CHINMAYA VIDYALAYA, CMECT - GC

1ST MODEL EXAMINATION - 2023 - '24

MARKING SCHEME
ECONOMICS (030)

Class : XII Marks : 80.

Time : 3 Hrs.

Q. No. SECTION A - MACROECONOMICS Marks

1. (b) Statement I is true; Statement II is false. 1
2. (c)₹ 70 1
3. (c) i and iii 1
4. (d) ₹ 47,31,426 1
5. (a) Banks hold only about 15 percent of their deposits as cash. 1
The rest of the deposits are given out as loans.
6. (b) Stabilisation of prices 1

7. (b) ₹ 780 crores 1

8. (c) The value of the rupee against one dollar must be rising before 1
the intervention.
9. (d) Only P, R and S 1
10. (d) A rise in imports from country Y to country X.
OR
(a) A situation of Deficient Demand. 1

11. (i) Monetary Policy 2020 is the Policy formulated by the RBI
in 2020 related to money matters of the country.
Or It is the policy formulated by the RBI in 2020 related to
the distribution of credit among users as well as the 3
rate of interest on borrowing and lending.
1
(ii) Money multiplier is 𝐿𝑅𝑅
LRR = SLR + CRR
1
= 18.50 % + 3% =21.50% , 21.50% = 4.65
(iii) Cut in Reverse Repo Rate is likely to increase in the
demand for goods and services in the economy.
12. (a) The given statement is false as the current account of balance
of payments records unilateral transfers along with exports
and imports of goods and services.
(b) The given statement is false as the borrowings from abroad 3
are recorded in the Capital account of balance of payments on
the credit side as it results in an inflow of foreign currency in
the economy.
Or
Rise in exchange rate from $1 equal to Rs70 to $1 equal to Rs74
means depreciation of Indian currency. Foreign goods become
costlier. Prices of imports of essential goods rise. So imports
 decrease. The Reserve Bank of India should sell US dollars from
its foreign exchange reserves. As a result, supply of foreign
exchange market increases. It will lead to fall in foreign exchange
rate.
13. National Income (ii) = (i) + Operating Surplus + (vi) + (iv)
= 4200 – 200 – 400 – 2400 = Rs1200 crores
National Income (ii) = (vii) + (x) + (v) + Net Exports – (xi) – (viii) + 4
(iv)
Net Exports = (ii) – (vii) – (x) – (v) + (xi) + (viii) – (iv)
= 4200 – 2000 – 1000 – 1100 + 100 + 150 – 200 = Rs150 crores
14. If National Income = 250 crore and savings = 80 crore, then
consumption = 170 crore.
APC = C/Y
= 170/250 = 0.68
If National Income increases to 390 crore and savings to 115 crore 4
then consumption = 275 crores.
APC = C/Y
= 275/390 = 0.70
Change in savings = 115 – 80 = 35
Change in income = 390 – 250 = 140
MPS = change in savings/change in income = 35/140 = 0.25
Or
Ex-post Aggregate Demand (AD) refers to the total demand for
goods and services in an economy after actual transactions take
place. On the other hand, ex-post Aggregate Supply (AS)
represents the total quantity of goods and services produced and
supplied by all firms in the economy after considering actual
production levels.
In the real-life scenario where ex-post Aggregate Demand 1
exceeds ex-post Aggregate Supply, several impacts on the level of
output, income, and employment are likely to occur.
(i) Output; with the surge in demand for goods and services
firms would experience pressure to increase production
to meet the higher consumer demands. This increase in
production can lead to higher overall output in the
economy, as firms strive to fulfil the excess demand from 1
consumers and business.
(ii) Income; as firms ramp up production to meet the
increased demand, they are likely to hire more workers
and increase work hours for existing employees. This
expansion of employment opportunities would result in
higher aggregate income for households, as more people 1
gain employment and earn wages.
(iii) Employment; the situation of excess demand would lead
to an expansion of the labour force, as firms hire
additional workers to boost production. The reduction in
unemployment levels is expected as more people find job
opportunities in responses to the higher demand for 1
goods and services.
15. (a) The given statement is refuted as the fiscal deficit can exist
without revenue deficit, if:
(i) Capital Budget is in deficit (CE > CR) with balanced
Revenue Budget (RE = RR)
(ii) Capital Budget is in deficit (CE > CR) in greater proportion 4
to Surplus Revenue Budget (RR > RE)
(b) The given statement is appropriate. The government may
impose higher taxes (both direct and indirect) on the richer class,
reducing their purchasing power, government may use the same
tax revenue to provide goods and services (free or subsidized
price) to the poorer section of the society to support them.
16. Autonomous consumption 𝐶̅ = 100, MPC = b = 80% = 0.8,
Autonomous investment I = 60
Consumption function equation C =𝐶̅ + bY = 100 + 0.8Y
At equilibrium level of income, Y = C + I
Y = 100 + 0.8Y + 60
Y – 0.8Y =160
0.2Y = 160; Y = 160/0.2 = 800 6
Therefore, equilibrium level of income = Rs800 crore.
Full employment level of income = Rs 1000 crore.
Since equilibrium level of income is less than full employment
level of income, it is a situation of deficient demand. Therefore,
required increase in income to combat deflationary gap
∆Y = 1000 – 800 = Rs200
K = 1/1-MPC = 1/1 – 0.8 = 1/0.2 = 5
∆𝑌
K = ∆𝐼
200
5 = ∆𝐼 ; ∆I = 200/5 = 40
Hence, additional investment required to reach the full
employment level of income = Rs 40 crore.
Or
(a) At equilibrium: AD = Y
160 + 0.8Y = Y
0.2Y = 160 ; Y = 160/0.2 = 800
Therefore, equilibrium level of income = Rs800 crore
(b) From the aggregate demand function, MPC = 0.8
Autonomous consumption 𝐶̅ = 100 3
C = 100 + 0.8Y
C = 100 + (0.8) 800
100 + 640 = 740
S = Y – C = 800 – 740 = 60
Therefore, total savings at equilibrium level of income = Rs60
crore 3
17. (a) Factor cost refers to all factor payments made by the
production units to the factors of production for rendering
their productive services. 3
Market price is the price at which a commodity is sold in the
market. Market price is sum total of factor cost and net indirect
taxes.
 (b) Net value added at factor cost = iii + iv – ii – v –
depreciation 3
= 20 + 2 – 5 – 1 – 1 = Rs15 lakhs
Note: Depreciation = cost of asset/estimated life of asset = 10/10
years = 1 lakh
SECTION B - INDIAN ECONOMIC DEVELOPMENT
18. c) (ii), (i), (iii), (iv) 1
19. d) All the above 1
20. b) (i), (ii), (iii) 1
21. d) Reduced harm to beneficial insects and pollinators 1
22. d) Assertion(A) is false but Reason (R) is true. 1
23. c) It gave much importance to manufacturing sector. 1

OR
a) India
24. b) (i), (ii) and (iii) 1
25. d) low level of literacy, high mortality rates and low life 1
expectancy.
26. c) Both the statements I and II are true. 1
27. a) A-iv, B-iii, C-i, D-ii 1
28. After independence the government of India took several
institutional land reforms to ensure transformation of Indian
agriculture, such as
1) Land ceiling – It ensured reduction of concentration of
land ownership in few hands.
2) Abolition of zamindari system- It focussed on
elimination of farmers exploitation and promotion of 3
agricultural growth.
These reforms have led stability of farming as an
occupation and promoted equity.
OR
Two main features are:
1) Pre dominance of agricultural sector: The agricultural
sector accounted for the largest share of work force with
approximately Three Fourth of the work force depending
on agriculture, directly or indirectly.
2) Growing regional variation: Due to rise of manufacturing
and service sector in some parts of India (like Madras,
Bombay and Bengal presidencies) the dependency ratio of
work force on agricultural sector declined.
29. The given statement is correct to a considerable extent.
(i) In 2009, the Government of India enacted the Right to
Education Act to make free education a fundamental right
of all children in the age group of 6-14 years.
(ii) Government of India has also been started levying at 2 % 3
‘education cess’ on all union taxes. The revenues from the
education cess has been ear marked for spending
elementary education .
 (iii) The Government also sanctions a large outlay for the
promotion of higher education and new loan schemes for
students to pursue higher education.
However , still government expenditure on education is
only about 4 % GDP, which is less than 6 % target as
proposed by Education Commission 1964.
30. China’s development strategy after gaining Independence
China's Economic Development Strategy After Gaining
Independence:
China pursued a comprehensive strategy of economic
development after gaining independence. Four key policy
initiatives implemented by the Chinese government to achieve
economic growth and industrialization are:
1. Economic Reforms and Opening-Up Policy: In 1978, China
embarked on economic reforms and implemented the
Opening-Up Policy. This policy aimed to attract foreign
investment, promote trade, and encourage private
entrepreneurship.
As an example, the establishment of Special Economic
Zones (SEZs) in cities
2. Export-Led Growth: China adopted an export-oriented 4
development strategy, focusing on manufacturing and
exports. The country positioned itself as the "world's
factory," leveraging its large labour force and low
production costs.
3. Infrastructure Development: The Chinese government
invested heavily in infrastructure development, including
transportation, energy, and communication networks.
4. Human Capital Investment and Education: China
prioritized investments in education and human capital
formation. The country focused on providing access to
primary and secondary education, vocational training,
and higher education.
31. 1. Development of market infrastructure: the government
invest in the development of modern market
infrastructure, such as whole sale markets, cold storage
facilities and transportation networks.
2. Market information systems: Implementing a reliable and
up to date market information system helps farmers make
informed decisions about when, where and at what price
to sell their produce.
3. Price support and minimum support price schemes: The 4
government implements price support mechanisms and
MSP schemes to provide a guaranteed minimum price for
certain agricultural commodities.
4. Farmer cooperatives and producer organisations:
encouraging the formation of cooperatives and producer
organisations can strengthen the bargain power of small-
scale farmers.
Or
 Rural banking in India has significantly expanded over time,
particularly after nationalisation of commercial banks in 1969,
which marked the beginning of social banking in rural areas.
Following observations highlight the way rural banking system
has contributed to the process of rural development in India:
i) Rural banking started offering institutional credit to the
farmers at a moderate rate of interest.
ii) Institutional credit has liberated the farmers from the debt
trap of mahajans and money lenders.
iii) Institutional credit has promoted commercialisation of
agriculture as it caters to short period as well as long period
credit needs of the farmers.
But deficiencies of rural banking system are equally glaring.
Important ones are:
i) Banking credit or institutional credit has often been tied
to collateral ( security or guarantee of a property for the
loans), because of which a large section of small and
marginal holders are often left out.
ii) Owing to political populism, the government has often
laxity ( lack of strictness) in the recovery loans. As a result,
default rate has tend to swell over time. Loan waivers
have become more like a political tool of appeasement
rather than a genuine help to the deserving farmers.

32.  There are about 473 million workers in the country, out of 1
which 30 million workers are in the formal sector and 70
millions are in the informal sector.
 About 6 % people are employed in the formal sector and
the rest 94 % are employed in the in formal sector. 1
 Out of 30 million formal sector workers only 6 million that
is only about 21 % are women and the rest 24 million are
men. ie; 79 % 1
 In the informal sector, male workers account for 69 % of
the workforce and the female workers account for just 31 1
%
33. A. – (i) Subsides are meant to benefit the farmers by a
substantial amount of fertiliser subsidy also benefits the
fertiliser industry. 3
(ii) Among farmers, the subsidy largely benefits the
farmers in the more prosperous regions only.
(iii) It is a huge burden on the government’s finances.
B. – (i) Self-sufficiency in food grains – the second phase of
Green Revolution, the Green Revolution technology
technology involving HYV seeds spread to a large number
of states and benefited a large variety of crops.
(ii) Increase in marketed surplus resulted in decline in the
price of food grains – A good proportion of the wheat and
rice produced during the Green Revolution period was 3
sold by the farmers in the market.
 (iii) Buffer Stock – The Green Revolution enabled the
government to procure sufficient amount of food grains
to build buffer stock which could be used in time of food
shortage.
(any relevant point)
OR
A. The government has merged the two – loss incurring
business, with a motive to
(i) achieve higher economic and functional efficiency. 2
(ii) Minimise possible losses.
B. GST is the single comprehensive indirect tax on supply
of goods and services, right from the manufacturer /
service provider to the consumer. It is applicable
throughout the country with one rate for one type of 4
goods and services. Under GST there are five standard
rates applied ie; 0% ,5%, 12%, 18% and 28 % on supply
of all goods and services across the country. It has
amalgamated a large number of central and state
taxes and cesses. It has replaced large number of taxes
on goods and services levied on production/ sale of
goods or provision of service.
 Some of the major taxes levied by the Central
Government which have been subsumed in GST are :
Central excise duty, Service tax, Central Sale Tax etc.
 The major state taxes which have been subsumed in
GST are VAT / Sale Tax, Entertainment Tax, Entry tax,
Octroi etc.
Thus goods and service tax has simplified the
multiplicity of taxes on Goods and Services.
34. (a) The development that meets the needs of present generation 3
without compromising the ability of future generation to meet
their own needs is known as sustainable development.
Sustainable development does not solely focus on the
environment as it has four pillars to focus on including
environmental protection, economic development, social
development and indigenous people and culture.
(b) The two strategies for sustainable development in India are
(i) Bio composting: farmers had over a period of last five 3
decades totally neglected the use of compost and
completely switched over to chemical fertiliser, which
adversely effected the productive land and water bodies.
(ii) Bio-pest control: due to the Green Revolution more and
more use of chemical pesticides foe higher yield led to the
contamination of food products like milk, meat and fish,
soil, water bodies and even ground water were polluted
with pesticides. But now efforts are being made to bring in
better methods of pest control like the ones based on plant
products like neem trees are proving quite useful.