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CBSE XII Pre Boards 2015 : ECONOMICS with Answers (KV Chennai)

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KENDRIYA VIDYALAYA SANGATHAN : CHENNAI REGION CLASS XII COMMON PRE-BOARD EXAMINATION 2014-15 Subject:ECONOMICS Max Marks:100 Class XIITime Allotted: 3Hours : : 1) 2) 3) 1 6 17 18 4) 7 10 19 22 , . , 3 : 60 5) 11 12 23 25 4 , : 70 6) 13 16 26 29 6 7) , : 100 General Instructions:1. 2. 3. 4. 5. 6. 7. All questions are compulsory in both the sections. Marks for questions are indicated against each. Questions 1-6 and 17-18 are MCQ type questions, they are required to be answered in one word. Questions 7-10 and 19-22 are short answer type questions carrying 3 marks, they are required to be answered in 60 words each Questions 11-12 and 23-25 are also short answer type questions carrying 4 marks, they are required to be answered in 60-70 words each Questions 13-16 and 26-29 are long answer type questions; they are required to be answered in 100words each. Answer should be brief and to the point and the above word limit should be adhered to as far as possible. Section- A 1 ( ) ( ) ( ) ( ) 1 Which of the following is, one cause for leftward shift of the supply curve a)Decrease tax b) Use of old technology c)Decrease labour cost d) None of the above 2 ( ) 50 ( ) 10 5 ( ) 5 10, ? ( ) 2 1 What is the value of AR, when price of a pen is Rs.5 and quantity of pens are 10 a) 50 3 b) 10 c) 5 d) 2 , , ( ) ( ) ( ) ? ( ) 1 When Marginal Product is falling and positive, at what rate Total Product is changing? a)Increasing rate, b)Diminishing rate, C)Constant rate d) No change 4 -- , ( ) ( ) ( ) ( ) 1 Find out implicit cost from the following sentence An Indian former grown rice, employed his own family members and purchased seeds. c) Employed family members d) Purchased seeds a) Rice b) Farmer 5 ) ( ) ( ) ? ( ) Which of the following is a feature of monopoly ? a) Single seller b) No freedom of entry 1 c) Close substitute d) All of the above 6 ? ( ) ( ) ( ) ( ) How does an increase in price of substitute goods in consumption affect the equilibrium price? 1 a) Equilibrium price will decrease b) Equilibrium price will increase c) Equilibrium price will remain the same d) None of the above 7 5% 300 318 . . 8 A 5 percent fall in the price of good raises its demand from 300 units to 318 units. Calculate its price elasticity of demand. . 9 ? 3 In Indian economy there is underutilization of resources. Which point will show this situation through production possibility curve? Give two main reasons in Indian economy , .? How is the demand for a good affected by a rise in the prices of other goods?Explain. 10 3 3 ? ) ( ) ( ) 3 Which of the following have inelastic demand a) salt b) medicines c) mobile phones, Why? 11 ? Prepare a Production Possibility schedule assuming that the marginal opportunity cost is constant. Also comment on the shape of PPC? 4 12 , ? . ? 4 Equilibrium price of an essential medicine is too high. Explain what possible steps can be taken to bring down the equilibrium price but only through the market forces. Also explain the series of changes that will occur in the market. (OR) How is equilibrium price of a commodity determined? Explain with the help of a demand and supply schedule 13 : 1) 2) 3) . 6 Giving reasons, state whether the following statements are true or false: i) Average product will decrease only when marginal product decrease ii) With increase in level of output, average fixed cost goes on falling till it reaches zero iii) Under diminishing returns to a factor, total product continues to increase till marginal product reaches zero 14 Explain three properties of indifference curves. (Or) 6 Explain the conditions of consumer s equilibrium under indifference curve approach. 15 ? 1) > 2) = ? 6 Is a producer in equilibrium under the following situations? (i) When marginal revenue is greater than Marginal cost (ii)When Marginal revenue is equal to marginal cost. Give reasons for your answer. 16 ) ? ( ) 6 Explain the implications of the following a) Freedom of entry and exit. And b) Product differentiation SECTION B 17 ? ) ) ( ) ( ) 1 What will be the effect of fall in CRR on money supply: a) Increase b) Decrease.c) No change. d) Increase SLR 18 , 8000 ) 2000 . ) 18000 10,000 ? ) 5000 ) 10000 1 In a government budget, primary deficit is Rs. 10,000 crores and interest payment is Rs. 8,000crores. How much is the fiscal deficit? a) 2000 b) 18000 19 c) 5000 d) 10000 ? ? 3 What is the difference between real GDP and nominal GDP?Which of these is a better index of welfare of people? 20 500 10% . ) 12000 , 25% . 3 Calculate the value money multiplier and the total deposit created if initial deposit is of Rs. 500 crores and LRR is 10%. a) If total deposits created by commercial banks are Rs.12000, LRR is 25% calculate initial deposit. 21 ) ) : 1 2 3 4 5 6 ( ) 94 68 20 64 160 40 From the following data about a government budget find a) Revenue Deficit b) Fiscal Deficit and c) Primary Deficit. S.No. Items Rs. (cr.) 01 Tax revenue 94 3 02 03 04 05 06 22 Capital receipts Non-tax revenue Borrowings Revenue expenditure Interest payments 68 20 64 160 40 , ? 3 If Inflation is higher in a country A than in country B and the exchange rate between two countries is fixed , what is likely to happen to trade balance between two countries? 23 ? 4 Distinguish between autonomous and accommodating transaction of balance of payment account 24 , ) ) . ( ) ( ) 4 Classify the following and Explain the basis of classification of government receipts into Revenue receipts and Capital Receipts. (a) Receipts from sale of share of a public sector undertaking. (b) Borrowings from public c) Profits of public sector undertakings. (d) Income tax received by government 25 . ( ) . 4 Explain Banker to the Government Function of the central bank. ( or ) Explain the Medium of exchange and Store of value functions of money 26 ? ) ( ) ) ) 6 . How will you treat the following while estimating national income of India? (a) Dividend received by an Indian from his investment in share of a foreign company. (b) Money received by a family in India from relative working abroad. (c) Interest received on loan given to a friend for purchasing a car. 27 . . 6 Explain the concept of underemployment equilibrium with the help of a diagram. show onthe same diagram the additional investment expenditure required to reach full employmentequilibrium. C=200+ 0.9Y( C= 28 Y= , 2000 . 1) 2) . is S=-200+0.25Y . 2000 1) 2) 3) . 6 From the following information about an economy, Calculate i) its equilibrium level of national income, and ii) Savings at equilibrium level of national income. Consumption function C=200+ 0.9Y (where C= consumption expenditure and Y=National income), Investment expenditure is Rs. 3000. (OR ) The saving function of an economy is S=-200+0.25Y. The economy is in equilibrium when income is 2000. 29 Calculate a) Investment expenditure at equilibrium level, b) Autonomous consumption , c) Investment multiplier : ( ) 1) 300 2) 30 3) 600 4) 1800 5) 180 6) 2400 7) 360 8) 165 9) 10) 75 90 11) 60 12) 30 13) 14) 390 210 6 15) 150 From the following data calculate National Income by expenditure and Income method : (Rs in crores) (i) Government final consumption expenditure 300 (ii) Subsidies 30 (iii) Rent 600 (iv) Wages and salaries 1800 (v) Indirect Tax 180 (vi) Private final consumption expenditure 2400 (vii) Gross domestic capita information 360 (viii) Social security contribution by employers 165 (ix) Royalty 75 (x) Net factor income paid to abroad (xi) Interest 60 (xii) Consumption of fixed capital 30 (xiii) Profit 390 (xiv) Net exports (xv) Change in stock 90 210 150 KENDRIYA VIDYALAYA SANGATHAN, CHENNAI REGION CLASS XII COMMON PRE-BOARD EXAMINATION 2014-15 Subject:ECONOMICS Time Allotted: 3HRS Max Marks:100 SCORING KEY Q.N o Value point Mark s 1 B 1 2 C 1 3 B 1 4 C 1 5 D 1 6 B 1 7 Elasticity of demand= % 1 1 1 % ,% change in quantity demand is 6% % change in price is 5% 6% Ed=5% =1.2 8 a) The point inside the boundary of PPC will show under utilization of resources, 1 b) this is due to lack of capital, c) backward technology and d) lack of job opportunities 9 1,1 Substitute good:-When price of a substitute good increases demand for other good also increases and vice versa e.g. tea& coffee 2 Complementary good:-When price of a complementary good increases demand for other good also decreases and vice versa e.g. pen & Ink 10 11 2 A & B, as they are essentials. 3 Production Good X possibilities A B C D E F 0 1 2 3 4 5 Good Y MOC 100 80 60 40 20 0 20 20 20 20 20 Shape of PPC will be straight line touches both the axis. 4 12 Equilibrium price is the price where demand for a commodity is exactly equal to its supply Price(Rs) Demand(units) Supply(units) 100 20 Excess demand 2 80 3 60 4 40 < 80 5 20 < 100 1 Remarks 1 1 > > = 40 60 1 = Equilibrium Excess supply 1 Equilibrium price is Rs.3 Where both market demand and market supply are equal If Demand > Supply, It is the situation of excess demand, price of the commodity will be pushed up till demand= supply If Demand<Supply, It is the situation of excess supply, price of the commodity will be pushed down till demand = supply ( OR) One possible step can be to reduce tax on medicine ( or alternatively give D T competition between sellers. This will lead to fall in price of the medicine. ( Any other individual response with suitable justification should also be accepted even if there is no reference to the text). 13 i) False. Average product will decrease only when marginal product is lesser than average product whether MP is rising or falling. ii) False. AFC= TFC/Q. The TFC is constant and positive. Hence an increase in output AFC will fall but can never be zero. iii) True. Under diminishing returns MP falls. TPincreases till MP is positive. 2 2 2 14 (a) An indifference curve always slopes downward. (b) Indifference curves are convex to the origin. (c) Indifference curve can never intersect each other. (Three points with explanation) Or 2 2 2 The indifference curve on the budget line to find the point of consumer s equilibrium. The conditions for consumer equilibrium. (1)Indifference 3 Curve should be convex to the origin. (2)Slope of Budget Line should be equal to the slope of IC. (Px/Py = MRSxy). (3). Where the IC is tangent to 3 Budget line. The teacher will use power point slides to show the diagram and explain the conditions. (1) Why will the consumer not choose a bundle on IC . (2)Why will the consumer not choose a bundle on IC . Conditions of consumer s equilibrium:-(a) Budget line should be tangent to Indifference curve i.e.MRSXY= (b)Indifference curve should be convex to the point of origin at equilibrium point. 15 Producer is said to be in equilibrium when he is earning maximum profit. Necessary conditions are: 1.MR=MC 2.MC>MR after MC=MR output levelas long as MC is less than MR ,It is profitable for the producer to go on producing more because it adds more to profits. 3. when MC> MR after equilibrium, it means producing more will lead to decline in profits. 16 Free entry & Exit:- When existing firms are earning profit, freedom of entry induces new firms to enter the industry. This raises market supply which in turn leads to fall in market price. Profits fall and continue to fall till each firm is earning zero economic profit / normal profit / Zero profit. OR When existing firms are incurring losses, the firms start leaving the industry. This reduces the number of firms. The market supply is reduced which in turn leads to rise in market price. Losses fall and continue to fall till they are wiped out and each firm left in the industry is earning zero economic profit / normal profit / Zero profit 2. Product differentiation means that buyers differentiate between the products produced by different firms. Therefore, they are willing to pay different prices for the products of different firms. Different groups of buyers prefer products of different firms. This gives an individual firm some monopoly power, i.e. power to influence the demand for its product by changing price. 1 2 1 1 1 SECTION - B 17 a 1 18 b 1 19 1 When domestic product is valued at current prices it is called nominal domestic product and when it is valued at base year prices it is called real 1 domestic product. The real domestic product is a good indicator for welfare of the people. 20 a) Total deposit = Initial deposit x money multiplier = 500 x 10 = 5000 crores. b) Money multiplier = 1/LRR = 1/.25 = 4 Initial deposit = Total deposit / money multiplier = 12000/4 = 3000 3 21 Revenue Deficit =46, b) Fiscal Deficit = 64 and c) Primary Deficit= 24 1 Each 22 If Inflation is higher in country A than in country B , and the exchange rate 1 between the countries is fixed, the trade balance of country A will be deficit while that of country B will be surplus. In case of Inflation in country A and 1 prices of country B remaining constant, imports of country A will rise or Exports of country A will decline . As a result trade balance of country A will be unfavourable and trade balance f country B will be favourable . 23 (Autonomous items: Autonomous items in the B.O.P refer to international economic transactions that take place due to some economic motive such as profit maximization. These items are often called above the line items in the B.O.P. The balance of payments is in a deficit if the autonomous receipts are less than autonomous payments. The monetary authorities may finance a deficit by depleting their reserves of foreign currencies, or by borrowing from I.M.F. Accommodating items: Accommodating items in the B.O.P. refer to transactions that 2 2 occur because of other activity with the B.O.P such as government financing. Accommodating items are also referred to as below the line of items. a) It is a capital receipt as it results in reduction of assets. 1 (b) It is a capital receipt as it creates a liability. 24 1 (c) It is a revenue receipt as it neither creates a liability nor reduces any assets. 1 (d) It is a revenue receipt as it neither creates a liability nor reduces any Basis for classification is liability and assets 25 1 1 Central bank acts as a financial advisor to the government. 2 Keeps deposits makes paymentto govt. ( or ) a). A medium of exchange People can exchange goods and services 2 through the medium of exchange. 2,2 b)A store of value Value of goods can be stored in the form of money 26 a) It is factor income from abroad , so it will be included in N.I (b) It is transfer receipts, so it is not included in N.I. (c) Not included in N.I. because it is a non-factor receipt as the loan is not used for production but for consumption 27 Equilibrium level of income is determined at the point when aggregate demand is equal to the aggregate supply. Aggregate Demand:- Aggregate demand represents the total expenditure on goods and services in an economy aggregate demand consists of a) consumption expenditure (c) b) Investment expenditure (I) Thus AD = C+I Aggregate supply:- It refers to the total production of goods and services in an economy. In other words, it refers to country s national product or national them Thus AS = Y Determination of the equilibrium level of them: The equilibrium level of theme is determined at point where AD = AS. The following table and diagram illustrate the idea. Schedule and diagram showing the determinations of equilibrium level of income (Rs in Crores) 2 2 2 Yes (Equilibrium can get Before full employment also called underemployment or unemployment equilibrium) When Ag. D is less than Ag. S at less than full employment level then it is a situation of underemployment. ( OM) level in the diagram as it is because of increase an additional investment shifting Ag.D0 curve to Ag.D1. 28 Ans:i) i) Y = C+I, Y (200+O.9Y)+3000, Y-O.9Y=3200, 6 Y= 3200X10/1=32000(National income) ii) C=200+0.9Y: 200+0.9(32000) = 28800+200=29000, III) Savings=Y-C 32000-29000=3000 (2 marks each)OR Ans: (a) S=-200 +0.25(2000)=-200+500=300 So equilibrium investment (I)=S, therefore I=300 (b) S=-200+0.25x0=-200+0, Autonomous =-200 ( i.e. dissavings) So autonomous consumption =200 (c) Investment multiplier =1/MPS, =1/0.25=4 29 National Income = = Income Method= = = =vi + i + vii + xiv v + ii xii x 2400+300+360+210-180+30-30-90 Rs. 3000 Crores. iv + viii + (iii + ix) +xi + xiii x 1800+165+(600+75)+60+390-90 Rs. 3,000 Crores. 1 1 1 1

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