ASSEB| CLASS 12| ECONOMICS| SOLVED PAPER - 2025| H.S. 2ND YEAR
2025
ECONOMICS
Full Marks: 80
(Part-A=40 + Part-B=40)
Pass Marks: 24
Time: Three hours
The figures in the margin indicate
full marks for the questions
PART – A
(Introductory
Macroeconomics)
1. Give short answers to any four of the following questions: 1x4=4
(i) Who is
known as the father of Macroeconomics?
Ans:-
John Maynard Keynes is considered the father of macroeconomics.
(ii) What are
the two sectors studied in ‘two-sector economy’?
Ans:- The
two sectors studied in a two-sector economy are the household sector and the
business (or firm) sector.
(iii) Write
the full form of FRBM Act, 2003.
Ans:- The
full form of FRBM Act, 2003 is Fiscal Responsibility and Budget Management Act,
2003.
(iv)
“Voluntary unemployment can exist in an economy with full employment equilibrium.”
Write whether this statement is correct or incorrect.
Ans:- The
statement "Voluntary unemployment can exist in an economy with full
employment equilibrium" is correct.
(v) In which
year the ‘Breeton Woods’ Conference of the United Nations was held?
Ans:- The
'Bretton Woods' conference of the United Nations was held in 1944.
(vi) When the
level of effective demand is attained?
Ans:- The
level of effective demand is achieved when aggregate demand is equal to
aggregate supply.
(vii) NNPFC
= NNPMP - Indirect taxes +
Subsidies. (Fill in the blank)
2. Answer any five of the following questions: 2x5=10
(i) Write two
differences between direct tax and indirect tax.
Ans:- Two
differences between direct tax and indirect tax:-
(i) Incidence
and effect: In a direct tax, the incidence and effect fall on the same
person (for example, income tax paid by the individual), while in an indirect
tax, the incidence and effect fall on different persons (for example, GST is
paid by the consumer but collected by the seller).
(ii)
Transferability: Direct taxes cannot be shifted to others, while indirect
taxes can be shifted from one person to another.
(ii) What do
you understand by ‘paradox of thrift’?
Ans:- The
paradox of thrift refers to a situation where an increase in the overall
tendency of people to save more leads to a fall in aggregate demand, resulting
in lower income and output in the economy. Thus, increased saving may reduce
the aggregate saving in the economy due to lower income.
(iii) Write
one similarity and one difference between capital goods and intermediate goods.
Ans:- One
similarity and one difference between capital goods and intermediate goods:-
(i)
Similarity: Both are used in the process of producing other goods.
(ii)
Difference: Capital goods are used for the production of other goods and
are not fully used up in the same production cycle (e.g., machinery), while
intermediate goods are fully used up in the production process (e.g., raw
materials).
(iv) Explain
the concept of ex-ante investment and ex-post investment.
Ans:- Concept
of ex ante investment and ex post investment:-
(i) Ex ante
investment refers to the planned or intended investment by firms during a
period.
(ii) Ex post
investment refers to the actual investment made during that period.
(v) What are
sources of supply of foreign currency in an economy?
Ans:- Sources
of supply of foreign exchange in an economy:-
(i) Export of
goods and services: When a country exports, it earns foreign exchange.
(ii) Foreign
investment: Foreign direct investment (FDI) and portfolio investment bring
in foreign exchange.
(iii)
Remittances and unilateral transfers: Money sent by non-residents and gifts
from abroad.
(iv) Tourism:
Foreign tourists bring in foreign exchange.
(v)
Speculation: Sale of foreign exchange by those who expect its value to
fall.
(vi)
Differentiate between revenue expenditure and capital expenditure.
Ans:-
Difference between revenue expenditure and capital expenditure:-
Revenue
expenditure is incurred for the day-to-day functioning of the government or
business and does not create any assets (e.g., salaries, subsidies).
Capital
expenditure is incurred to acquire or create assets or reduce liabilities
(e.g., building infrastructure, debt repayment).
(vii) What do
you understand by devaluation of domestic currency? Write with an example.
Ans:-
Devaluation means an official reduction in the value of a country's currency in
relation to foreign currencies by the government. For example, if the
government reduces the value of ₹1 from $0.013 to $0.010, it is devaluation.
This makes exports cheaper and imports costlier.
3. Answer any two of the following questions: 3x2=6
(i) In an
economy marginal propensity to save is 0.5. What will be the increase in income
if there is a new investment of Rs. 600 crores? 3
Ans:-
(ii) What is
fiscal policy? Write its two objectives? 1+2=3
Ans:-
Fiscal policy refers to the use of government spending and taxation to
influence a country's economic activity. It is an important tool for managing
economic growth, controlling inflation, and achieving other macroeconomic
objectives.
Fiscal policy
has two main objectives:-
(i) Economic
growth and stability: The objective of fiscal policy is to promote strong
and sustainable economic growth and maintain stability in the economy through
the strategic allocation of government resources and investments.
(ii) Price
stability: Another objective is to control inflation and stabilize prices,
ensuring that price fluctuations do not adversely affect consumers, producers,
or the overall economy.
(iii) How
financial deficits can be reduced? Explain briefly. 3
Ans:- Fiscal
deficits, like the fiscal deficit, can be reduced through a combination of the
following measures:-
(i) Reducing
government expenditure: The government can cut unnecessary or
non-developmental expenditure, such as subsidies or administrative costs, to
reduce the deficit.
(ii)
Increasing revenue: The government can increase its revenue collection by
increasing tax rates, improving tax compliance, or broadening the tax base.
(iii)
Promoting economic growth: Higher economic growth leads to increased income
and, as a result, higher tax revenue without increasing tax rates.
(iv)
Disinvestment and asset sales: The government can sell stakes in public
sector enterprises or other assets to generate non-tax revenue.
(v)
Reforming subsidies: Rationalizing or targeting subsidies ensures that only
the needy receive benefits, thereby reducing the overall subsidy burden.
These steps
help reduce the gap between government expenditure and revenue, thereby
reducing the fiscal deficit.
(iv) In the
context of national income accounting, analyse the concept of planned and
unplanned change in inventories with a hypothetical example. 3
Ans:- In
national income accounting, change in inventory refers to the difference
between the opening and closing stock of goods held by firms.
This change
may be planned or unplanned:-
(i) Planned
change in inventory: This occurs when a firm deliberately decides to
increase or decrease its stock. For example, suppose a firm begins the year
with 1,000 units of inventory and plans to increase it to 2,000 units,
expecting to sell 10,000 units. The firm makes 11,000 units (10,000 for sales +
1,000 for planned inventory increase). If actual sales match the expectation
(10,000 units), the closing inventory is as per plan – this is a planned
change.
(ii) Unplanned
change in inventory: This occurs due to unexpected changes in sales. For
example, if the above firm produces 11,000 units and expects sales of 10,000
units but actual sales are only 9,000 units, the closing inventory becomes
3,000 units (1,000 initial + 11,000 produced – 9,000 sold). The additional
1,000 units (over and above the planned 2,000) are unplanned accumulations due
to lower than expected sales. Conversely, if sales were higher than expected,
there would be an unplanned reduction in inventory.
Gross value
added by the firm = Sales + Change in inventory – Value of intermediate goods.
This means that
changes in inventory – whether planned or unplanned – directly affect the value
added by the firm and thus the calculation of national income.
4. Answer any two of the following questions: 6x2=12
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