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Class 12 Economics: CBSE Sample Question Papers- Term I (2021-22)- 4 | Sample Papers for Class 12 Commerce PDF Download

Class-XII


Time: 90


Max. Marks: 40

General instructions:

  1. The Question Paper contains 3 sections. 
  2. Section - A has 24 questions. Attempt any 20 questions.
  3. Section - B has 24 questions. Attempt any 20 questions. 
  4. Section - C has 12 questions. Attempt any 10 questions. 
  5. All questions carry equal marks. 
  6. There is NO negative marking.

Section - A

Q.1: Which of the following is not the function of the Central Bank?
(a) Issuing Currency Notes
(b) Acting as a bank to the government
(c) Issuing ₹ 1 and coins
(d) Lender of last resort

Correct Answer is Option (a)
₹ 1 and coins are issued by the government and not the Central Bank.


Q.2: Identify which of the following statements is true.
(a) The difference between planned revenue expenditure and planned revenue receipts is called Fiscal deficit.
(b) The difference between total planned expenditure and total planned receipts is called fiscal deficit.
(c) The difference between total planned receipts and interest payment is called primary deficit.
(d) The sum of primary deficit and interest payment is called fiscal deficit.

Correct Answer is Option (d)
Fiscal deficit refers to the excess of total expenditure over total receipts excluding borrowings. Primary deficit is defined as fiscal deficit less interest payments. It indicates borrowing requirements of the govt. to meet fiscal deficit net of interest payments.


Q.3: Which of the following is/are not an export?
(i) Sales of cars abroad 

(ii) Purchase of foreign components
(iii) Students from abroad studying in your country
(iv) Sales of financial services overseas 

Identify the correct alternatives from the following:
(a) ii
(b) ii and iii
(c) iii and iv
(d) iii

Correct Answer is Option (a)
Purchase of foreign components is import for country.


Q.4: Trade of visible items between the countries is known as _________.
(a) Balance of Payment
(b) Balance of Trade
(c) Deficit Balance
(d) All of these

Correct Answer is Option (a)
Balance of Trade = Exports – Imports


Q.5: _________ is the rate at which Commercial Banks of the country lend funds to general public.
(a) Bank Rate
(b) Repo Rate
(c) Interest Rate
(d) Reverse Repo Rate

Correct Answer is Option (c)
The rate at which commercial banks of the country give loans to general public is called as interest rate.


Q.6: Direct tax is called direct because it is collected directly from:
(a) the producers on goods produced
(b) the sellers on goods sold
(c) the buyers of goods
(d) the income earners

Correct Answer is Option (d)
In case of direct tax, the burden of tax and the liability to pay it falls on the same person. The liability to pay the tax cannot be shift to another person.


Q.7: From the set of information given in Column A and Column B, choose the correct pair of options:
Class 12 Economics: CBSE Sample Question Papers- Term I (2021-22)- 4 | Sample Papers for Class 12 Commerce(a) 1 – a
(b) 2 – b
(c) 3 – c
(d) 4 – d

Correct Answer is Option (b)
Formal and modern census, as they are now, were conducted non-synchronously between 1865 and 1872 in different parts of the country. This effort which ends in 1872 has been called the first census in India. However, the first synchronous census in India was held in 1881.


Q.8: Choose the correct alternative given below from the following statements – Assertion (A) and Reason (R)
Assertion (A): Following the policy of globalization, India has become one of the important destinations for outsourcing.
Reason (R): At lower wage rates, there is large pool of skilled and young manpower available in India.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

(c) Assertion (A) is true but Reason (R) is false. 
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (a)
Globalisation has made India an important destination of outsourcing due to availability of large pool of skilled and young manpower in India.


Q.9: Which of the following statements is true?
(a) Government Borrowings from the World Bank is a Revenue Receipt.
(b) Higher fiscal deficit is the result of higher revenue deficit.
(c) The loans taken by government represent a situation of fiscal deficit.
(d) The excess of capital receipts over the revenue receipts is called Revenue deficit.

Correct Answer is Option (c)
Fiscal deficit is defined as the amount of borrowing the government has to resort to meet its expenses.


Q.10: Read the following statements and select the correct alternative from the following:
Statement 1: Brain drain is a cause for poor human capital formation in India.
Statement 2: The quality of human capital also decreases due to high growth of population.
(a) Both the Statements are true.
(b) Both the Statements are false.
(c) Statement 1 is true but Statement 2 is false. 

(d) Statement 1 is false but Statement 2 is true.

Correct Answer is Option (a)
The problems faced by human capital formation are brain drain and high growth of population.


Q.11: What effect will the increase in foreign direct investment will have on the economy?
(a) Increase in the Forex Reserve
(b) Increase in the supply of Foreign Currency
(c) Decrease in the Exchange Rate
(d) All of the above

Correct Answer is Option (d)
When there is increase in foreign direct investment in the country, then it will lead to increase in supply of foreign currency or increase in the foreign exchange and hence will lead to fall in the exchange rate.


Q.12: Education increases peoples: 
(a) Productivity
(b) Skill
(c) Income 

(d) All of these

Correct Answer is Option (d)
Expenditure on education leads to increase in productivity among human resource and hence creates skills and increase their income.


Q.13: “Every Indian should be able to meet his or her basic needs such as food, a decent house, education and health care and inequality in the distribution of wealth should be reduced.” Identify the goal of the five-year plan in the above line.
(a) Growth
(b) Equity 

(c) Both (a) and (b)
(d) None of these

Correct Answer is Option (b)
Growth, modernisation and self-reliance, by themselves, may not improve the kind of life which people are living. A country can have high growth, the most modern technology developed in the country itself, and also have most of its people living in poverty. It is important to ensure that the benefits of economic prosperity reach the poor sections as well instead of being enjoyed only by the rich. So, in addition to growth, modernisation and self-reliance, equity is also important.


Q.14: High powered money includes:
(a) Currency held by public
(b) Cash reserves with the bank
(c) Both (a) and (b)
(d) None of the above

Correct Answer is Option (c)
High-powered money is the sum of commercial bank reserves and currency (notes and coins) held by the Public. High-powered money is the base for the expansion of Bank deposits and creation of money supply.


Q.15: Which of the following is a source of capital receipt?
(a) Foreign donations
(b) Dividends 

(c) Disinvestment
(d) Indirect taxes

Correct Answer is Option (c)
Disinvestment is a capital receipt as it reduces assets.


Q.16: Prime Minister’s Rozgar Yojana aimed at creating self-employment opportunities in _________ areas.
(a) Rural 

(b) Remote 
(c) Urban 
(d) Backward

Correct Answer is Option (c)
Prime Minister ’s Rozgar Yojana aimed at creating selfemployment opportunities in urban areas. The Khadi and Village Industries Commission was implementing it. Under this programme, one could get financial assistance in the form of bank loans to set up small industries.


Q.17: Who is called the ‘bank of issue’? 
(a) RBI

(b) SBI
(c) IDBI 

(d) ICICI

Correct Answer is Option (a)
The Reserve Bank has the sole right to issue currency notes, except one rupee notes which are issued by the Ministry of Finance.


Q.18: Ms. Deepa, an economics teacher was discussing the following concept with students: “Those transactions which are made by the monetary authority of a country which have an impact on official reserves of a country are called as _________.”
(a) Foreign exchange transactions
(b) Foreign currency transactions
(c) Official reserve transactions
(d) Both (a) and (b)

Correct Answer is Option (c)


Q.19: Read the following statements and select the correct alternative from the following:
Statement 1: Agricultural diversification is useful in countries like India which are completely dependent on agriculture.
Statement 2: The risk with the farmers is reduced and they are provided with sustainable livelihood options due to agricultural diversification.
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true but Statement 2 is false.
(d) Statement 1 is false but statement 2 is true.

Correct Answer is Option (a)


Q.20: Find out the value of LRR if initial deposit is ₹ 400 crores and which lead to creation of total deposits of ₹ 2000 crores.
(a) 20%
(b) 30%

(c) 40% 
(d) 50%

Correct Answer is Option (b)
Total deposits
Class 12 Economics: CBSE Sample Question Papers- Term I (2021-22)- 4 | Sample Papers for Class 12 Commerce
Class 12 Economics: CBSE Sample Question Papers- Term I (2021-22)- 4 | Sample Papers for Class 12 Commerce
LRR = 1/5
LRR = 0.20 or 20%


Q.21: FDI inflow is a type of _________.
(a) Accommodating transactions
(b) Accumulating transactions
(c) Autonomous transactions
(d) None of these

Correct Answer is Option (c)
Foreign direct investments are autonomous transactions of longterm capital movement, motivated by economic interests, with the profit at the first place.


Q.22: What does the government budget represents?
(a) Actual revenue and estimated revenue
(b) Estimated revenue and actual receipt
(c) Estimated receipt and estimated expenditure 

(d) All of these

Correct Answer is Option (c)
Budget is a financial statement showing the expected receipt and expenditure of Government for the coming fiscal or financial year.


Q.23: Read the following statements and select the correct alternative from the following:
Statement 1: Rich farmers are able to benefit from the institutional credit mainly.
Statement 2: One of the problem faced in the functioning of rural banking is that they are unable to recover agricultural loans.
(a) Both the Statements are true. 
(b) Both the Statements are false. 
(c) Statement 1 is true but Statement 2 is false. 
(d) Statement 1 is false but Statement 2 is true.

Correct Answer is Option (a)
Both statements are true. Benefits of institutional credit are mainly enjoyed by the rich farmers. Also, in the functioning of rural banking system, they are unable to recover agricultural loans.


Q.24: Identify the correctly matched pair of Column A to that of Column B: 
Class 12 Economics: CBSE Sample Question Papers- Term I (2021-22)- 4 | Sample Papers for Class 12 Commerce(a) 1 – a 
(b) 2 – b 
(c) 3 – c 
(d) 4 – d

Correct Answer is Option (b)
Adverse balance of trade in the economy creates problems for India’s foreign trade.


Section - B

Q.25: If the total deposits created by commercial banks is ₹ 12,000 crores and legal reserve requirements is 25%, then initial deposits will be _________.
(a) ₹ 5,000 crores
(b) ₹ 3,000 crores
(c) ₹ 6,000 crores
(d) ₹ 4,000 crores

Correct Answer is Option (b)
Money Multiplier = 1/LRR
= 1/25% = 100/25  = 4
Total Deposit Creation: Initial Deposits × Money Multiplier
12,000 = Initial Deposits × 4
Initial Deposits = 12,000/4 = ₹3,000 crores


Q.26: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): Invisible items are all those types of services which are exported and imported.

Reason (R): Unilateral transfer refers to one sided transfer from one country to other. These are not trading transactions.
From the given alternatives choose the correct one.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (b)
Invisible items includes a large variety of non-factor services (known as invisible items) sold and purchased by the residents of a country, to and from the rest of the world. Payments are either received or made to the other countries for use of these services. Unilateral transfers include gifts, donations, personal remittances and other ‘one way’ transactions. These refer to those receipts and payments, which take place without any service in return. Receipt of unilateral transfers from rest of the world is shown on the credit side and unilateral transfers to rest of the world on the debit side.


Q.27: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): India’s agricultural sector, on the eve of independence, exhibited the characteristics which pointed to the backwardness of India’s agriculture as well as its stagnation.

Reason (R): Systematic de-industrialization is the term that describes the status of industrial sector during the British rule.
From the given alternatives choose the correct one.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (b)
India’s agricultural sector, on the eve of independence, exhibited three principal characteristics, these characteristics pointed to backwardness of India’s agriculture as well as its stagnation, uiz, low level of productivity, high degree of vulnerability and a wedge between owners of the soil and tillers of the soil. Systematic deindustrialization is the term that describes the status of industrial sector during the British rule. It implies decay of world famous traditional handicraft industry owing to discriminatory policies of the British Government and bleak growth of modern industry now to lack of investment opportunities.


Q.28: Identify the correct sequence of items in Column B by matching them to those in Column A.
Class 12 Economics: CBSE Sample Question Papers- Term I (2021-22)- 4 | Sample Papers for Class 12 Commerce(a) 1-a, 2-c, 3-d, 4-b 
(b) 1-b, 2-c, 3-d, 4-a
(c) 1-c, 2-a, 3-b, 4-d
(d) 1-c, 2-b, 3-a, 4-d

Correct Answer is Option (c)


Q.29: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): Under economic planning a central authority defines a set of targets to be achieved within a specified period of time.
Reason (R): Socialism is an economic system in which major economic decisions are taken by the market forces.
From the given alternatives choose the correct one.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (c)
A plan should have some clearly specified goals. Due to limited resource, a choice has to be made in each plan about which of the goals is to be given primary importance. In the context, economic planning is a process under which a central authority defines a set of targets to be achieved within a specified period of time. Socialism is an economic system in which major economic decisions are taken by the government, keeping in view the collective interest of the society as a whole.


Q.30: Which of the following is not the part of M2? 
(a) Currency with the public
(b) Deposits with the Banks
(c) Deposits with the Post Office
(d) None of the above

Correct Answer is Option (c)
M2 = M1 + Savings deposits with Post office Savings banks. Saving deposit includes the features of both demand and term deposits.


Q.31:
Class 12 Economics: CBSE Sample Question Papers- Term I (2021-22)- 4 | Sample Papers for Class 12 CommerceOn the basis of the above-mentioned information answer the following question: In 1973-74, more than _________ million people were below the poverty line.
(a) 320
(b) 300
(c) 250
(d) 350

Correct Answer is Option (a)
The diagram shows the number of poor and their proportion to the population in India for the years 1973-2012. In 1973-74, more than 320 million people were below the poverty line.


Q.32: Identify the incorrect statement from the following.
(a) The rate at which one currency is exchanged for another is called Foreign Exchange Rate.
(b) The system of exchange rate in which exchange rate is officially declared and fixed by the government is called fixed exchange rate system.
(c) Fixed exchange rate is determined by the forces of demand and supply in the market.
(d) None of the above

Correct Answer is Option (c)
The system of exchange rate in which exchange rate is officially declared and fixed by the government is called fixed exchange rate system. Fixed exchange rate is not determined by the forces of demand and supply in the market. Such a rate of exchange has been associated with Gold Standard System during 1880-1914.
According to this system, value of every currency is determined in terms of gold. Accordingly, ratio between gold value of the two countries was fixed as exchange rate between those currencies.


Q.33: Read the following statements carefully and choose the correct alternatives given below.
Statement 2: The National Food for Work Programme was launched in most backward districts of the country.
Statement 2: Poverty can effectively be eradicated only when the poor start contributing to growth by their active involvement in the growth process.
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.

Correct Answer is Option (a)
The National Food for Work Programme was launched in November 2004 in 150 most backward districts of the country, identified by the Planning Commission in consultation with the Ministry of Rural Development and the State Governments. Poverty alleviation has been one of the guiding principles of the planning process in India. Poverty can effectively be eradicated only when the poor start contributing to growth by their active involvement in the growth process. This can only be achieved by launching various employment schemes.


Q.34: The poor are identified on the basis of:
(a) Occupation
(b) Ownership of assets 

(c) Both (a) and (b)
(d) None of these

Correct Answer is Option (c)
The poor are identified on the basis of their occupation and ownership of assets. The rural poor work mainly as landless agricultural labourers, cultivators with very small landholdings, landless labourers who are engaged in a variety of nonagricultural jobs and tenant cultivators with small landholdings. On the other hand, the urban poor are largely the overflow of the rural poor who had migrated to urban areas in search of alternative employment and livelihood, labourers who do a variety of casual jobs and the self-employed who sell a variety of things on roadsides and are engaged in various activities.


Q.35: Seema, Saroj and Saloni were discussing about Central Bank’s functions. Seema said that the central bank is the government’s bank, Saroj said that the central bank issues currency notes other than the ₹ 1 note and coins; and Saloni said that the central bank acts as a regulator of the commercial banks with its credit control policies. Who is correct among the three of them?
(a) Seema only
(b) Saroj and Saloni only 

(c) Seema and Saloni only
(d) All of them.

Correct Answer is Option (d)
All the three Saroj, Seema and Saloni are correct as they are saying different functions of the central bank. Central banks possess the exclusive right to manufacture notes in an economy. All the central banks across the world are involved in issuing notes to the economy. This is one of the most important functions of the central bank in an economy and due to this the central bank is also known as the bank of issue. The central bank accepts deposits and issues funds to the government. It is also involved in making and receiving payments for the government. Central banks also offer short term loans to the government in order to recover from bad phases in the economy.


Q.36: Read the following statements carefully and choose the correct alternatives given below.
Statement 1: Human capital formation increases productivity of physical capital.

Statement 2: By enhancing productive capacities of the labour force, human capital formation induces greater employment.
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false. 

(d) Statement 2 is true and Statement 1 is false.

Correct Answer is Option (a)
Human capital formation increases productivity of physical capital as specialised engineers and skilled workers can certainly handle machines better than the other. It facilitates the use and growth of innovative skills. Innovation is the life line of growth. By enhancing productive capacities of the labour force, human capital formation induces greater employment. Thus, there is a cause and effect relationship between human capital formation and economic growth.


Q.37: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): Surplus in the current account arises when debit items are more than credit items.  Reason(R): Deficit in the current account indicates net outflow of foreign exchange.

From the given alternatives choose the correct one.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (d)
Surplus in the current account arises when credit items are more than debit items. It indicates net inflow of foreign exchange. Deficit in the current account arises when debit items are more than credit items, i.e., when foreign exchange receipts in the current account fall short of foreign exchange payments, it leads to current account deficit. It indicates net outflow of foreign exchange.


Q.38: Growth of GDP and Major Sectors (in %)

Class 12 Economics: CBSE Sample Question Papers- Term I (2021-22)- 4 | Sample Papers for Class 12 CommerceNote: *Data pertaining to Gross Value Added (GVA). The GVA is estimate from GDP by adding subsidies on production and subtracting indirect taxes.
On the basis of the information given above, identify which sector has recorded a high growth rate during 2013–14.
(a) Agriculture
(b) Manufacturing
(c) Tertiary
(d) None of these

Correct Answer is Option (a)
During 2012-15, there has been a setback in the growth rates of different sectors witnessed post–1991. While agriculture recorded a high growth rate during 2013–14, this sector witnessed negative growth in the subsequent year.


Q.39: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): Investment in education is considered as one of the most important sources of human capital formation.
Reason (R): Expenditure regarding on-the-job training is a source of human capital formation.
From the given alternatives choose the correct one.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (b)
Investment in education is considered as one of the most important sources of human capital formation because labour Skill of educated person is more than that of uneducated person and hence the former is able to generate more income and his contribution to economic growth is consequently more. Expenditure regarding onthe-job training is a source of human capital formation as the return of such expenditure in the form of enhanced labour productivity is more than the cost of it.


Q.40: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): As a custodian of the cash reserves of the commercial banks, the central bank maintains the cash reserves of the commercial banks.
Reason (R): As banker to the banks, the central bank acts as the lender of the last resort.
From the given alternatives choose the correct one.

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (b)
As a custodian of the cash reserves of the commercial banks, the central bank maintains the cash reserves of the commercial banks. Every commercial bank has to keep a certain percent of its cash reserves with the central bank by law.
As banker to the banks, the central bank acts as the lender of the last resort. In other words, in case the commercial banks fail to meet their financial requirements from other sources, they can, as a last resort, approach to the central bank for loans and advances.
The central bank assists such banks through discounting of approved securities and bills of exchange.


Q.41: Medium-term credit loans are required for________.
(a) Purchasing machinery
(b) Constructing fences
(c) Digging wells
(d) All of the above

Correct Answer is Option (d)
Medium-term loans are required for purchasing machinery constructing fences and digging wells. Such loans are generally stretch over a period of 12 months to 5 years.


Q.42: An Indian company located in India invests in a company located abroad. This transaction is entered in India’s balance of payments account on:
(a) Credit side of current account.
(b) Debit side of current account.
(c) Credit side of capital account.
(d) Debit side of capital account.

Correct Answer is Option (d)
Capital Account of BoP records capital transfer such as loans and investments between one country and the rest of the world, which causes a change in the assets or liability status of the residents of the domestic country or its government. Investment to abroad result in outflow of foreign exchange thus, recorded as a debit item.


Q.43: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): Diversification of crop production implies production of diverse variety of crops rather than one specialised crop. Reason (R): Diversification of production activity implies a shift from crop farming to other areas of production activity employment.

From the given alternatives choose the correct one.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (b)
Diversification is an emerging challenge in the context of rural development. It has two aspects. One is diversification of Crop Production It implies production of diverse variety of crops rather than one specialized crop. It means a shift from single-cropping system to multi-cropping system and second is diversification of Production Activity/ Employment It implies a shift from crop farming to other areas of production activity employment.


Q.44: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): Liberalisation implied a substantial shift in the role of the RBI from a regulator to a facilitator of the financial sector.
Reason (R): Privatisation is the general process of involving the private sector in the ownership or operation of a state-owned enterprise.
From the given alternatives choose the correct one.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (b)
Liberalisation of the economy means its freedom from direct or physical controls imposed by the government. Under financial sector reforms, Liberalisation implied a substantial shift in the role of the RBI from a regulator to a facilitator of the financial sector. Privatization implies shedding of the ownership or management of a government owned enterprise. Government companies are converted into private companies in two ways by withdrawal of the government from ownership and management of public sector companies and or by outright sale of public sector companies.


Q.45: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): The basic objectives of rural development are to generate alternative means of livelihood in the rural areas.
Reason (R): Rural development is a process whereby the standard of living of rural people, especially poor people, rises continuously.
From the given alternatives choose the correct one.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (a)
Rural development is a comprehensive term which essentially focuses on action for the development of areas that are lagging behind in the overall development of the village economy. It is a process whereby the standard of living of rural people, especially poor people, rises continuously. The basic objectives of rural development are to generate alternative means of livelihood in the rural areas, so that dependency on agriculture sector is reduced.


Q.46: _________ poverty is defined as the minimum income needed in order to maintain the average standard of living in society.
(a) Absolute
(b) Relative 

(c) Chronic
(d) None of these

Correct Answer is Option (b)
Relative poverty is defined as the minimum income needed in order to maintain the average standard of living in society. It refers to lack of resources in relation to different classes, regions, and countries.


Q.47: Identify the incorrect statement from the following.
(a) Greater dependence on agriculture as suggested by occupational structure on the eve of independence implied lesser availability of land per head for the farming population.
(b) Demographic conditions during the British rule exhibited all features of a stagnant and backward economy.
(c) Development of infrastructure is a precondition to the economic and social development of a country.
(d) None of the above.

Correct Answer is Option (d)
Greater dependence on agriculture as suggested by occupational structure on the eve of independence implied lesser availability of land per head for the farming population. Accordingly, agriculture was taken largely as a means of subsistence and less as an occupation for profit. Demographic conditions during the British rule exhibited all features of a stagnant and backward economy. Both birth rate and death rate were very high nearly 48 and 40 per thousand respectively. Infrastructure refer to the elements of economic change as well as elements of social change which serve as a foundation for growth and development of a country. Development of infrastructure is a precondition to the economic and social development of a country.


Q.48: Read the following statements - Assertion (A) and Reason (R).
Assertion (A): Import of Steel by a steel company is reflected in the current account of balance of payments.
Reason (R): Export and import of goods and invisibles are recorded in current account of balance of payments.
From the given alternatives choose the correct one.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (a)
Current account is that account of BoP, which records exports and imports of visible and invisible items and unilateral transfers.


Section - C

Direction: Q. No. 49–54 are to be answered on the basis of the following passage:
Asserting that there have been record GST collections in the past few months, Union Finance Minister Nirmala Sitharaman on Monday announced a proposal to remove 400 old exemptions and take every possible measure to reduce anomalies.
Sitharaman’s assertions came a day after the Finance Ministry on Sunday announced that Goods and Services Tax (GST) collections for January 2021 touched an all-time high of ` 1.19 lakh crore since the introduction of GST regime.
“A record GST collections have been recorded in the last few months. As chairperson of the GST Council, I want to assure the government will take every possible measure to reduce anomalies. The government is focused to further ease the process,” Sitharaman said during her budgets. “A proposal will be brought to remove 400 old exemptions this year. From October 1, 2021, a revised customs duty structure free of distortions will be there,” she added.
She also said that the definition of small companies will be revised by raising the capital base to ₹ 2 crore from the current limit of ₹ 50 lakh.

– “FM announces removal of 400 old exemptions, measures to reduce anomalies in GST”
– The Economic Times – February 01, 2021

Q.49: The full form of GST is _________
(a) Goods and Sales Tax 

(b) Goods and Service Tax
(c) Goals and Sales Tax
(d) Goals and Service Tax

Correct Answer is Option (b)
The full form of GST is Goods and Services tax and it was implemented on 1st July, 2017.


Q.50: Choose the correct alternative given below for the following statements – Assertion (A) and Reason (R):
Assertion (A): The finance minister Nirmala Sitharaman proposed to remove 400 old exemptions.
Reason (R): To increase capital base.

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion(A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). 

(c) Assertion (A) is true but Reason(R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (c)
The finance minister Nirmala Sitharaman has proposed to remove 400 old exemptions so as to reduce anomalies.


Q.51: What is the new definition of small companies?
(a) Capital base of ₹ 50 lakh.
(b) Capital base of ₹ 50 crore.
(c) Capital Base of ₹ 2 lakh.
(d) Capital Base of ₹ 2 crore.

Correct Answer is Option (d)
The new definition of small companies is that capital base Has been raised to ₹ 2 crore. Earlier it was ₹ 50 lakh.


Q.52: Which of the following is the benefit of small companies?
(a) Shortage of Capital
(b) Need less technology 

(c) Undeveloped production system 
(d) Problem of raw material

Correct Answer is Option (b)
The benefit of small companies is that they require less technology.


Q.53: Read the following statements and select the correct alternative from the following:
Statement 1: Goods and services tax reduced tax evasion and also reduced the cascading effect.

Statement 2: GST is not a transparent tax.
(a) Both the Statements are true.
(b) Both the Statements are false.
(c) Statement 1 is true but Statement 2 is false.
(d) Statement 1 is false but Statement 2 is true.

Correct Answer is Option (c)
GST is a transparent tax as consumers know how much tax they are paying for goods and services. Also GST has removed multiple indirect taxes with the single tax, hence it has eliminated the cascading effect of taxation.


Q.54: The Goods and Services tax (GST) collected for the January rose to _________.
(a) ₹ 2.19 lakh crore
(b) ₹ 1.19 lakh crore
(c) ₹ 4.37 lakh crore
(d) ₹ 5.37 lakh crore

Correct Answer is Option (b)
The Goods and Services tax(GST) collected for January 2021 rose to ₹ 1.19 lakh crore.


Direction: Q.No. 55-60 are to be answered on the basis of the following data:
Paras had to write a report on the problems that India faces in Human Development. He highlighted the following points:
(A) Rising Population: Rapidly rising population adversely affects the quality of human capital formation in developing countries. It reduces per capita availability of existing facilities. A large population requires huge investment in education and health. This diverts the scarce money to production of human capital at the cost of physical capital.
(B) Long-term Process: The process of human development is a long-term policy because ski formation takes time. The process which produces skilled manpower is thus slow.
(C) High Regional and Gender Inequality: Regional and gender inequality lowers the human development levels.
(D) Brain Drain: Migration of highly skilled labour termed as “Brain Drain” adversely affects economic development.
(E) Insufficient on-the-job training in agriculture: Agriculture sector is neglected where the workers are not given on-the-job training to absorb emerging new technologies.
(F) High Poverty Levels: A large proportion of the population lives below poverty line and does not have access to basic health and educational facilities. A large section of society cannot afford to get higher education or expensive medical treatment for major diseases.
Q.55: Choose the correct alternative given below for the following statements – Assertion (A) and Reason (R):
Assertion (A): Rising population is a problem for human development due to huge spending on education and health.
Reason (R): Rising population is a problem for human development due to reduction in per capita income.

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion(A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). 

(c) Assertion (A) is true but Reason(R) is false.
(d) Assertion (A) is false but Reason (R) is true.

Correct Answer is Option (b)
When the size of population rises, then it requires increased expenditure on education and health which becomes a burden for the economy to bear such expenditure.


Q.56: Human Development is a _________ process.
(a) Short-term 

(b) Slow 
(c) Fast
(d) Depends on the wealth

Correct Answer is Option (b)
Human development is an end in themselves and it is a slow process a sit requires years of schooling i.e. gaining education and continuous expenditure on health services to form human development.


Q.57: Read the following statements and select the correct alternative from the following:
Statement 1: Brain drain in countries like India is caused due to gender inequality.
Statement 2: Brain drain in countries like India is caused due to migration.
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 1 is false and Statement 2 is true.

Correct Answer is Option (d)
Brain drain caused by migration of people occurs due to highly skilled people who want to enjoy higher standard of living in other countries.


Q.58: A large population of Indians live below the poverty line due to _________.
(a) No access to basic education
(b) No access to basic health facilities 

(c) Both (a) and (b)
(d) Neither (a) nor (b)

Correct Answer is Option (c)
A large population of Indians live below the poverty line due to not having basic access to education and health facilities. Therefore, they remain in the vicious circle of poverty.


Q.59: Read the following statements and select the correct alternative from the following:
Statement 1: Regional inequality and gender inequality causes the human development level to fall.
Statement 2: In agriculture sector, on-the-job training is provided to farmers.
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true but statement 2 is false.
(d) Statement 1 is false but statement 2 is true.

Correct Answer is Option (c)
In agriculture sector, farmers are not given on-the-job training so that they can learn new technologies. They are not trained or educated regarding the new schemes.


Q.60: Physical capital depreciates as the time goes but depreciation in human capital can be recovered by making investment in _________ and _________.
(a) Education and Inflation
(b) Education and Health
(c) Goods and services 

(d) Both (a) and (b)

Correct Answer is Option (b)
Both forms of capital depreciate with time but the nature of depreciation differs between the two. Continuous use of machine leads to depreciation and change of technology makes a machine obsolete. In the case of human capital, depreciation takes place with ageing but can be reduced, to a large extent, through continuous investment in education, health, etc. This investment also facilitates the human capital to cope with change in technology which is not the case with physical capital.

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1. What is the format of the Class XII Economics CBSE Sample Question Papers for Term I (2021-22)?
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