RBSE Class 12 Economics Model Paper 1 English Medium

RBSE Class 12 Economics Model Paper 1 English Medium are part of RBSE Class 12 Economics Board Model Papers. Here we have given RBSE Class 12 Economics Sample Paper 1 English Medium.

Board	RBSE
Textbook	SIERT, Rajasthan
Class	Class 12
Subject	Economics
Paper Set	Model Paper 1
Category	RBSE Model Papers

RBSE Class 12 Economics Sample Paper 1 English Medium

Time: 3.15 Hours
Maximum Marks: 80

General Instructions to the Examinees

1. Candidate must write his/her Roll No. on the question paper compulsorily.
2. All the questions are compulsory.
3. Write the answer to each question in the given answer book only.
4. For questions having more than one part, the answers to those parts are to be written together in continuity.
5. Write down the serial number of the question before attempting it.

6. Section	Q. Nos	Marks per question	Word limit of answer
   A	1-10	1	10 Words
   B	11-18	2	20  Words
   C	19-27	4	30-40 Words
   D	28-30	6	250-300 Words

7. Question Nos. 28,29 and 30 have internal choices.

PART – A

Question 1.
Who is called the Father of Economics? [1]

Question 2.
When were the words ‘Micro’ and ‘Macro’ used for the first time? [1]

Question 3.
What do you mean by opportunity cost? [1]

Question 4.
What is the meaning of short-run? [1]

Question 5.
What is the capital intensive technique? [1]

Question 6.
Define market. [1]

Question 7.
Which organization publishes national Income estimation in India? [1]

Question 8.
Write the name of one sector of circular flow model of simple income. [1]

Question 9.
Write any one example of intermediate goods. [1]

Question 10.
Write the formula of revenue deficit. [2]

PART – B

Question 11.
Mention any two differences between ‘Micro’ and ‘Macro’ economics. [2]

Question 12.
Explain the substitution effect with example. [2]

Question 13.
Define perfect competition market. [2]

Question 14
Write the formula to calculate Gross Domestic Product at Market Price (GDP_MP ). [2]

Question 15.
If Net National Product at Market Price (NNP_MP ) is  ₹ 2000 crore, Indirect Tax (IT) is ₹ 150 crore and Subsidy (S) is ₹ 50 crore, calculate Net National Product at Factor Cost (NNP_FC). [2]

Question 16.
If marginal propensity to consume is 0.80, calculate the value of multiplier. [2]

Question 17.
Differentiate between devaluation and revaluation. [2]

Question 18.
Write the full form of the following- [2]

1. BHlM
2. USSD.

PART-C

Question 19.
Give the meaning of indifference curve. Mention its three features. [2 + 2 = 4]

Question 20.
Calculate Average Fixed Cost, Average Variable Cost, Shortrun Average Cost and Shortrun Marginal Cost from the table given below [4]

Units	Total Fixed Cost	Total Variable Cost	Total Cost	Average Fixed Cost	Average Variable Cost	Short-run Average Cost	Short­ run Marginal Cost
0	0	0	20	–	–	–	–
01	20	30	50	20	30	50	7
02	20	45	65	?	22.50	?	15
03	20	55	75	6.66	?	25	10

Question 21.
Clarify the difference between gross investment and net investment. [4]

Question 22.
What is a monopolistic market? Mention any four of its components. [4]

Question 23.
Write the definition and formula of Private Income. [4]

Question 24.
Write any four functions of currency. [4]

Question 25.
If autonomous investment in the economy is ₹ 100 crore and the given consumption function C = 80 + 0.75 Y, what will be the equity level of income? [4]

Question 26.
What is meant by aggregate demand? Show the derivation of aggregate demand curve through diagram. [4]

Question 27.
According to you, why is international trade important? Give any four reasons. [4]

PART-D

Question 28.
Define the elasticity of demand. Explain the geometrical procedure of measurement of elasticity of demand with the help of a diagram. [6]
OR
Define total utility and marginal utility. Describe the relationship between total utility and marginal utility through a diagram.

Question 29.
Explain the concept of market supply with the help of an imaginary table. [6]
OR
Explain the Law of Variable Proportions with the help of a diagram.

Question 30.
Describe any six functions of commercial banks in detail. [6]
OR
Describe any six methods adopted by the central bank for credit control.

Answers

Answer 1:
Adam Smith is called the Father of Economics.

Answer 2:
The words ‘Micro’ and ‘Macro’ were used for the first time in the year 1933.

Answer 3:
The opportunity cost of a commodity is the quantity sacrificed in the production of another commodity in place of production of that commodity.

Answer 4:
Short-run refers to that period of time in which production can be increased only by variable factors of production (labour).

Answer 5:
When increased use of capital is done as compared to labour, it is known as capital intensive technique.

Answer 6:
Such entire region where free and competitive relations are established between the buyers and the sellers is known as market.

Answer 7:
Central Statistical Organization (CSO) publishes National Income estimation in India.

Answer 8.
Family sector.

Answer 9:
Thread which is used to make ready-made clothes is one example of intermediate goods.

Answer 10:
Revenue deficit = Revenue income – Revenue expenditure.

Answer 11:

Basis of Difference	Micro Economics	Macro Economics
1. Unit of study	In this, study of one individual unit is done.	In this, study of entire economy of a country is done.
2. Changes	Changes in micro economics can also take place in the condition of stability in macro economics.	There is no effect of change in the structure of micro economics on the stability of macro economics.

Answer 12:
Substitution effect means that if a good becomes relatively cheaper, then it is substituted for a costlier good. For example- if the price of good X becomes cheaper than the price of good Y, then the cheaper good X is substituted in place of the costlier good Y, i.e. the demand of good X increases.

Answer 13:
Perfect competition market refers to that form of market in which no firm is able to influence the cost of a particular commodity due to presence of a large number of buyers and sellers.

Answer 14:
GDP_MP = C + I + G + (x-M)
GDP_MP = Gross domestic product at market price C = Consumption expenditure I = Investment expenditure G = Government expenditure X – M = Net exports

Answer 15:
NNPFr = NNPMP – IT + S = 2000 – 150 + 50 = 2050 – 150 = 1900 crore.

Answer 16:
Value of multiplier (K) = 1 / 1 – MPC
Given that MPC = 0.80
Therefore, K = 1 / 1 – 0.80 = 1 / 0.20 = 5.

Answer 17:
Devaluation refers to the process of depreciation in value of its currency by the government of a country in comparison to foreign currency while in revaluation the value of currency of a country is increased as compared to foreign currency.

Answer 18:
BHIM = Bharat Interface for Money
USSD = Unstructured Supplementary Service Data.

Answer 19:
An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility.
Features:

1. It is downward sloping.
2. Indifference curve is convex to the origin.
3. Each higher indifference curve depicts greater satisfaction.
4. Two indifference curves cannot intersect each other. (any three)

Answer 20:
\(AFC = \frac {TCF}{Q} = \frac {20}{2} = 10\)
\(AVC = \frac {TVC}{Q} = \frac {55}{3} = 18.33\)
\(SAC = \frac {TC}{Q} = \frac {65}{3} = 325\)
\(SMC = \frac {\Delta TC}{\Delta Q} = \frac {30}{1} = 30\)

Answer 21:
Gross Investment– Expense done by the producer on capital goods in a fixed time period (usually one year) is called gross investment. For example- increase in the total quantity of new machine, new building, new dam, new electricity plant, etc. Expense done on old machine, old building, old dam, old canal is also included in gross investment.

Net Investment– This is basically gross investment minus the amount of wear and tear in physical capital goods in a fixed time period (usually one year). Investment which is obtained after deducting the price depreciation, i.e. wear and tear of physical capital goods is known as net investment.

Answer 22:
Monopolistic market is that situation in which an individual or a firm has full control on production or sale of a commodity or a service. Difference between firm and industry gets eliminated in this form of market.

1. There is only a single seller or producer in this market.
2. There is no near substitute of the commodity produced by the monopolistic individual or firm.
3. Difference between firm and industry is eliminated” in this form of market.
4. The ultimate objective of the monopolistic individual or firm is to incur maximum profit.

Answer 23:
Private Income is the total of factor incomes and transfer incomes received from all sources by private sector (private enterprise and households) within and outside the country.
Formula-
Private Income = (NNP_FC) + TP + IPD – CSS – PPU Here,
TP = Transfer payment received from government and abroad
IPD = Interest on public debts
CSS = Community security subsidy
PUU = Excess profit of public sector units

Answer 24:
Functions of currency-

1. Medium of Exchange- Currency functions in the form of medium of exchange. Nowadays, all the transactions are performed using currency. This is a very important function of currency. The producers and the sellers obtain currency as the price of their goods and the buyers pay the value of goods or services brought by them in the form of currency.
2. Measure of Value- This is the second most important function of currency. After currency came into circulation, value of all the goods and services is determined by currency. Due to this, buying and selling of goods and services has become very easy.
3. Means of Store of Value- Due to perishable nature of several commodities, it was not possible to store value in barter exchange system, but the circulation of currency has made this task easier. Currency is sustainable in nature. Therefore, value can easily be stored in the form of currency.
4. Basis of Deferred Payment- Currency has made it possible to make future payment because there are limited ups and downs in value of currency. In present time, most of the business transactions are based on credit. With the use of currency, the amount of credit can be easily obtained in the future.

Answer 25:
Y = C + la {C = 80 + 0.75Y} {la = 100}
Y = 80 + 0.75Y + 100
Y – 0.75Y = 80 + 100
Y (1 – 0.75) =180
0.25Y = 180
Y = 180 / 0.25 x 4 = 720 crore

Answer 26:
Consumption expenditure, private investment expenditure, purchase of goods and services by the government and net exports are included in aggregate demand. Other things remaining the same, aggregate demand refers to those goods and services which are purchased by consumers, investors, government and foreigners at various price levels. Aggregate demand can be shown through Keens diagram of income determination. In figure 1, Keens has depicted aggregate expenditure (investment expenditure) on various levels of gross national product. While in figure 2, derivation of aggregate demand has been shown at various price levels.

Answer 27:
Importance of International Trade- The importance of international trade can be understood from the following points:

1. All the countries are not capable of producing all types of goods in equal form, therefore they have to depend on others for the fulfillment of requirement of necessary goods.
2. There is unequal distribution of factors such as fertile soil, mineral wealth, forest wealth, etc., in the world. The climate is also unequal. The coordination among various factors of production is therefore not appropriate.Therefore, every country specializes in production of such a commodity, for which it has abundance of resources. Due to this, production cost comes to be less. Export of goods is done in order to incur profits. On the contrary, due to lack of resources and their high prices, such respective goods are imported from other countries.
3. Modem technology is obtained through international trade by which development of developing and backward countries becomes possible.
4. Competition increases between domestic industries also through international trade, and they increase both the quality of their products and the amount of sales in order to derive more profit from international trade.

Answer 28:
Elasticity of demand refers to change in demand of a particular commodity which takes place due to the changes which take place in the price of that commodity. Elasticity of demand exhibits the amount of inter-relationship between the price and the demand of a commodity. Economist Cairn Cross has rightly said that elasticity of demand of a commodity refers to that rate on which the quantity of commodity purchased changes due to changes in price of that commodity.

Geometric or Point Procedure- This procedure is used to determine the price elasticity of demand at a particular point of demand curve. Price elasticity is not the same at different points of the demand curve, rather it is different. Price elasticity on some point is determined with the help of upper portion and lower portion of that point through the following formula of determination of price elasticity-

\(\frac {PB}{PA}\)

Here, PB = lower portion from the point
PA = upper portion from the point
If both the portions are same, then the elasticity of demand is equal to one. If the lower portion is greater than the upper portion, then the elasticity of demand will be greater than one and if the lower portion is less than the upper portion, then the elastcity of demand will be less than one. All these three conditions are depicted in the following figure

In the above figure, elasticity of demand is equal to one at point R, because both, the portion below the point R and above the point are equal. On point S the elasticity of demand is greater than one because the portion below point S is greater than the portion above point S. On the contrary, elasticity of demand is less than one on point T because the lower portion is less that the upper portion.
If the demand curve is not a straight line rather it is in the shape of a curve, then a tangent line is drawn from that point on which elasticity of demand has to be determined and the elasticity of demand is determined from the above mentioned procedure.

OR
Total Utility- Sum total of satisfaction which is derived from consumption of different units of a commodity in a given time period is known as total utility. It is calculated in the following way- .
TU_n = U₁ + U₂ ……… + U_n
TU_n = Sum total of utility derived from consumption of n units of a commodity
U₁ = Utility derived from first unit of the commodity
U₂ = Utility derived from second unit of the commodity
U_n = Utility derived from n unit of the commodity

Marginal Utility- The increase which takes place in total utility when a consumer increases the consumption of any commodity by one unit is known as the marginal utility of that unit. Consumption of other commodities is considered to be fixed in this. In the form of formula, it is written as-|
MU_n = TU_n -TU_n-1
Here, MU_n = Marginal utility of nth unit
TU_n = Total utility of n units
TU_n-1 = Total utility of (n – 1) units
Description of inter-relationship between total utility and marginal utility through a diagram- interrelationship between total utility and marginal utility can be made through the following diagram-

It is clear from the above figure that marginal utility decreases up till sixth unit but the total utility has increased. Total utility is the maximum at seventh unit and the marginal utility is zero. After this, marginal utility becomes negative and total utility starts declining.

Answer 29:
Explanation of the concept of with the help of an imaginary table- A market supply table shows the sum total of supply done by the producers on different prices in a particular time period, as it is mentioned in the table given below-

Price of the commodity per dozen (in rupees)	Supply from firm ‘A’ (in dozen)	Supply from firm ‘B’ (in dozen)	Supply in the market (in dozen) A + B
10	100	150	250
20	200	250	450
30	300	350	650
40	400	450	850
50	500	550	1050

It is clear from the above table that when the price of the commodity is ^ 10 per dozen, its supply in the market is 250 dozen. As the price increases to ₹ 20, ₹ 30, ₹ 40 and ₹ 50 respectively, the supply in the market also increases to 450, 650, 850 and 1050 dozen respectively. It is clear that along with increase in price, supply of a commodity also increases.

OR
Law of Variable Proportions- Traditional economists regarded the law of diminishing utility to be such an essential law which broadly applies in the field of production. Professor Marshall had associated it with agriculture but the modem economists present the argument of applying it in all the sectors in the form of short term factor of production. Modem economists call it as the law of variable proportions. According to them, this law of utility is just a stage of the law of variable proportions.

Explanation of the Law- The law of variable proportions states that as the quantity of one factor is increased, keeping the other factors fixed, the marginal product of that factor will eventually decline, i.e. total production, average production and marginal production will change at different rates. This condition is exhibited in the table given below-

Fixed factors Units of land and capital	Units of variable factor-labor	Total Production (TP)	Average Production (AP)	Marginal Production (MP)	Phases
1	1	10	10	10	First Stage
1	2	24	12	14
1	3	39	13	15
1	4	52	13	13	Second Stage
1	5	60	12	8
1	6	66	11	6
1	7	66	9.4	0	Third Stage
1	8	64	8	2

First Phase- In this stage, along with the increase in variable factor- labour, total production, average production and marginal production- all these three increase continuously. This is a phase of law of increasing utility. In this phase, due to increase in the amount of labour, there is optimum use of fixed factors of production. Due to this, cost per unit declines.

Second Phase- This phase starts from the fourth unit of labour. In this phase, total production increases at a declining rate. After remaining constant, average production starts to decline and there is continuous decline in marginal production. Favourable use of factors is eliminated in this phase.

Third Phase- This phase starts from the seventh unit of labour, in which coordination between the factors starts to decline and marginal production becomes negative. Total production also starts to decline from eighth unit onwards.
The second phase is the best in context to the producer. He cannot incur maximum profits while remaining in the first and the third phase. He would prefer to remain at a suitable point or equity point in the second stage itself.

All these three phases can be better represented by the figure given below

It is clear from the above figure that average production increases from point O up till point L. This is the first phase of production. Second stage lasts from L to N and the third stage starts beyond N. No producer would prefer to remain in the third phase because in this stage production starts to decline in place of increasing. He would rather prefer to stay in the second phase itself.

Answer 30:
Six Functions of Commercial Banks- Following are six functions of commercial banks:
1. Accepting Deposits- Accepting deposits from their customers is a major function of
commercial banks. Banks accept deposits from the people and gather financial resources in abundance. The banks also give interest to the customers on these deposits. In order to attract deposits from the customers, banks provide the facility of opening various types of accounts. Following are the major types of accounts which can be opened in banks-

1. Saving Account
2. Fixed Deposit Account
3. Current Account
4. Recurring Deposit Account
5. Prime Minister Public Money Account

2. Granting Loans- Another important function of commercial banks is to provide loans to customers according to their demand. On one hand, banks provide loans to traders and industrialists, and on the other hand, they also provide loans to general customers for the purpose of building home, buying vehicle, education of children and marriage, etc. Commercial banks keep a fixed percentage of their deposits as liquidity and forward the rest of the deposits in the form of loans to their customers. In comparison to deposits, they charge higher interest on loans.
Banks provide loans in the following forms-

1. Loan or Advance
2. Cash Credit
3. Overdraft
4. Discounting Bills of Exchange

3. Credit Creation- Another important function of commercial banks is creation of credit through loans. Banks provide loans many times more than their equity capital and deposit amounts. This is the reason they are able to incur huge profits. According to economist Sayers, “Banks are not only the institutions which gather currency, but they are also creators of currency in a meaningful form.” The statement of Professor Holmes also has an important place in this context. According to him, “Formation of derived deposits itself is creation of credit”.

4. Agency Services- Agency services refer to those services functions which the banks perform in the form of their customers’ representatives.

5. Internet Banking- Nowadays, banks provide the facility of internet banking to their customers. By this facility, a customer can make online payments from home itself. This task is performed by obtaining Login ID and Password from the bank.

6. ATM Facility- In order to provide the facility of withdrawing money 24 x 7 to their customers, commercial banks install ATM machines, which are used to withdraw money, at important public places. A customer can withdraw money within the fixed limit from these machines. He does not need to visit the bank for this. ATM is a computerized machine which is connected to the bank’s server.

OR
The methods adopted by the central bank to control credit can be categorized into two parts-

1. Quantitative Methods
2. Qualitative Methods

Out of the above mentioned methods, following is a description of six methods-
1. Bank Rate Policy- Bank rate refers to that rate of interest on which central bank provides loans to commercial banks on the basis of accepted securities or on the basis of rediscounting first class bills. When the central bank wants to expand credit, it decreases the bank rate, and when it has to contract credit, it increases the bank rate. In this way, the central bank directly influences the capacity of giving loans of its subsidiary banks. This is the most practiced method of credit control.

2. Open Market Operations- When the central bank buys and sells government securities, it is called open market operations. When the central bank wants to expand credit, it starts to buy government securities and when it wants to contract credit, it starts to sell government securities. Cash reserves of banks increase as they buy securities and they become capable of extending loans in greater amount. In the same way, cash reserves of banks decline as they sell securities and therefore their capacity of extending loans declines.

3. Change in CRR- The central bank also influences the amount of credit creation by making change in Cash Reserve Ratio. When it wants to expand credit, it reduces this ratio and in order to contract credit, it increases this ratio.

4. Change in SLR- In order to expand credit, Statutory Liquidity Ratio is reduced and in
order to contract credit, this ratio is increased. ‘

5. Selective Credit Control- Under selective credit control, the central bank adopts liberal credit policy towards those sectors in which there is a need to expand credit and strict credit policy is adopted towards those sectors in which there is a need to contract credit.

6. Credit Rationing- Under this method, the central bank evaluates the requirements oi various sectors and fixes a maximum limit of credit creation. By this, the power of credit creation of banks becomes limited. Credit rationing can be done in the following ways-

1. Fully eliminating the facility of repayment of bills for a bank.
2. By fixing the limit for rediscounting of bills for a bank.
3. By fixing a limit or quota of loans to be extended to various

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