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 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 C

Question 1. Distinguish between Factor Cost and Market price.
Or
Answer : Factor cost refers to the amount paid to the factors of production for their contribution in the production process Whereas Market price refers to the price at which product is actually sold in the market.
Or
Factor income to abroad is the income earned by the normal residents of a country from rest of the world (ROW) in the form of wages and salaries, rent, interest, dividend and retained earnings . Whereas Factor income from abroad is the factor income paid to the normal residents of other countries ( i.e, nonresidents ) for their factor services within the economic territory.

Question 2. Calculate level of income for a hypothetical economy, for which it is given that:
a) Total savings are Rs. 3000 crore and
b) Ratio of Average Propensity to Save and Average Propensity to Consume is 2 : 7
Or
Calculate Marginal Propensity to Consume for a hypothetical economy. Given that:
a) National Income rises to Rs. 400 crore and
b) Change in Investment (ΔI) = ₹ 80crores
Answer : Here , S = Rs. 3000 crore
𝐴𝑃𝑆/𝐴𝑃𝐶 = 27
Or APS = 𝑆/𝑌 = 2/(7+2) = 29
S = 2/9 × Y
3000 = 2/9 × Y
Y = 9/2 × 3000
National income = Rs. 13,500 crores
Or
Here , ᅀI = Rs. 80 crore, ᅀY = Rs. 300 crore
Hence , multiplier (k) = ᅀY / ᅀ𝐼 = 40080=5
NOW K = 1/(1−𝑀𝑃𝐶) = 5
5 – 5MPC = 1
5 – 1 = 5MPC
4 = 5MPC
MPC = 4/5
= 0.8

Question 3. ‘Real GDP is better than Nominal GDP as it truly reflects the growth of an economy’. Justify the given statement.
Answer : Real GDP helps in determining the effect of increased production of goods and services is affected by change in physical output only. On the other hand , Nominal GDP can increase even without any increase in physical output as it is affected by change in prices also. Real GDP is a better measure to make periods comparison in the physical output of goods and services over different years.

Question 4. State and discuss any two health deficiencies of Indian health Infrastructure.
Or
Compare and analyze the distribution of workforce in India for the year 1972-73 and give reasons for the nature of workforce distribution.

Answer : a) Inequitable distribution of health Services :The existing health system suffers from inequitable distribution of institutions and manpower. About 70% of India’s population live in rural areas , but only 20% of total hospitals are located in rural areas. Most of the modern health facilities are available only in urban areas.
b) Malnutrition :- Widespread malnutrition poses a major threat to the lives , especially in case of children.
Or
The following points can be analysed with the help of given data :
a) More proportion of rural population : The total workforce in India in the year 1972-73 was 234 million , out of which major portion 83% (194 million) belonged to rural population and the rest 17% ( 39 million ) belonged to the urban population . It happened because a majority of rural population was engaged in agricultural and allied sectors.
b) More proportion of Rural females : Females in the rural areas formed 36% of the workforce as compared to just 18% females in the urban areas.

Question 5. ‘Investment in infrastructure contributes to the economic development of a country.’  Justify the given statement with a valid argument.
Answer : The given statement is true; infrastructural development in an economy increases productivity, induces higher investment, facilitates employment, and generates more income. With the rise in income the quality of life of the people improves. Thus, conclusively we may say that infrastructure contributes to the economic development of a country.

Question 6. Giving valid reasons explain which of the following will be included in estimation of National Income of India?
a) Purchase of a machine by a factory.
b) Earnings of a self-employed doctor having a clinic at his own residence.
c) Growing vegetables in a kitchen garden of the house.
Or
Estimate the value of Nominal Gross Domestic Product for a hypothetical economy, the value of Real Gross Domestic Product and Price Index are given as ₹200 crores and 110 (with base=100) respectively.
Answer : a) Yes, it will be included in the national income as it is a part of the gross domestic capital formation.
b) Yes, it will be included in the national income as it is a mixed income.
c) No, it will not be included in the national income as it is difficult to estimate the value of production (It is a non-market transaction).
Or
Nominal GDP = (𝑅𝑒𝑎𝑙 𝐺𝐷𝑃 × 𝑃𝑟𝑖𝑐𝑒 𝑖𝑛𝑑𝑒𝑥) / 100
Nominal GDP = (200 × 100) / 100
= 220
= ₹ 220 crores

Question 7. Study the following information and compare India and china’s sectoral composition towards GDP in 2003’

Answer : ‘Contribution of primary sector : The contribution of agriculture to GDP was 15% in case of China whereas , it was 23% in case of India.
‘Contribution of Secondary sector : The Secondary sector contributed highest to China’s GDP at 53% whereas in India , the share was 26%.
‘Contribution of Service sector : The Service sector contributed highest to India’s GDP at 51% whereas in China , the share was 32%.

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

The gradual upward increase of bilateral trade that started in 2004 continued with US\$ 9.2 Billion in 2010 to US\$ 17 billion by the year 2014.Pakistani exports increased from US\$ 1.5 billion in 2010 to US\$ 2.5 billion by the end of 2014. In contrast, Chinese exports to Pakistan spiked due to massive exports of Chinese traders from 7.6 billion to 14.5 billion. That caused a trade deficit of US\$ 12 billion which needs to be addressed for a balance. Foreign Trade Agreement (FTA) largely benefitted Chinese traders and Pakistani traders could not take the full benefit of FTA. Pakistani traders could only utilize 3.3% of concessional tariffs agreed by China. China benefitted more from tariff concessions than Pakistan and the former became one be largest exporters to Pakistan.
Chinese market was less accessible for Pakistani traders because China had already given tariff concessions to other several countries. It was also due to the absence of Pakistani businessmen in the negotiation. This consideration also be kept in attention. China, eventually, became a single largest importer and exporter of Pakistan and its significance became more important due to its status as a biggest non-energy import market of Pakistan. In the same way, China became the largest market for Pakistan’s exports. (IMF, Direction of Trade Statistics, 2015, 2016) There are some causes that Pakistani trader could not get benefit from FTA properly.
Export of intermediate products and raw materials such as yarn, cotton, woven fabrics and grey fabric. Lack of export of value added products. On the other hand major products that Pakistan imports from China were, chemicals, synthetic textile fiber, machinery and its parts.
To improve the situation in Pakistan’s favor, a round of negotiation was held in the Capital city Islamabad in 2016 but no agreement was concluded due to divergences on the issues. The trade deficit between 2010 and 2014 doubled from US\$ 6 billion to US\$ 12 billion. It was Pakistan’s biggest trade
deficit with any state. Consequently, Pakistan is remained reluctant to initiate the second phase of FTA, in which the market will transfer to 90% concessions. To cater the fears, Chinese traders will not be allowed for further concessions by the Commerce Ministry of Pakistan. The latter will be dealt at par with the Pakistani exporters while giving concessions to them at the CPEC industrial zone.
It is a need that Pakistan looks into overall global exports, capacity-building of its business class, up-gradation of technology, and duty draw-backs to improve its exports and reduce trade –deficit.

Question 8. Outline and discuss any two economic advantages of Foreign Trade Agreement accruing to the economy of China.
i. China benefitted more from tariff concessions than Pakistan and the former became one of the largest exporters to Pakistan. China became the largest market for Pakistan’s exports.
ii. China, eventually, became a single largest importer and exporter of Pakistan and its significance became more important due to its status as a biggest non-energy import market of Pakistan.

Question 9. Analyse the implication of FTA on Pakistan vis-à-vis the Chinese economy.
Answer : Foreign Trade Agreement (FTA) largely benefitted Chinese traders and Pakistani traders could not take the full benefit of FTA. Pakistani traders could only utilize 3.3% of concessional tariffs agreed by China. China benefitted more from tariff concessions than Pakistan and the former became one be largest exporters to Pakistan. Chinese market was less accessible for Pakistani traders because China had already given tariff concessions to other several countries. It was also due to the absence of Pakistani businessmen in the negotiation.

Question 10. ‘GDP as an index of Welfare may understate or overstate welfare ’.Explain the statement using examples of Non-monetary exchanges.
Answer : GDP doesn’t account for Non-monetary Exchanges.
Non-monetary exchange transactions are not included in the estimation of Gross Domestic Product on account of practical difficulties like non-availability of reliable data. Although these activities enhance public welfare which may lead to under- estimation of GDP.
For example: kitchen gardening, services of homemaker etc.

Question 11. ‘Monetary measures offer a valid solution to the problem of Deflationary gap in an economy’. 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) Decrease in bank rate : Bank rate is the rate at which the central bank lends money to commercial banks to meet their long-term needs. During deficient demand , the central bank reduces the bank rate in order to expand credit .It leads to fall in the market rate of interest which induces people to borrow more funds. It ultimately leads to increase in the aggregate demand.
b) Decrease in Repo rate : Repo rate is the rate at which the central bank lends money to commercial banks to meet their short-term needs. During deficient demand, the central banks decreases the repo rate to expand credit. It leads to fall in the interest rates which induces people to borrow more funds and help to increase the aggregate demand.

Question 12. a) From the following data calculate gross value added of factor cost:

b) Distinguish between ‘Domestic Income’ and ‘National Income’.
Or
a) Given the following data, find Net National product at Market price.

b) State any two methods of measuring National Income.
Answer : a) GVAFC = (i x ii) + v – vi – iv – vii – viii
= (1500 X 30) + 4000 – 3000 – 10000 – 2800 – 3500
= Rs. 29,700
b) 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.
Or
a) Domestic income (NDP at FC) = compensation of employees + mixed income + Rent(royalty) + Profit
Domestic Income = 4000+8500+500+1200
= Rs.14,200
NNP at fc = Domestic income + NFIA
= 14,200 – 90
= Rs. 14,110
NNP at MP = NNP at FC + 600
NNP at MP = 14,110+ 600
= Rs. 14,710
b) Two methods of measuring National Income: