Class 12 Economics: CBSE Sample Question Papers- Term I (2021-22)

The government’s objective of ‘redistribution of income’ can be achieved by levying high rate of tax on the rich and making expenditure of that amount for the welfare of the poor. Thus, rationalization of taxes or targeting those people who are poor.

Balance of payment of an economy records exports and imports of goods and services, unrequited transfers and capital transfers received and paid. Thus, by making transactions of these, foreign exchange is received and paid. Thus, inflow and outflow of foreign exchange to/from the economy takes place in balance of payment.

Reserve bank of India does not interact directly with the public. As Central bank deals with commercial banks and commercial banks deal with the public. Deposits are made by public with the commercial banks and central bank deal with commercial banks in controlling money supply and credit through various instruments or policies.

All the three options (a), (b) and (c) are invisible items under current account of the balance of payment transaction. But merchandise linked transactions are the goods exported or imported which is a part of visible items.

Demonetization means taking away notes or coin from its status as legal tender. Both the statements are true as demonetization is a step taken by the government to deal with the problem of corruption, black money, terrorism and circulation of fake currency in the Indian economy. Also, it has improved tax compliance over a period of time.

Ms. Sakshi, an economics teacher explained the concept of ‘cash reserve ratio’ by saying that minimum percentage of the total deposits (net demand and time deposits) which is kept by any commercial bank with the central bank. Because through Cash reserve ratio, Central bank is able to control the money supply.

The type of exchange rate that Sindhu is talking about is ‘Managed floating exchange rate’. In this type of exchange rate, with the help of market forces of demand and supply, exchange rate is determined. And competent authority, i.e., country’s central bank intervenes so as to maintain the exchange rate within a specific range. Central bank also keeps reserves of foreign exchange within the targeted value. Managed floating exchange rate is also called as ‘Dirty floating’.

Public goods are those goods which are collectively consumed by the public. The given statement 1 is true. For example, air.  But the statement 2 is false as public goods are non-excludable and non-rival in nature. Taking the example of air, no one can be excluded from consuming it and also if one group of people consumes the public good, here, air then the consumption of air for other people do not fall. 

Balance of payment of a country comprises of two accounts: (a) Current account, and (b) Capital account. Current account records transactions related to export and import of goods and services, unilateral transfers received and paid to and from rest of the world and capital account records transactions related to Borrowings and loans given, Investment made to and from rest of the world, and change in foreign exchange reserves.

RBI, i.e. central bank of India performs various functions such as banker to the government of India, custodian of gold reserve of India, financial advisor to government of India, also act as banker to commercial banks. But RBI does not perform the function of issue of coins and one-rupee notes. This function of issue of onerupee notes and coins is performed by ministry of finance. 

Industrial policy Resolution (IPR), 1956 was introduced in second five-year plan. It covered various issues related to the industrial enterprises of the country. In this, industries were divided into three types: Schedule A, Schedule B and Schedule C. 

Occupational structure can be defined as distribution of workforce among various different sectors of the economy such as primary, secondary and tertiary sectors.

Due to green revolution, ‘marketable surplus’ could be generated. Marketable surplus can be defined as that portion of agricultural produce which farmers sell in the market after fulfilling their selfconsumption requirements.

Poverty line in India can be defined as the minimum nutritional requirements of an individual in a day measured in monetary value. Also, the statement 2 is false because the definition of poverty line in monetary terms has changed over the years.

Human capital implies skills, expertise, knowledge acquired by human resource by making expenditure on education, health and other factors. Because of skilled manpower in India, it has become ‘outsourcing hub’ of the world. India’s population converted into human capital is an important factor which is responsible for the status India has gained at the international platform.

Before the green revolution in 1967-68, India was not self-sufficient in foodgrains. India was heavily dependent on USA (United States of America) for the supply of foodgrains. But after green revolution, it led to rise in production of foodgrains by a larger amount.

Option D is correct.

Portfolio investments are investments in securities such as shares and bonds where the investor does not seek direct managerial control but aims for financial returns.

Foreign Institutional Investors (FII) are a common example of portfolio investors; they invest in another country's securities without taking direct control of the firms.

The given statement pairing D-iv is therefore correct: portfolio investments correspond to foreign institutional investors as an example.

The other listed pairings are not correct:

• A-i is incorrect because exports of goods and services are not the same as the excess of exports over imports (the latter is trade surplus).
• B-ii is incorrect because a trade surplus is not classified as an invisible item; invisibles refer to services, income and transfers.
• C-iii is imprecise: current transfers may be recorded as positive or negative in the balance of payments depending on whether they are receipts or payments; they are not universally a positive item.

NABARD is an apex body or organisation which helps in promoting the strength of various credit institutions, like, cooperatives, commercial banks and regional rural banks. Also, it provides financial help to the non-farm sector.

Vaccinating the adult population of the country with Covaxin /Covishield without any charge would mean that this type of expenditure by government is neither creating any asset nor causing any fall in liability. Hence, it is categorized as revenue nature expenditure.

Poverty in India arises due to various reasons such as population explosion, low capital formation, higher unemployment, inequalities in income, etc. But ‘rise in per capita GDP’ is not the reason for poverty in India. Rather, it reduces poverty.

If money deposited in the bank is `100, and no other money is circulating in the economy, then the total money supply in the economy is ₹100 because money supply can be defined as total stock of money available in the economy at a given point of time in the form of currency and demand deposits.

Infant mortality rate can be defined as number of deaths per 1000 live births of children below one year of age in a year. All these reasons, improvement in health facilities, improvement in educational standards, and technological expansion over the years can lead to fall in infant mortality rate but option (c) fall in standard of living of people increases the infant mortality rate.

Subsidies are given to the farmers so that they get inputs at prices which are lesser than the market price. As the statement 1 is false, subsidies do add burden on the financial health of a nation. If with the help of subsidies, government tries to remove the gap between rich and poor, hence aim of equitable distribution of income may be violated if subsidies is removed.

Before India’s independence, the agricultural sector stagnated due to mainly land settlement system. Various land revenue systems such as Zamindari system, Ryotwari system and Mahalwari system exploited cultivators, or farmers very badly which led to decline in agriculture sector.

When a commercial bank receives deposits, it keeps a part of it with the Central bank and a part with itself. These are called legal reserves. The money lent comes back to it as deposits. Again it keeps a part of it with the central bank and a part with itself and lends the rest. This process continues. In this way bank gives loans which is many a times the original deposit.

Public investment in agriculture sector especially in infrastructure like irrigation, power, etc. has been reduced in the reform period.

Horticulture plays an important role in providing employment opportunities. It has become a sustainable livelihood option for farmers thereby improving their economic condition.

The objective of government budget is maintaining economic stability in the economy. During inflation, government should reduce its expenditure and increase tax rate and during deflation, it should its expenditure and reduce tax rate.

Import substitution leads to restricting imported foreign goods but producing those goods in the domestic country. Import substitution helps in saving foreign exchange in the country by importing less through restrictions like tariffs and quotas.

Bonus shares to equity shareholders does not involve provision of new resources and no transaction is recorded.