Session: 2017 – 18
Half Yearly Exam
Economics (030)
Set – B
Class: XII
SECTION A1 / Is PPC affected when resources are inefficiently employed?
No, few resources will be inefficiently employed / 1
2 / (b) Costs + profit / 1
3 / The minimum profit sufficient to stay in business, it is an implicit cost and is included in the cost of production. / 1
4 / TC is equal to fixed cost / 1
5 / No change in country’s PPF presently however it will improve production activities and deposition of tax will shift PPF to right.(to be elaborated)
OR
Central problems of economy for whom to produce
Functional distribution and personal distribution. (to be explained with examples and guiding principle) / 3
6 / Change in quantity demanded comes from change in the price of the good itself and change in demand comes from change in the non price factors .(to be elaborated ) / 3
7 / When price of a good falls from rupees 15 per unit to rupees 12 per unit, its demand rises by 25%. Calculate price elasticity of demand.
% change in QD/%ch in PR
25/20= 1.25 / 1+2+1
8 / MR=MC and MC should be rising
(to be explained with a numerical example and diagram) / 4
9 / With entry of the firms in the market supply increases and profit of the firms decreases, so weak firms start leaving the market supply decreases and the profit again start increasing. It is because of free entry and exit of the firms.
OR
Due to excess demand which arises due to price ceiling by the govt. It is the price which is fixed below the equilibrium price by the govt. It is fixed to protect the interest of the of the consumers. Due to this a black market is formed. To control black marketing govt introduces rationing which creates problems like poor quality goods, long ques etc. / 4
10 / MRS=Px/Py Consumers Equilibrium
Disequilibrium will be either when MRS>Px/Py Or MRS<Px/Py
Both conditions need to be explained using a diagram.
OR
MUx/Px=MUy/Py Putting values 2/1=2/2
MUx/Px>MUy/Py
Consumer consumes more of X than Y with law of DMU he will be able to equate X with Y. / 6
11 / Explain ‘returns to a factor’. Use total and marginal product approach. / 6
12 / It will increase the supply which will decrease the price and increase the quantity.
(To be explained further with the help of a diagram) / 6
SECTION B
13 / (b) Cash reserves with RBI. / 1
14 / (b) Escheat. / 1
15 / Borrowings lead to creation of liability. / 1
16 / It is the excess of receipts over expenditure excluding borrowing. / 1
17 / It will increase money with the bank in the form of savings. More savings means more availability of money in the form of deposits which could be utilized for credit. The banks have more money means it could be kept as reserve with central bank for a legal authority to extend credit. / 3
18 / Demonetization has forced people to declare their money with the govt and convert black money to white by paying tax. Govt has increased its tax revenue from it.
OR
By offering subsidies to the producers for mass consumption of goods, It may grant tax concessions to the producers of such goods, like life saving drugs. The govt can even produce such goods itself if pvt sector is not very keen for production due to lesser profits. / 3
19 / Custodian of cash reserves
Lender of last resort
Clearing house function(tp be explained further / 4
20 / capital receipts as it reduces the assets of the govt
Capital receipt it increase the liability.
Revenue receipt, neither create liability nor reduces the assets of the govt
Revenue receipt, neither create liability nor reduces the assets of the govt
OR
Excess of revenue expenditure over revenue receipts.
Yes when revenue budget is balanced and capital budget shows deficit.
Deficit in capital budget is greater than surplus in revenue budget. / 4
21 / Receipts or the income to the govt from all sources, it can be revenue recipts or capital receipts(All such receipts that neither create liability nor reduces the assets of the govt) it can be tax and non tax revenue Tax can be direct and indirect all such money from taxation is called tax revenue. Income from profits of PSU,s interest on loans and fee and fines etc which is earned from other sources is called non tax revenue / 4
22 / Hose holds increase their consumption expenditure on consumer durables
Investors will be able to borrow cheaper loans thus investment is increased.
Economy witnesses growth due to increase in consumption and investment expenditure.
OR
Chequable accounts from which money can be drawn at call
Stock of money held by its people at a point of time
M1 is a measure of money supply it includes cash and currency held with public, demand deposits held with commercial banks and other deposits held with RBI like public FI and demand deposits of foreign central banks and foreign govt. DD of international FI like IMF etc / 6
23 / Money creation (or deposit creation or credit creation) by the banks is determined by (i) the amount of the initial fresh deposits and (ii) the LegalReserve Ratio (LRR), the minimum ratio of deposit legally required to be keptas cash by the banks. It is assumed that all the money that goes out of banks is redeposited into the banks.Let the LRR be 20% and there is a fresh deposit of Rs. 10,000. As required, the banks keep 20% i.e. Rs. 2000 as cash. Suppose the banks lend the remaining Rs. 8000. Those who borrow use this money for making payments. As assumed those who receive payments put the money back into the banks. In this way banks receive fresh deposits of Rs. 8000. The banks again keep 20% i.e. Rs.1600 as cash and lend Rs. 6400, which is also 80% of the last deposits. The money again comes back to the banks leading to a fresh deposit of Rs. 6400. The money goes on multiplying in this way, and ultimately total money creation is Rs. 50000.Given the amount of fresh deposit and the LRR, the total money creation is Total money creation = Initial deposit * (1/LRR ) / 6
24 / Fall in the price of crude has induced govt to increase excise duty on petrol and diesel
A substantial fall in crude oil induces govt to increase the excise on petrol and diesel which without any direct benefit to the consumers. This raises tax revenue of the govt ad thus fiscal deficit gets reduced. / 6
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