# 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 below. These Class 12 Economics Sample Papers will help you to get more understanding of the type of questions expected in the upcoming exams. All sample guess papers for Economics Class 12 have been designed as per the latest examination pattern issued by CBSE. Please practice all Term 2 CBSE Sample Papers for Economics in Standard 12.

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

Question 1. Distinguish between Personal income and Private income.
Or
Distinguish between National disposal income and National Income.
Personal income is the sum total of earned and transfer incomes received by the individuals from the income sources involved within and outside the nation. Whereas Private income can be contemplated as the factor and transfer of the income received from all the private sources within and outside the country.
Or
National disposal Income includes factor incomes as well as transfer incomes whereas national income includes only factor incomes.

Question 2. Calculate equilibrium level of income for a hypothetical economy, for which it is given that:
a) Autonomous Investments = ₹ 700.0 crores, and
b) Consumption function, C = 100 + 0.65Y
Or
Calculate Change in Income (ΔY) for a hypothetical economy. Given that:
a) Marginal Propensity to Consume (MPC) = 0.75, and
b) Change in Investment (ΔI) = ₹780.00crores
Given Consumption function is,
C=100+0.65 Y
Autonomous investments= 700 crores
We know, at equilibrium level
Y = C+ I
Y= 100+0.65Y +700
Y – 0.65Y = 700
0.35Y= 700
Y = 700/0.35
Y = ₹ 2,000 crores
Or
Given Δ I = ₹780 crores
MPC = 0.75
As we know,
Multiplier(K)= 1/(1−𝑀𝑃𝐶) = 1/0.25 = 4
WE know that ,
4 = 𝐶ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑖𝑛𝑐𝑜𝑚𝑒 / 780
= Rs. 3,120 crores

Question 3. ‘It is not essential that there will always be full employment at equilibrium level of income’. Justify the given statement.
Yes an economy can be in equilibrium when there is unemployment in the economy when the aggregate demand= aggregate supply in the economy. It refers to a situation when aggregate demand is equal to the aggregate supply at a level where the resources are not fully employed.

Question 4. State and discuss any two healthcare steps/ initiatives that help people towards a good quality of life.
Or
On the basis of the graph, analyze the growth of GDP and Employment in India.

Answer : Two healthcare initiatives to be integrated to help people move towards a good quality of life are:
a) The effectiveness of healthcare programmes rests on primary healthcare . So, serious steps should be taken to improve them.
b) All citizens can get better health facilities if public health services are decentralized.
Or
The information from the given graph reveals that:
a) During 1950-2010 , GDP of India grew positively and was higher than the employment growth.
b) There was always fluctuation in the growth of GDP, but employment grew at the rate of not more than 2%.
c) During these years the gap between the growth of GDP and employment was widening .

Question 5. ‘Infrastructure development is also crucial for the social development of a country.’ Justify the given statement with a valid argument.
Social infrastructure plays an important role in both the economic development of a nation and the development of society’s quality of life. Social infrastructure enhances social wellbeing and furthers economic growth by providing basic services and facilities which allow businesses to develop and flourish. Infrastructure investments can affect social welfare by potentially improving the quality of life of those living in the invested area. For example, public parks, water systems, and other facilities can improve social welfare without having any effect on residents’ incomes.

Question 6. Giving valid reasons explain which of the following will be included OR not in estimation of National Income of India?
a) Firm incurred expenditure on medical treatment of employee’s family
b) Durable goods purchased by a household.
c) Petrol used in police vehicles.
Or
Estimate the value of Real Gross Domestic Product for a hypothetical economy, where Nominal GDP is quadruple of Price index.
a) Yes, it is a part of the compensation of employees and, therefore, it will be included in the national income
b) Yes, it will be included in the national income as it is a part of the private final consumption expenditure.
c) No, it will not be included in national income as petrol is an intermediate good in this case. It is used for the provision of the final product (maintenance of law and order by the police).
Or
Real GDP = (𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃 / 𝑃𝑟𝑖𝑐𝑒 𝐼𝑛𝑑𝑒𝑥) × 100
Real GDP= (4/1)×100
Real GDP = Rs. 400 crores

Question 7. Study the following information and compare the Economies of India and Sri Lanka on the grounds of ‘health expenditure as a percentage of GDP’

Answer : Health expenditure as a percentage of GDP’ is that proportion of Gross Domestic Product which is spent or invested for providing healthcare facilitie/ for the development of health infrastructural facilities in a country.
According to the given data it is evident that India is contributing 3.9% of its total GDP on health expenses, which is just a notch above the corresponding figure of 3.3 for Sri Lanka.
Considering the vast geography of India and the alarming health status 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 health infrastructure.

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

India and China had similar per capita GDP in 1983. However, Chinese per capita GDP will be five times that of India’s in 2022. Manufacturing and exports have played a significant role in the Chinese economy, transiting it from lower to higher per capita GDP. We were one of the largest consumers of mobile phones in 2014. In 2014-15, our mobile phone imports exceeded \$8 billion. Our electronics imports were threatening to exceed our oil imports. The government took many steps like 100 per cent automatic FDI, levy of import duties to protect local manufacturers, the Phased Manufacturing Plan (PMP), manufacturing clusters (EMC 2.0) and the Production Linked Incentive (PLI) scheme. Despite some execution challenges on the ground, these steps have developed our mobile phone manufacturing base. They have attracted investments, created lakhs of jobs, and have moved us from being a net importer to a net exporter. The next frontier for us is to boost exports and increase value addition. Our mobile phone exports are primarily limited to feature phones and low-value smartphones. India must aim for a significant increase in exports from the current \$4 billion. A judicious mix of protection (levy of import duty/banning of finished goods) and incentives (PMP, PLI scheme, 100 per cent FDI) has developed local manufacturing, created jobs, and turned a trade surplus. Imagine the opportunity to replicate this success across sectors like speciality steel, automobiles, auto components, toys, bulk drugs, technical textiles, food products, solar PV modules, and medical devices. Our value addition in mobile phone manufacturing is currently limited to 15-20 per cent versus more than 40 per cent in China. The scheme for promoting the manufacturing of electronic components and semiconductors (SPECS) is a step in the right direction. Many parts like display panel assembly, camera modules, batteries, chargers, PCB assembly, etc, are being manufactured/proposed to be manufactured in India. This will increase the value-added to the Chinese level over the next few years. We must focus on setting up a fabrication plant to manufacture semiconductor chips to facilitate complete vertical integration. We should leverage our common interests with Taiwan, a global leader in chip manufacturing, for a head start. We missed the manufacturing/export bus in the 1980s. We did excel in services like software to become back office to the world. With China+1 becoming a geopolitical imperative, it is an opportune time for us to expand the manufacturing sector and improve our export market share. Many of our peers are ahead of us in ease of doing business, but none of them has a large domestic market like us. The automobile and generic pharma sector in the past and the mobile phone/RAC sectors recently have shown that we know the formulae.

Question 8. From 1893 to 2022, State how Chinese per capita GDP growth become five times more than that of India.
i) India and China had similar per capita GDP in 1983. However, Chinese per capita GDP will be five times that of India’s in 2022. Manufacturing and exports have played a significant role in the Chinese economy, transiting it from lower to higher per capita GDP.
ii) Our value addition in mobile phone manufacturing is currently limited to 15-20 per cent versus more than 40 per cent in China.

Question 9. Discuss some initiatives taken by the Indian government to promote the manufacturing of electronic components. Can this step paves the direction to ‘ Aatma Nirbhar bharat ‘.
i) The government took many steps like 100 per cent automatic FDI, levy of import duties to protect local manufacturers, the Phased Manufacturing Plan (PMP), manufacturing clusters (EMC 2.0) and the Production Linked Incentive (PLI) scheme.
ii) The scheme for promoting the manufacturing of electronic components and semiconductors (SPECS) is a step in the right direction. Many parts like display panel assembly, camera modules, batteries, chargers, PCB assembly, etc, are being manufactured/proposed to be manufactured in India. This will increase the value-added to the Chinese level over the next few years.
Yes ,this is one of the right step towards creating self-reliant India .(Aatmanirbhar Bharat )

Question 10. Explain how ‘Externalities’ impact the use of Gross Domestic Product as an index of economic welfare.
Externalities refer to benefits or harms of an activity caused by a firm or an individual, for which they are not paid or penalised. Externalities impacts the welfare of the society but Such external effects do not form part of market transactions . GDP does not take into account externalities, positive or negative.

Question 11. ‘Government may choose to use fiscal policy to help reduce an Inflationary gap in an economy’.State and discuss any two monetary measures to justify the given statement.
During inflationary situation the govt. can take two fiscal policy measures to reduce excess demand:
a) An increase in Taxes :- Government levies new taxes and enhances the rate of prevailing ones. It reduce the disposal income of the people , and therefore , the aggregate demand is reduced.
b) Surplus budget policy : Government’s expenditure should remain less than its income to control the excess demand.

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

b) Distinguish between ‘Real GDP’ and ‘Nominal GDP’ .
Or
a) Given the following data, find Net Value Added at Factor Cost :

b) State any two components of ‘Gross fixed capital formation’.
a) National Income (NNPFC)
= Government Final Consumption Expenditure + Private Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports – NIT + NFIA
= 350 + 780 +200 + 70 -94 + (-50)
= Rs. 1,256 crore
b) Real GDP refers to production of goods and services valued at constant prices. Whereas Nominal GDP refers to production of goods and services valued at constant prices.
Or
a) Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock) – Purchase of Intermediate Goods – Depreciation – Net Indirect Taxes
= 900+ (-40)-600-80-120
= Rs. 60 crore
b) Component of Gross fixed capital formation are: