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

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

Question 1. Distinguish between Depreciation and Capital loss.
Or
Distinguish between Gross investment and Net investment.
Answer : Depreciation refers to fall in the value of fixed assets due to normal wear and Tear passage of time or expected obsolescence whereas capital loss refers to loss in value of the fixed due to unforeseen obsolescence, natural calamities, thefts accidents,etc.
Or
Gross investment is addition to the stock of capital before making allowance for depreciation
whereas
The actual addition made to the capital stock of the economy in a given period is termed as Net investment.

Question 2. Calculate the value of MPC and MPS for a hypothetical economy, for which it is given that:
a) Consumption function, C = 100 + 0.6Y
b) Derive the saving function.
Or
Calculate Change in Income (ΞY) for a hypothetical economy. Given that:
a) Marginal Propensity to Consume (MPC) = 0.750, and
b) Change in Investment (ΞI) = βΉ125.00 crores
Answer : C = 100 + 0.6Y
So, MPC = 0.6
MPS = 1- MPC = 1- 0.6 = 0.4
S = -C + (1- b )Y
= -100 + 0.4Y
Or
Multiplier (k) = πΆβππππ ππ πΌπππππ / πΆβππππ ππ πΌππ£ππ π‘ππππ‘ = 1/(1βπππΆ)
= 11β0.75 = 10.25 = 4
4 = πΆβππππ ππ πΌπππππ / πΆβππππ ππ πΌππ£ππ π‘ππππ‘
4 = πΆβππππ ππ πΌπππππ / 125.00 = 500
Change in Income = Rs. 500 crores

Question 3. βThere exists a direct relationship between MPC and the value of multiplier.β Justify the given statement.
Higher the MPC, more will be the value of multiplier, and vice versa.
The concept of multiplier is based on the fact that one person’s expenditure is another person’s income. When investment is increased, it also increases the income of the people, people spend a part of this increased income on consumption. However, the amount of increased income spent on consumption depends on the value of MPC . Thus, the value of multiplier depends upon the MPC.

Question 4. State and discuss Indian system of medicines (ISM).
Or
The following table which shows distribution of workforce in India for the year 1972-73. Analyse it and give reasons for the nature of workforce distribution.

Answer : a) India has its own well developed alternative system of healthcare, namely AYUSH , consisting of six systems β Ayurveda , Yoga , Unani , Sidha , Naturopathy and Homeopathy, ISM has huge potential and can solve a large part of our health care problems because they are effective, safe and inexpensive.
Or
a) In 1972-73, out of total workforce of 234 million, 195 million was in rural areas and 39 million in urban areas. It shows 83% workforce lived in rural areas. Gender differences were also observed. In rural areas, males accounted for 125 million workforce and women 70 million of workforce. In urban areas, 32 million males formed the workforce whereas women workforce was only 7 million. In the country only 77 million female workers were there as compared to 157 million male workers. In other words, 32% of female workers were there and 68% male workers were there in the country in 1972-73. The data shows:
(a) pre dominance of agriculture.
(b) more male workers both in urban and rural areas.
(c) less female workers in both rural and urban areas. Also, female workers were much lesser in urban areas.

Question 5. βIndia on the brink of a power crisis due to coal shortage’. Discuss the major reforms need to be initiated to meet energy crisis.
a) Use of Renewable:- uses of Renewable Sources ensures additional supply of electricity India is the world 5th largest producer of wind power.
b) Control of transmission and distribution losses :- To solve the power crisis, serious steps are being taken to control transmission and distribution losses

Question 6. Giving valid reasons explain which of the following will be included in estimation of Domestic Income of India?
a) Profits of Tata Industries from its business in America.
b) Retained Earnings of foreign company from India.
c) Profits earned by a branch of Foreign Company in India.
Or
Estimate the value of Nominal Gross Domestic Product for a hypothetical economy, the value of Product of Real GDP and Price index is 34000.
a. It will not be included in the Domestic Income as Tata Industries is located outside the domestic territory of India. However, it will be included in the national income as it is a part of factor income from abroad.
b. It will be included in the Domestic Income as retained earnings have accrued within the domestic territory of India.
c. It will be included in the Domestic Income as profits are earned within the domestic territory of India.
Or
Nominal GDP= ππππ πΊπ·πΓπππππ πππππ₯ / 100
Nominal GDP = 34000/100 = 340

Question 7. Study the following information and compare the Economies of India, Nepal and Bangladesh on the grounds of βPer capita income and life expectancyβ.

SOME DATA REGARDING INDIA AND ITS NEIGHBOURS FOR 2019

Answer : Life Expectancy at birth denotes, as the name suggests, average expected length of life of a person at the time of birth.
Per capita income is a measure of the amount of money earned per person in a nation or geographic region.
According to the given data Nepal and Bangladesh have low per capita income than that of India, yet they are better than India in life expectancy.
.If India wants to grow at a faster rate, she must concentrate on higher judicious investment on development of health infrastructure.

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

Over the years, India has had a trade surplus with Pakistan, with much less imports than exports. Pakistan was among Indiaβs top 50 trade partners in 2018-19, but was pushed out of the list in 2019-20. It had been anticipated that a trade ban between the countries would affect Pakistan more, since it relied heavily on India for key raw materials for its textiles and pharmaceuticals industries. After the ban, imports of these five products fell drastically to \$1 million to \$2 million between April 2020 and January 2021, while cotton imports stopped altogether. The only increase has been in pharmaceutical products β Pakistan has so far imported around \$67.26 million worth of drug products, and over \$115 million worth of organic chemicals to ensure sufficient supplies of medicines during the Covid-19 pandemic.Pakistanβs decision to suspend bilateral trade with India in August 2019 was a fallout of the constitutional changes in Jammu and Kashmir, which Pakistan said were βillegalβ. However, an underlying reason for suspending trade was the 200 per cent tariff imposed by New Delhi on Pakistani imports earlier that year after India revoked Pakistanβs Most Favoured Nation (MFN) status in the aftermath of the Pulwama terrorist attack.Trade between the two countries suffered greatly β Indiaβs exports to Pakistan dropped nearly 60.5 per cent to \$816.62 million, and its imports plummeting 97 per cent to \$13.97 million in 2019-20.The Pakistani decision to lift the ban on cotton imports comes in the backdrop of a shortage in raw material for Pakistanβs textile sector, which has reportedly suffered due to low domestic yields of cotton. Also, imports from countries like the US and Brazil are costlier and take longer to arrive.

Question 8. Outline and discuss How trade ban between India and Pakistan affect Pakistan more.
i. A trade ban between the countries would affect Pakistan more, since it relied heavily on India for key raw materials for its textiles and pharmaceuticals industries
ii. Imports from countries like the US and Brazil are costlier than that of India.

Question 9. Analyse why is Pakistan lifting it’s ban on Indian imports.
The Pakistani decision to lift the ban on cotton imports comes in the backdrop of a shortage in raw material for Pakistanβs textile sector, which has reportedly suffered due to low domestic yields of cotton. Also, imports from countries like the US and Brazil are costlier and take longer to arrive. Pakistan has so far imported around \$67.26 million worth of drug products, and over \$115 million worth of organic chemicals to ensure sufficient supplies of medicines during the Covid-19 pandemic.

Question 10. Explain how βGreen GNP reflect some index of economic welfare and sustainability.β
Green GNP measures national income or output adjusted for the depletion of natural resources and degradation of the environment. It will help to attain a sustainable use of natural environment and equitable distribution of benefits of developments. A larger number signifies greater sustainability. Hence it reflects some index of economic welfare and greater sustainability.

Question 11. βFiscal policy measures can be adopted to correct the deficient demand.β
State and discuss any two fiscal measures to justify the given statement.
1) Increase in government spending: –
Government incurs expenditure on infrastructural and administrative activities. During deficient demand, the government should increase expenditure on public works like construction of roads, flyovers, buildings, etc with a view to provide additional income to people. This will increase the aggregate demand and will help to correct the situation of deficient demand.
2) Decrease in Taxes: –
During deficient demand government reduces the rates of taxes and even abolishes some of the Taxes. It raises the purchasing power of people. Due to increase in disposable income, people are able to spend more on consumption and investment. It raises the level of aggregate demand and helps to control the situation of deficient demand.

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

b) Why do we measure National income at the prices of the Base year ?
Or
a) Given the following data, find Net Value Added at market price:

b) State any two components of βFinal expenditureβ.
a) National Income = (i)+(ii)+(iii)+(iv)+(vi)+(v)
= βΉ80+βΉ50+βΉ40+βΉ6+βΉ700+(-βΉ4)
= βΉ872 crore
b) The need for estimating National Income at constant prices arises because national income at current prices may give a misleading picture of economic performance if the prices are continuously rising or falling. With high rate of inflation in India nominal income may create a false sense of economic growth..
Or
a) Net Value Added at Factor Cost (NVA @ MP) = (i)+(ii-iii)-(vi)-(v)
= βΉ100+(βΉ30-βΉ25)-βΉ45-βΉ25
= βΉ35 crore
b) Private final consumption expenditure :- It refers to expenditure incurred by households and private non-profit institutions serving households on all types of consumer goods i.e. durable , non-durable goods and services .
Government final consumption expenditure:- It refers to expenditure incurred by general government on various administrative Services like defense law and order education etc.

Question 13. a) βThe combination of major environmental change, like deforestation, and poverty can spark the fire of a global pandemic. βIn the light of the above statement, How deforestation impacting the environment.
b) βUnderemployment/Disguised unemployment in agriculture is another huge problem which exists in India and has its effects on economic growth.
Do you agree with the given statement? Discuss any two disadvantages of Disguised unemployment in the light of the above statement.