CBSE Class 12 Economics Question Paper 2020 Set 58-5-2 Solutions

HMJ/1
Strictly Confidential: (For Internal and Restricted use only)
Senior School Certificate Examination - 2020
Marking Scheme – ECONOMICS
SUBJECT CODE:030 PAPER CODE –58/5/2

General Instructions: -

1. You are aware that evaluation is the most important process in the actual and correct
assessment of the candidates. A small mistake in evaluation may lead to serious problems
which may affect the future of the candidates, education system and teaching profession. To
avoid mistakes, it is requested that before starting evaluation, you must read and understand
the spot evaluation guidelines carefully. Evaluation is a 10-12 days mission for all of us.
Hence, it is necessary that you put in your best efforts in this process.

2. Evaluation is to be done as per instructions provided in the Marking Scheme. It should not be
done according to one’s own interpretation or any other consideration. Marking Scheme should
be strictly adhered to and religiously followed. However, while evaluating, answers which are
based on latest information or knowledge and/or are innovative, they may be assessed
for their correctness otherwise and marks be awarded to them.

3. The Head-Examiner must go through the first five answer books evaluated by each evaluator on
the first day, to ensure that evaluation has been carried out as per the instructions given in the
Marking Scheme. The remaining answer books meant for evaluation shall be given only after
ensuring that there is no significant variation in the marking of individual evaluators.

4. Evaluators will mark( √ ) wherever answer is correct. For wrong answer ‘X”be marked.
Evaluators will not put right kind of mark while evaluating which gives an impression that answer
is correct and no marks are awarded. This is most common mistake which evaluators are
committing.

5. If a question has parts, please award marks on the right-hand side for each part. Marks
awarded for different parts of the question should then be totaled up and written in the left-hand
margin and encircled. This may be followed strictly.

6. If a question does not have any parts, marks must be awarded in the left-hand margin and
encircled. This may also be followed strictly.

7. If a student has attempted an extra question, answer of the question deserving more marks
should be retained and the other answer scored out.

8. No marks to be deducted for the cumulative effect of an error. It should be penalized only once.

9. A full scale of marks 0-80 has to be used. Please do not hesitate to award full marks if the
answer deserves it.

10. Every examiner has to necessarily do evaluation work for full working hours i.e. 8 hours every
day and evaluate 20 answer books per day in main subjects and 25 answer books per day in
other subjects (Details are given in Spot Guidelines).

11. Ensure that you do not make the following common types of errors committed by the Examiner
in the past:-

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 Leaving answer or part thereof unassessed in an answer book.
 Giving more marks for an answer than assigned to it.
 Wrong totaling of marks awarded on a reply.
 Wrong transfer of marks from the inside pages of the answer book to the title page.
 Wrong question wise totaling on the title page.
 Wrong totaling of marks of the two columns on the title page.
 Wrong grand total.
 Marks in words and figures not tallying.
 Wrong transfer of marks from the answer book to online award list.
 Answers marked as correct, but marks not awarded. (Ensure that the right tick mark is correctly
and clearly indicated. It should merely be a line. Same is with the X for incorrect answer.)
 Half or a part of answer marked correct and the rest as wrong, but no marks awarded.

12. While evaluating the answer books if the answer is found to be totally incorrect, it should be
marked as cross (X) and awarded zero (0)Marks.

13. Any unassessed portion, non-carrying over of marks to the title page, or totaling error detected
by the candidate shall damage the prestige of all the personnel engaged in the evaluation work
as also of the Board. Hence, in order to uphold the prestige of all concerned, it is again
reiterated that the instructions be followed meticulously and judiciously.

14. The Examiners should acquaint themselves with the guidelines given in the Guidelines for spot
Evaluation before starting the actual evaluation.

15. Every Examiner shall also ensure that all the answers are evaluated, marks carried over to the
title page, correctly totalled and written in figures and words.

The Board permits candidates to obtain photocopy of the Answer Book on request in an RTI
application and also separately as a part of the re-evaluation process on payment of the
processing charges.

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Q. SECTION- A (MACRO ECONOMICS)
Marks
NO. EXPECTED ANSWER
Question- _____ deficit includes interest payment by the Government on the past loans.
1 (Fill up the blanks with correct answer).
Answer- Fiscal/ Revenue 1
Question- To reduce credit availability in the economy, the Central Bank may ____
(Choose the correct alternative)
2 (a) buy securities in the open market. (c) reduce reserve ratio.
(b) sell securities in the open market. (d) reduce repo rate.
1
Answer – (b) sell securities in the open market.
Question- State, whether the following statement is true or false:
3 ‘Purchase of machinery by a producer is an intermediate good.’
1
Answer- False
Question- In case of an underemployment equilibrium, which of the following alternative is
not true? (Choose the correct alternative)
(a) Aggregate demand is equal to Aggregate supply.
4 (b) There exist excess production capacities in the economy.
(c) Resources are not fully and efficiently utilized.
(d) Resources are fully and efficiently utilized.
1
Answer- d) resources are fully and efficiently utilized
Question- Which of the following is not a ‘factor payment’? (Choose the correct alternative)

(a) Free uniform to defence personnel. (c) Rent paid to the owner of a building.
5
(b) Salaries to the Members of Parliament. (d) Scholarship given to the students.
1
Answer- d) Scholarship given to the students.

Question- combined factor income, which can’t be separated into various factor income
6 components, is known as ____. (Fill up the blanks with correct answer).
Answer-mixed income of self employed. 1
Question- State, whether the following statement is true or false:
7 ‘All financial institutions are banking institutions’.
Answer- False. 1
Question - Net Domestic Fixed Capital Formation + Change in Stock = .
8 (Fill up the blank with correct answer)
Answer -Net Domestic Capital Formation

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OR 1
Question-When Nominal Gross Domestic Product (GDP) is ₹ 840 crores and price Index is 120,
then the Real Gross Domestic Product (GDP) will be . (Fill up the blank with correct alternative)
(a) ₹ 700 crores (b)₹ 900 crores (c) ₹ 800 crores (d) ₹ 500 crores
Answer - a) ₹ 700 crores.
1
Question- If Marginal Propensity to Save (MPS) is 0.25 and initial change in
investment is ₹250 crores, then the final change in income would be .
9 (Choose the correct alternative)
(a)₹ 1,000 crores (b) ₹ 1,200 crores (c)₹ 500 crores (d) ₹ 3,500 crores 1
Answer- a) ₹ 1000 crores.
Question- Which of the following statement is incorrect?
a) Gross Domestic Product (GDP) at Market Price = GDP at factor cost plus Net Indirect
taxes.
b) Net National product (NNP) at market price = NNP at factor cost
c) Gross National Product (GNP) at Market price = GDP at Market price Plus Net Factor
10 Income from abroad.
d) Net National product (NNP) at factor cost= National Income.
1
Answer- (b) Net National product (NNP) at market price = NNP at factor cost
OR
Question- If the Real Gross Domestic Product (GDP) in an economy is ₹ 520 crores and
Nominal Gross Domestic Product (GDP) is ₹ 650 crores, calculate the price Index.
1
Answer- 125
Question- ‘Subsidies to the producers, should be treated as transfer payments.’ Defend or
refute the given statement with valid reason.
Answer- The given statement is defended, as subsidy is a transfer payment. Subsidy is the
financial assistance provided by the government to producers to fulfil its social welfare
objectives. Government does not get anything in consideration for the same. It does not
contribute to the current flow of goods and services and hence do not contribute to any 3
value addition. (no marks to be allotted if reason is not given or is wrongly given)
11
OR
Question- Explain Circular Flow of Income in a two sector economy.
Answer- Two sector model consists of production sector and household sector. Households
are the owners of factors of production and supply factor services to production sector. The 3
production units in return make factor payment. Households spend the entire income on
the purchase of goods and services produced by firms. Thus, consumption expenditure
flows from households to firms, completing the circular flow of income. (to be marked as a whole)

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Question- Calculate Net Value Added at Factor cost from the following data:
S. No. Particulars (₹ in
lakh)
(i) Durable Producer Goods(with a life span of 10 years) 10
(ii) Single use Producer Goods 5
(iii) Sales 20
12 (iv) Unsold Goods(Stock) 2
(v) Goods & Services Tax (GST) 1
Answer- Net Value Added at factor cost = iii+iv-ii-v- Depreciation
1
= 20+2-5-1- 1 1
=₹ 15 Lakhs ½
𝑐𝑜𝑠𝑡 𝑜𝑓 𝑎𝑠𝑠𝑒𝑡 10 𝑙𝑎𝑘 ℎ𝑠
Depreciation = 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑙𝑖𝑓𝑒 𝑜𝑓 𝑎𝑠𝑠𝑒𝑠𝑡 = 10 𝑦𝑒𝑎𝑟𝑠 = 1 lakh ½
13 Question-In the given figure, what does the gap ‘KT’ represent? State and discuss any two
fiscal measures to correct the situation.

1
Answer- KT’ represents inflationary gap
Two fiscal measures are –
a) Increase in Taxes - To curb the inflationary gap the government may increase the
1½
taxes. This may reduce the purchasing power in the hands of the public which in
turn may reduce the Aggregate Demand in the economy to bring it equal to the
Aggregate Supply.
b) Reduction in Government Expenditure- To curb the inflationary gap the government
may reduce its non developmental expenditure. This may reduce the purchasing
1½
power in the hands of the people which in turn will reduce the Aggregate Demand
in the economy to bring it equal to the Aggregate Supply.
For visually Impaired Candidates:
Question - What is meant by deflationary gap? State and discuss any two fiscal measures to correct
the situation of deflationary gap.
Answer- Deflationary gap is that situation when Aggregate Demand is lesser than Aggregate Supply 1
corresponding to full employment level.
Two fiscal measures are to control it are:
a) Decrease in Taxes - To curb the deflationary gap the government may decrease the taxes.

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This may increase the purchasing power in the hands of the people which in turn may 1½
increase the Aggregate Demand in the economy to bring it equal to the Aggregate Supply.
b) Increase in Government Expenditure- To curb the deflationary gap the government may
increase its expenditure. This may increase the purchasing power in the hands of the people
which in turn may increase the Aggregate Demand in the economy to bring it equal to the
1½
Aggregate Supply.
OR
Question- Explain, how the ‘Reverse Repo Rate’ helps in correcting Excess Demand in an
economy?
Answer- Reverse Repo rate is the rate of interest at which commercial banks can park their
surplus funds with the central bank, for a relatively shorter period of time. To deal with the
situation of excess demand this rate may be increase by the central bank. It may encourage
the commercial bank to park their surplus funds with Central Bank. As a result, the 4
availability of creating credit with the commercial bank will be reduced. Consequently,
consumption expenditure and investment expenditure may get reduced, implying
reduction in Aggregate Demand. (To be marked as a whole) (any other valid explanation to be allotted marks)
14 Question – ‘Taxation is an effective tool to reduce the inequalities of income.’ Justify the
given statement with valid reasons.
Answer- The given statement is appropriate. The government may impose higher taxes
(both direct and indirect taxes) on the richer class, reducing their purchasing power.
Government may use the same tax revenue to provide goods and services (free or at 4
subsidized price) to the poorer section of society to support them. (to be marked as a whole)
(No marks to be allotted if reason is not given or is wrongly given)
15 Question-Explain the ‘bank of note issue’ function of Central Bank.
Answer-The Central Bank plays the role of the sole note issuing authority in an economy.
The Central Bank undertakes this function of being a monopolist in issuing currency to 4
maintain uniformity of currency across nation and to control money supply process at a
centralised level. This function also builds faith in the currency system of the economy.
(any other relevant explanation to be allotted marks accordingly) (To be marked as a whole)
16 Question- Answer the following questions based on the data given below :
(i) Planned Investments = ` 100 crore.
(ii) C = 50 + 0.50 Y
(a) Determine the equilibrium level of income. 2
(b) Calculate the value of Savings at equilibrium level of National Income. 2
(c) Calculate the value of Investment Multiplier. 2
Answer- a) At Equilibrium AD = Y = C+I
½
Thus, Y = (50 + 0.5Y) + 100 ½
Y – 0.5 Y = 150 ½
½
Y = 150/0.5 = ₹ 300 crores.
So, equilibrium level of income = ₹ 300 crores.

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b) Consumption at equilibrium level of income
S= (-) c + (1-b)Y 1
S = (-)50 +( 0.5)(300) ½
½
Savings = ₹ 100 crores (any other alternative correct method to be awarded marks)
1
c) Investment Multiplier = 1−𝑀𝑃𝐶 1
1
= 1−0.5 ½
= 2 ½
OR
Question: Discuss the working of the adjustment mechanism in the following situations:
a) If Aggregate Demand is greater than Aggregate Supply
b) If Ex-Ante Investments are less than Ex-Ante Savings

Answer: a) If ex-ante Aggregate Demand (AD) is more than ex-ante Aggregate Supply (AS),
it means buyers are planning to buy more than what the producers are planning to
produce. Thus, the inventories-in-hand of producers may fall. As a result, producers may
plan to raise output and employment. This mechanism will continue to operate till the two
forces become equal. 3
b) If ex-ante investments are lesser than ex-ante savings, it means buyers are planning to
buy less than what the producers are planning to produce. Thus, the un planned undesired
inventories-in-hand of producers may rise. As a result, producers may plan to reduce output
and employment. This mechanism will continue to operate till the two forces become
equal. 3
17 Question- a) ‘Recently Indian Rupee (₹) has depreciated significantly. This has lead to
distress for Indian Importers.’ Defend or refute the given statement with valid reasons.
Answer- (a) The given statement can be defended as depreciation of Indian currency (₹)
means fall in the value of domestic currency in term of foreign currency (say $). This means
that Indian importers have to pay more units of Indian currency (₹) to by one unit of the
foreign currency ($) which will make Indian imports costlier. Thus, importers may feel
distressed due to depreciation of Indian Rupee (₹). (To be marked as a whole)
3
(any other relevant explanation to be allotted marks accordingly)

Question-b) Distinguish between ‘trade deficit’ and ‘current account deficit’.
Answer- (b) Trade deficit implies the excess of total value of import of goods (visible only) 1½
over the total value of exports of goods (visibles only), whereas,
Current Account deficit implies the excess of total value of import of goods (visible) and
services (invisibles including current transfers) over the total value of exports of goods 1½
(visible) and services (invisibles including current transfers). (To be marked as a whole)
(any other relevant explanation to be allotted marks accordingly)
Section B Indian Economic Development
18 Question-Define ‘Quota’ 1
Answer- Quota refers to non-tariff barriers imposed on the quantity of imports and exports.

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19 Question- Which of the following countries initiated its process of Economic Reforms in
the year 1991? (Choose the correct alternative)
a) Pakistan (b)India c) Russia (d) China
Answer- (b) India 1
20 Question- Greater proportion of women workers are found in (urban/rural)
areas as a component of Indian work force. (Choose the correct alternative)
Answer- rural 1
21 Question- State, whether the following statement is true or false :
“GATT was established in 1923 with 48 member countries.”
Answer-False 1
22 Question- ‘GLF’ with respect to the People’s Republic of China referred to as .
(Choose the correct alternative).
(a) Giant Leap Forward (b) Great Lead Forum
(c) Great Leap Forward (d) Giant Lead Forum
Answer- (c) Great Leap Forward 1
23 Question-Policy of ‘Import Substitution’ was targeted to protect _ industries.
Answer- domestic 1
24 Question- Which of the following is not used as a strategy for Sustainable
Development ? (Choose the correct alternative)
a) Use of bio-gas b) Use of solar power (c) Use of thermal power (d) Use of hydel power
Answer- c) Use of thermal power 1
25 Question- Maternal Mortality Rate is high in _ (China/Pakistan).
(Fill up the blank with correct alternative)
Answer-Pakistan 1
26 Question- State, whether the following statement is true or false :
“As per the Human Development Report, 2018, India was ranked at 180th position.”
Answer- False 1
27 Question- If a construction site Manager hires two workers on daily wages basis, such a
situation is covered under (formal/informal) sector.
(Fill up the blank with correct alternative)
1
Answer- informal
28 Question- Discuss briefly the concept of ‘Informalisation of workforce’ in India. 3
Answer – In the recent years India has witnessed an unprecedented shift of the workforce from the
formal sector to informal sector. This process whereby, the proportion of informal worker in the
total workforce increases is known as informalisation of workforce. The government has initiated 3
the modernization of the informal sector and provision of social security of measure to the worker
in the informal sector. (to be marked as a whole)
OR
State any three challenges facing rural development in India.
Answer – Three challenges faced by rural development in India are:
a) development of human resource. 1
b) development of infrastructure 1
c) Measures for alleviation of poverty (any other valid point to be allotted marks) 1

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29 Question- Compare and analyse the given data of India and China with valid reasons :
Country Annual growth rate of population (2015) Sex ratio (per thousand males)
India 1.2% 929
China 0.5% 941
Source: World Development Indicators, 2015
Answer-
a) The given data shows that China could arrest its annual population growth rate with
the implementation of some stringent measure in late 1970’s like the introduction
of one child norm. This step has been instrumental in controlling the growth of
population in China. India stands virtually more than double to China at its annual 2
population growth rate of 1.2% as compared to China’s annual population growth
rate of 0.5% pa.
b) The social dynamics of both the countries are similar to each other; sex ratio is low
and biased in both the countries due to preference for male child. Whereas, India 1
stands at 929 females per 1000 males, China is not far ahead at 941 females per
1000 males.
30 Question-Discuss briefly any two salient features of India’s pre-independence
occupational structure. 4
Answer- The occupational structure of India on the eve of independence had the following
two main features:
i) Predominance of agriculture sector: The agricultural sector accounted for the
largest share of workforce with approximately three-forth of the workforce 2
depending on agriculture, directly or indirectly.
ii) Growing regional variation- Due to rise of manufacturing and services sector in
some parts of India (like the then Madras, Bombay and Bengal Presidencies) the 2
dependency ratio of workforce on agricultural sector declined.
(any other relevant argument to be allotted marks)
OR
Discuss briefly, the rationale behind “equity with growth” as planning objectives for Indian
Economy.
Answer – Growth refers to increase in country’s capacity to produce the output of goods
and services in an economy. Equity refers to reductions in inequality of income and wealth.
When the objective of economic growth and equity are achieved, it may lead to
development with social justice, which may increase the per capita availability of goods and 4
services. (To be marked as a whole)
(Marks to be awarded for any other relevant explanation)
31 Question- “Modernisation as a planning objective shows a dichotomy with employment
generation”. Justify the statement.
Answer- The given statement is appropriate. Modernisation implies use of advanced
technology to enhance productivity at a faster pace. With application of modern 4
technology, higher output is obtained at a relatively lower cost. However, in a labour

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abundant country like India modernisation may lead to an increase in unemployment as
modern technology requires lesser labour per unit of output. (to be marked as a whole)
(any other valid argument to be allotted marks)
OR
Question-State the two –fold motive for the systematic destabilisation of indigenous Indian
industries in the British era.
Answer- Two fold motive behind systematic destabilisation of indigenous Indian industries
in the British era was: -
-To get raw material from India at cheaper rates to be used for upcoming modern 2
industries in Britain.
-To sell finished product produced by the British industries in Indian market at 2
higher prices.
32 Question- State and discuss any two problems faced by power sector in India.
Answer- Major challenges faced by power sector in India are, as follows:
(i) India’s installed capacity to generate electricity is not sufficient. Even the installed
2
capacity is underutilized because power plants are not running properly.
(ii) State Electricity Board which distribute electricity are incurring losses due to
obsolete transmission and distribution system and wrong pricing. 2
(Marks to be awarded for any other relevant answer)
33 Question- Critically examine the results of Poverty Alleviation Programmes implemented in
India since independence.
Answer- Poverty Alleviation Programmes are the designated programmes to target reduction
in/removal of poverty in a country. India, which inherited poverty from British rule, tried her
level best to eradicate poverty through various Poverty Alleviation Programmes over the years.
As a result, the percentage of absolute poor in some states has fallen well below the national
average of poverty. However, the problems of malnourishment, hunger and illiteracy continue
to be a common feature in many parts of India, because of the following reasons:
 There has been no radical change in the ownership of assets.
 Due to unequal distribution of land and other assets, benefits from such programmes
have been appropriated by the non-poor.
 Inadequate resource allocation for these programmes. 6
 The Government officials responsible for implementing these programmes were ill
motivated and inadequately trained.
To conclude we may say that poverty alleviation programmes were a great step but could not
achieve desired results due to improper implementation. (to be marked as a whole)
(any other relevant answer should be allotted marks)
OR
a) “Ujjawala Yojana has been a game changer for rural India.” State any three
conventional fuels being targeted under the Ujjawala Yojana.
Answer: The conventional sources of energy causes environmental pollution therefore the
government have introduced the ‘Ujjwala Yojna’ as a game changer for rural India by providing
free LPG gas cylinders (cleaner fuel) to rural households.
The three conventional fuels targeted under Ujjawala Yojana are:

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(i) Agricultural waste and dried dung
(ii) Firewood
(iii) Coal (or any other valid example) 3
b) “Economists believe that India should spend at least 6% of its GDP on Education for
achieving desired results.” Justify the statement with valid reason.
Answer: The given statement is appropriate as it was recommended by the Education
Commission of 1964-64. The government is spending 4 percent (approx.) of GDP on education,
which is quite inadequate. Education is an important component of human capital formation as
it helps in increasing the availability of skilled and educated labour force in the country which 3
may result in greater production and economic growth. (to be marked as a whole)
(any other relevant argument should be marked)
(data is only supportive, marks should not be deducted is not given)
34 Question (a) Discuss the need for on –the –job training for an employee. `
Answer- (a) Employers use on the job training methods for its employees to target an
overall increase in the skills and efficiencies of the workers. On the job trainings leads to an
increase in productivity of labour and production of goods. Such trainings keep the
employees updated with the latest changes in their field of working. 3
(to be marked as a whole) (any other relevant argument should be marked)
Question (b) Discuss the role played by horticulture in the direction of rural development in
India.
3
Answer- (b) In rural India, horticulture plays a vital role in providing food and nutrition to
the rural population. It also addresses the problem of unemployment (particularly disguised
and seasonal unemployment) in the villages. Various horticultural activities in Indian
villages have improved the economic condition of many farmers. Such activities have
become a lucrative source of livelihood for many women in the rural India.
(to be marked as a whole) (any other relevant argument should be marked)

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