CBSE Economics Model Question Paper Term 2 pdf download for 2021-2022 Exam
Paper 1 (for March 2022 Term-II Exam)
Q.1 “As income increases, APC continuously declines, whereas APS continuously increases.” True/False? Give reason. (2 marks)
“An economy facing unintended accumulation of inventories would try to reduce aggregate demand.” Do you agree with the
given statement? Support your answer with valid reasons. (2 marks)
Q.2 Calculate Investment expenditure from the following data about an economy which is in equilibrium: (2 marks)
National income = `1,000 crore
Marginal propensity to save = 0.25
Autonomous consumption expenditure = `200 crore
Q.3 Distinguish between consumption goods and capital goods, giving an example of each. (2 marks)
Distinguish between stock and flow variables, giving an example of each. (2 marks)
Q.4 “Compared to the 1970s, there has hardly been any change in the distribution of workforce across various industries.”
Comment. (2 marks)
There exists an inverse correlation between infrastructural growth and national income. Defend or Refute the statement. (2 marks)
Q.5 “Ujjwala Yojana has been a game changer for rural India.” State any two conventional fuels being targeted under the LPG
cylinder distribution scheme (Ujjwala Yojana). (2 marks)
Q.6 “India’s GDP is expected to expand 7.5% in 2022-23: World Bank”. Does the given statement mean that welfare of people of
India increase at the same rate? Comment with reason. (3 marks)
State any three precautions while estimating national income by value added method. (3 marks)
Q.7 Read the following News Report and answer the questions that follow: (3 marks)
The Monetary Policy Committee of the Reserve Bank of India kept interest rates on hold Thursday even as it vowed to keep
policy sufficiently loose to help revive the coronavirus-battered economy. Accepting a key demand of lenders and the corporate
sector, the central bank cleared a one-time restructuring of loan accounts to bail out stressed borrowers, including personal,
small and medium loans.The details of the loan restructuring scheme — expected to kick in after the moratorium on loan
repayments ends August 31 — will be worked out by a committee headed by former ICICI Bank Chairman KV Kamath. The
RBI also continued to provide support on the liquidity front and opened a new targeted window for small lenders. The central
bank kept the repo rate unchanged at 4 per cent and reduced the reverse repo rate to 3.35 per cent.
(a) Suppose you are a member of the Monetary Policy Committee of the RBI. What suggestion will you give regarding
change in money supply to help revive the coronavirus-battered economy?
(b) “The Monetary Policy Committee of the RBI kept interest rates on hold…” What does the term ‘interest rates’ imply
here? Give their meanings.
Q.8 Read the following carefully and answer the questions that follow: (3 marks)
India aims to raise health spending to 2.5% of GDP, says Health Minister Harsh Vardhan
Union Health Minister Harsh Vardhan on Sunday reiterated the Narendra Modi government’s commitment to increase the
expenditure on public health to 2.5 per cent of India’s gross domestic product (GDP) by 2025.
“The Union Government is committed to increasing the public healthcare spending as a percentage of GDP from the existing
1.15 per cent to 2.5 per cent by 2025,” he said in the third episode of ‘Sunday Samvaad’, a weekly interaction he has been
holding with his social media followers every Sunday for the last three weeks. Harsh Vardhan noted that the committed leap in
the share means an actual rise of 345 per cent from the current expenditure.
(a) What per cent of its GDP does India invest on infrastructure? Is it sufficient for economic development of the nation?
(b) Name the term which is an indicator used by exports to gauge the number of people dying prematurely due to a particular
disease, as well as, the number of years spent by them in a state of ‘disability’ owing to the disease.
Read the following text carefully and answer question number 9 and 10 given below:
India and China had historically maintained peaceful relations for thousands of years of recorded history. But the harmony of the
relationship has varied in modern time, especially after the rule of the Communist Party in China; the two nations have sought
economic cooperation with each other, while frequent border disputes and economic nationalism in both countries are a major point of contention. The modern relationship began in 1950 when India was among the first countries to end formal ties with the Republic
of China (Taiwan) and recognise the People’s Republic of China as the legitimate government of Mainland China. China and India are
two of the major regional powers in Asia, and are the two most populous countries and among the fastest growing major economies in
the world. Growth in diplomatic and economic influence has increased the significance of their bilateral relationship.
Relations between contemporary China and India have been characterised by border disputes, resulting in three military conflicts – the
Sino-Indian War of 1962, the border clashes in Nagasaki in 1967, and the 1987 Sum- dorong Chu standoff. However, since the late
1980s, both countries have successfully rebuilt diplomatic and economic ties. In 2008, China became India’s largest trading partner
and the two countries have also extended their strategic and military relations. Since 2013, border disputes have reemerged to take
centre-stage in the two countries’ mutual relations. In early 2018, the two armies got engaged in a standoff at the Doklam plateau
along the disputed Sino-Nepalese border. Since summer 2020, armed standoffs and skirmishes at multiple locations along the entire
Sino-Indian border escalated. A serious clash occurred in the Galwan Valley resulting in the death of 20 Indian soldiers and some
number of Chinese soldiers.
Despite growing economic and strategic ties, there are a lot of hurdles for India and the PRC to overcome. India faces trade imbalance
heavily in favour of China. The two countries failed to resolve their border dispute and Indian media outlets have repeatedly reported
Chinese military incursions into Indian territory. Both countries have steadily established military infrastructure along border areas
including amidst the 2020 China–India skirmishes. Additionally, India remains wary about China’s strong strategic bilateral relations
with Pakistan,and China’s funding to the separatist groups in Northeast India, while China has expressed concerns about Indian
military and economic activities in the disputed South China Sea.
Q.9 “India and China had historically maintained peaceful relations for thousands of years of recorded history. But the harmony of
the relationship has varied in modern time.”Explain the statement by giving valid reasons. (3 marks)
Q.10 “Despite growing economic and strategic ties, there are a lot of hurdles for India and the PRC to overcome.” Explain how.
Q.11 ‘An economy is operating at under-employment level of income’. What is meant by the given statement? Discuss one fiscal
measure and one monetary measure to tackle the situation. (5 marks)
How is ‘saving and investment’ approach derived from the ‘aggregate demand and supply’ approach of income determination?
Explain using diagram. (5 marks)
Q.12 (a) Gross investment is always greater than net investment.” Defend or refute the given statement with valid argument.
(b) Calculate the value of “Rent” from the following data: (3 marks)
Items ` crore
(i) Gross Domestic Product at market Price 18,000
(ii) Mixed Income of Self-Employed 7,000
(iii) Subsidies 250
(iv) Interest 800
(v) Rent ?
(vi) Profit 975
(vii) Compensation of Employees 6,000
(viii) Consumption of Fixed Capital 1,000
(ix) Indirect Tax 2,000
Q.13 What are the strategies for sustainable development? Explain briefly any five strategies.
Q.1 Sale of electric cars is rising particularly in big cities like Delhi. Analyse its impact on gross domestic product and welfare.
Q.2 Giving valid reasons, state whether the following statements are true or false: (2 marks)
(a) An excess of aggregate demand over full employment level of aggregate supply represents a situation of inflationary gap.
(b) If the ratio of Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) is 4 : 1, the value of
investment multiplier will be 4.
State giving reason whether the following statements are true or false:
(a) An increase in the bank rate is effective to combat inflation.
(b) In situation of deficient demand, the central bank raises cash reserve ratio. (2 marks)
Q.3 If in an economy, the consumption and savings curves are parallel to each other, what will be the value of multiplier? Explain.
What changes will take place in the economy if aggregate demand exceeds aggregate supply at full employment? (2 marks)
Q.4 Discuss any two environmental concerns faced by India in the present times. (2 marks)
How far India has been able to develop its infrastructure? (2 marks)
Q.5 “It is necessary to create employment in the formal sector rather than in the informal sector.” Defend or refute the given
statement with valid arguments. (2 marks)
Q.6 Comment upon the informalisation of labour force in India. (3 marks)
Q.7 Read the following News Report and answer the questions that follow: (3 marks)
The key indicators of RBI Monetary Policy 2020 along with their current rates in the table given below:
Indicator Current Rate
Repo Rate 4.00%
Reverse Repo Rate 3.35%
Bank Rate 4.65%
On 9th October 2020, RBI has kept the Repo Rate unchanged at 4.00% and reduced reverse repo rate to 3.35%. In addition
to that, the bank rate stands at 4.65%. This has been done to limit the damage to the economy caused by the Covid-19 and
(a) What does RBI Monetary Policy 2020 mean?
(b) What does the ‘Bank Rate’ mean?
(c) What will be the likely effect of cut in Reverse Repo Rate on the demand for goods and services in the economy during
Q.8 Which of the following are a part of a country’s Net Domestic Product at market price? Give reasons in support of your answer.
(i) Indirect tax (ii) Net factor income from abroad
(iii) Net exports (iv) Consumption of fixed capital (3 marks)
How will you treat the following while estimating domestic product (or domestic factor income) of India?
(i) Rent received by an Indian resident from his property in Singapore
(ii) Salaries received by Indian residents working in Russian embassy in India
(iii) Profits earned by a foreign company or a foreign bank in India (3 marks)
Q.9 From the following data, calculate: (a) Gross domestic product at market price and (b) Factor income from abroad. (5 marks)
Items ` crore
(i) Gross national product at factor cost 6,150
(ii) Net exports (–) 50
(iii) Compensation of employees 3,000
(iv) Rent 800
(v) Interest 900
(vi) Profit 1,300
(vii) Net indirect taxes 300
(viii) Net domestic capital formation 800
(ix) Gross fixed capital formation 850
(x) Change in stocks 50
(xi) Dividend 300
(xii) Factor income to abroad 80
(a) Explain briefly any two precautions in making estimates of domestic factor income by income method. (2 marks)
(b) Calculate Net Domestic Product at market price: (3 marks)
Items ` crore
(i) Interest received by households 600
(ii) Consumption of fixed capital 800
(iii) Rent and royalty 700
(iv) Net factor income from abroad 100
(v) Net indirect tax 850
(vi) Profit 1,200
(vii) Social security contributions by employees 700
(viii) Mixed income of self-employed 8,000
(ix) Wages and salaries 5,000
(x) Dividend 400
Read the following text and table carefully and answer question number 10 and 11 given below:
SECTOR-WISE GDP OF INDIA AND CHINA
Gross Value Added (GVA) at current prices for the services sector is estimated at 96.54 lakh crore INR in 2020-21. The services sector
accounts for 53.89% of total India’s GVA of 179.15 lakh crore Indian rupees. With GVA of Rs. 46.44 lakh crore, the Industry sector
contributes 25.92%. While Agriculture and allied sector share 20.19%. At 2011-12 prices, the Agriculture & allied, Industry, and
Services sector’s composition is 16.38%, 29.34%, and 54.27%, respectively.
In 2020-21, the agricultural sector had contributed around 7.7 percent to the gross domestic product (GDP) of China, whereas 37.8
percent of the economic value added had originated from the industry and 54.5 percent from the service sector, respectively.
Trends in Output Growth in Different Sectors, 1980–2015
Country 1980–90 2014–15
Agriculture Industry Service Agriculture Industry Service
India 3.1 7.4 6.9 3.1 6.9 7.6
China 5.9 10.8 13.5 3.1 5.3 7.1
Q.10 Compare and contrast India and China’s sectoral contribution towards GVA/GDP in 2020-21. What does it indicate? (3 marks)
Q.11 Analyse the trends in output growth in different sectors between 1980-2015. (3 marks)
Q.12 Answer the following questions based on the data given below: (5 marks)
Planned Investments I = `100 crore.
Consumption C = 50 + 0.50Y
(a) Determine the equilibrium level of income.
(b) Calculate the value of savings and consumption expenditure at equilibrium level of National Income.
(c) Calculate the value of Investment Multiplier.
Q.13 (a) Define Infrastructure. Explain the two categories into which infrastructure is divided. (2 marks)
(b) “The improvement in the health system in India has been unreasonably slow since independence. Indian health system
has been a victim of a relatively low public expenditure.” In the light of the above statement, state any three problems of
the health system in India. (3 marks)
1. True: At a lower level of income, a consumer spends a larger proportion of his/her income on consumption expenditure (basic
survival requirements). As the income increases, owing to the psychological behavior of a consumer (rational), people tend to
consume less and save more for future uncertainty. Thus, APC decreases and APS increases as income increases.
The given statement is not correct.The situation of unintended accumulation of inventories arises when ex-ante aggregate
demand is lesser than the ex-ante aggregate supply. This would pile up the stock with the producers, thus to tackle this situation
the economy must increase AD.
2. Autonomous consumption expenditure C = 200.
MPC = b = 1 – MPS = 1 – 0.25 = 0.75
At equilibrium level of national income Y = C + I ⇒ Y = C + bY + I ⇒ Y = 200 + 0.75Y + I
1,000 = 200 + 0.75 (1,000) + I ⇒ 1,000 = 200 + 750 + I
1,000 = 950 + I ⇒ I = 1,000 – 950 = 50. Therefore, investment expenditure = `50 crore
4. The given statement is false. Distribution of workforce by industrial sectors shows substantial shift from farm work to non-
farm work. In 1972-73, about 74 per cent of workforce was engaged in primary sector and in 2011-12, this proportion
has declined to about 50 per cent. Secondary and service sectors are showing promising future for the Indian workforce. The
shares of these sectors have increased from 11 to 24 per cent and 15 to 27 per cent, respectively.
The given statement is refuted, as generally, there exists a positive correlation between infrastructural growth and national
income. Infrastructure is the support system for an economy which facilitates greater productive activities, higher levels of
output/income and improvement of quality of life in an economy.
5. The conventional sources of energy cause environmental pollution therefore the government have introduced the ‘Ujjawal
Yojana’ as a game changer for rural India by providing free LPG gas cylinders (cleaner fuel) to rural households. The three
conventional fuels targeted under Ujjawala Yojana are :(i) Agricultural waste and dried dung (ii) Firewood (iii) Coal (any two)
6. I option: Generally it is considered that an increase in the Gross Domestic Product (GDP) of any economy (India in this case)
ensures increase in welfare of the people of the country. However, this may not always be correct. GDP is not the best indicator
of the economic welfare of a country. Some of the prime reasons for the same are:
(a) unequal distribution and composition of GDP,
(b) non-monetary transactions in the economy which are not accounted for in GDP, and
(c) occurrence of externalities in the economy (both positive and negative).
7. (a) RBI should release the money supply.
(b) Repo Rate and Reverse Repo Rate
8. (a) Considering the vast geography of India, investment of only 30% of GDP on infrastructure 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 infrastructure.
(b) Global burden of diseases (GBD), now known as Total Burden of Disease
11. I Option: An economy is said to be operating at under employment equilibrium level. It means a situation of deficient demand
in the economy.
12. (a) The given statement is refuted. Gross investment includes addition to capital stock which also includes replacement for the
normal wear and tear (depreciation). Whereas, addition to capital stock in an economy is measured by net investment. So, in
an accounting sense, if the value of depreciation becomes zero, only then gross investment will be equal to net investment.
(b) GDPmp = NDPfc+ Depreciation + Net indirect tax
(i) = (vii) + (ii)+ [(iv) + (vi) + Rent] + (viii) + [(ix)-(iii)] ⇒ 18,000 = (6,000 + 7,000 + (800 + 975 + Rent) + 1,000 + (2,000 – 250)
18000 = 17525 + Rent ⇒ Rent = `475 crore
1. The services of a school teacher will be included in the national income of the country as it contributes to the current flow of
services in the economy.
2. APC cannot be negative as even at zero level of income, there will be some minimum amount of consumption (i.e. autonomous
consumption) for survival. While, APS can be negative because at zero level of income, there can be dis-savings.
The aggregate demand curve is parallel to the consumption curve since they have the same slope, i.e. MPC. This is because self-employment and regular salaried employment to casual wage work as ‘casualisation of workforce.‘In recent times the
Indian Economy has experienced the problem of Casualisation of the workforce. During the COVID-19 lockdown
millions of casual workers lost their jobs, raising the question of their survival.
Sample Paper-19- Answers
1. The park in neighbourhood can be a source of positive externality as it helps in reducing pollution and thereby improving
health and efficiency. However, it can be a source of negative externality if it is used by anti-social elements. This can increase
crime and lead to insecurity.
(a) Intermediate good. Reason: Since it is used up completely in the production process (making tea) in the same year.
(b) Final good. Reason: Since it is for final investment.
2. II Option: (a) It will increase the level of aggregate demand in the economy.
(b) It will decrease the level of aggregate demand in the economy.
3. The statement is false. Ex-ante savings are equal to ex-ante investments only when the economy is in equilibrium. At under-
employment equilibrium level, when ex-ante investments fall short of ex-ante savings, it will lead to accumulation of unplanned
inventories. Hence the producer will reduce employment leading to reduction in output and income till the two forces becomes
equal to each other and vice versa.
6. We know that the equilibrium level of income in an economy is determined when: S = I
–10 + 0.20Y = 240 ⇒ 0.20Y = 250 ⇒ Y = `1,250 crores
To double of the existing income level (DY = 1,250 crores), K = DY/DI = 1/MPS
1250/DI = 1/0.2 ⇒ DI = `250 crores
8. When base year’s prices are higher than the current year’s prices.
The given statement is correct. Real Gross Domestic Product (GDP) is a better indicator of economic growth than Nominal
Gross Domestic Product (GDP) as it is not affected by changes in general price level. (Give a numerical example)
(a) Price Index = Nominal GDP/Real GDP × 100 = 650/520 × 100 = 125
(b) Nominal GDP = Real GDP × Price Index/100 = `500 × 125/100 = `625 crores
11. (a) GVAMP = [(ii) + (iii) + (iv)] – (v) = [200 + (–)10 + 10] – 120 = 200-120 = `80 lakhs
(b) Domestic Income (NDP@fc) =(i)+(ii)+(iv)+(vii)+(viii)+(x) = 2000 + 800 + 460 + 940+ 300+ 200 = `4,700 crore
(a) NVAFC = (i) – (ii) – (iv) – [(iii) – (v)] = 800 – 200 – 20 – [30 – 50] = `600 crores
(b) GNP at market price = (i) + (ii) + (xiii) + (v) + (vi) + (iii) + Depreciation + (viii) – (xii) + (vii) – (xi)
= 2,500 + 500 + 200 + 400 + 350 + 7,500 + 70* + 200 – 50 + 150 – 100 = `11,720 crore
Working Notes: *Depreciation = Gross investment – Net investment (or Net addition to capital stock)= 470 – 400 = `70 crore
12. (a) Decrease the taxes and Increase in public expenditure (Explain)
(b) Real GDP of the year 2020-21 has decreased as compared to 2019-20.
(c) Rise in aggregate demand
(d) 5.15 per cent
1. Sale of electric cars raises GDP, because sales are of final products.
Electric cars provide convenience in transportation and reduces air pollution, which raises the welfare of the people. However,
traffic jams due to increase in number of cars may reduce welfare.
2. (a) The given statement is true; an excess of aggregate demand over full employment level of aggregate supply represents
a situation of inflationary gap, production cannot be increased beyond this level. Increase in AD here onwards, will
increase only the general price level.
(b) The given statement is false. Let the value of MPS = x. Therefore, MPC = 4x.
We know that MPC + MPS = 1 ⇒ x + 4x = 1 ⇒ 5x = 1 ⇒ MPS (x) = 1/5 = 0.20
Substituting the value of MPS in k = 1/MPS = 1/0.20 = 5. Thus, the value of multiplier is 5 and not 4.
(a) True: During inflation, the Central bank increases the bank rate. Therefore, commercial banks also increase their lending
rates. This will discourage people to take loans. This will reduce the money supply and the level of aggregate demand in the
economy to combat inflation.
(b) False: In situation of deficient demand, the Central bank decreases the cash reserve ratio (CRR). As a result, banks are
required to hold smaller fraction of their deposits as cash reserves with the central bank. Therefore, the lending capacity of the banks increases. It leads to an increase in money supply. This will raise the level of aggregate demand and correct the
situation of deficient demand.
3. Value of investment multiplier = 2
Explanation: Since consumption and savings curves are parallel to each other, therefore they have the equal slopes.
We know that the slope of the consumption curve is MPC and the slope of the savings curve is MPS.
Thus, MPC = MPS. Since MPC + MPS = 1, therefore we have MPS + MPS = 1
2 MPS = 1 ⇒ MPS = 1/2 = 0.5. Therefore, Value of investment multiplier, k = 1/MPS = 1/0.5 = 2
If aggregate demand exceeds the full employment level aggregate supply, then a situation of excess demand exists in the
economy. Excess demand gives rise to an inflationary gap; which causes a rise in the general price level or inflation.
5. The given statement is true and can be defended on the following arguments:
(i) Formal sector of employment provides greater job security as compared to informal sector of employment.
(ii) Under the formal sector of employment people are entitled to better social security benefits.
7. (a) Monetary Policy is the policy formulated by the RBI in 2020 related to money matters of the country.It is the policy
formulated by the RBI in 2020 related to the distribution of credit among users as well as the rate of interest on borrowing
(b) Rate at which banks borrow from the RBI for long-term.
(c) The demand for goods and services in the economy will increase due to cut in Reverse Repo Rate.
8. (i) Indirect tax is a part of NDPmp because indirect taxes have not been paid yet to the government.
(iii) Net exports is a part of NDPmp because it is an item of final expenditure.
(i) No, it will not be included in domestic factor income of India because this income is earned outside the domestic territory
(economic territory) of India. It is factor income from abroad.
(ii) No, it will not be included in domestic factor income of India because Russian embassy in India is not a part of domestic
territory of India. So, this income is not earned within the domestic territory of India. It is factor income from abroad.
(iii) Yes, it will be included in domestic factor income of India because the foreign company or the foreign bank is located
within the domestic territory of India. So, it is an income earned within the domestic territory of India.
9. (a) Gross domestic product at market price (GDPmp) = Compensation of employees + Rent + Interest + Profit + Depreciation
+ Net indirect taxes = 3,000 + 800 + 900 + 1,300 + 100 + 300 = `6,400 crore
Working Note: Depreciation = Gross fixed capital formation + Change in stocks – Net domestic capital formation
= 850 + 50 – 800 = `100 crore
(b) Gross national product at factor cost = GDPmp + Factor income from abroad – Factor income to abroad – Net indirect taxes
6,150 = 6,400 + Factor income from abroad – 80 – 300
Factor income from abroad = 6,150 + 80 + 300 – 6,400 = `130 crore
(b) Net Domestic Product at market price (NDPmp) = (ix) + (i) + (iii) + (vi) + (vii) + (v)
= 5,000 + 600 + 700 +1,200 + 8,000 + 850 = `16,350 crore.
12. (a) At Equilibrium AD = Y = C + I
Thus, Y = (50 + 0.5Y) + 100 ⇒ Y – 0.5 Y = 150 ⇒ Y = 150/0.5 = `300 crores
(b) Consumption at equilibrium level of income C = 50 + 0.50 (300) = `200 crores.
Savings at equilibrium level of income S = Y – C = 300 – 200 = `100 crores.
(c) Investment Multiplier = 1/(1 –MPC) = 1/(1 – 0.5) = 2