SOLUTIONS
2025 BOARD EXAM
CBSE CLASS 12-HUMANITIES ECONOMICS Board Paper 2025 — Set 2
2025
ECONOMICS
CLASS 12-HUMANITIES
CBSE EXAMINATION PAPER-2025
ECONOMICS
(Solved)
General Instructions :
Read the following instructions carefully and follow them :
- This question paper contains 40 questions. All questions are compulsory.
- This question paper is divided into 5 sections.
- Section A – questions number 1 to 2 are case based questions
- Section B – questions number 3 to 22 are multiple choice questions
- Section C – questions number 23 to 28 are short answer type i
- Section D – questions number 29 to 36 are short answer type ii
- Section E – questions number 37 to 40 are long answer
- There is no overall choice given in the question paper. However, an internal choice has been provided in few questions.
- Use of calculator is NOT allowed.
Section A
Read the following text carefully :
Climate change and sustainability of environment are two pressing issues that have captured global attention. In recent years, the world has witnessed a surge in extreme weather events including severe droughts, cloud bursts, floods, land slides, receding coastlines and the alarming melting of arctic ice and Himalayan Glaciers. Wildfires have become more frequent and intense.
In this context, sustainable agriculture emerges as a crucial solution. This refers to those farming practices that meet today's requirements while preserving resources for the future generation. This means adopting methods that protect the environment, reduce dependence on chemical inputs, efficiently using water and land and ensuring socio-economic equity for farmers.
On one hand sustainable agricultural practices are necessary, on the other, they are often more expensive to implement compared to conventional methods. Sustainable practices like organic farming, climate — smart technologies, modern irrigation system may seem costly upfront, but they offer long-term benefits by improving productivity, and environmental stewardship. Without accessible and affordable financing options, the much needed shift to sustainable farming practices will remain a distant dream for many.
Therefore, sustainable finance should not only promote eco-friendly practices but also ensure that financial resources are available to the farmers who need it.
Source : https://website.vbi.org.in/web/rbi/-/speches interview/financingfor-sustainable-agriculture (adopted and modified)
On the basis of the given text and common understanding, answer the following questions :
(1) Define Sustainable Agriculture.
(2) "Sustainable Agriculture practices, like organic farming may seem costly initially, but offer long term benefits." Discuss the long term benefits these practices can offer.
(3) State any two strategies to promote sustainable development in a developing country like India.
Read the following text carefully :
Balance of Payments (BOP) systematically summarise, the economic transactions of an economy with the rest of the world, over a given period of time. The BOP can be broadly divided into two accounts namely :
• current account
• capital account
The current account measures the transfer of goods, services, income and transfers between an economy and rest of the world. The current account may be sub-divided into merchandise account and invisible account. Merchandise account consists of transactions related to export and import of goods.
In the invisible account, there are three broad categories :
Non-factor services such as travel, transportation, insurance etc.
Transfer which do not involve any value in exchange.
Income which includes compensation of employees and investment income.
The capital account reflects the net changes in financial claims on rest of the world.
The capital account can be broadly broken up into two categories :
• Non-debt flows such as direct and portfolio investments.
• Debt flows such as external assistance, commercial borrowings, nonresident deposits etc.
The sum of the two accounts indicates the overall balance, which could be either be in surplus or deficit. The movement in overall balance is reflected in changes in international reserves of the country. Source : https : // mospi.gov.in/109-balance — payments (adopted and modified)
On the basis of the given text and common understanding, answer the following questions :
(1) Define Balance of Payments.
(2) Differentiate between the two accounts of Balance of Payments.
(3) Give the meaning of Balance of Payments deficit with formula.
Section B
The monetary policy is formulated by the ___ in the Indian economy.
(Choose the correct option to fill up the blank)
The correct answer is 'Reserve Bank of India.' The context states that the Reserve Bank of India (RBI) acts as the monetary authority of the country, regulating the supply of money and formulating monetary policy in India.
Identify which of the following is not to be considered while estimating Revenue Deficit of a country.
(Choose the correct option to fill up the blank)
In the Keynesian Economics, ___ starts from the origin and is always drawn at an angle of 45°.
(Choose the correct option to fill up the blank)
The correct option is 'Reference line'. In Keynesian economics, the 45° line represents all points where income equals expenditure, thus indicating the macroeconomic equilibrium. It starts from the origin (0,0) and bisects the first quadrant at a 45° angle, making it a reference line against which other functions such as consumption and investment can be plotted.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct options given below:
Assertion (A): In case of public goods no one can be excluded from enjoying the benefits.
Reason (R): Public goods are non-rivalrous and non-excludable in nature.
Value Addition = ___ - Value of Intermediate Consumption.(Choose the correct option(s) to complete the stated formula.)
(i) Domestic sales
(ii) Sales - change in stock
(iii) Value of output
(iv) (Number of units produced) x (Price per unit)
Suppose for an economy, autonomous consumption stands at ₹100 crore and total consumption is ₹130 crores. The value of induced consumption would be₹ ___ crore.
(Choose the correct option to fill up the blank)
As the Banker to the Bank, Reserve Bank of India performs all functions except ____ .(Choose the correct option to fill up the blank)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct options given below:
Assertion (A): If the value of Marginal Propensity to Save is 0.5, Marginal Propensity to Consume will be equal to Marginal Propensity to Save.
Reason (R): Sum of Marginal Propensity to Consume and Marginal Propensity to Save always equals to unity.
The correct option is: "Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A)."
The Marginal Propensity to Consume (MPC) and the Marginal Propensity to Save (MPS) always add up to 1. If the MPS is 0.5, then MPC must also be 0.5, making them equal in value. This confirms the assertion. The reason given is a fundamental economic principle that justifies the assertion accurately, making it the correct explanation.
The budget under which the government may spend an amount equal to the revenue it collects is referred to as ___ Budget. (Choose the correct option to fill up the blank)
To arrive at the value of equilibrium level of income, there must exist an equality between ex-ante_____and ex-ante______. (Choose the correct option to fill up the blank)
(i) Aggregate Demand, Aggregate Supply
(ii) Aggregate Demand, Savings
(iii) Aggregate Demand, Investment
(iv) Savings, Investment
⎯⎯⎯⎯⎯⎯⎯ of agriculture refers to production of crops for sale in the open market rather than for self consumption purpose.
Read the following statements carefully :
Statement 1 : In 1978, commune lands were divided into small plots to the individual households for cultivation.
Statement 2 : Under commune system, professionals were sent to work and learn from the country side.
In the light of the given statements, choose the correct option from the following :
The correct option is: Both Statement 1 and Statement 2 are true.
Statement 1 is true, as it refers to the 1978 agricultural reforms in China, where commune lands were distributed to individual households for cultivation under the Household Responsibility System. This move significantly increased productivity and rural incomes.
Statement 2 is also true, as it reflects the policy during the Cultural Revolution in China, where intellectuals and professionals were sent to rural areas to work and learn from farmers as part of the "Down to the Countryside Movement." Both statements are accurate based on historical context.
Identify, the options that emphasize the role of information and technology.
(i) Achieving sustainable development
(ii) Attainment of food security
(iii) Disseminates information regarding emerging technologies.
Read the following statements : Assertion (A) and Reason (R). Choose one of the correct options given below :
Assertion (A) : Under the land reforms, Indian government fixed the minimum land size which could be owned by an individual.
Reason (R) : The purpose of land ceiling was to avoid the concentration of land ownership in a few hands.
⎯⎯⎯⎯⎯⎯⎯ are the people who operate their own farms / enterprises.
(Choose the correct option to fill up the blank )
Agricultural marketing is a process that involves the_________of agricultural commodities.
(Choose the correct option to fill up the blank)
The correct option is 'Economic Development' because agricultural marketing encompasses a variety of activities such as assembling, storage, processing, transportation, packaging, grading, and distribution of agricultural commodities, all of which contribute to the economic development of the agricultural sector and the economy as a whole.
In recent years, all the adults are encouraged to open bank accounts as a part of a scheme known as⎯⎯⎯⎯⎯⎯⎯.
(Choose the correct option to fill up the blank)
The given chart indicates the problem of in_________ the Indian Economy, post 1990-92.
(Choose the correct option to fill up the blank)
The correct option is 'Jobless Growth.' This is because the context highlights that despite economic growth, there has been a decline in employment growth, indicating a situation where the economy is growing without corresponding job creation, a phenomenon referred to as 'Jobless Growth.'
Read the following statements carefully :
Statement 1 : Environmental concerns of waste generation and pollution have become critical, due to reversal of demand and supply relationship.
Statement 2 : Environmental crisis happens, when the rate of resource extraction is less than that of regeneration of resource.
In the light of the given statements, choose the correct option from the following :
__________is based on the idea that education and health are integral to human well-being. (Choose the correct option to fill up the blank)
The correct option is 'Human Development' because it emphasizes that education and health are essential for achieving human well-being, enabling people to make valuable choices and lead fulfilling lives. This aligns with the provided context that highlights the importance of education and health in fostering human development.
Section C
“The government generally levies higher Goods and Services Tax (GST) on socially undesirable products like cigarettes, tobacco, liquor etc.”." Identify and explain the indicated government budget objective in the above statement.
Two friends Ramesh (a software engineer) and Pihu (a bakery owner) are discussing their contribution to the nation's economy through tax payments. Ramesh earns ₹8,00,000 per year, which makes him liable to pay income tax. Pihu pays Goods and Service Tax (GST) on the sale of cakes and pastries.
On the basis of the given text, identify whether Ramesh is paying a direct tax or an indirect tax. Explain valid differences between two types of taxes.
(a) Define liberty indicator.
(b)State any two liberty indicators.
Medhya and Danish both had their own farms. Medhya invested in a few agricultural courses, learnt modern farming techniques and trained her labourers on best practices related to soil fertility, crop management, pest control etc.
Whereas, Danish invested heavily in, by purchasing advanced farming machinery, irrigation systems and high quality seeds. Do you agree that, Danish had made investment in human capital ?
Give valid reason in support of your answer.
'Expenditure on preventive medicine, curative medicine and social medicine helps in building human capital and economic development."
Do you agree with the given statement ? Give valid arguments in support of your answer.
Section D
In the recent times through various schemes and policies, the Government of India has taken vital initiatives to generate employment directly / indirectly.
Justify the statement giving valid arguments.
'Micro credit programmes have been very helpful in supporting rural development and improving livelihoods in India."
Do you agree with the given statement ? Give valid reasons in support of your answer.
On the basis of the given data, compare and analyse the Distribution of workforce and its contribution to Gross Value added in India and China.
(A) On the basis of the given image, explain the steps which may be taken by the Government of India to control the indicated macroeconomic Issue.
(B) Define 'Open Market Operations'.
To control macroeconomic issues, the Government of India can implement several strategies. Firstly, it can adjust monetary policies through the Reserve Bank of India (RBI), including modifying interest rates and reserve requirements to influence money supply. Secondly, fiscal policies can be adjusted—altering government spending and taxation to manage demand and stimulate economic activities. Thirdly, improving education and healthcare access can enhance labor productivity, which in the long-term alleviates unemployment. This multifaceted approach aims to achieve stable economic growth and control inflation. Open Market Operations (OMO) refer to the buying and selling of government bonds by the central bank, primarily the Reserve Bank of India (RBI), in the open market. This process serves as a vital monetary policy tool to regulate the money supply within the economy. OMOs can be classified into two categories: outright operations, which involve permanent transactions without obligations to reverse them, and repo operations, where bonds are sold with a commitment to repurchase them later. When the RBI buys securities, it injects liquidity into the system, promoting economic growth. Conversely, selling securities withdraws liquidity to control inflation and stabilize the economy. Thus, OMOs are crucial for maintaining monetary balance in an open economy.
Justify the following statements with valid arguments :
(i) Money supply in an economy is an example of a stock variable.
(ii) The Central Bank provides several Banking services to the government.
Assuming for a hypothetical economy, Central Bank increases the Reserve Ratio from 20% to 25% and the total primary deposits stand at 1,000.
Explain the effect of rise in Reserve Ratio on credit creation by commercial banks.
Suppose for an economy, government proposes project for construction of expressways with an incremental investment of 1200 crore. Assuming,80% of increase in income is spent on consumption.Estimate the following on the basis of above information :
(a) Change in income (ΔY).
(b) Change in consumption (ΔC).
Section E
(i) 'After 1991, reforms in external sector led to an increase in foreign exchange inflows'.
Justify the given statement with valid argument.
(ii) During the planning period, public sector was given a dominant role in Indian Economy.
Justify the rationale behind this step taken by the Government of India.
(i) To promote green revolution, the Indian government provided fertilizer subsidies to the farmers.
Briefly explain any two arguments in favour of subsidies.
(ii) As per a news report dated, 8th Oct. 2021, the Government of India sold its entire 100% stake in Air India. Tata sons, the original founder of Air India won the bid and purchased the airline for 18,000 crore.
(1) Identify the step taken by the Government of India.
(2) State any two ways in which identified step can be executed by the government.
Subsidies play a crucial role in supporting farmers, especially smallholders, in India. Firstly, they incentivize the adoption of new High Yield Variety (HYV) technology, crucial for enhancing agricultural productivity. Given the inherent risks associated with new technologies, subsidies reduce financial burdens, encouraging farmers to experiment with these innovations without the fear of substantial losses. Secondly, agriculture in India remains a risky venture, particularly for poorer farmers who lack resources. Without subsidies, many would struggle to afford essential inputs like fertilizers, exacerbating income inequalities in farming communities. Therefore, continuing subsidies aims to promote equity and sustain livelihoods among vulnerable farming populations, ensuring that the benefits of agricultural advancements reach those who need them most.
The step taken by the Government of India involved the privatization of Air India, marking a significant shift in economic policy towards reducing public ownership in sectors traditionally dominated by the state. This decision was rooted in the idea that privatization could lead to improved operational efficiency and service quality, coupled with an inflow of foreign direct investment (FDI). The government executed this step through two primary ways: firstly, by outright sale of the public sector enterprise to Tata Sons, who initially founded the airline, thus establishing historical continuity. Secondly, it involved restructuring the overall management and ownership structure of Air India, allowing the private sector to drive its operations and strategic direction, promoting competition in the aviation sector and aligning with broader economic reforms. These methods facilitate the reduction of government liabilities while enhancing service delivery through private sector efficiency.
(i) On the basis of the data given below, estimate the value of National Income (NNPFc)
(ii) Differentiate between Real flow and Money flow.
NNPFC=GDPMP+Net Factor Income from Abroad−Depreciation (Consumption of Fixed Capital)−Net Indirect Taxes
Calculate GDP at Market Price
GDPMP=Private Final Consumption Expenditure+Government Final Consumption Expenditure+Gross Domestic Fixed Capital Formation+Addition to Stock+Net Exports =2000+1500+1000+400+700=₹5,600 crore.
Calculate NNP at Factor Cost , NNPFC=5600+100−50−200=₹5,450 crore Answer=₹5450
Real flow and money flow are fundamental concepts in economics that represent different types of interactions in an economy. Real flow refers to the actual movement of goods and services in the economy. It represents the physical transactions between producers and consumers, where firms supply goods and services to households in exchange for factors of production. This flow can be measured through methods like the product or expenditure methods, showcasing the tangible aspect of economic activity.\n\nOn the other hand, money flow pertains to the circulation of currency or monetary value among various sectors in the economy. It reflects how financial resources change hands as payments for goods and services, investment, and consumption. Money flow is quantified using the velocity of money, indicating how quickly money circulates within the economy.\n\nIn essence, while real flow captures the actual flow of goods and services signifying economic activities, money flow highlights the financial transactions that accompany these activities. Both flows are interdependent; a change in real flow will generally lead to corresponding changes in money flow, demonstrating the dynamic nature of economic relationships. Thus, understanding both flows is crucial for analyzing economic stability and growth.
(i) Gauhar, has recently completed her fashion designing studies and started a boutique. To produce dresses for sale, she purchased various materials, including a sewing machine, fabric, buttons and thread. These items are essential for producing the dresses.
Classify the material purchased by Gauhar as Final or Intermediate goods, giving valid reasons in support of the classifications.
(ii) National Income is always equal to Domestic income in a two sector economy.
Defend or refute the given statement with valid reasons.
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