ISC Class 12 Sample Paper Economics

isc
specimen paper
2025
ISC Study Material

ECONOMICS

Maximum Marks: 80
Time Allotted: Three Hours
Reading Time: Additional Fifteen Minutes

Instructions to Candidates
➢ You are allowed additional fifteen minutes for only reading the question
paper.
➢ You must NOT start writing during reading time.
➢ This question paper has 9 printed pages.
➢ It is divided into three sections and has 13 questions in all.
➢ All questions are compulsory. Answer all questions.
➢ Section A has sixteen subparts which are very short answer questions.
Each question carries 1 mark.
➢ While attempting Multiple Choice Questions in Section A, you are
required to write only ONE option as the answer.
➢ Section B has eight questions which are short answer questions.
Each question carries 4 marks.
➢ Section C has four questions which are long answer questions.
Each question carries 8 marks.
➢ Internal choices have been provided in two questions in Section B and
in one question in Section C.
➢ The intended marks for questions are given in brackets [ ].

Instruction to Supervising Examiner
➢ Kindly read aloud the Instructions given above to all the candidates
present in the examination hall.

ISC SPECIMEN QUESTION PAPER 2025
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SECTION A – 16 MARKS

Question 1
(i) [1]
Good A

L

E K

IC
T

O Good B
M

Points K and T will NOT be attained by the consumer. Select the reason
from the options given below. (Understanding)
(a) K does not lie on any IC and entire money is not spent at T.
(b) K is beyond the financial capacity of the consumer and T provides a
lower level of satisfaction.
(c) Equilibrium should be unique and that is point E.

(d) K gives more of both the goods A and B and T gives less B.
(ii) Utility maximising consumers would like to decrease the consumption [1]
when (Understanding)
(a) MUx = Px
(b) MUx > Px
(c) MUx < Px
(d) MUx = Py
(iii) [1]
D
Price M

N
D
Quantity

With reference to the diagram shown above, select the reason for the
movement from point M to N from the following options. (Analysis)

ISC SPECIMEN QUESTION PAPER 2025
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(a) Increase in the real income of the consumer and rise in relative price
of the commodity.
(b) Increase in the real income of the consumer and fall in relative price
of the commodity.
(c) Decrease in the real income of the consumer and rise in relative price
of the commodity.
(d) Decrease in the real income of the consumer and fall in relative price
of the commodity.
(iv) Naseer is planning to buy a car for his family. Observe the image shown [1]
below and select the MOST rational reaction of Naseer. (Application)

Price of petrol

(a) Naseer will not change his decision to buy a car.
(b) He will postpone his plan to buy a car.
(c) Naseer will become indecisive.
(d) He will decide to purchase two cars instead of one.
(v) Which one of the following statements is CORRECT with reference to [1]
government budget? (Application)
(a) Interest paid on government’s borrowing reduces liability of the
government.
(b) Financial aid received from the World Bank for cyclone affected
areas is revenue receipt.
(c) Grants given by the central government to the state government is
capital expenditure.
(d) Profits of BHEL, a PSU, increases the assets of the government.
(vi) If the value of US Dollar increases continuously in terms of Yen, it will [1]
result in (Understanding)
(a) more import from USA by Japan.
(b) more import from Japan by USA.

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(c) more export of USA to Japan.
(d) less export of Japan to USA.

(vii) Sometimes, a firm considers the action and reaction of its rival firms while
determining its price and output levels.
Which market form does such firm belong to? (Recall) [1]
(a) Perfect Competition
(b) Monopoly
(c) Monopolistic competition
(d) Oligopoly

(viii) Given below are two statements marked as Assertion and Reason. Read the [1]
statements carefully and choose the correct option. (Analysis)
Assertion: A firm is able to sell more quantity of a commodity by reducing
its price.
Reason: As it sells additional units of the commodity at a lower price, the
firm’s marginal revenue will be less than its average revenue.

(a) Both Assertion and Reason are true and Reason is the correct
explanation of Assertion.
(b) Both Assertion and Reason are true but Reason is not the correct
explanation of Assertion.
(c) Assertion is true and Reason is false.
(d) Both Assertion and Reason are false.
(ix) Given below are two statements marked as Assertion and Reason. Read the [1]
statements carefully and choose the correct option. (Analysis)
Assertion: GST is a kind of Proportional tax.
Reason: The tax rate remains same irrespective of the level of income of
the people.
(a) Both Assertion and Reason are true, and Reason is the correct
explanation of Assertion.
(b) Both Assertion and Reason are true, but Reason is not the correct
explanation of Assertion.
(c) Assertion is true and Reason is false.
(d) Both Assertion and Reason are false.
(x) Oligopoly differs from monopolistic competition on the basis of number of [1]
sellers.
State any other difference between these two market forms. (Recall)
(xi) APC can be greater than one, but MPC is always less than one. Give a [1]
reason to justify this phenomenon. (Understanding)
ISC SPECIMEN QUESTION PAPER 2025
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(xii) If aggregate demand exceeds aggregate supply in a situation of full [1]
employment, what will be its impact on the economy? (Understanding)
(xiii) If autonomous payments are higher than autonomous receipts, how can [1]
BOP be brought into balance? (Understanding)

(xiv) Monopsony is regarded as a buyers’ market. Do you agree? Give a reason. [1]
(Evaluate)
(xv) Illustrate that Investment multiplier is inversely proportional to MPS. [1]
(Understanding)
(xvi) Cite one measure to overcome a deflationary gap . (Recall) [1]

SECTION B – 32 MARKS
Question 2
(i) Prices of air conditioners and refrigerators have shot up in the new year as [2]
consumer durables makers pass on the impact of rising raw material costs
and higher freight charges to customers, while home appliances like
washing machines may witness 5-10 per cent price hike later this month or
by March.
(Source: The Economic Times)
Explain the behaviour of supply of this consumer durable. Illustrate the same
in a diagram. (Understanding)
(ii) If the price hike in the market is about 10% and this leads to the fall in the [2]
quantity demanded by 12%, calculate the price elasticity of demand.
Mention the degree of price elasticity of demand. (Application)

Question 3

(i) Union Finance Minister Mrs. Nirmala Sitharaman announced during her [2]
Budget speech that the Centre would reduce its fiscal deficit to 5.1% of
gross GDP in 2024 – 25. (The present fiscal deficit is 5.8% of GDP.)
(Source: Union budget 2024-25)
What would be the impact of this decision on government borrowing? Why?
(Understanding)
(ii) It is believed that increase in public expenditure leads to Inflation. Under [2]
what circumstances, may a government consider it prudent to increase
public expenditure to control inflation? (Understanding)

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Question 4
(i) Given that fixed cost is Rs.30. Calculate TVC and TC from the following [2]
data. (Application)
Output(units) 0 1 2 3
Marginal Cost 0 10 15 25

(ii) Cite any two differences between Returns to Factor and Returns to Scale. [2]
(Understanding)
OR
(i) Draw a well labelled diagram to show AFC and AC curves. State the nature [2]
of each curve. (Understanding)
(ii) Study the data given below and identify the laws followed in the production [2]
of A and B depicted in the Table I and Table II. Justify your answer with a
reason for each. (Analysis)

Table I Table II
Machines Labour Output of A Machines Labour Output of
(units) B (units)
5 10 1000 5 10 400
5 11 1150 10 20 800
5 12 1310 15 30 1200

Question 5
(i) A perfectly competitive firm always enjoys normal profit in the long run [2]
irrespective of the situation it faces in the short run. Discuss the statement in
brief. (Understanding)
(ii) A car company ‘W’ hired an international cricket player for its endorsement [2]
in India while two other car companies’ ‘Y’ and ‘R’ hired two famous
Bollywood film stars for this purpose. Explain the feature of the competitive
market indicated above. (Understanding)

Question 6
(i) A firm under perfect competition is a price taker but the industry is the price [2]
maker. Defend or refute this statement by giving a reason. (Evaluate)
(ii) Normal profits for a firm imply that the firm is breaking even. Explain. [2]
(Understanding)

Question 7
(i) India has been operating on a managed floating exchange rate regime since [2]
March 1993. Explain the statement. (Understanding)
(ii) List different components of Balance of Payment on current account and [2]
capital account. (Recall)
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Question 8
(i) With the help of a reason, explain why the following are included in [2]
calculation of National Income. (Understanding)
(a) Goods supplied free of cost by the government
(b) Own account production

(ii) Outline any two precautions that should be taken in estimation of National [2]
income by Expenditure method. (Understanding)
OR
(i) Differentiate between Personal income and Private income. [2]
(Understanding)
(ii) Why are net exports added in the total expenditure in measuring National [2]
income by Expenditure method? (Understanding)

Question 9 [4]
With the help of a diagram, determine the equilibrium level of output and income
by using Aggregate demand and Aggregate supply approach. (Understanding)

SECTION C – 32 MARKS

Question 10
(i) What are Average product and Marginal product? With the help of a suitable [6]
diagram, discuss the relationship between Average product and Marginal
Product. (Understanding)
(ii) Which stage of the Law of Variable proportions will be the best for the [2]
producer? Explain with a reason. (Understanding)

Question 11
(i) Will you defend or refute the case depicted in the following diagram? [2]
Provide a rationale in support of your view. (Evaluate)
Good B

IC
Good A
(ii) Name the law which deals with the behaviour of marginal utility when the [6]
consumer consumes a commodity continuously at a given time. Explain this
law with the help of a diagram. (Understanding)

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Question 12
(i) Discuss the categories of Factor income considered in calculating the [4]
National income by Income method. (Understanding)
(ii) Calculate GDPmp and NNPfc from the following data. (Application) [4]

Items ₹ (in Crore)
(i) Wages & salaries 170
(ii) Rent 10
(iii) Interest 20
(iv) Profits 25
(v) Dividend 12
(vi) Royalty 5
(vii) Employer’s contribution to social security 30
(viii) Net factor income from abroad (−)3
(ix) Consumption of fixed capital 34
(x) Net indirect tax 38
OR

(i) Explain the different components of Final Expenditure in calculating the [4]
National income by Expenditure method. (Understanding)
(ii) Calculate GNPmp using Income method and Expenditure method from the [4]
following data. (Application)

Items ₹ (in Crore)
(i) Private final consumption expenditure 800
(ii) Net exports 20
(iii) Rent 40
(iv) Interest 60
(v) Government final consumption expenditure 200
(vi) Profit 120
(vii) Net domestic capital formation 100
(viii) Compensation of employees 800
(ix) Net indirect taxes 100
(x) Consumption of fixed capital 20
(xi) Net factor income from abroad (-) 30

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Question 13
Read the passage given below and answer the questions that follow.
In India, Fixed deposits have long been a favourite investment choice of people
especially senior citizens as it promises steady returns. It attracts those people who
are seeking a stable income. But it’s an illusion in the period of inflation.

Inflation is the rate at which the general level of prices for goods and services
rises, subsequently eroding the purchasing power of money. In simple terms, what
money could buy today, it might not a few years down the line. Fixed deposits are
financial instruments offered by banks where you deposit a lump sum amount for a
fixed period at a predetermined rate of interest. Consider an investment of Rs 1
crore in a fixed deposit at a 6% annual interest rate and the annual rate of inflation
is 5%. By the 10th year your pre inflation return is 1.79 crore, but post inflation it’s
just 1.10 crore. The nominal value of investment in fixed deposits may appear to
grow, inflation significantly diminishes their real value and purchasing power over
time.

(Source: https://www.linkedin.com)
(i) What is the theme of the extract? (Interpretation) [2]
(ii) Differentiate between Demand pull and Cost push inflation. [2]
(Understanding)
(iii) What are the demand deposits and time deposits? (Recall) [2]
(iv) Since 1998 RBI has been using new measures of money supply, M0, M1, M2 [2]
and M3. Which one of these measures incorporates fixed deposit as one of its
components? Mention the other components of that measure.
(Understanding)

ISC SPECIMEN QUESTION PAPER 2025
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ECONOMICS
ANSWER KEY

SECTION A – 16 MARKS

Question 1
In answering Multiple Choice Questions, candidates have to write either the
correct option number or the explanation against it. Please note that only
ONE correct answer should be written.
(i) (b) K is beyond the financial capacity of the consumer and T provides a [1]
lower level of satisfaction.
(ii) (c) MUx < Px [1]
(iii) (b) Increase in the real income of the consumer and fall in relative price of [1]
the commodity.
(iv) (b) He will postpone his plan to buy a car. [1]
(v) (b) Financial aid received from the World Bank for cyclone affected areas is [1]
revenue receipt.
(vi) (b) more import from Japan by USA. [1]

(vii) (d) Oligopoly [1]
(viii) (b) Both Assertion and Reason are true but Reason is not the correct [1]
explanation of Assertion.
(ix) (a) Both Assertion and Reason are true and Reason is the correct [1]
explanation of Assertion.
(x) [1]
Basis Monopolistic competition Oligopoly
Type of product Firms sell differentiated Firms sell
products homogeneous or
differentiated products
Entry and Exit There is a free entry of Entry of firms is
firms. restricted.
Control over Every firm has fairly large Each firm exercises
market price control over price of its substantial control
own product over price.
(Candidates are required to state any one difference between the two
market forms. The differences must be written in a complete sentence and
not in a phrase or captions. There must be a common basis of contrast.)
(xi) When C>Y , APC = C/Y >1; but MPC is always less than 1 because [1]
increase in consumption expenditure is always less than increase in income
as a part of increased income is used for saving as well.
(xii) It will generate inflationary gap or will lead to inflation. [1]

ISC SPECIMEN ANSWER KEY 2025
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(xiii) Through accommodating capital receipt. [1]

(xiv) As there is a single buyer in the market, the buyer influences the market in [1]
determination of price of the product. So it’s regarded as buyers’ market for
the dominance of buyer.
(xv) Investment multiplier (k) = 1 . Higher MPS reduces k and lower MPS [1]
MPS
raises k.
(xvi) • Direct tax rate is to be reduced. [1]
• Government can increase its expenditure.
• Policy of deficit financing can be followed.
• Central bank can reduce bank rate, repo rate, CRR, SLR.
• Central bank can purchase government securities from open market.

(Candidates have to mention one measure through which deflationary
gap can be reduced. Any other relevant measure will be accepted.)

SECTION B – 32 MARKS
Question 2
(i) Supply will decrease as the same supply will be at higher price (or lower [2]
supply at the same price) due to an increase in the cost of production and
transportation. Supply curve will shift leftwards as shown below.

Price S1
S
P1

P

O Quantity
Q

(Candidates are required to briefly explain the impact on supply as a result
of the change in other factors. The explanation given must be in relation
to the situation given in the extract.)
(ii) % 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑 12 [2]
ep = = = 1·2
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒 10
Here ep > 1. Therefore, demand is (relatively) elastic.
(Candidates must write the mathematical expression and then deduce the
price elasticity of demand.)

ISC SPECIMEN ANSWER KEY 2025
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Question 3

(i) Decision of reduction of fiscal deficit will lead to a decrease in government [2]
borrowing because

Fiscal deficit = Total expenditure of the government — (Revenue receipt +
Recoveries of loan + other receipts of the government) = Borrowing and
other liabilities of the government.

Therefore, reduction of fiscal deficit will lead to reduction of borrowing.
(Candidates have to
(ii) In the situation of emergency, like natural calamity, pandemic (COVID 19) [2]
etc. government can provide subsidies to the sellers or producers of the basic
necessities to control the upward pressure on prices of these commodities. In
this situation government has to increase its expenditure for providing this
subsidy.
(Candidates have to mention a specific situation when the government has
to adopt policies to take this unusual step.)

Question 4
(i) Output Marginal TVC TC [2]
Cost
0 0 0 30
1 10 10 40
2 15 25 55
3 25 50 80
(ii) [2]
Basis Returns to a Factor Returns to Scale
Law It means or indicates a It means or indicates a
change in the level of change in the level of
output due to change in output due to change in
any one factor, keeping all the factors of
other factors constant. production at a particular
rate.
Variability of Here factor proportion i.e. In this case, factor
factors K/ L, changes. proportion, i.e. K/L,
remains constant.
Types of Three possible returns to a There are three types of
returns factor are, increasing returns to scale, like,
return, constant return and increasing returns to
diminishing return to a scale, constant returns to
factor scale and decreasing
returns to scale.
Applicability It’s applicable in the short It’s applicable in the
run. long run.
(Candidates are required to write any two distinctions between the two
laws. The differentiation should be done on a common basis.)
OR
ISC SPECIMEN ANSWER KEY 2025
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(i) AFC curve is a rectangular hyperbolic curve or it’s asymptotic. [2]
AF
C

AFC

Output
AC curve is a ‘U’ shaped curve.

AC AC

Output
(ii) Table I depicts the Law of Variable proportions. Here, output increases due [2]
to change in K/L ratio, i.e., due to change in labour only while machine
remains constant.
Table II depicts the law of Returns to Scale as K/L =1/2 i.e. constant. Here
output increases due to change in labour and machine at the same rate.
(Candidates are required to first identify the behaviour of the output in
relation to the changes in factors. They have to then provide a reason to
support the laws identified by them.)

Question 5
(i) If firms enjoy supernormal profit in the short run, new firms will enter the [2]
industry in the long run which will cause an increase in the market supply.
This will lead to a fall in price of the commodity till it becomes equal to AC
and each firm enjoys normal profit.
If firms face loss in the short run, they will exit the industry in the long run
which will cause a decrease in the market supply. This will lead to a rise in
price of the commodity till it becomes equal to AC and each firm enjoys
normal profit.
(Candidates have to briefly explain both the cases of supernormal profit
and loss in the short run and how the firm achieves normal profit in the
long run.)
(ii) It is a sales promotion measure in view of intense competition and [2]
interdependence of firms under oligopoly. Every firm under this market
form enjoys a large market share due to small number of firms. Every firm’s
action affects its rival firms. So, while taking decision a firm has to take into
account the impact on and reaction of its rivals. This phenomenon has been
reflected in the example.
(Candidates have to explain sales promotion measure with reference to
intense competition and inter dependence.)
ISC SPECIMEN ANSWER KEY 2025
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Question 6
(i) Price of the commodity is determined by the interaction of market demand [2]
and market supply. So, market or the industry is the price maker. But no
individual firm under this industry can influence this price for its
insignificant market share. It only has to accept the market determined price
and can sell any amount of the commodity. So firm is the price taker.
Therefore, the statement is to be defended.
(Candidates have to agree or disagree with the statement. They must
support their stance with a valid reason.)
(ii) Normal profit is the minimum profit which is required by the organiser to [2]
continue the production. This is a part of total cost of production of a firm.
Break-even point is the point where TR=TC, i.e., neither loss nor profit. A
firm enjoys normal profit when the total revenue of the firm is enough to
cover its cost only since normal profit is a part of total cost.
(Candidates have to explain normal profit and then relate it to break even
point.)

Question 7
(i) India has been following flexible exchange rate system for many decades, [2]
where foreign exchange rate is determined by the forces of demand for and
supply of foreign exchange. Since 1993, RBI has been intervening to
purchase and sell foreign currencies when foreign exchange rate is very low
or high, i.e., India is now following the managed floating exchange rate
system for controlling the fluctuation of foreign exchange rate.
(Candidates have to explain flexible exchange rate system and refer to
government intervention since 1993.)
(ii) Components of current account are as follow: [2]
• Export of goods & import of goods
• Export of services & import of services
• Unilateral transfer receipt & Unilateral transfer payments
• Income receipts &income payments
OR
• Balance of trade
• Balance of invisible trade
• Balance of unilateral transfer
Components of capital account are capital receipt & capital payment.
OR
Balance of capital account.

Question 8
(i) (a) Because it is a part of government’s final consumption expenditure. [1]
(b) Because it constitutes a portion of current production of the economy. [1]
ISC SPECIMEN ANSWER KEY 2025
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(ii) • All final products irrespective of whether these are marketed or not, are [2]
to be included.
• Expenditure on intermediate goods is to be excluded.
• Expenditure on second hand goods is to be excluded.
• Expenditure on financial assets is to be excluded.
• Government expenditure on transfer payments is to be excluded.
(Any two precautions to be written in complete sentences. Any other
relevant precaution will be accepted.)
OR
(i) Personal Income Private income [2]
It is the income which It is the income accruing to the private
individuals actually receive from sector from all the sources.
all the sources
Corporate savings and corporate Both corporate savings and corporate
taxes remain excluded from taxes are the parts of private income.
personal income.
(Candidates may write the differences in either tabular or paragraph
form.)
(ii) Exports represent the expenditure by foreigners on the goods and services [2]
exported by the country. It is to be added to get GDP because goods and
services exported are the part of domestic product. Again, imports represent
the expenditure made by the residents of the country on imported goods and
services. It should be subtracted from the total expenditure as the goods and
services imported are not the part of domestic production of the country.
Hence, it cannot be a part of GDP. Therefore, (exports —import) i.e. net
export is a part of GDP and hence of NI.

Question 9 [4]
Equilibrium income refers to the level of real income or the level of output for
which aggregate demand and aggregate supply become equal. Therefore, the
equilibrium condition is stated as, AS=AD i.e., Y = C+I.
AS
AS
Consumption
expenditure and
investment AD= C+I
expenditure

450

Income
Y
Y12 YY
e
e
Y2
1
Ye is the equilibrium income because for this level of income equilibrium condition
Y=C+I, has been satisfied. At Y = Y1, C+I > Y, i.e., a situation of excess demand
which induces the producers to produce more and this leads to rise in Y until Y=
ISC SPECIMEN ANSWER KEY 2025
6

C+I i.e. Equilibrium is restored.
Again, at Y= Y2, C+I <Y i.e. a situation of excess supply which induces the
producers to reduce the current production and this leads to fall in Y until Y= C+I
i.e. Equilibrium is restored.

SECTION C – 32 MARKS

Question 10
(i) Average product is the production per unit of a factor, such as labour. It is [6]
expressed as APL = TP/L or Q/L
Marginal product is the change in production for one unit change in variable
factor, say labour. It’s expressed as, MPL = ∆Q/ ∆L.

APL
& I II III
MP
L

k

APL

Labour
L2
L1
L2
MP
In Stage I (under law of increasing return) – When APL rises, MP>AP. MP
curve lies above AP curve in the above diagram when later slopes positively.
At the end of the stage I, When AP is maximum for L1 of labour, MP =AP
and MP curve intersects AP curve at its maximum point, k.
In Stage II (under law of diminishing return) – When AP falls, MP < AP and
MP curve lies below AP curve and intersects labour axis, i.e. MP=0, for L2
level of labour at the end of the stage II.
In stage III (under law of negative return) – AP continues to fall, but never
becomes zero for positive labour. MP<0 and the curve lies under labour axis.
(Candidates must mark the stages correctly on the diagram. Explanation
must correspond with the stages or the law and the diagram as well.)
(ii) Producer will take the decision of his operation, among these three stages, [2]
through the process of elimination. Stage III will be eliminated as MP<0. If
producer operates at any point in stage I before it ends, he won’t be able to
enjoy the full advantage of maximum productivity as AP is continuously
rising over the entire stage. Therefore, a rational producer will operate only
in stage II.
(Candidates must specify Stage II and then give the reason for the
elimination of Stage I and Stage III.)
ISC SPECIMEN ANSWER KEY 2025
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Question 11
(i) The diagram shows a straight line Indifference curve which is to be refuted. [2]
IC cannot be a straight line in general for imperfect substitute goods. Here
always a same amount of good B is sacrificed for every additional unit of
good A. That is MRS is constant. But the concept of indifference curve, in
general, is based on the assumption of DMRS. Therefore, the case depicted
in the diagram should be refuted on the ground of violation of the
assumption of DMRS.
(Candidates must agree or disagree with the situation depicted in the
diagram and provide a valid argument in support.)
(ii) The Law of Diminishing Marginal Utility states that with continuous [6]
increase in consumption of a commodity, total utility increases at a
diminishing rate, i.e. marginal utility declines.
Assumptions
• Utility is measured cardinally
• Every unit of the commodity is homogeneous.
• Law of satiety holds.
• Consumption is continuous.
M
Total
Utility
Figure 1

TU

Q Quantity

Marginal
Utility
Figure 2

Quantity
Q

Fig 1. shows that TU curve slopes positively tillMU point M indicating rising
TU with increase in consumption up to Q and it becomes maximum at M.
Beyond it, TU curve slopes negatively, i.e, beyond the satiation point TU
decreases with further increase in consumption. TU curve is concave to the
horizontal axis as TU increases at diminishing rate.
MU curve slopes negatively in Fig 2. It indicates that MU falls continuously
with increase in consumption of the commodity. As consumer fails to derive
ISC SPECIMEN ANSWER KEY 2025
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any additional utility from consumption of additional unit of commodity at
the point of saturation, MU becomes zero and MU curve intersects the
quantity axis for OQ level of consumption. Beyond Q, MU becomes
negative with further increase in consumption.
(Candidates required to state the law first, assumptions, draw the diagram
and explain with reference to the diagram.)

Question 12
(i) Broad categories of factor income are [4]
• Compensation of employees
• Operating surplus
• Mixed income of self employed

Compensation of employees comprises all types of payment made by the
employers for their employees. It includes the following:
Wages and salaries in cash inclusive of bonus, DA, LTC, house rent
allowance etc.
Payment in kind, like free medical facilities, rent-free accommodation,
subsidized food etc.
Supplementary labour income in form of employers’ contribution toward
social security benefit such as group insurance, provident fund, gratuity etc.
Operating surplus is the income earned from the ownership of capital and
entrepreneurship. It comprises rent, interest, profit and royalty.
Mixed income of self-employed covers total income of the own- account
workers and the profits generated in the unincorporated enterprises.
(ii) NNPfc = (i) + (ii) + (iii) + (iv) + (vi) + (vii) + (viii [4]
= 170 + 10 + 20 + 25 + 5 + 30 + (−) 3
= ₹ 257 Cr.

GDPmp = (i) + (ii) + (iii) + (iv) + (vi) + (vii) + (ix) + (x)
= 170 + 10 + 20 + 25 + 5 + 30 + 34 + 3
= ₹ 332 Cr.
OR

(i) The components of final expenditure are as follow: [4]
Private final consumption expenditure [Brief description]
Gross investment expenditure (inclusive of government investment
expenditure) [Brief description along with its categories of gross domestic
capital formation, inventory accumulation or change in stock and residential
investment]
Government final consumption expenditure [Brief description]
Net exports [Brief description with the meaning of ‘Net’]
ISC SPECIMEN ANSWER KEY 2025
9

(ii) Following Income method : [4]
GNPmp = (iii) + (iv) + (vi) + (viii) + (ix) + (x) + (xi)
= 40 + 60 + 120 + 800 + 100 + 20 + (−) 30
= ₹ 1110 Cr.
Following Expenditure method:

GNPmp = (i) + (ii) + (v) + (vii) + (x) + (xi)
= 800 + 20 + 200 + 100 + 20 + (−) 30
= ₹ 1110 Cr.

Question 13
(i) The theme of the extract is fixed deposit is a myth during the time of [2]
inflation. As Inflation is a continuous rise in price level in the economy, it
causes a decline in the purchasing power of money and hence the real value
of return from the fixed deposit.
(Candidates have to interpret the theme of the extract briefly in their own
words.)
(ii) Demand pull inflation originates from demand forces, i.e., when aggregate [2]
demand rises and exceeds aggregate supply of goods and services, it will
lead to rise in price level in the economy.

Cost push inflation refers to the continuous increase in price level due to
increase in cost of production caused by increase in wage rate, profit margin
etc.
(iii) Demand deposits are the deposits in bank account where the deposited [2]
money can be withdrawn by cheques at any time. Current account deposits
and saving account deposit are the demand deposits.

Time deposits are the deposits in bank account where the deposited money
cannot be withdrawn before the time of its maturity. Cheque is not issued on
this deposit. Fixed deposit and recurring deposit are the time deposits.
(iv) M3 incorporates fixed deposit. [2]
Other components are currency held by the public (C), demand deposits with
commercial bank (DD) and other deposits with the RBI (OD).

ISC SPECIMEN ANSWER KEY 2025
10

CISCE STUDY MATERIAL

ICSE ISC

INFORMATION CLASS STUDY MATERIAL

1 Time Table 9 Specimen Paper
10 Specimen Paper
2 Result
11 Specimen Paper
3 Syllabus 12 Specimen Paper

OTHER RESOURCES
10 Question Paper
Maps of India, Maps of World
Writing Skill Formats 12 Question Paper
Periodic Table
9/10 Lab Manuals
BOOKS 11/12 Lab Manuals
ICSE Class 10 Prescribed Books
ISC Class 12 Prescribed Books
ISC Class 12 Project Work

ENTRANCE EXAMS

JEE Main CLAT CUET UG
JEE Advanced NEET UG Fashion & Design