ST.

XAVIER'S SENIOR SECONDARY SCHOOL, DELHI - 110054

Pre-Board Examination 2018 in ECONOMICS

Set 1
Std. 12 Max. Marks : 80
05-01-2018 Time : 3 hrs.

General Instructions:
i) Questions 1 - 4 and 13 - 16 are very short answer questions carrying 1 mark each.
Answer them in one sentence each/write the correct option on your answer sheet.
ii) Questions 5 - 6 and 17 - 18 are short answer questions carrying 3 marks each.
Answers to them should not normally exceed 60 words each.
iii) Questions 7 - 9 and 19 - 21 are short answer questions carrying 4 marks each.
Answers to them should not exceed 70 words each.
iv) Questions 10 - 12 and 22 - 24 are long answer questions carrying 6 marks each.
Answers to them should not exceed 100 words each.

Section - A (Introductory Microeconomics)

1. Which of the following is not an example of a normative statement in Economics: (1)
a) The income tax rates should be reduced to increase tax compliance.
b) The infrastructure in government schools should be improved to achieve better
performance.
c) The Indian economy will grow at a rate of 7% in the next financial year.
d) The government should take measures to curb the rising pollution levels in Delhi.

2. A rise in the price of both the goods consumed by the consumer shifts the indifference curve
to the left. True/False. Give reason. (1)

3. Why is budget line a straight line? (1)

4. Arun buys burger and coke. The marginal utility of the last piece of burger is 90 utils and of
the last sip of coke is 40 utils. The price of burger is Rs. 30 and that of coke is Rs. 20.
This means that Arun will-
a) Buy more of burger and less of coke.
b) Buy more of coke and less of burger.
c) Not change the present consumption levels.
d) None of the above. (1)

5. A large part of agricultural land remains unutilized due to inadequate irrigation facilities.
Government builds a new canal to bring water to such areas. What will be the impact of
this move on the PPC of the country? Use diagram to explain. Name the central problem
that depends on distribution of factor incomes in the economy. (2+1)
6. Define production function. Distinguish between short run and long run production function.
(OR)
Define cost in economics. Distinguish between fixed and variable cost. (1+2)

7. A consumer buys 14 units of a good at a price of Rs. 8 per unit. At a price of Rs. 7 per unit,
his expenditure on this good decreases by Rs. 14. Calculate the price elasticity of demand
and draw the demand curve on the basis of this measure of elasticity. (4)

8. Explain the nature of Total Variable Cost curve. Use diagram. (4)
(OR)
Comment on the shape of the demand curve in case the Total Revenue curve is a –
a) Positively sloped straight line.
b) Horizontal straight line. (2+2)
Std. 12 page 2 ECONOMICS (Set - 1)

9. Suppose the market determined wage rate for unskilled labour in the urban areas is very
low. Explain what can be done by the government to safe guard the interest of the workers.
Use diagram. (4)

10. a) Market for a consumer durable is in equilibrium. The government moves this
commodity to a higher tax bracket of GST. Use diagram to explain the impact of
this move on the equilibrium price and quantity of this good.
b) A consumer consumes only two goods. Discuss the conditions of consumer
equilibrium using ordinal approach. (3+3)

11. a) Price of a commodity is Rs 10 per unit and total revenue at this price is Rs. 1600.
When the price rises by 20%, total revenue increases by Rs. 800. Calculate its
price elasticity of supply.
b) From the following data find out the output at which the producer is in equilibrium.
Give reasons for your answer. (3+3)
Output 1 2 3 4 5
Marginal revenue (Rs) 8 6 4 2 0
Average total cost (Rs) 5 4 4 4.25 4.6

12. a) Discuss the four main features of monopoly.

b) Differentiate between collusive and non-collusive oligopoly. (4+2)
(OR)
Describe the four main features of perfect competition and their implications. (6)

Section - B (Introductory Macroeconomics)

13. If the deposit multiplier is 5, what is the value of LRR? (1)

14. Define SLR. (1)

15. What will be the impact of an increase in the official reserves of foreign exchange by
the central bank on the exchange rate? (1)

16. What do you mean by disequilibrium in BOP? (1)

17. Describe the components of revenue receipts of the government’s budget. (3)
(OR)
What do you mean by revenue deficit? How is revenue deficit related to fiscal deficit? (1+2)

18. In the central government’s budget, the finance minister proposes to place cigarettes in
the highest tax bracket and reduce the tax burden on the low income group. What possible
objectives is the government trying to achieve through these proposals? (3)

19. How does central bank act as a banker’s bank? State any two differences between central
bank and commercial banks. (3+1)

20. a) If the compensation of employees in a firm constitutes 55% of the net value added
at factor cost, what is the proportion of income from property and entrepreneurship?
b) How do non-monetary exchanges make GDP an inadequate measure of welfare? (1+3)

21. Describe the components of the current account of BOP.

(OR)
 Giving two examples, explain why there is a rise in the demand for a foreign currency when
its price falls. Use diagram. (4)

Std. 12 page 3 ECONOMICS (Set - 1)

22. a) Calculate Employer’s contribution to social security schemes- (3+3)

Items Rs (Crores)
1. National income 460
2. Net factor income paid abroad (-) 10
3. Profit 30
4. Rent 30
5. Interest 40
6. Wages and salaries in cash and kind 330

b) Find the value of imports-

Items Rs (Crores)
1. Private final consumption expenditure 2000
2. Government final consumption expenditure 3000
3. Gross fixed capital formation 1000
4. Exports 100
5. Changes in stocks 500
6. Net indirect tax 250
7. Depreciation 150
8. Factor income paid abroad 50
9. GDP at market price 6400

23. a) Define deflationary gap. Describe the use of open market operations to reduce it.
b) If the consumption expenditure at zero level of income is Rs 80 crores, the investment
multiplier is 5 and the investment expenditure is Rs. 400 crores, calculate the
equilibrium level of national income. (3+3)

24. Explain the Investment and Savings approach of determining the equilibrium level of output
and employment. Use diagram. (6)
(OR)
Use diagram to explain inflationary gap. Also discuss two fiscal measures to reduce it. (4+2)

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