# 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 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 B

Question 1. Distinguish between National disposal income and personal disposal income.
Or
Distinguish between Money flow and Real flow.
Answer : National disposal Income is a broader concept as it includes income of both public and private sector
Whereas personal disposal income is a narrow concept as it includes income of households only.
Or
Money flow refers to the flow of money in terms of receipts and payments across different sectors of the economy. Flow of factor payments by producer sector to the household sector or flow of money from household sector to producer sector on account of the purchase of goods and services for consumption are examples of money flows.
Real flow refers to the flow of goods and services across different sectors of the economy. Flow of factor services from household sector to the producer sector or flow of goods and services from producer sector to household sector are examples of real flows.

Question 2. Calculate level of income for a hypothetical economy, for which it is given that:
a) Average Propensity to Consume (APC) = 1
b) Consumption function, C = 20 + 0.800Y (Amount in crores)
Or
Calculate the value of multiplier for a hypothetical economy. Given that:
Increase in Income (ΔY) = Increase in Consumption (ΔC)
Average propensity to consume (APC ) is 1 at break even point , i.e. when consumption ( c) = Income (Y)
Given Consumption function is,
C= 20+0.8 Y
Putting C =Y in the consumption function , we get
Y = 20+0.8 Y
Y = 100
It means , APC will be 1 when the level of income is Rs. 100 crores.
Or
It means that the increase in income is spent on consumption i.e., MPC = 1
We know: Multiplier (k) = 1/(1−𝑀𝑃𝐶)
When MPC = 1, then k = 1/(1−1) = 1/0 = ∞
Value of multiplier = ∞

Question 3. ‘Even at zero level of income, there is consumption’. Justify the given statement.
There is minimum consumption , known as autonomous consumption even at zero level of national income because survival needs consumption. This consumption is done by utilising previous savings (dissaving) .

Question 4. State and discuss any two factors of infrastructural development of a country.
Or
Compare and analyze the ‘Secondary sector composition’ in Rural and Urban areas based on following information:

Answer : a) Energy – Energy is an important input most of the production processes and consumption activities. There exists a positive correlation between economic growth and demand for energy.
b) Power – Power or electricity is a critical component of infrastructure, which is often identified with progress in modern civilization.
Or
The data in the given table reveals that:
a) About 20 per cent of rural workers are working in manufacturing industries, construction and other industrial activities (secondary sector) whereas it is about 34% of urban workers in urban areas .
b) Secondary sector is able to provide more employment in urban areas than in rural areas
Due to the better infrastructural facililties in Urban areas .

Question 5. ‘Development of infrastructural facilities help to reduce unemployment in the economy.’ Justify the given statement with a valid argument.
The given statement is true; Infrastructure helps in generating employment. Many people get employment in infrastructural projects like construction and maintenance of roads , railways , electricity, plants etc. Many more people 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) Rent-free house given to an employee by an employer
b) Purchases by foreign tourists.
c) Payment of fees to a lawyer engaged by a firm
Or
Estimate the value of GDP deflator for a hypothetical economy, the ratio of Nominal Gross Domestic Product to Real Gross Domestic Product is 5:4.
a. Yes, it is included in the national income by Income Method since it is a part of ‘wages in kind’ paid to employees.
b) Yes, purchases by foreign tourists are ‘exports’ and, therefore, they are included in the national income through the Expenditure Method
c) It is an intermediate expenditure for the firm because it involves purchase of services by one production unit (firm) from another production unit (lawyer). So, it is deducted from the value of output of the firm to arrive at the value added. So, it is not included in national income.
Or
GDP deflator = (𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃 / 𝑅𝑒𝑎𝑙 𝐺𝐷𝑃) × 100
GDP deflator = 5/4 × 100
GDP deflator = 125

Question 7. Study the following information and compare the Economies of India and Singapore on the grounds of ‘Percentage of people using safely managed’.

Answer : ‘Percentage of people using safely managed’is the proportion of people having proper safe drinking water facilities as well as sanitation facililties in the country.
According to the given data it is evident that in India , still some people are not getting proper drinking water and sanitation facililties which is a major setback to our infrastructural development, as it directly impacts the health of the people whereas in Singapore there 100% availability of safe drinking water and sanitation facililties to all the people.
If India wants to grow at a faster rate and to achieve better infrastructural status , she must concentrate on higher judicious investment on development of infrastructure.

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

Pakistan China Trade in Post 1971 Era:

The trade during this decade shows a sharp rising drift from US\$ 73.4 million in 1970 to US\$ 192.8 million at the end of this decade. The exports from China to Pakistan touched their peak with slight fluctuations, as high as US\$ 167.8 million. All were due to favorable China’s export policy, and increasing consumer class with the oil boom in the Middle East. In contrast, Pakistan experienced an inconsistent trend though upward (Malik, 2017). Political circumstance and trade policy influence the upward or downward trend of foreign trade. China made a focus on export growth strategy while Pakistan was facing Afghan war on its western borders and hosting a continuous influx of Afghan refugees burdensome of Pakistan’s already weak economy underwent the debacle of East Pakistan. All these factors combined contributed in the sharp decrease of Pakistani exports from 1984 to 1988. However, latter Pakistan adopted a prudent export policy that temporarily spiked exports to US\$ 169 in the FY 1989. On the contrary, China got an opportunity to bring its exports from US\$ 162 million to US\$ 337.5 million.(IMF) That gap widened the trade deficit to high as US\$ 270 million in FY 1988. (Ministry of Foreign Affairs, 2006).

The bulk of bilateral trade reached US\$ 424.6 million to US\$ 716.8 million in the decade of the 90s. However, the balance of trade remained in favor of China. Pakistan could hardly touch US\$54 million to US\$179 million. The declining was due to a dismal situation on the part of Pakistan as comparison to China. It was due to the political instability and lack of prudent export policy.

This agreement was signed with the following goals:
To integrate Chinese and Pakistani economies for shared advantage., To establish investment regimes in services sector particularly in IT and related services, infrastructure, education, tourism, Research and Development, etc ,To prepare environment for transfer of technology, creation of new jobs, joint venture to build a capacity of domestic service suppliers.

Question 8. Outline and discuss any two objectives of Free trade agreement between China and Pakistan.
The objective of free trade agreement between China and Pakistan are :
i. To integrate Chinese and Pakistani economies for shared advantage and to establish investment regimes in services sector particularly in IT and related services, infrastructure, education, tourism, Research and Development, etc
ii. To prepare environment for transfer of technology, creation of new jobs, joint venture to build a capacity of domestic service suppliers.

Question 9. Analyse how China’s exports to Pakistan touched their peak, as high as US\$ 167.8 million.
The exports from China to Pakistan touched their peak due to favorable China’s export policy, and increasing consumer class with the oil boom in the Middle East. China made a focus on export growth strategy while Pakistan was facing Afghan war on its western borders and hosting a continuous influx of Afghan refugees burdensome of Pakistan’s already weak economy underwent the debacle of East Pakistan. On the contrary, China got an opportunity to bring its exports from US\$ 162 million to US\$ 337.5 million.(IMF)That gap widened the trade deficit to high as US\$ 270 million in FY 1988. (Ministry of Foreign Affairs, 2006). The bulk of bilateral trade reached US\$ 424.6 million to US\$ 716.8 million in the decade of the 90s. However, the balance of trade remained in favor of China.

Question 10. Explain how well GDP measures the well-being of society?
GDP is an indicator of a society’s standard of living, but it is only a rough indicator because it does not directly account for leisure, environmental quality, levels of health and education, activities conducted outside the market, changes in inequality of income, increases in variety, increases in technology, or the—positive or negative—value that society may place on certain types of output.
The standard of living is all elements that affect people’s happiness, whether these elements are bought and sold in the market or not.

Question 11. ‘Government may choose to use fiscal policy to help reduce a Deflationary gap’.
State and discuss any two monetary measures to justify the given statement.
Two measures which may be used to solve the problem of deflation are:
a) 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, 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.
b) Decrease in Taxes – During Deficient demand , government reduces the rate of taxes and even abolishes some of the taxes. 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 Net National Product at Market Price:

b) Distinguish between ‘Personal Income and ‘Private income’.
Or
a) Given the following data, find Net Value Added at Factor Cost:

b) State any two precautions taken while calculating National income by ‘Expenditure method’.
a) Net National Product at Market Price is calculated as:
NNPmp = Wages and Salaries + Social Security Contribution by Employers + Rent + Interest + Profit + Net Factor Income from Abroad + Net Indirect Tax.
= 1,800 + 300 + 460 + 940 + 200 + 50 + 300 = Rs. 4,050 crores.
To get a national product, we add net factor income from abroad and to get the national product at market prices we add net indirect taxes.
b) Personal income refers to income actually received by household from all sources . Whereas,
Private income refers to the income which accrues to private sector from all sources.
Or
a) Value of output = Sales value + Change in stock
= Rs. 600 – Rs. 40 = Rs. 560 crore
GVAmp = Value of Output – Intermediate Consumption
= Rs. 560 – Rs. 400 = Rs. 160 crore
NVAfc = GVAmp – Depreciation – Net indirect taxes
= Rs. 160 – Rs. 30 – Rs.50 = Rs. 80 crore
b) The precautions to be taken while using expenditure method are :
i. Expenditure on Intermediate goods will not be included in the national income.
ii. Purchase of second-hand goods will not be included.

Question 13. a) ‘Over the past two decades in particular, economic growth has come at the expense of the environment. Earth’s natural resources have been used in ways that are environmentally inefficient and wasteful, with dangerous consequences such as decreased air quality and overall climate change. Sustainable development is a carefully planned strategy to embrace growth while using resources more efficiently’.
In the light of the above statement, suggest any four strategies for sustainable development.
b) ‘It is necessary to generate employment in the formal sector rather than in the informal sector’, Do you agree with the given statement? Discuss any two advantages of formal sector.