian economy.

Privatisation was the major component of
economic reforms programme.
Privatisation means a greater role for private
capital and enterprise.
The main objective of economic reforms is
to make use of privately owned resources for
collective welfare of the people.
It has restricted the areas of public sector to the
following areas :
(a) Essential manufactured goods.
(b) Exploration and exploitation of oil and
mineral resources.
(c) Strategic areas, i.e. defence equipments etc.
(ii) Following are the advantages to trade and industry
from the introduction of GST (any three)
(a) Increased ease of doing business;
(b) Reduction in multiplicity of taxes that are at
present governing our indirect tax system,
leading to simplification and uniformity;
(c) Elimination of double taxation on certain
sectors like works contract, software, and
hospitality sector;
(d) Helpful to mitigate cascading of taxes as
Input Tax Credit will be available across
goods and services at every stage of supply;
(e) Reduction in compliance costs as there
is need of multiple record keeping for a
variety of taxes. Thus, lesser investment
of resources and manpower in maintaining
records;
(f) More efficient neutralisation of taxes,
especially for exports thereby making
our products more competitive in the
international market and give boost to
Indian Exports.
******
Chap 1 Sample Papers 20 Solutions Page 7

ECONOMICS (030)
Section A -Macro Economics 3. In the COVID-19 times, many economists have raised
their concerns that Indian economy may have to face
a deflationary situation, due to reduced economic
Multiple Choice Questions (Q1 to Q10) 1 ´ 10=10 activities in the country. Suppose you are a member
of the high powered committee constituted by the
1. Retail banking is to provide banking services______ Reserve Bank of India (RBI). You have suggested
(a) entirely to agriculture sector only that as the supervisor of commercial banks,______of
the money supply be ensured, by the Reserve Bank of
(b) only to self-help group for their survival
India (RBI).
(c) only to individual customers in an integrated (a) release
manner
(b) restriction
(c) contraction
Ans : (d) None of these
(c) Only to individual customers in an integrated Ans :
manner
(b) restriction
Under deflationary gap, RBI increases money supply
2. Statement I : Intersectoral flows refer to the flow of
in order to stimulate AD.
goods and services as well as flow of money among
different sectors of the economy.
4. The money multiplier in an economy increases
Statement II : Intersectoral interdependences are
with_______.
satisfied through a system of mutual exchanges,
(a) increase in banking habits of the population
and mutual exchanges lead to intersectoral flows of
money as well as goods and services. (b) increase in the population of the country
In the light of the given statements, choose the correct (c) increase in cash reserve ratio
alternative from the following (d) increase in statutory liquidity ratio
(a) Both statements are false Ans :
(b) Both statements are true (a) Money multiplier in an economy increases with
(c) Statement I is true and Statement II is false the increase in the banking habits of the population.
(d) Statement I is false and Statement II is true It measures the amount of money that commercial
banks would create out of their deposits after keeping
Ans :
certain fractions as reserve. So, as the banking habits
(b) Both statements are true. of the people increase, the deposits will also increase
leading to an increase in the value of money multiplier.
Page 8 Sample Papers 20 Solutions Chap 1
5. Statement I : Autonomous transactions are (c) Interest rate

independent of the state of BoP account. (d) Open-market operations of the Central Bank
Statement II : Balance of payments is an accounting
statement that records monetary transactions between Ans :
residents of a nation and the rest of the world. (c) ` 25,500
In the light of the given statements, choose the correct Given S = – 100 + 0.2Y; I = 5,000
alternative from the following When economy is in equilibrium, then S = I
– 100 + 0.2Y = 5,000
0.2Y = 5,000 + 100
(d) Statement I is true and Statement II is false 0.2Y = 5,100
5, 100
Ans : Y = 0.2
Equilibrium level of income = ` 25,500
or
(b) It is not a tool of monetary policy as it does not
6. Suppose that the Balance of Trade (BoT) of a nation, affect the demand and supply of money.
exhibits a surplus of ` 20,000 crores.
The import of merchandise of the nation is half of the
exports of merchandise to the rest of the world.
The value of exports would be ` ______ crores.
(a) 24,000
(b) 35,000
(c) 30,000
(d) 40,000
8. If total expenditure is ` 2,000 and total receipts is `
Ans : 1,500, fiscal deficit will be equal to
(d) BoT = Value of Exports – Value of Imports (a) ` 1,400
According to question, import of goods are half (b) ` 600
of exports (c) ` 3,000
So, if exports = x, then imports = 12 x (d) Can t be determined
Now, BoT Surplus = 20,000 or
If primary deficit is ` 3,000 and interest payment is `
So, 20,000 = x - 12 x 500, the fiscal deficit is
1 (a) ` 4,100
2 x = 20,000 = ` 40,000 crores
(b) ` 4,200
7. S = – 100 + 0.2Y is the saving function in an economy. (c) ` 3,500
Investment expenditure is ` 5,000. Calculate the (d) ` 4,000
equilibrium level of income. Ans :
(a) ` 23,000 (d) Can t be determined
(b) ` 25,000 Total receipts are comprised of debt creating capital
(c) ` 25,500 receipt, which are excluded from fiscal deficit. Thus,
(d) ` 24,500 in this case fiscal deficit can’t be calculated.
or or
Which of the following is not a tool of monetary (c) Primary Deficit = Fiscal Deficit – Interest
policy?
Payment
(a) Cash reserve ratio
(b) Tax rate 3,000 = Fiscal Deficit – 500
Fiscal Deficit = 3,000 + 500 =` 3,500
9. Assertion : In absence of any legal hier of an Compensation of employees 800

individual, government distributes its financial assets.
Rent 250
Reason : Non-tax revenues of government budget is
categorised under capital component. Government final consumption 500
Alternatives expenditure
(a) Assertion is true, but Reason is false Consumption of fixed capital 60
(b) Assertion is false, but Reason is true Interest 150
(c) Both Assertion and Reason are true and Reason Net current transfers from rest of the (–) 80
is the correct explanation of Assertion. world
(d) Both Assertion and Reason are true, but Reason is Net factor income from abroad (–)10
not the correct explanation of Assertion. Net exports (–) 20
Ans : Net indirect taxes 80
(b) Assertion is false, but Reason is true Ans :
In absence of any legal hier, government forfiet its Expenditure Method
financial assets, while non -tax receipts comes under Gross Domestic Product at Market Price (GDPMP)
revenue budget. = Private Final Consumption Expenditure
+ Government Final Consumption Expenditure
10. Assertion : Capital of balance of payment is non + Gross Domestic Capital Formation + Net Exports
-recurring in nature. = 1,000 + 500 + (200 + 60) + (– 20)
Reason : Capital transfers affects the assets and = 1,000 + 500 + 260 – 20 = ` 1,740 crore
liabilities of a country. Gross National Product at Factor Cost (GNPFC)
Alternatives = GDPMP – Net Indirect Taxes + Net Factor Income
(a) Assertion is true, but Reason is false from Abroad (NFIA)
(b) Assertion is false, but Reason is true =1,740 – 80 + (– 10) =1,740 – 90
(c) Both Assertion and Reason are true and Reason = ` 1,650 crore
Ans : 12. Describe any three sources of demand for foreign
exchange.
(d) Both Assertion and Reason are true, but Reason is or
not the correct explanation of Assertion. What is Balance of Payments? Give meanings of
Capital account of BoP is comprised of items which trade balance and current account balance.
are not regular sources i.e., non-recurring in nature,
Ans :
though it impacts the assets and liabilities of the
country. The three sources of demand for foreign exchange are
described below
(i) Purchase of Foreign Goods by Domestic
Short Answer Questions (Q11 to Q12) 3´2=6 Residents To purchase of foreign goods domestic
residents need foreign exchange. So, this results
11. Calculate ‘Gross National Product at Factor Cost’ in demand for foreign exchange.
(GNP,c) from the following data by expenditure (ii) Re-payments of International Loans International
method loans have to be paid back in foreign exchange, so,
this also results in demand for foreign exchange.
Items (in crores) (iii) Tourism to Abroad When Indian tourists visit
Private final consumption expenditure 1,000 abroad, they need foreign exchange to meet their
Net domestic capital formation 200 expenses related to boarding and lodging. So,
Profits 400 they demand foreign exchange.
or 14. In the given figure, what does the gap ‘KT’ represent
Balance of Payments BoP of a country is a systematic ? State and discuss any two fiscal measures to correct
record of all the economic transactions between the the situation.
residents and non-residents of a country during an
accounting year.
Trade Balance The difference between export
and import of goods, i.e. only the visible items of
economic transactions is termed as Balance of Trade.
Balance of Trade = Export of Goods – Import of
Goods
Current Account Balance Current account is that
account of BoP, which records exports and imports
of visible and invisible items and unilateral transfers.
Short Answer Questions (Q13 to Q15) 4 ´ 3 = 12 Ans :

‘KT’ represents inflationary gap which means
13. Derive the formula, aggregate demand is more than aggregate supply
1 corresponding to full employment level. Two fiscal
K = MPS
measures to correct the situation of inflationary gap
Where K = Investment Multiplier
are
MPS = Marginal Propensity to Save (i) Revenue Policy To correct the situation of
Ans : inflationary gap, government raises the rate of all
taxes.
We know that,
This reduces the purchasing power by reducing
K= D Y
DI disposable income (i.e. after tax income) of the
Where, K = Investment Multiplier people which in turn will reduce the aggregate
demand in the economy.
DY = Change in Income (ii) Expenditure Policy To correct the situation of
DI = Change in Investment inflationary gap, government should reduce its
Also, DY = DC + DI public expenditure.
This reduces the purchasing power by reducing
[ DC = Change in Consumption] total income of the people which in turn will
DI = DY - DC reduce the aggregate demand in the economy.
Now, K = DYD-YDC [ a DI = DY - DC ]
Dividing the numerator and denominator by DY , we 15. Read the given excerpt taken from the article ‘What is
get ‘Money” published by The Economic Times on 20th
DY September 2022
K = DYDYDC “The money came into existence to overcome the
- drawbacks of the barter system. Earlier, people used to
DY DY
DC exchange goods and services as a form of commerce.
1
K = 1 - MPC :a DY = MPC D
This often led to many disadvantages, one of which
1 was the double coincidence of wants. To solve this
K = MPS
problem, a standard medium of exchange, money,
[ a MPC + MPS = 1 & 1 – MOC = MPS]
was introduced.”
1
Hence, K = MPS Explain in brief the function of money highlighted in
the given excerpt.
or Total Deposit = Initial Deposit # Money Multiplier

Define credit multiplier. What role does it play in
= 1, 500 # 1 = ` 10,000 crore
determining the credit creation power of the banking 0.15
system?’Use a numerical illustration to explain.
Ans :
‘Medium of exchange’ is one of the primary and most
important function of money.
Any commodity can be purchased or sold through the
medium of money. In other words, money becomes
the representative of general purchasing power. It
is the function of money which has made the work
of exchange easy because money has the merit of Long Answer Questions (Q16 to Q17) 6 ´ 2 = 12
general acceptability.
This function of money has solved the problem of 16. (i) “Management of a water polluting oil refinery says
‘double coincidence of wants’ created by the barter that the it (oil refinery) ensures welfare through
system of exchange. Under the barter system, it its contribution to Gross Domestic Product”.
was very rare when the owner of some goods or Defend or refute the argument of management
services could find someone who wanted his goods with respect to GDP as a welfare measure of the
or services and at the same time, he possessed that economy.
goods or services that the first person wanted. e.g. A (ii) Giving reason, explain the treatment assigned to
man wanting rice in exchange of wheat had to find a the following while estimating national income
man wanting wheat in exchange of rice. This made (a) Interest paid by banks on deposits by
the exchange of goods and services difficult. But the individuals
evolution of money has solved this problem. A person (b) National debt interest
can sell his wheat in the market for money and from
Ans :
that money he can purchase rice. So, the ‘medium of
exchange’ function of money has solved the problem (i) The above argument is refuted. GDP is not
of ‘double coincidence of wants’ related with the considered a good measure of welfare as it fails
barter system of exchange. to take into effect ‘externalities’.
or Externalities refer to the benefits or harms that a
Money multiplier or deposit multiplier measures the firm or an individual causes to another for which
amount of money that the banks are able to create they are not paid.
in the form of deposits with every unit of money, it e.g. river pollution created by an oil refinery has
keeps in reserves. It is calculated as disastrous effects on aquatic life.
1 It reduces the overall welfare of the society and
Money Multiplier = LRR
Where, LRR = Legal Reserve Ratio comprising of create negative externality.
Cash Reserve Ratio (CRR) and Statutory Liquidity (ii)
Ratio (SLR). (a) Interest paid by banks on deposits by
It should be remembered that higher the value of individuals should be included in estimation
LRR, lower is the value of money multiplier and less of National Income as it will be treated as
money is created by the banking system and vice- factor income.
versa. (b) National debt interest should not be
e.g. Calculate the value of money multiplier and also included in estimation of national income
find the total deposit created, if there is an initial as it is assumed that government borrows
deposit of ` 1,500 crore and LRR is 15%. for consumption and hence, it is treated as
transfer payment.
Solution LRR = 15% or 0.15
1 = 1 =
Money Multiplier = LRR 0.15 6.67
Initial deposit = ` 1,500 crore
17. (i) From the following data about a government them to invest.
budget, find out the following (c) The government might waive-off the excise
(a) Revenue deficit duty on goods manufactured by investors in
(b) Fiscal deficit these regions Excise duty is levied on goods
(c) Primary deficit manufactured or produced in India. Waiving
of the excise duty will ensure that the price
Contents ` (in Arab)
of the good is less and this will increase the
Tax revenue 47 demand for the good and ensure a ready
Capital receipts 34 market for the product. This will motivate
Non-tax revenue 10 the investors to invest in backward region.
Bornowings 32 or
(i) (a) Corporation Tax It is a direct tax as its
Revenue expenditures 80
impact and incidence is on the same person
Interest payments 20 (Company).
(ii) Explain the budgetary measures for achieving (b) Entertainment Tax It is an indirect tax as
the objective of setting up of production units in its impact and incidence are on different
backward regions. people.
or (c) Excise Duty It is an indirect tax as the
(i) Classify the following taxes into direct and burden of its payment can be shifted to
indirect tax. Give reasons for your answer. another person.
(a) Corporation tax (ii) Difference between primary deficit and revenue
(b) Entertainment tax deficit are
(c) Excise duty
Basis Primary Deficit Revenue Deficit
(ii) Distinguish between primary and revenue deficit?
Meaning Primary deficit Revenue deficit
Ans : is the difference is the difference
(i) (a) Revenue Deficit = Revenue Expenditure between between revenue
fiscal deficit expenditure and
– (Tax Revenue+ Non-tax Revenue) and interest revenue receipts.
= 80 – (47 + 10) = 80 – 57 = ` 23 Arab payments.
(b) Fiscal Deficit = Borrowings Implications Primary deficit Revenue deficit
Borrowings = ` 32 Arab indicates the shows the
borrowing inefficiency of
So, Fiscal Deficit = ` 32 Arab requirement of the government
(c) Primary Deficit = Fiscal Deficit – Interest the government. to meet
Payments = 32 – 20 = ` 12 Arab its current
(ii) The possible budgetary incentives that a expenditure.
government might decide to give to investors for Scope It has a narrow It has a wide
making investments in backward region are as scope. scope.
follows
(a) The government might give a tax-holiday
for a stipulated period for such investors
The reason behind this is that the incentive
of tax-holiday might motivate the investors
to invest in backward region.
(b) The government may offer subsidy on
loans for such investors The provision of
subsidy implies that the investors will not be
required to pay back a certain percentage of
the loan taken by them. This might induce
Section B -Indian Economic Development (c) Employment elasticity of growth

Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10 Ans :

(b) Self-employment
18. Which of the following factors are not considered or
while constructing the HDI Index? (b) Casualisation
(a) A good environment as measured by appropriate
environment policies 21. Which of the following measures does not come under
(b) A decent standard of living as measured by GDP the purview of an improved agricultural marketing
per capita system?
(c) Long and healthy life measured by life expectancy (a) Assurance of MSP, provision of food through
at birth PDS and maintenance of buffer stocks
(d) Knowledge as measured by the adult literacy rate (b) Regulation of markets to create an orderly and
transparent marketing system
Ans :
(c) Cooperative marketing, in realising fair prices for
(a) A good environment as measured by appropriate farmers’ products
environment policies (d) All of the above comes under the purview of an
improved agricultural marketing system
19. An adulterated element leak into the ground filtration, Ans :
and carried into a ground water reservoir is known
as_______ (d) All of the above comes under the purview of an
(a) Water pollution (b) Air pollution improved agricultural marketing system
(c) Land contamination (d) Noise pollution
or
After mining activity has been conducted, the huge
holes that are left behind, are used for______.
(a) waste storage
(b) waste disposal
(c) wastewater storage
(d) waste and water storage 22. Match the following
Ans : Column I Column II
(a) Water pollution A. Economic Development (i) Mao
or in China
(b) waste disposal B. India’s new (ii) China
Development Policy
20. _______ is the most preferred form of employment C. The Great Leap Forward (iii) 1978
among women in India. D. Commune (iv) 1991
(a) Technical employment Codes
(b) Self-employment A B C D
(c) Both (a) and (b) (a) (i) (ii) (iii) (iv)
(d) Wage employment (b) (ii) (i) (iv) (iii)
or (c) (iii) (iv) (i) (ii)
Increase in the proportion of casual workers as a (d) (iv) (ii) (i) (iii)
proportion of total workforce is known as______.
(a) Informalisation Ans :
(b) Casualisation (c) (iii) (iv) (i) (ii)
23. Statement I : There is a need for the owner of the Ans :

human capital to be present in the place of production. (c) Minimum Support Prices (MSP)
Statement II Human capital is intangible; it is or
endogenously built in the body and mind of its owner. (b) Credit taken to meet expenditure on agriculture
(a) Both statements are false 26. Assertion (A) Railways brought a significant change
in the structure of the Indian economy.
Reason (R) It enabled people to break geographical
(c) Statement I is true and Statement II is false and cultural barriers and promoted commercialisation
(d) Statement I is false and Statement II is true of agriculture.
Ans : Alternatives
24. Statement I : Education is a wider concept and is the correct explanation of Assertion.
encompasses literacy.
Statement II A person is considered literate if he/she
has ability to read and write in any language. A person
is educated if he/she can find a work and can earn Ans :
some income. (c) Both Assertion and Reason are true and Reason
In the light of the given statements, choose the correct is the correct explanation of Assertion.
Ans :
(c) Literacy refers the ability to read and write.
Education considers three parameters: primary,
secondary and higher education. 27. Assertion (A) Primary sector is an important source
of labour supply to the secondary and tertiary sectors
of the economy.
25. _______is a form
Reason (R) When productivity rises in agriculture
of market intervention by the Government of India to
(owing to the use of innovative technology), less
insure agricultural produces against any sharp fall in
labour is needed to produce a given level of output.
farm prices.
Alternatives
(a) Quality Assured Prices (QAP)
(b) Structural Adjustment Prices (SAP)
(c) Minimum Support Prices (MSP)
(d) Adequate Prices is the correct explanation of Assertion.
or (d) Both Assertion and Reason are true, but Reason is
Agricultural marketing does not comprise of________ not the correct explanation of Assertion.
(a) storage of the produce for sale in future
(b) credit taken to meet expenditure on agriculture Ans :
(c) transportation of the produce to the market place (d) Both Assertion and Reason are true, but Reason is
for sale not the correct explanation of Assertion.
(d) grading of the produce according to the quality
Short Answer Questions (Q28 to Q29) 3´2=6 enabling them to determine any flaws or problems
and rectifying the problem on the spot.
28. The figure given below depicts that India’s This leads to higher efficiency of not only the person
environmental problems pose a dichotomy- they are under training but also the organisation as a whole.
poverty induced and at the same time arise due to or
affluence in living standards. Do you agree with the I defend the given statement. Regular salaried
given statement? Justify. employees are more in urban areas than in rural areas
due to following reasons
(i) Education and Training Regular salaried
employment requires certain educational
qualifications and professional skills. Education
and training facilities are not as good in rural
areas as in urban areas. Therefore, chances of
regular employment are higher for urban people.
(ii) Infrastructure Large companies including
MNCs are concentrated in the urban areas due
to the presence of economic infrastructure and
availability of modern facilities like banks,
transport, communication, etc. These companies
hire regular salaried employees, which results in
Ans : concentration their in the urban areas.
(iii) Agriculture Rural population is primarily engaged
This is true that India’s environmental problems pose in agricultural sector and are not willing to take
a dichotomy they are poverty induced and at the same the risk of leaving their farms for regular salaried
time arise due to affluence in living standards. On one employment. This is also a reason for regular
hand, population explosion and widespread poverty salaried employment to be less prevalent in rural
has led to deforestation in India as the poor people in areas.
the rural areas are compelled to fell trees for earning
their livelihood and for use as fuel, on the other hand
the growing demand for natural resources due to
affluence in living standards in the urban areas is also
equally responsible for the present environmental
degradation.
30. Compare and analyse the given data of India and

29. Bring out the need for on-the-job-training for a
China, with valid reasons.
person.
or Country Annual Gender Ratio
Defend or refute the statement with valid explanation Growth Rate (Per thousand
“There are more number of regular salaried employees of Population males)
found in urban areas than in rural areas”. (2015)
Ans : India 1.2 % 929
Firms provide on-the-job training to their workers China 0.5 % 941
to enhance their skills which helps in human capital Source World Development Indicators, 2015
formation. Ans :
On-the-job training is an important factor of human
capital formation as it results in enhanced labour (i) Annual Growth Rate of Population (2015) The
productivity. On-the-job training allows trainees and annual growth rate of population in India is high
employees to get acquainted with their co-workers. at 1.2%. China has a low growth rate at 0.5%. The
Training allows the supervisors or managers to assess low growth rate can be attributed to the adoption
progress of a person over a short period of time of one-child policy by China. Also, the high
growth rate in India implies that the population sectors is essential due to following reasons
of India will exceed China’s population by 2050. (i) Expenditures on education and health, make
(ii) Gender Ratio Gender ratio in both the countries substantial long-term impact and they cannot be
is low, but in India it is more lower than China. A reversed.
low gender ratio indicates that both the countries (ii) Individual consumers of education and health
are male-dominated. services do not have complete information about
the quality of services and their costs.
31. (i) Give the meaning of demonetisation? (iii) The government has to ensure that private
(ii) Discuss briefly any two major steps taken by the institutions in these sectors adhere to the standards
Government of India on ‘Financial Sector’ front stipulated by the government and charge the
under the Economic Reforms of 1991. correct price.
or (iv) In developing economies, a substantial section
Deepesh argues that in the era of privatisation, there is of society cannot afford to have these services by
no need for government intervention in education and paying for it. These should be provided to them
health sectors. However, his friend Mahesh argues by the government.
that education and health care services create social
benefits and therefore there is a need for government 32. State whether the following statements are true or
intervention in education and health sectors. Decide false, with valid arguments
with reasons, who is right? (i) Substituting fertiliser subsidies with agricultural
Ans : subsidies as the farmer was benefitting fertiliser
industry and not the target group has been the
(i) Demonetisation implies stripping the legal tender topic of immense debate regarding provision of
statue of a currency. subsidies during 1960’s and 70’s.
(ii) Financial sector includes financial institutions (ii) The main reason for constituting Karve
such as commercial banks, investment banks, Committee in 1955 was setting capital good
stock exchange and foreign exchange market. The industries in rural areas and thus promoting rural
following reforms were initiated in this sector development.
(a) Competition from New Private Sector
Banks The banking sector was opened for Ans :
the private sector. This led to an increase in (i) The given statement is true. It was argued
competition and expansion of services for that eliminating subsidies would increase the
consumers. inequality between the small and large farmers,
(b) Change in the Role of Reserve Bank of thus fertiliser subsidies which benefitted fertiliser
India (RBI) RBI’s role underwent a change industry and big farmers should be substituted
from a ‘regulator’ to a ‘facilitator’. Due to with agricultural subsidies.
this, Foreign Institutional Investors (FIIs) (ii) The given statement is false. In 1955, the Village
such as merchant bankers, mutual funds and Small-Scale Industries Committee also called
and pension funds were allowed to invest in Karve Committee was set-up which explored the
financial market. possibility of using small scale industries for
(c) Recent refrom ‘Demonetisation’ India faced promoting rural development.
its first demonetisation in 1946 and second
one in 1978. On both the occasions, the
reason was to combat black money that
went circulating wide and large. On 8th Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12
November, 2016, India witnessed its third
phase of demonetisation, wherein Prime
Minister Narendra Modi banned 500 and 33. (i) Define worker population ratio.
1,000 currency notes with immediate effect. (ii) What do you understand by the term ‘distress
or sale’?
Mahesh is right, the government intervention in these (iii) Literacy rates in India have increased but so has
the absolute number of illiterates. Why?
or are not properly protected by labour laws.

(i) Enlist some problems faced by farmers during the Particularly, during pandemic times, as
initial years of organic farming. demand for goods and services fell the
(ii) “In recent times, the Indian economy has casual workers were left jobless, without
experienced the problem of casualisation of any compensation or support.
the workforce. This problem has only been (b) During the Covid-19 lockdown, millions of
aggravated by the outbreak of Covid-19.” casual workers lost their jobs, raising the
Do you agree with the given statement? Discuss question of their survival. Also, additional
any two disadvantages of casualisation of the health expenditure added to their troubles.
workforce in the light of the above statement. If such workers had been working under
Ans : the formal sector, it would have given them
some respite in their difficult times. Thus,
(i) Worker population ratio is defined as the ratio this had led to increase in the problem
between the total number of workers in a country further.
and the population in the country, multiplied by
100. Symbolically,
Worker Population Ratio
= Total Number of Worker s # 100
Total Population
(ii) Lack of agricultural marketing infrastructure
often forces the farmers to sell their produce at
low prices for fear of spoilage or to pay off an
imminent debt.
This is termed as distress sale. Farmers tend to 34. Read the following text carefully and answer the
suffer highly on account of these sales, because given questions on the basis of the same and common
they not only get a low price for their produce, understanding
but are also cheated by use of false weights and One of the most compelling reasons for studying
are charged a high commission. environmental science and management is the
(ii) Literacy rates in India have increased mainly fact that, in the view of many leading authorities,
because of the growth in the educational facilities. we are now experiencing an environmental crisis,
However, with tremendous increase in the indeed, many authors have claimed that the
population, the absolute number of illiterates present environmental crisis is unprecedented in its
have also increased. magnitude, pace and severity (Park 2001). Awareness
or of this environmental crisis has grown since the
(i) The problems faced by farmers during the initial 1970s, partly as a result of the prominence given to
years of organic farming are major so-called ‘environmental’ disasters such as the
(a) Organic farming requires inputs like Sahelian droughts of the 1970s and 1980s and the
organic manure, bio-fertilisers and organic nuclear accident at Chernobyl in 1986.
pesticides. Though they are cheaper yet A major assessment of the global environment
farmers find it difficult to get them. published in 1999, the UNEP Global Environment
(b) The yield from organic farming is much less Outlook 2000 Report (UNEP 1999), drew attention to
than that of modern agricultural farming. two critical, recurring themes
(c) The price of organic food is high, so it is  the fact that the global human ecosystem
difficult to sell them. is threatened by grave imbalances in
(d) Organic products generally have more productivity and in the distribution of goods
blemishes and shorter shelf life. and services as evidenced by the fact that a
(ii) The given statement is quite appropriate with large proportion of the human population
reference to the ‘casualisation of labour’ in India. lives in poverty and that a widening gap exists
This is because of the following disadvantages of between those who benefit from economic
casualisation of the workforce and technological development and those
(a) For casual workers, the rights of the labour who do not
 the fact that accelerating changes are occurring quality are also rising as decline in air and
at the global scale, with rates of economic water quality has resulted in increased
and social development outstripping progress incidence of respiratory and water-borne
in achieving internationally co-ordinated diseases.
environmental stewardship-with the result (d) Global environmental issues such as global
that improvements in environmental warming and ozone depletion also contribute
protection due to new technologies are being to increased financial commitments for the
‘cancelled out’ by the magnitude and pace government.
of human population growth and economic Thus, it is clear that the opportunity costs of
development. negative environmental impacts are high.
Consequently, a wide range of environmental (ii) There are two views on the inter-relation between
problems has emerged, those problems include economic development and the environment.
anthropogenic climate change (‘global warming’), the They are as follows
depletion of stratospheric ozone (the ‘ozone hole’), (a) According to the first view, economic
the acidification of surface waters (‘acid rain’), the development degrades our environment by
destruction of tropical forests, the depletion and using natural resources for production of
extinction of species, and the precipitous decline goods and services. Economic development
of biodiversity. Yet, while all of these problems results in pollution in the form of air
have physical (environmental) manifestations, their pollution, water pollution and land pollution.
causes - and their potential solutions - are invariably (b) According to the second view, economic
bound up with human attitudes, beliefs, values, development improves environmental
needs, desires, expectations and behaviours. Thus, quality. The discovery of new materials and
the symptoms of the environmental crisis cannot sources not only use fewer natural resources,
be regarded purely as physical problems requiring but sometimes replace them. Thus, with
solutions by environmental ‘specialists’, instead, economic development, degradation of
they are intrinsically human problems and they are environment decreases.
intimately related to the question of what it means to From the above discussion, we find that relationship
be human. between environment and economic development is
(i) “Opportunity costs of negative environ-mental dynamic and complex if not positive.
impact are high.” Comment. Poverty in developing countries is also said to be
(ii) There exists a positive correlation between responsible for environmental degradation. Poor
environmental sustainability and economics people rely on natural resources heavily for their
development. Do you agree? Give suitable reason survival, which leads to over use of natural resources.
in support of your answer. Besides, when the cultivable land becomes short
Ans : relative to population, the poor are forced to make
their subsistence by cultivating fragile land on hills
(i) The negative environmental impact has high and mountains resulting in soil erosion on a large
opportunity costs as explained below scale.
(a) The industrial development in past has It is in such environment that poverty becomes a
polluted and dried up rivers and other vicious circle.
aquifers making water an economic good.
Also, cleaning up of polluted rivers and
replenishing water resources require huge
investments.
(b) The intensive and extensive extraction
of both renewable and non-renewable
resources has exhausted some of these
resources. Huge amount of funds need to be
spent on technology and research to explore

new resources.
(c) The health costs of degraded environmental

20 Sample Papers - Economics (Solved) PDF

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CBSE Economics Class 12

Sample Paper 1 Solutions Page 1

Sample Paper 1 Solutions

Section A -Macro Economics Ans :

1. Which of the following component(s) is/are not 3. Demand deposits include:

5. Read the following statements carefully: in capital account.

8. Read the following statements carefully:

Alternatives: 9. Read the following statements carefully:

(a) Explain the ‘mixed income of self-employed’

Section B -Indian Economic Development

Multiple Choice Questions (Q18 to Q27) 1 ´ 10=10

18. _______ are the institutional sources of agricultural

Ans : (c) A - (i)

26. From the set of events/systems given in Column I

29. “Industrial Policy Resolution of 1956 (IPR 1956) Ans :

into a huge market for the finished products of workforce.

It is proven empirically, that increase in human capital Ans :

Sample Paper 2 Solutions

Section A -Macro Economics (a) `15,000 crore

1. Which of the following items will not be included Ans :

4. Read the following statements carefully: (d) None of these

These are the objectives of:

o 12. Where are ‘borrowings from abroad’ recorded in the

Short Answer Questions (Q11 to Q12) 3´2=6

11. What is Balance of Payments account? Where are the

higher rate of 4.3%.

Section B -Indian Economic Development (c) kharif

23. From the set of events/systems given in Column I

Alternatives: Integrated GST (IGST).

Ans : Demonetisation emphasises the government’s

Long Answer Questions (Q33 to Q34) 6 ´ 2 = 12

Sample Paper 3 Solutions

5. Which of the following statements is correct?

6. Two friends discussed the recent changes made in

(c) 41 (a) 1970

(d) Assertion (A) is true but Reason (R) is false Ans :

25. Identify the correct pair from Column I and Column

26. About per cent of female workforce is employed in

Sample Paper 4 Solutions

Section A -Macro Economics Ans :

1. Which out of the following is a monetary measure to

Which of the following measures can be used to given below:

(a) `10 lakh Column I Column II

products only. burden of a tax and liability to pay falls on different

14. Find Gross Value Added at Market Price from the

GVAMP = (ii) + (iv) + (iii) — (v)

Ans : (c) To the left of point B, CC curve is higher than

(f) Plot a perpendicular from point B on the

20. What is the full form of PPP in terms of Gross

(c) only (iii) (d) Both statements 1 and 2 are true

22. Which of the following are major fish producing

(i) Odisha (a) Anti-rightist Movement

27. Which duty has been removed to increase the

Short Answer Questions (Q30 to Q32) 4 ´ 3 = 12 o

Sample Paper 5 Solutions

2. Which out of the following items is not included in

(c) Assertion (A) is false but Reason (R) is true Ans :

9. Choose the correct alternatives to be filled in given

Short Answer Questions (Q11 to Q12) 3´2=6

11. It is stated that “amalgamation of many central

Reason (R) is the correct explanation of Assertion (A) o

23. From the set of events/systems given in Column I