Sure Shot Questions: Introduction to Macroeconomics | Economics Class 12 - Commerce PDF Download

Based on a careful analysis of the previous years' questions and trends, we've put together a list of questions that are most likely to appear in the Class 12 Economics Board exams. These predictions aren’t just guesses—they’re based on how often these questions show up and how CBSE usually frames its papers.

Q1: What is macroeconomics, and how does it differ from microeconomics?
Ans: Macroeconomics studies the economy as a whole, focusing on aggregates like national income, total output, employment, and price levels. It is also called aggregative economics. Microeconomics, in contrast, examines individual decision-making units, such as households and firms, analyzing supply, demand, and prices for specific goods. For example, macroeconomics studies national unemployment rates, while microeconomics studies the demand for a particular product like smartphones. The two are interconnected, as macroeconomic trends (e.g., inflation) affect microeconomic decisions (e.g., pricing), and microeconomic behaviours shape macroeconomic outcomes.

Q2: What are two examples of macroeconomic study?
Ans: Two examples of macroeconomic study are: (a) Study of national income, which measures the total economic output of a country. (b) Study of employment levels, which analyzes the overall rate of unemployment or labor force participation in the economy.

Q3: What is the name of the Keynesian book published in 1936?
Ans: The Keynesian book published in 1936 is ‘The General Theory of Employment, Interest and Money’ by John Maynard Keynes.

Q4: Give one example of a microeconomic variable.
Ans: Demand for a particular good, such as the demand for a specific brand of clothing, is a microeconomic variable.

Q5: List four examples of macroeconomic variables.
Ans: Four examples of macroeconomic variables are: (a) Total output (GDP), (b) Rate of inflation, (c) Level of unemployment, and (d) Recession in the world economy.

Q6: Is the study of the cotton textile industry a macroeconomic or microeconomic study?
Ans: The study of the cotton textile industry is a microeconomic study, as it focuses on a specific industry and its individual firms, prices, and production decisions, rather than the economy as a whole.

Q7: Explain the scope of macroeconomics.
Ans: The scope of macroeconomics includes: 

• Understanding the economy’s operation through studying aggregates like national income, output, and employment. 
• Formulating economic policies to address issues like inflation, unemployment, and balance of payments, especially in developing countries.
• Analyzing general unemployment, its causes, and solutions by increasing effective demand through investment and consumption. 
• Studying national income to assess economic performance.
• Promoting economic growth by evaluating resources and planning for increased income and employment, as seen in growth economics.

Q8: What are the different types of goods produced in an economy?
Ans: The types of goods produced in an economy are: 

• Consumer Goods: Purchased for personal use, e.g., bread, clothing. 
• Free Goods: Abundant natural resources, e.g., air, sunlight. 
• Economic Goods: Scarce resources bought and sold, e.g., vegetables, minerals. 
• Private Goods: Owned by individuals, e.g., cars, mobile phones. 
• Public Goods: Owned by society or government, e.g., roads, hospitals. 
• Capital Goods: Used in production, e.g., machinery, tools.
  
  

Q9: Define and explain the importance of scarcity and opportunity cost in economics.
Ans: 

• Scarcity: Scarcity refers to the limited availability of resources to meet unlimited human wants, forcing choices in resource allocation. It is crucial as it drives supply and demand dynamics and affects production. 
• Opportunity Cost: Opportunity cost is the value of the next best alternative foregone when a decision is made, e.g., choosing to produce cars over trucks. It is important because it influences pricing and decision-making by highlighting the trade-offs in using scarce resources, ensuring efficient allocation.
  
  

Q10: What are the different ways resources can be allocated in an economy, and their advantages and disadvantages?
Ans: Resources can be allocated through: 

• Planned Economy: Government controls production and distribution. Advantages: Promotes social welfare, reduces inequalities, optimizes resources. Disadvantages: Limits individual choice, may lead to inefficiency. 
•  Market Economy: Driven by supply and demand. Advantages: High efficiency, encourages innovation. Disadvantages: Ignores social welfare, increases inequalities. 
• Mixed Economy: Combines government and private sector roles. Advantages: Balances efficiency and welfare. Disadvantages: Risks delays, corruption, and poor planning.
  
  

Q11: Define intermediate goods and final goods. Can milk be an intermediate good?
Ans: 

• Intermediate Goods: Goods used in the production of other goods or for resale, e.g., steel for cars. 
• Final Goods: Goods ready for consumption by end-users, e.g., clothes. Milk can be an intermediate good when used by a firm to produce products like ice cream, but it is a final good when consumed directly by a household.
  
  

Q12: Describe the four major sectors in an economy from a macroeconomic perspective.
Ans: The four major sectors are: 

• Household Sector: Individuals who consume goods and services and supply factors of production like labor. 
• Firm Sector: Production units that use factors of production to create goods for profit.
• Government Sector: Provides laws, infrastructure, and services like education, focusing on social welfare. 
• External Sector: Engages in exports and imports of goods, services, and capital flows with foreign countries.
  
  

Q13: Describe the Great Depression of 1929 and its impact on macroeconomics.
Ans: The Great Depression (1929–1933) was a global economic crisis starting with the U.S. stock market crash, causing a severe decline in output (33% in the U.S.) and employment (unemployment rose from 3% to 25%). Low demand led to overinvestment, reduced production, and income, creating a cycle of economic decline. It challenged classical economic theories, leading to the rise of Keynesian economics, which emphasized government intervention. This crisis established macroeconomics as a distinct field, focusing on aggregate economic behavior and policy solutions.

Q14: What are the key features of a capitalist economy?
Ans: A capitalist economy, or free market economy, has the following features:

• Private ownership of production means, driven by profit motives. 
• Minimal government role, limited to maintaining law, order, and stability. 
• Market forces of demand and supply solve central economic problems. 
• Dominant private sector role in production and resource organization. 
• Laissez-faire approach with minimal government interference, promoting competition and efficiency.
  
  

Q15: Discuss Adam Smith’s contributions to modern economics and his advocacy for a free market economy.
Ans: Adam Smith, considered the father of modern economics, authored ‘An Enquiry into the Nature and Cause of the Wealth of Nations’ (1776). He advocated for a free market economy, emphasizing self-interest as a driver of economic activity. His famous quote, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest,” illustrates that individuals pursuing profit provide goods society needs, benefiting all. Unlike the Physiocrats, who focused on agriculture as the source of wealth, Smith emphasized labor and market interactions, laying the foundation for modern economic thought.