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Board Paper of Class 12-Commerce 2016 Economics (SET 1) - Solutions

General Instructions
1) This question paper contains two sections: A and B.
2) There are 9 questions in total.

Section A
i. This section contains 1 question with ten sub-parts.
ii. Question No. 1 is compulsory.
iii. Attempt all the sub-parts of 2 marks each.
iv. This section is of 20 marks in total.

Section B
i. This section consists of 8 questions of 12 marks each.
ii. Attempt any 5 questions from question nos. 2 to 9.
iv. This whole section is of 60 marks in total.

• Question 1
 Answer briefly each of the following questions (i) to (x):                                                  10 × 2 = 20 (i) What is meant by income elasticity of demand? (ii) Technical advancement leads to cost saving. With the help of a diagram, explain the effect of technical advancement on the supply curve. (iii) Explain the meaning of M1 and M4 supply of money. (iv) With the help of a diagram, show how the equilibrium price can remain unchanged even after a rightward shift of the demand curve. (v) What is meant by fiscal policy? Name any two instruments of fiscal policy. (vi) Give two differences between Current Account and Capital Account of Balance of Payment Account. (vii) What is meant by budget line? (viii) State whether each of the items given below is  included in estimating National Income. Give a reason in each case to justify your answer. (a) Expenditure on the construction of Express Highway. (b) Expenditure on the purchase of an old house. (ix) If the value of MPC is 0.9, find the value of multiplier. (x) Explain the meaning of social cost with the help of an example.
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• Question 2
 (a) Explain any two reasons for the upward slope of the supply curve. [3] (b) Explain the shape of the following: (i) Total fixed cost curve. (ii) Total variable cost curve. [3] (c) Explain the concept of consumer's equilibrium with the help of indifference curve analysis. [6]
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• Question 3
 (a) The quantity demanded of a commodity at a price of Rs 10 per unit is 40 units. Its price elasticity of demand is –2. The price falls by Rs 2 per unit. Calculate the quantity demanded at the new price. [3] (b) Discuss two differences between cardinal utility and ordinal utility. [3] (c) Explain how equilibrium price can be determined with the help of: (i) Demand and supply schedule (ii) Demand and supply curves [6]
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• Question 4
 (a) Classify the following into fixed cost and variable cost giving a reason for your answer: (i) Expenses incurred on raw material (ii) Interest on capital (iii) Salaries to permanent employees [3] (b) Draw the TR and AR curves under perfect competition, with the help of a schedule. [3] (c) Discuss four differences between perfect competition and monopolistic competition. [6]
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• Question 5
 (a) Differentiate between fixed factor of production and variable factor of production. [3] (b) Show with the help of a diagram, how a perfectly competitive firm earns supernormal profit in short run equilibrium. [3] (c) Explain with the help of a diagram, the relationship between total product and marginal product. [6]
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• Question 6
 (a) Explain the primary functions of money. [3] (b) Explain the following functions of the Reserve Bank of India: (i) Banker to the government (ii) Issue of currency notes [3] (c) Explain the mechanism of credit creation by commercial banks with the help of an example. [6]
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• Question 7
 (a) Public expenditure helps in increasing the production of an economy. In this context, discuss any two points of importance of public expenditure. [3] (b) Explain any two causes of dis-equilibrium in the balance of payment. [3] (c) Define fiscal deficit, primary deficit and revenue deficit. Discuss their implications with reference of India. [6]
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• Question 8
 (a) Show the relationship between APC and APS. [3] (b) Explain the difference between induced investment and autonomous investment. [3] (c) Discuss the main components of aggregate demand in an economy with the help of a diagram. [6]
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• Question 9
 (a) Explain the following components of domestic factor income: (i) Compensation of employees (ii) Operating surplus [3] (b) Distinguish between private income and personal income. [3] (c) From the following data, calculate GNPMP and National Income by using value added method: [6] Rs in crores (i) Gross value of output in primary sector (at FC) 950 (ii) Gross value of output in secondary sector (at FC) 470 (iii) Gross value of output in tertiary sector (at FC) 500 (iv) Value of intermediate goods in primary sector 360 (v) Value of intermediate goods in secondary sector 200 (vi) Value of intermediate goods in tertiary sector 175 (vii) Depreciation 20 (viii) Indirect tax 35 (ix) Subsidy 10 (x) Net factor income from abroad 4
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