AHSEC Class 12 Economics Question Paper Solution 2022
ECONOMICS
2022
Full Marks: 80
Pass Marks: 24
Time: Three hours
The figures in the margin indicate full marks for the questions.
PART-A
1. Answer the following questions :
(i)Define involuntary unemployment.
Ans: Involuntary unemployment is a situation in which an individual is willing to work at the current wage rate, but is unable to find a job.
(ii) What is effective demand?
Ans: Effective demand is the amount of goods and services that consumers are willing and able to purchase at a given price level in an economy.
(iii) What do you understand by depreciation of capital?
Ans: Depreciation of capital refers to the decline in the value of an asset over time due to wear and tear, obsolescence, or other factors.
(iv) GNP= GDP_______.(Fill in the blank)
Ans: Net Factor income from abroad.
(v) What is foreign exchange market?
Ans: The foreign exchange market is a financial market where currencies are bought and sold. It is the largest and most liquid financial market in the world, with a daily trading volume of trillions of dollars.
(vi) Which of the following transactions are included in the current account of Balance of Payment?
(a) Import and Export of goods
(b) Import and Export of services
(c) Unilateral transfer
(d) All of the above
(Choose the correct option)
Ans:
2. Write the differences between GDP at market price and GDP at factor cost. 2
Ans: The correct option is (d) All of the above. The current account of the balance of payment includes import and export of goods, import and export of services, and unilateral transfers.
OR
Write one similarity and one difference between intermediate goods and capital goods. 1+1=2
Ans: Similarity: One similarity between intermediate goods and capital goods is that they are both used in the production of other goods and services.
Difference: Intermediate goods are typically produced and used within the same year, while capital goods have a longer lifespan and are used over a period of several years. Intermediate goods are used in the production of other goods, while capital goods are used to produce intermediate or final goods.
3. What do you understand by 'Paradox of Thrift'? 2
Ans: The Paradox of Thrift, also known as the "Savings Paradox," is an economic concept that suggests that individual attempts to save more money during times of economic downturn may actually lead to a worsening of the overall economic situation. This is because when individuals save more, they reduce their spending, which can lead to lower demand for goods and services. This, in turn, can lead to a decrease in production and employment, leading to further economic decline. The Paradox of Thrift suggests that while saving may be beneficial for individuals in the short term, it can have negative consequences for the overall economy in the long run.
OR
What is aggregate supply? Explain.
Ans: Aggregate supply refers to the total amount of goods and services that firms in an economy are willing and able to sell at a given price level in a given time period. It represents the ability of an economy to produce goods and services and is influenced by factors such as the availability of resources, the state of technology, and the efficiency of firms
4. Write two differences between direct tax and indirect tax.
Ans: The two differences between direct tax and indirect tax :
Direct taxes are taxes that are imposed directly on individuals or businesses, while indirect taxes are taxes that are imposed on the sale or consumption of goods and services.
Direct taxes are typically paid directly to the government by the taxpayer, while indirect taxes are collected by the seller of the goods or services and are passed on to the government.
5. What are the components of high-powered money ?
Ans: High-powered money, also known as base money, is the total supply of money in an economy that is controlled directly by the central bank. The components of high-powered money include:
Currency: physical notes and coins in circulation.
Reserves: funds that banks hold at the central bank, which can be used to meet their reserve requirements or to make payments to other banks.
Central bank deposits: funds that non-bank financial institutions and the government hold at the central bank.
International reserves: foreign currencies and assets held by the central bank, which can be used to stabilize the exchange rate or to make international payments.
Central bank capital: the equity capital of the central bank, which can be used to absorb losses and maintain financial stability.
OR
Define Bank Rate and Cash Reserve Ratio. 1+1=2
Ans: Bank Rate : Bank rate is the interest rate at which the central bank lends funds to commercial banks. It is also known as the discount rate and is used by the central bank as a monetary policy tool to influence the supply of credit and demand for money in the economy.
Cash Reserve Ratio : Cash reserve ratio (CRR) is the percentage of deposits that commercial banks are required to hold in the form of cash or deposits with the central bank. It is used by the central bank as a tool to regulate the availability of credit in the economy and to manage inflation.
6. Write two differences between Balance of Payment and Balance of Trade. 2
Ans: 1.The balance of trade measures the difference between imports and exports of goods, while the balance of payments measures all financial transactions between a country and the rest of the world.
2. The balance of trade is reported on a shorter time frame (e.g. monthly or quarterly) while the balance of payments is reported on an annual basis.
7. Write in brief the ideas of fixed exchange rate and flexible exchange rate. 2
Ans:Fixed exchange rate is a type of exchange rate regime where a currency's value is fixed or pegged to the value of another currency, or to a basket of currencies. Under this system, the central bank of a country intervenes in the foreign exchange market to maintain the fixed exchange rate by buying or selling its own currency.
On the other hand, a flexible exchange rate is a type of exchange rate regime where the value of a currency is determined by the forces of supply and demand in the foreign exchange market. Under this system, the central bank does not intervene in the foreign exchange market to maintain the value of the currency, and the currency's value is allowed to fluctuate freely based on market forces.
8. What is an investment multiplier? If a new investment of Rs. 300 crore increases National Income by Rs. 1200 crore, calculate the value of investment multiplier. In this case, what will be the value of MPC ? 1+1+2=4
Ans: The investment multiplier is a measure of the magnitude of the impact that an increase in investment spending can have on the level of national income. It represents the amount by which an initial increase in investment spending will be multiplied as it creates a series of additional rounds of spending throughout the economy.
If a new investment of Rs. 300 crore increases national income by Rs. 1200 crore, the investment multiplier can be calculated as follows:
Investment multiplier = Change in national income / Change in investment spending
= Rs. 1200 crore / Rs. 300 crore
= 4
The value of the marginal propensity to consume (MPC) can be calculated as the change in consumption spending divided by the change in national income. In this case, if the increase in national income of Rs. 1200 crore resulted in an increase in consumption spending of Rs. 800 crore, the value of MPC would be:
MPC = Change in consumption spending / Change in national income
= Rs. 800 crore / Rs. 1200 crore
= 2/3 or approximately 0.67.
OR
Briefly discuss the components of aggregate demand. 2+2=4
Ans: Aggregate demand refers to the total amount of goods and services that households, businesses, and the government sector are willing and able to buy at a given price level in an economy. It is the sum of all demand for goods and services in an economy, and is a key determinant of economic activity and overall economic performance.
The components of aggregate demand are:
Consumption: This refers to the spending on goods and services by households, and is the largest component of aggregate demand.
Investment: This refers to the spending on capital goods by businesses, as well as the spending on residential and non-residential construction.
Government spending: This refers to the spending on goods and services by the government sector.
Net exports: This refers to the difference between the value of exports and the value of imports. Net exports can either add to or subtract from aggregate demand.
9. Write differences between the following concepts: (any two)
(i) Autonomous investment and Induced investment.
Ans:
(ii) Ex-ante consumption and Ex-post consumption.
Ans:
(iii) Marginal propensity to consume and Marginal propensity to save.
Ans:
(iv) Marginal propensity to consume and Average propensity to consume
Ans:
10. Discuss four main functions of the Central Bank. 4
Ans: Four main functions of the Central Bank :-
Monetary policy: The central bank is responsible for implementing and managing the country's monetary policy, which includes setting interest rates and controlling the money supply in order to achieve economic goals such as low inflation and stable growth.
Financial stability: The central bank plays a critical role in maintaining financial stability by regulating and supervising the financial system, including banks and other financial institutions. This helps to reduce the risk of financial crises and ensure that the financial system is able to support economic growth.
Payment and settlement systems: The central bank is responsible for overseeing and maintaining the payment and settlement systems that enable the transfer of funds between banks and other financial institutions. This helps to ensure the smooth functioning of the financial system and the economy as a whole.
Currency issuance: The central bank is responsible for issuing and regulating the supply of the country's currency. This includes the design and production of paper money and coins, as well as the maintenance of sufficient reserves to meet the demand for currency.
OR
Explain how commercial banks create credit.
Ans: In India, commercial banks create credit through the process of fractional reserve banking. Under this system, commercial banks are required to hold a certain percentage of their deposits in reserve, while the rest can be loaned out to borrowers. When a bank makes a loan, it creates new money by crediting the borrower's account with the loan amount. This new money enters circulation when the borrower spends it, and the recipient of the funds can deposit it in a bank, which can then lend it out again, creating even more credit.
For example, suppose a commercial bank has deposits of 1000 rupees and is required to hold a reserve ratio of 10%. This means it must hold 100 rupees in reserve and can lend out 900 rupees. If the bank makes a loan of 900 rupees to a borrower, it creates 900 rupees of new money, which is credited to the borrower's account. If the borrower then spends the money, the recipient of the funds can deposit it in the bank, increasing the bank's deposits to 1900 rupees. The bank can then lend out a portion of these deposits, creating even more credit and expanding the money supply.
11. Discuss the components of the Government Budget. 4
Ans: Revenue budget: The revenue budget includes all the revenue that the government expects to receive from various sources, such as taxes, fees, and other non-tax revenue. It also includes the expenditure that the government incurs on various schemes and programs, as well as on the day-to-day running of the government.
Capital budget: The capital budget includes all expenditure on capital assets, such as infrastructure, machinery, and equipment. It also includes any revenue that the government expects to receive from the sale of capital assets.
Deficit: The deficit is the difference between the government's total expenditure and total revenue. If the expenditure exceeds the revenue, the government runs a deficit, which it finances by borrowing.
Debt: The debt is the total amount that the government owes to its creditors, including domestic and foreign lenders. The government's debt is a critical component of the budget and is closely monitored to ensure that it remains sustainable.
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AHSEC HS 2nd Year Economic Solved Question Paper 2022
PART-B
13. (i) Define sustainable development.
Ans:
(ii) During British rule, decay of Indian handicrafts was caused by -
(a) Discriminatory tariff policy of the British Government
(b) Competition from machine-made products
(c) Change in patterns of demand
(d) All of the above.
( Choose the correct option )
(iii) In which year the NITI Aayog was formed ?
(iv) What is the difference between Labour Force' and 'Work Force' ?
(v) Mention one similarity of the economic policies adopted by India and Pakistan.
(vi) The 'Great Leap Forward' campaign in China focused on
(Great Leap Forward)
(a) Privatisation
(b) Widespread industrialisation
(c) Development of services sector:
(d) Economic reform
(Choose the correct option)
14. Mention two major industrial sector reforms in the Indian economy under the policy of liberalisation. 2
OR
Write about two positive effects of LPG policies in the Indian economy.
15. Write two merits of GST. 2
OR
What is demonetisation? Mention one positive effect of demonetisation in the Indian economy. 2
16. What is structural composition of an economy 2 As an 2021, which sector contributed highest to the GDP of India ? 1+1=2
OR
Write two characteristics of small-scale industries.
17. Write two differences between economic infrastructure and social infrastructure. 2
OR
Write about two problems faced by the power sector in India.
18. Write any two measures undertaken by the Government of India improve agricultural marketing. 2
OR
What do you understand by diversification of agriculture? 2
19. What are the fliree main approaches undertaken by Government of India to alleviate poverty ? 2
OR
Write a short note on MGNREGA.
20. Discuss the goals of planning in India. 4
OR
Briefly discuss to positive and two negative impacts of Green Revolution. 2+2=4
21.Write a comparative note on the demographic indicators for India, China and Pakistan. 4
OR
(i) Write the reasons for rapid economic development in China. 2
(ii) Write tre reasons for slow economic growth in Pakistan. 2
22. Write about different types of unemployment. 4
23. Is economic growth, a cause of environmental degradation? Justify your answer. 4
OR
(i) Write two causes of global warming. 2
(ii) Suggest two measures for attaining sustainable development in India. 2
24. What is organic farming ? Discuss its merits and demerits. 1+5=6
OR
What is Human Capital? Discuss the sources of human capital formation. 1+5=6
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TOTAL (PART A & B): 40+40=80
Also Read: HS 2nd Year Economic Notes 2023-24
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