# Class 12 Economics Sample Paper Term 2 with Solutions Set A

Please refer to Class 12 Economics Sample Paper Term 2 With Solutions Set A provided below. The Sample Papers for Class 12 Economics have been prepared based on the latest pattern issued by CBSE. Students should practice these guess papers for class 12 Economics to gain more practice and get better marks in examinations. The Term 2 Sample Papers for Economics Standard 12 will help you to understand the type of questions which can be asked in upcoming examinations.

## Term 2 Sample Paper for Class 12 Economics With Solutions Set A

Question 1. Distinguish between Factor income and Transfer income .
Or
Distinguish between Domestic income and National income.
Answer : Factor income refers to income received by factors of production for rendering factor services in the production process Whereas transfer income refers to income received without rendering any productive services in return .
Or
Domestic income is the net money value of all the final goods and services produced within the domestic Territory of a country during a period of one year whereas national income refers to net money value of all the final goods and services produced by the normal residents of a country during a period of one year.

Question 2. In an economy, an increase in investment leads to increase in national income which is four times more than the increase in investment. Calculate marginal propensity to consume.
Or
Calculate Change in Income (ΔY) for a hypothetical economy. Given that:
a) Marginal Propensity to Consume (MPC) = 1/2, and
b) Change in Investment (ΔI) = ₹800 crores
Answer : Let increase in investment=ᅀI
Then, increase in national income =ᅀI +4ᅀI = 5ᅀI
Investment multiplier (k) = Increase in income/ Increase in investment
= 5ᅀI/ ᅀI = 5
We know , k = 1/1-MPC
5 = 1/1-MPC
1-MPC = 1/5
Hence , MPC = 1 – 0.2 = 0.8
Or
Multiplier (k) = 1/1-MPC = 1 / (1/1) − 1/2 = 2
We also know ; k = change in income (ᅀY) / change in investment (ᅀI)
2 = change in income (ᅀY) / 800
= ₹ 1600 crores

Question 3. ‘Over full employment equilibrium creates inflationary pressure’. Justify the given statement.
Answer : Over full employment equilibrium signifies that planned expenditure is equal to planned output at a level higher than full employment. However ,in reality, actual output cannot increase beyond this level as economy is already at full employment and there is no idle capacity so any increase in AD beyond the full employment output, will lead to increase in general price level ( i.e. inflation )and there will be no real increase in output.

Question 4. State and discuss three tier system of health infrastructure of India.
Or
Compare and analyze the ‘Employment in primary sector’ in Rural and Urban areas based On the following information:

Answer : India’s health infrastructure and health care is made up of three tier system Primary secondary and tertiary
1- Primary Health Care:- Primary Health Care includes education concerning problems and methods of identifying preventing and controlling them.
2- Secondary Health Care:- Hospitals which have better facilities for surgery, electrocardiogram (ECG) are called secondary Health Care institutions
3- Tertiary healthcare :- Hospitals which have advanced level equipment and medicine and undertake all the complicated health problems which could not be managed by primary and secondary comes under the tertiary healthcare.
Or
In case of urban areas , primary sector has the least share with 6.6%.so activities like agriculture or mining are not the major sources of employment in urban areas whereas in rural areas 59.8% of the workforce are engaged in primary sector ( agriculture and mining and quarrying ).

Question 5. ‘Development of infrastructural facilities help to reduce unemployment in the economy’
Justify the given statement with a valid argument.
Answer : The given statement is correct infrastructure helps in generating employment .Many people get employment in infrastructural projects like construction and maintenance of roads Railways electricity plants etc. Many more are able to find employment in industry and trade after the development of strong infrastructure.

Question 6. Giving valid reasons explain which of the following will be included in estimation of National Income of India?
a) Payment of interest by a bank to an individual.
b) Service charges paid to the dealer(broker) in exchange of second hand goods.
c) Purchase of shares of a domestic firm.
Or
Estimate the value of GDP deflator for a hypothetical economy, Where the ratio of Nominal GDP to Real GDP is 3:4.
Answer : a. Payment of interest by bank to an individual is a factor payment, therefore included in national income
b. It is included because it is factor income earned by broker for rendering his service.
c. No it is not included as it is a merely financial transaction which does not help in production.
OR
GDP Deflator (price index ) = Nominal GDP / Real GDP × 100
= ¾ × 100
= ₹75

Question 7. Study the following information and compare Health indicators of India and China on the grounds of health expenditure as ℅ of GDP.

Answer : ‘Investment in infrastructure as a percentage of GDP’ is that proportion of Gross Domestic Product which is invested for the development of infrastructural facilities in a country.
According to the given data it is evident that India is contributing 30% of its total GDP on infrastructural progress, which is just a notch above the corresponding figure of 28% for Singapore.
Considering the vast geography of India this is a relatively lower proportion in this direction. If India wants to grow at a faster rate, she must concentrate on higher judicious investment on development of infrastructure.

Read the following text carefully and answer question number 8 and 9 given below:

The China-Pakistan Economic Corridor (CPEC)

The China-Pakistan Economic Corridor (CPEC) is by far one of the most ambitious and expensive components of China’s Belt and Road Initiative (BRI). The economic corridor, a mix of transportation and energy infrastructure projects at an estimated cost of \$60 billion, has been implemented with full dedication and support from the Chinese government since it was officially launched in 2015. In recent years, CPEC has received more international attention and scrutiny than the BRI projects in any other country and for a good reason — if it is completed as envisioned, it can have significant consequences for China’s geopolitical and economic interests.

Aside from its transformative impact on Pakistan, which has received extensive media coverage already, the global significance of CPEC is rooted in the construction of highways, railroads, and pipelines that will connect Pakistan’s Gwadar port (on the Arabian Sea) with the city of Kashgar in western China. This transportation corridor will substantially increase the capacity for bilateral trade and investment between China and the Middle East. The latter has recently emerged as China’s largest source of oil and natural gas imports. CPEC can also enhance China’s naval presence in the Indian Ocean and the Persian Gulf if and when China decides to project military power in this region.

The Middle East region is the largest supplier of crude oil and natural gas to China. At present these resources are transported mainly by sea routes to eastern China, where most of its industrial activities are located. Once the CPEC railways and pipelines are constructed, it will be economical to transport commodities, such as oil and natural gas, to the Gwadar port and, from there to western China. The project is also compatible with the Chinese government’s Western China Development Strategy, which calls for relocating some energy-intensive industrial activities from the densely populated eastern regions to the western provinces (near Pakistan). The cost of transporting these energy products to China’s western regions through CPEC will be smaller than using the current sea route through the Indian Ocean to the east coast of China, followed by a ground transfer (by pipe and railway) to the western regions.

To the extent that CPEC will create a new channel for the flow of goods (and eventually people) in both directions between the Middle East and China, it will increase their economic and geopolitical interdependence. By facilitating this China-Middle East connectivity, CPEC will strengthen China’s position relative to other industrial nations in the Middle Eastern economies.

Question 8. Outline and discuss how CPEC will affect China’s economic relations with middle Eastern countries.
CPEC will create a new channel for the flow of goods (and eventually people) in both directions between the Middle East and China, it will increase their economic and geopolitical interdependence. By facilitating this China-Middle East connectivity, CPEC will strengthen China’s position relative to other industrial nations in the Middle Eastern economies.

Question 9. What is the global significance of CPEC and discuss it’s one benefit accruing to China?
The global significance of CPEC is rooted in the construction of highways, railroads, and pipelines that will connect Pakistan’s Gwadar port (on the Arabian Sea) with the city of Kashgar in western China. This transportation corridor will substantially increase the capacity for bilateral trade and investment between China and the Middle East.
The cost of transporting these energy products to China’s western regions through CPEC will be smaller than using the current sea route through the Indian Ocean to the east coast of China, followed by a ground transfer (by pipe and railway) to the western regions.

Question 10. Explain how ‘Population growth’ impact the use of Gross Domestic Product as an index of economic welfare.
GDP does not consider the changes in the population of a country. If rate of population growth is higher than the rate of growth of GDP, then it will decrease the per capita availability of goods and services, which will adversely affect the economic welfare.

Question 11. ‘Monetary measures offer a valid solution to the problem of Deflationary gap in an economy’.
State and discuss any two Qualitative monetary measure instrument to justify the given statement.
Two qualitative measures which may be used to solve the problem of deflation are:
a) Decrease in margin requirement: Margin requirement refers to difference between market value of security offered and the value of amount lent. During deficient demand, Central Bank reduces the margin, which enhances the credit creating power of banks. With the decrease in margin, commercial banks can grant more loans than before, against the same amount of security. It encourages the borrowers to borrow more money and raises the level of aggregate demand.
b) Selective credit controls: – It refers to a method in which central bank gives direction to other banks to give or not to give credit for certain purposes to particular sector . During deficient demand, the central bank withdraws rationing of credit and make efforts to encourage credit.

Question 12. a) From the following data calculate the value of GDP @ Market price :

b) Distinguish between ‘Intermediate consumption’ and ‘Final consumption’.
or
a) Given the following data, find Net Value Added at Factor Cost by a firm

b) State any two components of ‘Net Indirect tax’.
a) GDP@MP = (ii)+(i)+(iii)+(iv)
= ₹4800+₹7000+₹1500+₹400
=₹ 13700 crore
b) Intermediate consumption refers to the expenditure incurred by a production unit on purchasing those goods and services from other production units which are meant for resale or using up completely during the same year whereas Final consumption refers to the expenditure on goods and services meant for final consumption and investment.
Or
a) Net Value Added at Factor Cost (NVA @ FC) = (ii)+(v)-(vi)-(vii)-(iii)+ (i)
= ₹1200+₹60-₹90-₹700 – ₹60 +₹70
= ₹480crore
b) i)- Indirect taxes refers to those taxes which are imposed by the government on production and sale of goods and services
for example – Goods and services tax
ii)- Subsidies are the ‘economic assistance’ given by the government to the firms and households with a motive of general welfare. In India LPG cylinder is sold at subsidized rate.

Question 13. a) “At wind’s mercy, nation capital breathes a sigh of relief, Air Quality Index ‘very poor’ ”
In the light of the above statement, suggest some steps which can be taken to improve air pollution.
b) ‘India’s unemployment rate crept up to nearly 8% in December, according to the Centre for Monitoring Indian Economy (CMIE), an independent think tank. This problem has only been aggravated by the outbreak of COVID-19.’
Do you agree with the given statement? Discuss any two remedial measures for unemployment in the light of the above statement.