Class 12 Economics Sample Paper Term 2 with Solutions Set B

Please refer to Class 12 Economics Sample Paper Term 2 With Solutions Set B 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 B

Question 1. Distinguish between Consumption goods and Capital Goods.
Or
Distinguish between Net exports and Net factor income from abroad.
Consumption goods refers to those goods which satisfy human wants directly Whereas capital goods are those final goods which help in production of other goods and services.
Or
Net exports refers to difference between exports and imports of goods and services

Question 2. Calculate break-even level of income for a hypothetical economy, for which it is given that:
Consumption function, C = 60 + 0.8Y
Or
Derive the Consumption function for a hypothetical economy. Given that:
a) Marginal Propensity to Consume (MPC) = 1/3(MPS) and
b) Consumption at zero level of national income = ₹ 50 crores
We know that at break-even level of income .
Putting Y=C in the consumption function ( C = 60 + 0.8Y ), we get : Y= 60 + 0.8Y
Y-0.8Y = 60
0.2Y= 60
Y = 300
Y= Break-even level of income = 300
Or
a) MPC = 1/3 MPS
We know : MPC + MPS = 1
Putting value of MPC from (1) in (2) , we get :
1/3MPS + MPS = 1
MPS = 3/4 = 0.75
MPC = (1/3)×0.75 = 0.25
b) Consumption function is given as : C = 𝑐ˉ+𝑏(𝑌)a
Autonomous consumption (c) = 50 crores and b or MPC = 0.25
Putting the value of b and c in the consumption function, we get : C= 50 + 0.25 (Y)

Question 3. ‘Economists are concerned about the rising marginal propensity to save (MPS) in an economy’. Justify the given statement.
Since the sum of MPC and MPS is unity , any increase in marginal propensity to save (MPS) would directly lead to decrease in Marginal propensity to consume ( MPC). This means that lesser proportion of additional income is going to consumption, which is vital factor of aggregate demand / expenditure. This may further lead to fall in equilibrium level of income in the income.

Question 4. State and discuss any two reasons for the sharp divide between the urban and rural healthcare in India.
Or
Compare and analyze the ‘Female and male working in primary sector’ based on following information:

Answer : a) People living in rural areas do not have sufficient health infrastructure. This had led to differences in the health status of people. 70% of India’s population live in rural areas, but only 20% of total hospitals and 50% of total dispensaries are located in rural areas.
b) The PHCs located in rural areas do not even offer X-ray or blood testing facilizes, which constituted basic healthcare.
Or
Though both men and women workers are concentrated in the primary sector, women workers ‘concentration is very high there. About 57 per cent of the female workforce is employed in the primary sector whereas less than half of males work in that sector.

Question 5. ‘Energy crisis can be overcome with the use of renewable sources of energy.’
Justify the given statement with a valid argument.
The given statement is true; Being a tropical country, India has unlimited potential for renewable energy sources ( solar energy , wind energy, geothermal energy, bio-gas and tidal power). These sources do not rely on fossil fuel and avoid carbon emissions and provide additional supply of electricity.
India is facing serious power crisis as power generation is still insufficient in comparison to it’s requirement. Greater reliance on such renewable energy resources offers enormous economic, social and environmental benefits and helps to fight with power crisis.

Question 6. Giving valid reasons explain which of the following will be included in estimation of Domestic Income of India?
a) Compensation of employees to the residents of Japan working in Indian embassy in Japan.
b) Remittances from non-resident Indians to their families in India.
c) Rent received by an Indian resident from Russian embassy in India.
Or
Estimate the value of Real Gross Domestic Product for a hypothetical economy, the Ratio of Nominal GDP and Price index is 4:5.
Following will not be included in estimation of National Income of India:
a. Yes it will be included in domestic income of India. As Indian Embassy is a part of domestic territory of India.
b. No it would not be included in Domestic income of India as it is a current transfer from abroad . Transfer payment does not lead to value addition. Hence not included.
c. Compensation paid by the Government of India is mere transfer payment and does not lead to any flow of goods and services in an economy.
Or
Real GDP = 𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃 / 𝑃𝑅𝐼𝐶𝐸 𝐼𝑁𝐷𝐸𝑋 × 100
Real GDP = 45 ×100
Real GDP = Rs. 80 crores

Question 7. Study the following information and compare the Economies of ‘India’ and ‘Srilanka’.

SOME DATA REGARDING INDIA AND ITS NEIGHBOURS FOR 2019

Answer : Considering the vast geography of India , a small country in our neighbourhood, Sri Lanka, is much ahead of India in every respect and a big country like ours has such a low rank in the world. 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:

PAKISTAN FACES DILEMMA OVER TRADE TIES WITH INDIA

Pakistan’s government put a hold on restarting limited imports of sugar, cotton and wheat from India until New Delhi reviews its 2019 decision to revoke the Kashmir region’s special status.
It reversed the decision made earlier by Pakistan’s Economic Coordination Committee (ECC) to give the green light for imports from India, which would have ended nearly 20 months of trade suspension between the rivals.
The government’s decision came after sharp criticism from opposition parties. They slammed Prime Minister Imran Khan’s administration for not consulting the parliament and trying to mend ties with New Delhi without first resolving the Kashmir dispute.
After the reversal, Khan stressed that trade with India would not be normalized until New Delhi resumed Kashmir’s special constitutional status. Kashmir is a territory that is claimed by both India and Pakistan and partly controlled by each, with China also controlling the most remote segment of the region. India and Pakistan fought two of their three full-fledged wars over the Kashmir region.
Pakistan halted trade and diplomatic ties with India in 2019 after New Delhi imposed direct rule on the part of Kashmir it administers and imposed strict security controls there in anticipation of unrest at the decision. Anti-India sentiment runs deep in Pakistan, but experts say it does not help the struggling Pakistani economy.
“Anti-India sentiments have always been there in Pakistan, and those in power have successfully exploited them for their benefits,”
He pointed out that New Delhi’s moves affecting Kashmir over the past two years have further strengthened anti-India forces in Pakistan, resulting in a total breakdown in trade and diplomatic ties.
“Cutting off such relations has been far from being practical as it puts a tremendous burden on the economically struggling Pakistan. Goods from India are always cheaper than from anywhere else,” he said. Khurram Husain, a Pakistani business journalist, told DW that anti-India sentiment is rooted in geopolitics, nothing else. “It grows and diminishes with the requirements of Pakistan’s foreign policy,” Husain said, ‘Observers say the deep-seated animosity between the nuclear-armed neighbors is clouding rational policymaking on the part of some political leaders. “It’s also being exploited by the opportunistic Pakistani opposition to try to make Imran Khan look soft on India. Throw in the mix Kashmir, and the government’s options to try to open up a dialogue with India become very limited Pakistan’s struggling economy needs help.
Pakistan’s economy is currently in the doldrums, a position made worse by a third wave of the coronavirus pandemic, which has seen the reintroduction of partial lockdowns across the country. The economy of the Muslim nation, with a population of 220 million people, has slid deeper into crisis since Khan took over as PM in 2018. In the 2 1/2 years of Khan’s tenure, GDP growth fell from 5.6% to -0.4%. The country is in debt to the tune of nearly \$114 billion (€96.85 billion) — more than 85% of its gross domestic product. To boost growth and control spiraling inflation, Khan removed his finance minister last week and appointed a new one as part of a government shake-up. Given the fragile economic situation, Pakistan cannot afford hostility with India, experts say.
“Even limited trade with India will certainly help Pakistan’s sluggish economy,” Ranjan said.”By resuming economic ties, for instance, Pakistan can benefit from India-produced COVID vaccines, which are relatively cheaper but effective in the fight against the pandemic,” he added. Husain, the journalist, has a similar view. “Opening up trade with India in specific commodities, like some food items and cotton, can help control food inflation pressures,” he argued,’

Question 8. Discuss how Anti – Indian sentiments exploited Pakistan economy.
Anti-India sentiment runs deep in Pakistan, but experts say it does not help the struggling Pakistani economy. Pakistan halted trade and diplomatic ties with India in 2019 after New Delhi imposed direct rule on the part of Kashmir it administers and imposed strict security controls there in anticipation of unrest at the decision. Cutting off such relations has been far from being practical as it puts a tremendous burden on the economically struggling Pakistan. Goods from India are always cheaper than from anywhere else.

Question 9. In this covid- era, how Pakistan economy could benefit from India. Why Pakistan halted trade and diplomatic ties with India?
Even limited trade with India will certainly help Pakistan’s sluggish economy. By resuming economic ties, for instance, Pakistan can benefit from India-produced COVID vaccines, which are relatively cheaper but effective in the fight against the pandemic. Opening up trade with India in specific commodities, like some food items and cotton, can help control food inflation pressures. Pakistan halted trade and diplomatic ties with India in 2019 after New Delhi imposed direct rule on the part of Kashmir it administers and imposed strict security controls there in anticipation of unrest at the decision.

Question 10. Explain how ‘Distribution of GDP’ impact the use of Gross Domestic Product as an index of economic welfare.
It is possible that with rise in GDP, inequalities in the distribution of income may also increase, i.e. the gap between rich and poor increases. GDP does not take into account changes in inequalities in the distribution of income. So, Welfare of the people may not rise as much as the rise in GDP.

Question 11. ‘Government can influence the level of inflation in a country through its fiscal policy’.
State and discuss any two fiscal policy measures to justify the given statement.
a) PUBLICLY BORROWINGS:- Government borrows money from public in the form of public deposits. During excess demand, government borrows money from the public to withdraw excess money held by them. It helps to reduce the money supply in the economy and, ultimately, aggregates demand falls and corrects the inflationary pressure in the economy.
b) DEFICIT FINANCING :- Deficit financing, i.e. Printing of currency increases the supply of money in the economy. During excess demand, government avoids deficit financing to prevent increase of money supply..

Question 12. a) From the following data calculate the value of National Income:

b) Distinguish between ‘Final output method’ and ‘Value added method’.
Or
a) Given the following data, find Net Value Added at Factor Cost by TEXA Company :

b) State any two components of ‘Factor Income’.
a) National Income = (ii)+(iv)+(vi)+(viii)-(iii)+(v)
=₹ 480+₹ 300+₹ 90+₹ 50-₹ 70+ (-)30
=₹ 820 crore
b) According to Final output method method value of only final goods should be added to determine the national income.
According to Value added method method sum total of the value added by each producing unit should be added in the national income.
Or
a) Net Value Added at Factor Cost (NVA @ FC) = (i)+(iii)-(ii)-(iv)-(vi)- (viii – ix)
=₹1800+₹180-₹80 -₹400-₹90-₹90 +₹50
=₹1,370 crore
b) Component of factor income are:
i. Compensation of employees:- COE refers to amount paid to employees by employer for rendering productive services. It includes all the payments and benefits, which the employer receive, directly or indirectly, from the employer.
ii. Interest:- Interest refers to amount received for lending funds to a productive unit.

Question 13. a) ‘Environment fails to perform its vital function of life sustenance and it leads to the situation of environmental crisis. ‘
In the light of the above statement, discuss any two reasons for environmental crisis.
b) ‘Unemployment is confined not only to unskilled workers, rather a sizable number of skilled workers failed to get jobs for long periods. There are variety of ways by which an unemployed person is identified.’ Discuss any two Sources of data on unemployment in the light of the above statement.