KENDRIYA VIDYALAYA SANGATHAN

MARKING SCHEME (2023-24) SET-B

ECONOMICS
CLASS-XII
SECOND PRE-BOARD
Q. NO. Section-A (Introductory Macro Economics) Marks
प्र. सं. खण्ड-अ (परिचयात्मक समष्टि अर्थशास्त्र) अंक
1 (B) Cash Reserve Ratio 1
2 (D) S = (-) 60 + 0.20Y 1
3 (C) Credit side of capital account 1
4 (D) Legal Reserve Ratio is the sum of Cash Reserve Ratio and Statutory 1
Liquidity Ratio.
5 (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct 1
explanation of Assertion (A).
6 (A) Statement-1 is true and Statement-2 is false. 1
7 (C) Q and R 1
8 (C) Indirect Taxes < Subsidies 1
9 (C) Assertion (A) is true but Reason (R) is false. 1
10 (A) Rise in National Income 1
11 When the government increases the import duty of gold, the import of gold 1+1+1
will fall. This reduces the demand for foreign currency. With the supply of
foreign currency remaining the same, the foreign exchange rate would fall.
This implies an appreciation of rupees and due to appreciation import will
fall and export will be increase.
12. (A)(i) It will be included while estimating the National Income of India because 1
bank is a productive unit.
(ii) It will not be included while estimating the National Income of India 1
because Individual has taken loan for consumption purposes.
(iii) It will not be included while estimating the National Income of India 1
because it the debt on the loan which government took for its consumption
expenditure.
OR
(B) (i) Yes, it is included in the national income because it adds to the current flow 1½
of goods and services. Therefore, its imputed value should be included.
(ii) Yes, it is included in the national income by income method since it is a part 1½
of ‘wages in kind’ paid to employees.
13. (i) Given, C = 100 + 0.75Y 2
Autonomous investment (I)̅ = ₹ 150 crore
At the equilibrium level,
Y = C + I̅
Y = 100 + 0.75Y +150
Y = 250 + 0.75Y
Y – 0.75Y = 250
0.25Y = 250
Y = 250/ 0.25 = 1,000
(ii) At Y = 1,000 2
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 Consumption (C) = 100 + 0.75Y
= 100 + 0.75 (1000)
= 100 + 750
= 850
We know that, Y=C+S
S=Y-C
S = 1,000 – 850
= 150
14. Central bank acts as the banker to the banks in three ways: 4
 Custodian of the cash reserves of the commercial banks;
 As the lender of the last resort; and
 As clearing agent.
 As a custodian of the cash reserves of the commercial banks, the central
bank maintains the cash reserves of the commercial banks. Every
commercial bank has to keep a certain percent of its cash reserves with
the central bank by law.
 As Lender of the Last Resort
 As banker to the banks, the central bank acts as the lender of the last
resort.
 In other words, in case the commercial banks fail to meet their financial
requirements from other sources, they can, as a last resort, approach to
the central bank for loans and advances.
 The central bank assists such banks through discounting of approved
securities and bills of exchange.
 As Clearing Agent
 As the custodian of the cash reserves of the commercial banks, the central
bank acts as the clearing house for these banks.
 Since all banks have their accounts with the central bank, the central bank
can easily settle the claims of various banks against each other simply by
book entries of transfers from and to their accounts.
 This method of settling accounts is called Clearing House Function of the
central bank.
15. (A) Two monetary measures which may be used to solve the problem of 2+2
inflation :
(i) An increase in CRR/SLR
(ii) An increase in Bank rate/ Repo rate/ RRR
(iii) Sale of government securities in open market (Any two with explanation)
OR
(B) An economy is said to be operating under- employment equilibrium level, if 2+2
the planned aggregate expenditure (AD) fall short of available output in the
economy, corresponding to full employment level. It refers to a situation of
deficient demand, which give rise to a deflationary gap.
Any one fiscal measure with explanation.
16. (i) Reduction in income and wealth: the objective which the government is 3+3
trying to fulfil is ‘Reduction in income and wealth’.
Inequality of income and wealth reflect a section of society being deprived of
even basic necessities of life. Thus arises the need for reducing inequality of
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 income and wealth in the society, i.e., reducing the gap between rich and
poor.
The government can impose higher taxes on the rich reducing their
disposable income. The amount so collected through taxes can be used for
spending on welfare of the poor people. It can provide them by increasing
expenditure on transfer payment or subsidies.
(ii) Re-allocation of Resource: - Through the budgetary policy, Government
aims to reallocate resources in accordance with the economic (profit
maximisation) and social (public welfare) priorities of the country.
Government can influence allocation of resources through:
 Tax concessions or subsidies: To encourage investment, government can
give tax concession, subsidies etc. to the producers. For example -
Government discourages the production of harmful consumption goods
(like liquor, cigarettes etc.) through heavy taxes and encourages the use of
'Khadi products by providing subsidies.
 Directly produce goods and services: -There are many non-profitable
economic activities, which are not undertaken by the private sector like,
water supply, sanitation, law and order, national defence, etc.
17.(A) Income Method 3
(i) NNPFC = (iv) + (iii) + (vi) + (v)
= 1,400+740+1,000+40
= ₹ 3,180 Crore
Expenditure Method 3
(ii) NNPFC = (x) + (xi) + [(vii + viii)] + (i) + (v) - (ii)
= 2,000+1,000 + [500 + (-100)] + (-60) + 40 - 200
= ₹ 3,180 crore
OR
(B) Real Gross Domestic Product refers to the money value of all the final goods 3+3
and services produced in the domestic territory of a country during an
accounting year measured at base year prices.
 Nominal Gross Domestic Product refers to the money value of all the final
goods and services produced in the domestic territory of a country during
an accounting year measured at current year prices.
 Real Gross Domestic Product (GDP) is a better indicator of economic
growth than Nominal Gross Domestic Product (GDP). This is because only
real GDP shows the change in the flow of goods and services in the
economy, as it is estimated on the basis of constant price level.
SECTION–B (Indian Economic Development)
खण्ड-ब (भाितीय अर्थव्यवस्र्ा का ष्टवकास)
18. (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct 1
explanation of Assertion (A).
19. (D) All of the above. 1
20. (A) Yes 1
21. (D) (iii), (iv), (ii), (i) 1
22. (B) Both Assertion (A) and Reason (R) are true and Reason (R) is not the 1
correct explanation of Assertion (A).
23. (A) Absorptive capacity is defined as the ability of our environment to absorb 1
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 degradation.
24. (C) Aging of population 1
25. (A) Formation of regional and economic groups. Such as SAARC, G-8, 1
G-21 etc.
26. (B) (i), (ii) and (iii) 1
27. (B) (iv),(iii),(ii),(i) 1
28. It generates more employment and job opportunities. 3
It raises the overall GDP of the country.
It leads to formalisation of the employment sector.
29.(A)(i) Co-operative Credit Societies are financial entities established on a 1½
cooperative basis and, do banking functions with their members only.
Customers of cooperative Societies are also its owners. These societies
provide a wide range of regular banking and financial services to their
members only.
(ii) The non-institutional sources of rural credit- 1½
a. Money lenders b. Landlord
c. Agricultural traders d. Relatives
(B) (i) Disguised unemployment 3
(ii) Marginal productivity of the three extra people is zero.
(iii) Integrated rural development offering non- farm occupation in the
villages.
Development of urban industry that promotes rural- urban migration.
30. One worker who has completed his training and can handle the tools and 4
machines in a better way alliance productivity as compared to the unskilled
and uneducated worker. Therefore, Human capital formation increases
productivity, which means the generation of per-unit output will be higher as
compared to unskilled workers.
31.  As evident from the table, the percentage of workforce engaged in the 4
agriculture sector is highest in India, which stands at 43%. The
corresponding rates for China and Pakistan are 26% and 41%
respectively.
 The percentage of workforce engaged in industry is the highest in China
which stands at 28%. The corresponding rates for India and Pakistan are
25% and 24% respectively.
 The percentage of workforce engaged in the service sector is again
highest in China, which stands at 46%. The corresponding rates for India
and Pakistan are 32% and 35%respectively.
 These observations point to a fact that China is far ahead of India and
Pakistan in industrializing its production activity which is a sign of long
period growth and development.
 Higher percentage of the workforce in the service sector in China is also a
sign of its faster growth compared to India and Pakistan. However, the
fact should also be not ignored that Pakistan has taken over India as
regards the growth of the service sector; this points to rapid urbanization
in Pakistan.
32.(A) Agricultural marketing refers to the entire system under which the farmers 4
can dispose of their surplus produce. It includes all operations like, grading,
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 storing, transporting and distribution of agricultural commodities,
throughout the country.
 The first step was regulation of markets to create orderly and transparent
marketing conditions. By and large, this policy benefited farmers as well
as consumers. However, there is still a need to develop about 27,000 rural
periodic markets as regulated market places to realise the full potential of
rural markets.
 Second component is provision of physical infrastructure facilities like
roads, railways, warehouses, go downs, cold storages and processing
units. The current infrastructure facilities are quite inadequate to meet
the growing demand and need to be improved.
 Cooperative marketing, in realising fair prices for farmers’ products, is
the third aspect of government initiative. The success of milk
cooperatives in transforming the social and economic landscape of
Gujarat and some other parts of the country is testimony to the role of
cooperatives. However cooperatives have received a setback during the
recent past due to inadequate coverage of farmer members, lack of
appropriate link between marketing and processing cooperatives and
inefficient financial management.
 The fourth element is the policy instruments like (i) assurance of
minimum support prices (MSP) for agricultural products (ii) maintenance
of buffer stocks of wheat and rice by Food Corporation of India and (iii)
distribution of food grains and sugar through PDS. These instruments are
aimed at protecting the income of the farmers and providing food grains
at a subsidised rate to the poor. However, despite government
intervention, private trade (by moneylenders, rural political elites, big
merchants and rich farmers) predominates agricultural markets.
OR
(B) Use of IT in rural development in India: 4
 If farmers can plan their crop according to the need that is likely to
generate in future then the gap between the demand and supply can be
bridged. Information technology assists in making databases available to
such farmers with regard to the returns, the market is likely to generate
by the time the crops are ready. This would minimise the uncertainty of
the farmer.
 The quality and quantity of crops can be increased manifold if the farmers
are made aware of the latest equipment, technologies and resources.
Internet is a friendly user-friendly medium, which provides a platform for
easy exchange of information on a global level.
 Issues like weather forecast, crop treatment, fertiliser, pesticides, storage
condition etc. can be well administered, if expert opinion is made
available to the farmer
 With the help of information technology, the crutches of the middlemen
can be done away with and the farmers can get a clear vision about the
market, latest technologies and hence channelise their potential
accordingly. This would make them self-sufficient and yield planned crops
with a ready market.
33. (A) Demographic transition refers to the population related to economic 3+3
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 development. There are three stages of demographic transition:
 High birth rate and high death rate (STAGE I)
 High birth rate and low death rate (STAGE II)
 Low birth rate and low death rate (STAGE III)
The population in India started increasing from the year 1921, for which it is
called the year of Great Divide. But from the year 1951 onwards the
population in India started increasing at an alarming rate. So, 1951 is
otherwise called the year of small divide.
If we study the demographic profile during British period the following point
are not worthy.
 Before 1921, India was in the first stage of demographic transition.
 The second stage of transition began after 1921. However, neither the
total population growth nor the rate of population growth was high at
this stage.
 Overall mortality rate was very high, especially the infant mortality rate
about 218 per thousand, in contrast to present infant mortality rate of 33
per thousand.
 Life expectancy was also very low-32 years in contrast to the present 69
years.
 Prevalence of extensive poverty during the colonial period, contributed to
the worsening profile of India's population of the time.
OR
(B) There is sparkling prosperity, there is stinking poverty. “We have dazzling 3+3
five star hotels side by side with darkened ill-starred hovels”. We have
everything by globalization, we have noting by globalization. These critics
imply that we have achieved many things by globalization and we have also
lost many things due to globalization. Let’s discuss these.
Achievements:
 The opening of the economy has led to a rapid increase in foreign direct
investment and foreign exchange reserves.
 The foreign investment, which includes foreign direct investment (FDI)
and foreign institutional investment (FII), has increased from about US
$100 million in 1990-91 to US $ 30 billion in 2017- 18.
 There has been an increase in the foreign exchange reserves from about
US $ 6 billion in 1990- 91 to about US $ 413 billion in 2018-19.
 India is one of the largest foreign exchange reserve holders in the world.
India is seen as a successful exporter of auto parts, engineering goods, IT
software and textiles in the reform period.
 Rising prices have also been kept under control.
Losses:
 Loss of Domestic industries: - as a result of Globalization foreign
competition has increased in India. Because of better quality and low cost
of foreign goods, many Indian industrial units have failed to face
competition and have been closed.
 Problem of Unemployment: - as a result of globalization foreign
companies or even some Indian companies use capital intensive
technology. With the increasing use of capital intensive technology the

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 employment opportunities are reduced and increase the problem of
unemployment in Indian economy.
 Exploitation of Labour: - Globalization is exploiting unskilled workers by
giving lower wages, less job security long working hours and worse
working condition.
 Increase in Inequalities: - globalization has benefited MNCs and big
industrial units but small and cottage industries are adversely hit by it. It
has increased inequalities in India.
34.(i) The primary causes of the environmental crisis described in the passage are: 2
 Rapid growth of human population leading to extensive deforestation,
habitat destruction, and overconsumption of natural resources.
 Industrialization and modernization, which contribute to global warming
and climate change through reliance on fossil fuels and emission of
greenhouse gases.
 Expansion of agriculture and urbanization, resulting in the loss of
biodiversity and fragmentation of ecosystems.
 Irresponsible waste management and improper disposal of plastics,
leading to the accumulation of plastic waste in oceans and landfills,
causing harm to marine life and contaminating the environment. The
excessive use of chemical fertilizers and pesticides in agriculture also
contributes to soil degradation, water pollution, and loss of biodiversity.
(ii) Industrialisation has contributed to the environmental crisis in several 2
ways:
 Reliance on fossil fuels for energy production leads to the emission of
greenhouse gases, which causes global warming and climate change.
 The discharge of pollutants and waste from industries contaminates air,
water, and soil, posing risks to human health and biodiversity.
(iii) The impact of agriculture and urbanization on the environment includes: 2
 Conversion of forests and natural habitats into agricultural lands and
urban areas disrupts ecosystems, leading to the loss of biodiversity and
extinction of plant and animal species.
 Agricultural practices, such as the excessive use of chemical fertilizers and
pesticides, result in soil degradation, water pollution, and further loss of
biodiversity.

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