ASSEB| CLASS 12| ECONOMICS| SOLVED PAPER - 2025| H.S. 2ND YEAR

 

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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