ARMY PUBLIC SCHOOL NO.

1, JABALPUR
MODULE III
SUBJECT (ECONOMICS)
CLASS: XII
MM: 100
General Instructions:
1. All questions are compulsory.
2. Question no. 1 to 25 and 35 to 49 (including four case based questions) are 1
mark questions and are to be answered in one word/sentence.
3. Case based questions are Question No.7 to 10, 11 to 14, 37 to 41and Question
no. 47 to 49.
4. Question No. 26-28 and Question No. 50 are 3 marks questions and are to be
answered in 60-80 words.
5. Question No. 29-32 and Question No. 51, 52 are 4 marks questions and are to be
answered in 80-100 words.
6. Question No. 33,34 and Question no. 53-54 are 6 marks questions and are to be
answered in 100-150 words.
7. All Questions are compulsory.

PART A [INTRODUCTRY MACRO ECONOMICS] __________

1. __________ (Aggregate Demand/Aggregate Supply) refers to total ex-ante
expenditure in an economy during an accounting year.
(Fill in the blank with the correct alternative) 1
2. If Marginal Propensity to Save (MPS) is equal to zero, the value of investment
multiplier will be ___________ .
(Fill in the blank with the correct answer) 1
3. If Autonomous Consumption is greater than zero, it indicates that the National
Income of the economy will be __________ .
(Fill in the blank with the correct alternative) 1
(A) rising (B) falling (C) zero (D) constant
4. Read the following statements Assertion (A) and Reason (R ) .Choose one of the
correct alternatives given below:
Assertion (A) In an economy, if consumption expenditure is high, investment
multiplier will be low.
Reason (R ) the velocity by which money change hands, determines growth in an
economy.
Alternatives
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A)
c. Assertion (A) is true but Reason (R) is false.
 d. Assertion (A) is false but Reason (R) is true. 1
5. If the value of Average Propensity to consume is 1.5, the value of APS will be equal to
………………………………… 1
6. Write the correct pair 1
Column I Column II
A. Voluntary (i) Worker who is willing to work but is
Unemployment not getting work.

B. Involuntary (ii) Worker is not willing to work at

Unemployment existing wage rate.

C. Frictional (iii) A worker is not getting work in a

Unemployment particular season.

D. Disguised (iv) Marginal productivity of a worker is

Unemployment zero
Case Based Questions ([Link]. 7 to 10)
Read the following case study paragraph carefully and answer the questions on the basis of
the same.
When an economy undergoes a deflationary shock, the implications can be both positive and
negative for consumers and businesses. There is a big difference between the terms
disinflation and deflation, which we will first go over before getting into the causes and
effects of deflationary shocks and how these shocks can effect the economy ,consumers and
businesses.
Disinflation usually occurs during a period of recession and manifests itself by slowing down
the rate at which price increases; this occurs as a result of a decrease in consumers sales. If
the inflation drops to a lower level than before, technically that difference is disinflation.
Deflation, on the other hand, can be thought as the opposite of inflation, or as negative
inflation, and it occurs when the supply of goods and services rises faster than supply of
money.
7. ………………….. (Central bank/Commercial bank) helps to correct the situation
deflationary shock in a country through its credit control policy. 1
8. Which of the following statements stands true during deflationary gap? 1
(a) Actual output falls short of potential output
(b) Potential output short of actual output
© Actual demand is less than expected demand
(d) Expected demand is less than actual demand
9. Which of the following steps should be taken by Central Bank to boost demand in the
economy during deflationary gap? 1
a) Decrease tax rate b) Deficit financing
c) Decrease legal reserve requirements d) increase foreign exchange reserve
10. What will be the impact on money supply during deflationary gap? 1
a) increase b) Decrease c) Remain constant d) can’t be predicted
Read the following news report and answer Questions 11-14 on the basis of the same:
The Reserve Bank of India (RBI), cut Repo Rate to 4.4%, the lowest in at least 15 years.
Also, it reduced the Cash Reserve Ratio (CRR) maintained by the banks for the first time in
over seven years. CRR for all banks was cut by 100 basis points to release ₹ 1.37 lakh crores
across the banking system. RBI governor Dr. Shaktikanta Das predicted a big global
recession and said India will not be immune. It all depends how India responds to the
situation. Aggregate demand may weaken and ease core inflation.
The Economic Times; March 27th, 2020
11. Cut in Repo rate by RBI is likely to……….. (increase/decrease) the demand for goods
and services in the economy. 1
(Choose the correct alternative)
12. Decrease in Cash Reserve Ratio will lead to…...........… 1
(Choose the correct alternative)
a. fall in aggregate demand c. rise in aggregate demand
b. no change in aggregate demand d. fall in general price level
13. The difference by which actual Aggregate Demand exceeds the Aggregate Demand,
required to establish full employment equilibrium is known as……….………(inflationary
gap/deflationary gap). 1
Choose the correct alternative
14. The impact of “Excess Demand‟ under Keynesian theory of income and employment, in an 1
economy are: (choose the correct alternative)
a. decrease in income, output, employment and general price level
b. decrease in nominal income, but no change in real output
c. increase in income, output, employment and general price level
d. no change in output/employment but increase in general price level.
15. National income of a country is Rs 80 crore and consumption expenditure is rs 64 crore .
What will be the value of APS?
(a) 0.80 (b) 0.75 (c) 0.25 (d) 0.20
16. State the following statement true or false. Give valid reasons.
In a two sector economy , if income is zero, consumption will also be zero.
17. Break- even point occurs when
a) Y=S b) S=0 c) Y=C d) both (b) and (c )
18. Keynes discusses equilibrium level of output, using the concept of:
(a) autonomous investment (b) induced investment
(c) both (a) and (b) (d) none of these
19. If MPC=MPS, the value of multiplier will be:
(a) 0 (b) 1 (c) 2 (d) ∞
20. Ex-ante saving refers to :
(a) desired saving during the period of one year.
(b) planned saving during the period of one year
© actual saving during the period of one year
(d) Both (a) and (b)
21. Consumption function is the functional relationship between ………………… and
…………
(a) Consumption, Aggregate Demand (b) Consumption, National Income
© Aggregate Demand,Aggregate supply (d) National income , private income
22. If C=100+0.75 Y ,then saving function will be expresses as: 1
(a) S=100+0.25 Y (b) S=-100+0.75 Y
(c) S=-100+0.25 Y (d) S=-75+0.25 Y
23. “Change in government spending” is a part of: 1
(a) Monetary Policy (b) Fiscal policy
(c) Either (a) or (b) (d) Neither (a) or (b)

24. Average Propensity to Consume is……….. at Point B and Average propensity to Save is at
point A, 1

(a) 0,1 (b) 1,0 (c) 1,1 (d) 0,0

25. In the following diagram, the gap EF termed as: 1

(a) Inflationary Gap (b) Deflationary Gap

(c) Either (a) and (b) (d) Neither (a) nor (b)
26. From the following data, calculate the (a) Consumption Expenditure and (b) Investment
Expenditure for the economy. 3
S. No Particulars Amount (in Rs)
(i) Equilibrium level of 5,000
income
(ii) Autonomous 500
consumption
(iii) Marginal Propensity to 0.4
Save
27. Define Investment Multiplier. Explain the relation between Multiplier and MPC. 3
28. “CRR cut will improve bottom line, says Karnataka Bank CEO”
Private lender Karnataka Bank MD and CEO Mahabaleshwara MS on Friday said the Reserve
Bank of India (RBI) slashing the Cash Reserve Ratio (CRR) by 100 basis points (BPS) from
4% to 3% will improve the bottom line of banks.
“The three months repayment moratorium on all loans without down gradation of assets will
mitigate debt servicing burden and go a long way in overcoming the financial stress caused by
Covid-19,” he said in a statement.
The Economic Times, 27th March, 2020
Discuss how the above mentioned monetary instrument in news report is helpful in correcting
the situation of excess demand and deficient demand. 3
29. The value of marginal propensity to consume is 0.6 and initial income in the economy is
₹100 crores . Prepare a schedule showing Income, Consumption and Saving. Also show
the equilibrium level of income by assuming autonomous investment of ₹ 80 crores. 4
30. Assuming that increase in investment is Rs 1,000 crore and Marginal propensity to
consume is 0.9,explain the working of Multiplier. 4
31. Discuss the working of the adjustment mechanism in the following situations: 4
(a) Aggregate demand is greater than aggregate supply.
(b) Ex-ante investment are lesser than ex-ante savings.
32. State which of the following statements are true or false. Give valid reasons. 4
(a) According to Keynesian theory of employment, the state of full employment is obtained
only when the economy is in equilibrium.
(b) In a two sector economy , if consumption is equal to income, average propensity to save
will be zero.
33. Given saving curve, derive consumption curve and state the steps in doing so. Use
diagram. Also show when APC=1 and APS is negative. 6
34. Explain the equilibrium level of income with the help of saving and investment schedule
and diagram. Also explain the changes that take place in an economy when the economy is not
in equilibrium. 6
PART B:[ INDIAN ECONOMIC DEVELOPMENT]
35. Which of the following is the institutional source of credit? 1
(a) landlords (b) Government (c) Moneylenders (d) Village traders
36. Long period credit is needed for: 1
(a) construction of fences (b) Purchase of additional land
© Purchase of seeds and manures (d) purchase of machinery
Case Based questions([Link]. 37 to 41)
Read the following case study paragraph carefully and answer the questions on the basis of the
 same.
This paragraph talks about economic inequalities in India that have been driven by
employment patterns and changes in labour markets, which in turn have been affected by
macro economics policies and processes as well as forms of social discrimination and
exclusion. While many Asian economies have shown indications of rising inequality in recent
decades, the Indian experience is particularly remarkable in the way inequalities have
interwined and with the economic growth process.
Structural changes(or the relative lack of it) and the persistence of low productivity
employment in India are strongly related to falling wage share of national income and growing
wage inequalities, and the close relationship between formal and informal sectors is the
sharpest exemplar of this. Patterns of social discrimination along with gender and caste lines
have reinforced tendencies to create segmented labour markets that offer littile incentives for
employers to focus on productivity improvements.
37. Why did the government shift its strategy from long –term to short-term programmes to
remove unemployment? 1
(a) Short-term policies are more effective
(b) Long-term policies do not give appropriate response
© Its easy to check the progress
(d) All of the above
38. Women participation in rural areas is found to be higher as compared with urban areas in
India, due to which of the following reason? 1
(a) Widespread poverty
(b) Male members do not earn sufficient income
© Wages levels are low in rural areas
(d) All of the above
39. Increase in proportion of casual workers as a proportion of total workforce is known as
………………………(informalisation/casualization) 1
40. Due to introduction of new technology, workers may be replaced by machines leading to
……………… (technological/frictional) unemployment. 1
41. Read the following statements Assertion (A) and Reason (R ) .Choose one of the correct
alternatives given below: 1
Assertion (A) lack of training in farming activity leads to low productivity and growth of
agriculture in India.
Reason (R ) Reforms in India focused upon development of industries which was failed to
generate enough employment .
Alternatives
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion (A)
c. Assertion (A) is true but Reason (R) is false.
d. Assertion (A) is false but Reason (R) is true.
42. In case of underemployment, people work …………………………..than the standard
source of livelihood than among men . (less/more) 1
43. From the set of statements given in Column I and Column II, choose the correct pair of
statements: 1

Column I Column II
(i) Casual worker (a) Skilled workers
(ii) Labour force (b) All persons willing to work as
well as unwilling to work
(iii) Rate of participation (c) Participation of people in
production activity
(iv) Informal workers (d) Entitled to social security benefits

44. State whether the following statement is True or False: 1

Regulated markets were first established in Punjab.
45. What is distress sale? 1

46. From the set of statements given in Column I and Column II, choose the correct pair of
statements: 1

Column I Column II
(i) Lingering challenge (a) Challenge of high rents in agriculture.
(ii) Operation flood (b) A system of Milk Cooperatives,
launched in 1986.
(iii) Agriculture Marketing (c) Farmers’ act of bringing their produce
to the market for sale.
(iv) Diversification of production (d) Shifting to related areas of production
activity in agriculture activity, besides crop farming

Case Based Questions(Q. No. 47 to 49)

Read the following case study paragraph carefully and answer the questions on the
basis of the same:

The rural development generally refers to the process of improving the quality of
life and economic welfare of people living in relatively isolated and sparsely
populated areas. Different ministries of government of India formulate various
development schemes not to raise the profit but to maximize the welfare of the
people.
Some schemes like National Rural livelihood Mission,MGNREGA,Deen Dayal
Upadhyay Grameen Kaushal Yojana,Swachchh Bharat Mission,Pradhan Mantri
Sadak Yojana,and training to rural youth for self-employment, Antyodaya Anna
Yojana (AAY) , National Rural Health Mission, Aam Aadmi Bima Yojana , Kutir
Jyoti Programme etc. are made by the government to rural development of India.
The main objective of rural development has been to remove poverty of the people
and fill the widen the gap between the rich and the poor ,reducing migration,
restricting child labour and making villages’ self –sustaining work etc.
Government is also making efforts to improve agriculture marketing by removing
the role of intermediaries. Also non-farm activities are promoted in rural areas.
47. Which of the following are key areas of rural development in India? 1
(a) Infrastructural development (b) Education and training
(c) Agricultural marketing (d) All of these
48. Apni mandi is an alternative marketing channel which prevails in ………..
(Punjab and Haryana/Himachal Pradesh) 1
49. Non-farming activities are promoted by the government in the rural areas due
to which of the following reasons? 1
(a) It provides regular source of income.
(b) It addresses the problem of disguised unemployment
© It reduces dependency on farming activities
(d ) All of the above
50.
(a) The following table shows the population and worker population ratio for India
in [Link] the workforce (Urban and total) for India. 2
Region Estimates of Worker Population Estimated No. of
Population(in Ratio Workers (in
crores) crores)
Rural 71.88 41.9
Urban 28.52 33.7
Total 100.40 39.5`
(b) Explain the role of micro credit in meeting credit requirements of the poor. 1
51. a
(a) Why are female workers in rural areas unwilling to migrate outside
jobs? 2
(b) Analyse the change in occupational structure of the country
on the basis of the following table:
2
Change in occupational structure
Sector No. of Workforce%
Rural Urban
Primary 72.72 43.8
Secondary 10.02 24.7
Tertiary 17.26 31.5
Total 100 100

52. (a) Explain the distribution of employment from the graph given below: 2
(b)Bring the importance of animal husbandry as a source of diversification. 2
53. “Rural economic development is essential for Indian economic development”. Do you
agree with this statement? Support your answer with valid reason and also explain the
principle measures initiated by the government to improve marketing system for the
farmers in India. 6
54. Explain the possible causes of massive unemployment in India. Suggest suitable
measures to solve the problem of unemployment. 6