AHSEC| CLASS 12| ECONOMICS| SOLVED PAPER - 2023| H.S. 2ND YEAR
2023
ECONOMICS
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: 1x6=6
(i) Define
personal disposable income.
Ans:- Personal
disposable income refers to that part of personal income that is actually
available for consumption or savings by households.
(ii) What is
the primary objective of commercial bank?
Ans:- The
main objective of commercial banks is to provide financial services to the
general public and credit facilities to business which helps in ensuring
economic stability and growth of the economy.
(iii) Net
indirect taxes are estimated as –
(a) Indirect
taxes + Subsidies
(b) Subsidies
– Indirect taxes
(c) Indirect taxes – Subsidies
(d) Both (b)
and (c) (Choose the correct option)
(iv) Give two
examples of capital expenditure of the government budget.
Ans:- (i)
Expenditure on purchase of land by the Government.
(ii) Loans
given by the Central Government to the State Governments.
(v) What type
of budget should the government prepare during inflation?
Ans:- Surplus
budget refers to a budget where the estimated total receipts exceed the
estimated total expenditure. In the case of a surplus budget, the government
takes in more money than it invests in the economy. This leads to a fall in the
aggregate demand and price level in the economy and helps in tackling the
inflationary situation.
(vi) In order
to encourage investment in the economy the central bank will adopt which of the
following measures?
(a) Increase
cash reserve ratio
(b) Reduce cash reserve ratio
(c) Increase
bank rate
(d) None of
the above (Choose the correct option)
2. Answer the following: 2x6=12
(i) A firm
produces goods of Rs. 500 per year and uses intermediate goods of worth Rs.
250. The cost depreciation is Rs. 20 per year. Calculate gross value addition
and net value addition by the firm.
Solution:-
Gross value
Added = Value of output – Intermediate Goods.
= 500-250
= 250rs.
Net value
Added = GVA - Depreciation
= 250 - 20
= 230rs.
Or
What do you
understand by the problem of double counting in the context of national income
accounting?
Ans:- Counting
the value of an article more than once is called double counting. The problem
of double counting leads to an overestimation of the value of goods and
services produced. Thus, the importance of avoiding double counting lies in
avoiding overestimating the value of domestic products.
For example,
a farmer produces 10 kg of wheat and sells it for Rs. 800 to a flour mill owner
in the market.
A flour miller
sells it for Rs. 1000 to the baker.
The baker sells
it as bread to the shopkeeper for Rs. 1200.
The shopkeeper
sells whole bread to the end consumer for Rs. 1300.
Here, value of
output = 800 + 1000 + 1200 + 1300 = Rs. 4300
But here the
value of wheat is counted 4 times, the value of production by the miller is
counted 3 times. The value of production is counted twice by Baker. Counting
the value of an item more than once is called the problem of double counting.
Here value added
= 800 + 200+200+100 = 1300, this should be included in national income.
(ii)
Calculate national income with the following data.
GDP at market
price: Rs. 830 crores
Depreciation:
Rs. 120 crores
Net indirect
taxes: Rs. 70 crores
Net factor
income from abroad: Rs. 40 crores
Solution:-
NNPFC
= GDPMP – Depreciation + NFIA – NIT
= 830 – 120 + 40
– 70
= 710 + 40 – 70
= 750 – 70
=680 crores.
Or
Differentiate
between nominal GDP and real GDP.
Ans:- Nominal
GDP:
(i) Nominal GDP
is the gross domestic product without any effect of inflation.
(ii) Nominal GDP
of a country is expressed in terms of the prices of goods and services of the
current year.
Real GDP:
(i) Real GDP is
the inflation-adjusted GDP of a country.
(ii) Real GDP of
a country is expressed in terms of base year prices or constant prices of goods
and services.
(iii) Write
two objectives of government budget.
Ans:- The
objectives of the government budget are as follows:
(i)
Redistribution of resources equally throughout the country.
(ii) To reduce
inequality in terms of earning and wealth creation.
(iv) Write
two differences between revenue expenditure and capital expenditure.
Ans:- Revenue
expenditure:
(i)
Expenditure incurred for maintaining the day-to-day activities of a business.
(ii) There is
no increase in the value of the current asset.
Capital
expenditure:
(i)
Expenditure incurred on acquiring an asset to increase the capacity of an
existing asset resulting in an increase in its life.
(ii) The value
of existing assets increases.
Or
What is
revenue receipt? How it is different from capital receipt?
Ans:- Any
income earned from the main business operations of a company or business is
known as revenue receipt. These receipts directly affect the profit or loss of
the entity because they come from the core business activity. This receipt is
recurring in nature and is used to meet the day-to-day expenses of the
business.
Revenue receipts
come from the main operating activities of the business. Capital receipts are
those that come from the financial activities of the business.
(v) What is
deficit demand? Write one causes of deficit demand.
Ans:- Deficit
demand refers to a situation in which aggregate demand in an economy falls
short of the aggregate supply of goods and services at full employment. As a
result, the resources of the economy are partially utilized indicating
under-employment.
The
following are the reasons for the decrease in demand:
(i) Decrease in
the propensity to consume.
Or
What are the
factors that affect investment demand in an economy?
Ans:- Factors
affecting investment demand in an economy are:-
(i) Per Capita
Income: The first factor affecting investment is per capita national
income.
Simply put, per
capita income is national income divided by the number of people in a country.
Therefore, the average total income in a country is called per capita income.
(ii) Political
and Security: Situation The political and security situation of a country
can also affect the value of investment. If the political and security
situation in the country is not good, investors withdraw their investments and
this leads to a fall in the investment value.
(vi) Write
two merits of fixed exchange rate.
Ans:- Merits
of Fixed Exchange Rate System:
Following
are some of the merits of fixed exchange rate system:-
(i) It ensures
stability in foreign exchange which encourages foreign trade.
(ii) There is
stability in the value of money which protects it from the ups and downs of the
market.
Or
Define spot
and forward exchange rate.
Ans:- The
spot exchange rate is the current rate at which one currency can be
exchanged for another. Based on the demand and supply of currencies, it
represents the price of one currency in terms of another and is the most quoted
exchange rate in the foreign exchange market.
Forward
exchange rate is the exchange rate at which forward transactions are to be
honored. It is a type of 'contracted' exchange rate that applies for
transactions that have been signed today but are to be honored sometime in the
future.
3. Explain the expenditure method of calculating national
income. 4
Ans:- The expenditure method of calculating national
income or GDP takes into account the final goods and services produced in a
country during a given time period.
The formula
for calculating national expenditure is:
National
Income = C + I + G + (X – M)
Where,
C =
consumption by the residents of the nation
I = investment
G = government
spending
X = export
M = import
Or National
Income = C + I + G + NX
Or
Discuss the
circular flow of national income in a two-sector economy.
Ans:- Circular
flow means the endless flow of production, income and expenditure of goods and
services in an economy. It refers to the redistribution of income in a circular
manner between the production unit and the households.
Circular Flow
of Income in a Two-Sector Economy:
It is defined
as the flow of payments and receipts for goods, services and factor services
between households and firm sectors of the economy.
Explanation:-
(i) The outer
loop of the diagram shows the flow of factor services from households to firms
and the corresponding flow of factor payments from firms to households.
(ii) Inner
loop refers to the flow of goods and services from firms to households and the
related flow of consumption expenditure from households to firms.
(iii) The
entire amount of money, which is paid by the firms as factor payments, is paid
back to the firms by the factor owners.
4. Discuss the functions of money. 4
Ans:- Money has many functions and can be used for
various purposes. However the functions of money are broadly classified as primary
functions and secondary functions. They are briefly described below:
(A) Primary
Functions of Money:
(i) Medium
of Exchange: The most important function of money is that it acts as a
medium of exchange. Money is freely accepted in exchange for all other goods.
The barter system is extremely inconvenient. Thus, the advent of money removed
the difficulty of barter.
(ii)
Measure of value: This is another important function of money. There was no
common measure of value in the barter system, so the value of different types
of goods could not be compared with each other. Money can be used as a measure
of the value of various goods and services. Individuals find it convenient to
use monetary units as a unit of measurement.
(B) Secondary
Functions of Money:
(i) Storage
of Value: An important secondary function of money is the storage of value
of any goods and services. It's a convenient way to save money. Money is such a
medium in which people want to keep wealth with them. This increases purchasing
power.
(ii)
Standard of Deferred Payments: It is one of the important functions of
money as it can be used as a standard of deferred payments. Deferred payments
are payments that are to be made in the future. Money is used as a standard of
deferred payment due to which it has become easier to borrow and lend.
(iii) Transfer of value: Another important function of money is transfer of value. It helps to transfer the value of one's assets, properties and income to another person. It also simplified the transfer or transaction of goods and services.
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