Solution
TEST SERIES2025-26(010)
Class 12 - Economics
Macro Economics
1.
(b) 10%
Explanation:
Money Multiplier = ( LRR
1
)
10 =
1
LRR
LRR = = 0.10 or 10%
1
10
2.
(c) Bank money
Explanation:
es
Bank money
3.
ss
(d) Infinity
Explanation:
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Since the multiplier is a function of MPC, so when MPC is maximum, K must be maximum.
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Thus, K = 1−11
= infinity.
4.
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(d) 2
h
Explanation:
2
32
d
bo
5.
(d) ₹350 crores
03
Explanation:
₹350 crores
Su
80
6.
(c) ₹60 crore, 0.2
Explanation:
₹60 crore, 0.2
7. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
Both A and R are true and R is the correct explanation of A.
8.
(d) A is false but R is true.
Explanation:
A is false but R is true.
9.
(c) A is true but R is false.
Explanation:
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Fixed exchange rate keeps the government under pressure to check inflation because if prices in the
domestic market are high, demand for our exports will reduce.
10. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
Both A and R are true and R is the correct explanation of A.
11. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
Both A and R are true and R is the correct explanation of A.
12. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
Both A and R are true and R is the correct explanation of A.
13.
(c) A is true but R is false.
Explanation:
es
A is true but R is false.
14.
(c) A is true but R is false.
Explanation:
ss
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cla
A is true but R is false.
15. (a) Both A and R are true and R is the correct explanation of A.
77
Explanation:
Both A and R are true and R is the correct explanation of A.
h
16.
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(d) A is false but R is true.
d
Explanation:
A is false but R is true.
bo
03
17.
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the
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Assertion (A).
80
Explanation:
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the
Assertion (A).
18. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
Both A and R are true and R is the correct explanation of A.
19. (a) Statement II is true and statement I is false.
Explanation:
Statement II is true and statement I is false.
20.
(c) Statement I is true and Statement II is false.
Explanation:
Statement I is true and Statement II is false.
21. 1. decrease
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22. (a) It will Decrease
Explanation:
It will Decrease
23. 1. 0.2, 0.5
24. (a) It create excess supply in the market
Explanation:
It create excess supply in the market
25. i. Revenue deficit refers to the excess of revenue expenditure over revenue receipts of the government
in a financial year. It indicates that the government’s regular income is insufficient to meet its routine
administrative and welfare expenses, forcing it to borrow even for day-to-day functioning.
ii. Two components of revenue expenditure are:
(a) Subsidies, and
(b) Salaries and pensions.
iii. A high revenue deficit is harmful because it increases government borrowing for consumption
purposes and reduces funds available for capital formation and economic growth.
es
26. (a) Both i and iii
Explanation:
Both i and iii
ss
27. (b) official reserves
Explanation:
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official reserves
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28. (a) increases
Explanation: 77
increases
29. (b) Both A and R are true but R is not the correct explanation of A.
h
Explanation:
Both A and R are true but R is not the correct explanation of A.
32
d
30. (a) Statement 1 is true and Statement 2 is false.
bo
Explanation:
Statement 1 is true and Statement 2 is false.
03
31. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
Su
Both A and R are true and R is the correct explanation of A.
80
32. i. The Income Method estimates national income by adding all factor incomes earned during a year.
These include wages, rent, interest, and profits. It shows how income is distributed among factors of
production. Transfer payments and illegal incomes are excluded to avoid overestimation of national
income.
ii. National Income = Wages + Rent + Interest + Profit
= 5,000 + 1,800 + 1,200 + 2,000
= ₹ 10,000
Thus, the national income calculated through the Income Method is ₹ 10,000, representing total
factor earnings of the economy.
Indian Economy
33.
(d) Prime Minister
Explanation:
Prime Minister
34. (a) I, II, III
Explanation:
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I, II, III
35.
(d) ₹ 4,000
Explanation:
₹ 4,000
36.
(b) 1991
Explanation:
1991
37.
(c) Option (iii)
Explanation:
Health
es
38.
(d) Option (d)
ss
Explanation:
Expenditure on building machines and factories is a form of expanding physical capital and not
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human capital.
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39. 77
(c) Fruits, vegetable and flowers
Explanation:
h
Horticulture crops include fruits, vegetables and flowers besides several others.
32
d
40.
(d) Both There is greater risk in depending exclusively on farming for livelihood and To provide
bo
productive sustainable livelihood options to rural people
03
Explanation:
Both There is greater risk in depending exclusively on farming for livelihood and To provide productive
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sustainable livelihood options to rural people
80
41. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
Both A and R are true and R is the correct explanation of A.
42.
(d) A is false but R is true.
Explanation:
A is false but R is true.
43.
(b) Both A and R are true but R is not the correct explanation of A.
Explanation:
After liberalization tax structure has been simplified and moderated. This has raised the tax
compliance and therefore tax revenue of the government.
44.
(b) Both A and R are true but R is not the correct explanation of A.
Explanation:
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The system requires the member farmers to pool their production of milk for collective sale in the
market. Pooling increases the quantum of sale and thereby increases the bargaining power of the
farmers.
45. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
Both A and R are true and R is the correct explanation of A.
46. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
The subsistence form of farming reduces market risk in the economy. Subsistence farming focuses on
the production of those crops which are meat for self-consumption by farming families. The farmers
do not have to buy these crops from the market and thus market risk reduces.
47.
(d) Both the statements are true.
Explanation:
es
Both the statements are true.
48. (a) only P
ss
Explanation:
only P
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49. i. On the eve of Independence, Indian agriculture was characterized by low productivity, dependence
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on monsoon, use of traditional tools and methods, and dominance of subsistence farming. British
policies promoted commercial crops for export instead of food crops. Lack of irrigation, frequent
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famines and widespread poverty showed the backward condition of the agricultural sector.
ii. One commercial crop encouraged by the British was cotton.
h
50. i. Human capital refers to the stock of skills, knowledge, training and health possessed by people that
contributes to production. Its main features include being intangible in nature and requiring
32
d
continuous investment through education and health for growth.
ii. It increases productivity of labour, leading to higher national income.
bo
51. i. Informalisation is characterised by absence of job security, lack of social security benefits like
03
provident fund and medical insurance, and irregular and low wages with long working hours.
ii. One major disadvantage is lack of job security.
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52. (c) Deficit financing
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Explanation:
Deficit financing
53. (a) Fiscal reforms
Explanation:
Fiscal reforms
54. (b) Both A and R are true but R is not the correct explanation of A.
Explanation:
Both A and R are true but R is not the correct explanation of A.
55. (a) 1 - iv, 2 - i, 3 - ii, 4 - iii
Explanation:
1 - iv, 2 - i, 3 - ii, 4 - iii
56. (d) Statement 1 is true and Statement 2 is false.
Explanation:
One of the major aims of financial sector reforms is to reduce the role of RBI from regulator to
facilitator of financial sector. This means that the financial sector may be allowed to take decisions
on many matters without consulting the RBI.
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57. (d) A is false but R is true.
Explanation:
The reform policies introduced in and after 1991 removed many of these restrictions. Industrial
licensing was abolished for almost all but product categories — alcohol, cigarettes, hazardous
chemicals, industrial explosives, electronics, aerospace and drugs and pharmaceuticals.
58. i. Scholars opine that political instability, over-dependence on remittances, and foreign aid along with
the volatile performance of the agriculture sector are the reasons for the slowdown of the Pakistan
economy. Besides, the COVID-19 pandemic and restrained exports have been instrumental in abating
the sustainable growth of the country. Inflation is still the biggest issue that the government faces
even today. This has worsened the situation for millions of households who have seen a decline in
their purchasing power. Other issues caused due to natural phenomenon like flood-related damages
and potential locust attacks further exacerbates the situation.
ii. If a country can build up its foreign exchange earnings by sustainable export of manufactured goods,
it need not worry. In Pakistan, most foreign exchange earnings came from remittances from Pakistani
workers in the Middle-east and the exports of highly volatile agricultural products. Moreover, the
economy has been suffering instability due to various reasons.
es
a. Weak Economic Recovery: There was a growing dependence on foreign loans on the one hand
and increasing difficulty in paying back the loans on the other. The weak economic recovery
around the world, particularly in the European Union and the United States, has subdued demand
ss
for Pakistan’s exports. The outlook, however, remains bleak due to a weak global economic
recovery. After declining by 20 percent on a year-on-year basis in August, exports grew by 6
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cla
percent in September.
b. Structural inefficiencies: The chronic structural inefficiencies have worsened the condition. The
exporters who received additional orders in recent weeks were facing input (gas and cotton )
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shortages. This means export growth is unlikely to show an upward trend in economic activity and
employment. As a result, the structural issue with Pakistan’s economy, i.e., its inability to earn
h
sufficient foreign income to pay for its import and debt servicing needs, remains its shortcoming.
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d
bo
03
Su
80
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