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The Shri Ram School - Aravali Mock Paper 1 Class: XII Subject: Economics Time: 3 hours MM: 80 Candidates are allowed additional 15 minutes for only reading the paper. They must NOT start writing during this time. --------------------------------------------------------------------------------------------------------------------Answer all questions in Section A, Section B and Section C. Section A consists of objective/ very short answer questions. Section B consists of short answer questions. Section C consists of long answer questions. The intended marks for questions or parts of questions are given in brackets []. SECTION A 16 Marks Question 1 (i). The goal of ____________ is to create a competitive advantage and to make sellers product superior [1] to close substitutes in the market. (a) Price competition (b) Price discrimination (c) Product differentiation (d) Price differentiation (ii). The profit maximising level of output in the figure below is: [1] (a) PE (b) OM (c) OM TSRS/AR/XII/Eco/Mock Paper 1 The paper consists of 7 printed sides. Page 1 (d) OM (iii). Assertion: Marginal Product (MP) cuts Average Product (AP) from its top. [1] Reason: Marginal Product (MP) is the area under Total Variable Cost (TVC). (a) Assertion and Reason are true, and Reason is the correct explanation of the assertion (b) Assertion and Reasoning are true & Reason is not the correct explanation of the assertion (c) Assertion and reason are false (d) Assertion is true but Reason is false (iv). If APS = - 0.8, what would be APC? [1] (a) 0.8 (b) 1.8 (c) -1.8 (d) 1 (v). Which of the following is NOT a function of central banks? [1] (a) Issuing currency notes (b) Banker to banks (c) Accepting deposits from public at large (d) Maintaining foreign exchange reserves (vi). Assertion: The state of producer s equilibrium reflects maximum pure profits. [1] Reason: When MC > MR after equilibrium, it means producing more will lead to a rise in profits. (a) Assertion and Reason are true, and Reason is the correct explanation of the assertion. (b) Assertion and Reasoning are true & Reason is not the correct explanation of the assertion. (c) Assertion and reason are false. (d) Assertion is true but Reason is false. (vii). Which of the following statements is incorrect? [1] (a) Total of primary and derivative deposits is equal to demand deposits of commercial banks. (b) Primary deposits are always more than derivative deposits. (c) Credit creation is inversely related to reserve ratio (RR). (d) Derivative deposits lead to multiple creation of credit in the economy. TSRS/AR/XII/Eco/Mock Paper 1 The paper consists of 7 printed sides. Page 2 (viii). In a year when there were big increases in demand for new cars, many used cars also came onto the [1] market. The diagram below shows the demand for and the supply of new and used cars with original equilibrium position at E. What will be the new equilibrium position in each market? new cars used cars (a) X X (b) X Y (c) Y X (d) Y Y (ix). The correct sequence for demand curves of Monopolistic competition, perfect competition, [1] monopoly, and oligopoly is: (a) Perfect elastic, indeterminate, relatively elastic, relatively inelastic (b) Relatively elastic, perfect elastic, relatively inelastic, indeterminate (c) Relatively elastic, perfect elastic, perfect inelastic, indeterminate (d) Relatively inelastic, relatively elastic, perfect inelastic, indeterminate (x). Money serves as a convenient mode of transfer of value. Justify by giving a suitable example. [1] (xi). What is meant by inconvertible money? [1] (xii). Define production function. [1] (xiii). Illustrate a situation of inflationary gap in an economy. [1] (xiv). State one point of difference between money cost and real cost. [1] (xv). Give one example each of capital expenditure and revenue expenditure. [1] (xvi). Identify the taxation system from the schedule below: [1] Taxable Income ( In lakh) Tax Rate (%) 0-2.5 Exempt 2.5-5 5 5-7.5 10 TSRS/AR/XII/Eco/Mock Paper 1 The paper consists of 7 printed sides. Page 3 7.5-10 15 10-12.5 20 Above 12.5 25 SECTION B 32 Marks Question 2 i. Leonardo da Vinci s iconic Mona Lisa is the world's most famous and recognizable artwork. In the [2] case of such rare goods, the quantity supplied of the original painting remains fixed at Louvre Museum in Paris, France. Illustrate and explain the degree of price elasticity of supply of such a rare good. ii. Differentiate between intended and actual supply. [2] Question 3 i. State the implications of a high fiscal deficit in an economy. [1] ii. Explain the importance of public expenditure on income distribution. [3] Question 4 i. Give one point of difference between returns to scale and returns to a factor. [1] ii. With the help of a diagram, explain the relationship between AR and MR of a firm under imperfect [3] competition. OR i. Draw the cost curves whose gap decreases with an increase in the level of output produced. [2] ii. What is meant by price ceiling? Why does it lead to black marketing? [2] Question 5 i. Define GDP deflator. [1] ii. Illustrate how circular flow of income operates in a mixed capitalist economy. [3] Question 6 i. Illustrate the mechanism of an investment multiplier. [1] ii. Explain the equilibrium level of income and output determination by AD-AS approach. [3] Question 7 i. Briefly explain any two exceptions to the Law of Demand. [2] ii. Discuss any two properties of an indifference curve. [2] TSRS/AR/XII/Eco/Mock Paper 1 The paper consists of 7 printed sides. Page 4 Question 8 i. Write the components of central bank money. [1] ii. Analyse any three ways of advancing loans by commercial banks to public. [3] OR i. State any two limitations of credit creation. [1] ii. Money performs several important functions. Explain any two contingent functions. [3] Question 9 With the help of diagrams, show how equilibrium price and quantity of a commodity are affected when: [4] (a) Demand is fixed and supply decreases. (b) Supply is constant and demand increases. SECTION C 32 Marks Question 10 i. A perfectly competitive firm can produce even if it is incurring losses in the short run equilibrium. [4] Justify the given statement. ii. In a city known for its diverse culinary scene, numerous gourmet pizza restaurants thrive. Each [4] restaurant offers a unique selection of toppings, crust styles, and specialty pizzas. Consumers choose a specific pizza place based on their taste preferences and unique sales promotion measures adopted by such restaurants. Identify the type of market form. Analyse its characteristics from the passage. Question 11 i. When price of a commodity X changes from 40 per unit to 20 per unit, its demand increases by 20 [2] units. If price elasticity of demand is 0.5, calculate initial and final quantity demanded of the commodity. ii. How is the price elasticity of demand affected by the following factors: [6] (a) Proportion of income spent. (b) Postponement of consumption. (c) Nature of the commodity. OR i. Distinguish between income demand and cross demand. [2] ii. Ms. Joy, a utility maximising consumer, consumes two goods- pizzas and burgers whose prices are 2 [6] TSRS/AR/XII/Eco/Mock Paper 1 The paper consists of 7 printed sides. Page 5 and 1, respectively. The marginal utility derived from the two goods is given in a schedule below with an income of 12. Show and explain how many units of both goods should be purchased by Ms. Joy to achieve stability. Units MU of Pizzas MU of Burgers consumed (utils) (utils) 1 16 11 2 14 10 3 12 9 4 10 8 5 8 7 6 6 6 Question 12 i. Explain the precautions to be taken while estimating National income using product method. [2] ii. Calculate Net Valued Added at factor cost and Operating surplus from the following data: [6] in crores Particulars i. Increase in unsold stock 600 ii. Sales 10,625 iii. Purchase of raw materials 2,625 iv. Purchase of machines 2,000 v. GST 1,200 vi. Subsidies vii. Mixed income 3,740 viii. Wages and salaries 3,000 ix. Life insurance by employees 4,000 x. Depreciation 500 xi. Bonus and commission received 460 400 OR i. Distinguish between final goods and intermediate goods. [2] ii. Calculate national income using expenditure method and income method from the following data: [6] Particulars TSRS/AR/XII/Eco/Mock Paper 1 The paper consists of 7 printed sides. (in crore) Page 6 i. Compensation of employees 700 ii. Government final consumption expenditure 750 iii. Net factor income from abroad (-)10 iv. Net exports (-)15 v. Profits 600 vi. Net indirect taxes 60 vii. Mixed income of self employed 350 viii. Rent 200 ix. Interest 310 x. Private final consumption expenditure 1100 xi. Net domestic capital formation 385 xii. Consumption of fixed capital 65 Question 13 Read the passage given below and answer the questions that follow. Arresting rupee volatility: RBI's policy conundrum In the midst of persistent stagflation, heightened by the Russia-Ukraine conflict and rising US interest rates, the Indian currency has depreciated to unprecedented levels. To curb this volatility, the Reserve Bank of India (RBI) intervened in the foreign exchange market. While a weakening rupee theoretically benefits exporters, the inelastic demand for Indian exports raises doubts about these advantages. Conversely, importers face increased costs, impacting India's Balance of Trade, making it unfavourable. To address this, the RBI's Monetary Policy Committee raised the policy repo rate by 50 basis points on September 30, 2022, aiming to attract capital inflows by narrowing interest rate differentials. As per the WSS data, RBI has intervened in the FOREX market to the tune of $19 billion in the last month. However, this tightening may dampen aggregate demand, potentially adversely affecting economic growth, prompting a future review of the aggressive monetary policy stance. Source: Forbes India (October 13, 2022) i. Identify the exchange rate system highlighted in the passage. [1] ii. Which account of BOP has been impacted? Mention its components. [2] iii. Which flows bring about equilibrium in the balance of payments? [1] iv. How has increase in the policy repo rate led to a fall in the aggregate demand? [2] v. Explain any two adequate measures to correct an adverse BOP. [2] TSRS/AR/XII/Eco/Mock Paper 1 The paper consists of 7 printed sides. Page 7
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