SOLUTIONS
2025 BOARD EXAM
CBSE CLASS 12-HUMANITIES ECONOMICS Board Paper 2025 — Set 4
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 39 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 21 are multiple choice questions
- Section C – questions number 22 to 27 are short answer type i
- Section D – questions number 28 to 34 are short answer type ii
- Section E – questions number 35 to 39 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:
The Labour Force Participation Rate (LFPR) measures the percentage of the population either employed or actively seeking employment in a nation. In India, the labour force grew by 99-2 million persons between 2000-2019. The labour force grew from 396-3 million to 495-5 million.
During 2012-2019, the labour force grew without a matching increase in employment, leading to higher unemployment.
The gender disparity in India's labour market is notable with women's LFPR at 32-8% in 2022, significantly lower than men's LFPR at 77-2%. This is a major reason for India's overall low LFPR, which is lower than the global average of 47-3%.
During 2000-2019, rural LFPR declined by 14-1%, compared to a 3-5% decline in urban areas. This trend reversed between 2019 - 2022, with rural LFPR increasing by 6% (especially among rural women) and urban LFPR by 2-1%. These shifts suggest that fluctuations occur in women's labour market participation, particularly in rural areas.
This significantly affected the overall LFPR. Women join the workforce during economic hardships and move out when conditions improve.
On the basis of the given text and common understanding, answer the following questions:
(1) Define unemployment.
(2) Write the meaning of Labour Force Participation Rate (LFPR).
(3) Comment upon the gender disparities in rural and urban Labour Force Participation Rate (LFPR) during 2000- 2019.
Section B
Identify which of the following does not represent a public good.
(Choose the correct option)
The correct option is 'Purchase of railway ticket by an individual' because purchasing a railway ticket involves a transaction where the benefits are exclusive to the individual who buys the ticket. This makes it a private good since it is excludable and not free for all, unlike the other options which are public goods that are non-excludable.
Market forces of demand and supply, actively interact under _________ exchange rate system to determine the foreign exchange rate.
(Choose the correct option to fill in the blank)
Read the following statements carefully :
Statement 1 : During deflationary gap, the Central Bank of a country may increase the repo rate.
Statement 2 : The government can reduce the deflationary gap by purchasing Government Securities (G-Sec) in the open market.
In the light of the given statements, choose the correct option from the following.
Statement 1 is false because during a deflationary gap, the Central Bank typically lowers the repo rate to encourage borrowing and spending, rather than increasing it. Statement 2 is true since purchasing Government Securities in the open market injects liquidity into the economy, which can help reduce a deflationary gap by stimulating demand.
Under the Keynesian framework, the line drawn through the origin is at an angle of __________.
The correct answer is 45°. In the Keynesian framework, a 45° line is used to illustrate the relationship where the total output (supply) matches the total expenditure (demand) at each point. At this angle, every point on the line has equal horizontal and vertical coordinates, meaning that the quantity supplied equals the quantity demanded.
According to the data presented in the Union Budget 2023 24, the total receipts of the government (other than borrowings), and the total expenditure are estimated as 20 lakh crore and 45 lakh crore respectively. Therefore, the value of _________ deficit would be 25 lakh crore. (Choose the correct option to fill in the blank)
The correct answer is 'fiscal' because fiscal deficit is defined as the difference between the total expenditure of the government and its total receipts, excluding borrowings. In this case, total expenditure is 45 lakh crore and total receipts are 20 lakh crore, resulting in a fiscal deficit of 25 lakh crore.
Read the following statements carefully :
Statement 1 : Marginal Propensity to Consume (MPC) exhibits the consumption per unit of income.
Statement 2 : As the national income of a country rises, the proportionate increase in the consumption is always more than the increase in the income.
In the light of the given statements, choose the correct option from the following :
In a two-sector economy, Aggregate Supply can be determined by adding__________ and __________.(Choose the correct option to fill in the blanks)
Read the following statements carefully :
Statement 1 : Foreign aids are the capital receipts for the government.
Statement 2 : Disinvestments may lead to a decrease in the assets of the government.
In the light of the given statements, choose the correct option from the following :
From the following, identify the situation which indicates the Current Account Surplus (CAS) in Balance of Payments (BOP) account of a nation.
Read the following statements Assertion (A) and Reason (R).
Choose the correct option from the options given below :
Assertion (A) : People spend to acquire information related to labour and other markets (like, education and health).
Reason (R) : Expenditure on information is necessary for efficient utilisation of the human capital stock.
Identify, which of the following statements is incorrect about the Rural Banking system in India. (Choose the correct option)
The incorrect statement is: 'The Rural Banking system in India works under the guidance, instruction and supervision of the State Bank of India.' This is inaccurate because the Rural Banking system in India operates under a multi-agency framework which includes various institutions like commercial banks, regional rural banks, and cooperatives, and is not solely guided by the State Bank of India.
Identify, which of the following statements is incorrect about the functions of environment. (Choose the correct option)
The incorrect statement is 'Environment deteriorates quality of life.' This is incorrect because the environment is essential for sustaining life and providing resources, and while it can be negatively impacted by human actions, its functions do not inherently cause a decline in quality of life. Instead, the environment supports life, provides resources, and helps assimilate waste.
Read the following statements Assertion (A) and Reason (R). Choose the correct alternative from the options given below :
Assertion (A) : Under the financial sector reforms introduced in 1991, foreign investment limit in banks was raised up to around 74%.
Reason (R) : Foreign Institutional Investors (FIIs) were allowed to invest in Indian financial markets, post-1991.
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). Although the foreign investment limit in banks was indeed raised to 74% under the reforms, the allowance for Foreign Institutional Investors (FIIs) to invest in markets is a separate outcome of the reforms and does not directly explain the increase in the foreign investment limit in banks.
Suppose an imaginary economy is experiencing a situation of rise in Real Gross Domestic Product (GDP), without any corresponding adequate rise in the employment opportunities in the economy."
In economic parlance, such a situation is termed as growth.
(Choose the correct option to fill in the blank)
The correct option is 'Jobless'. This term refers to a situation where GDP increases without a rise in employment opportunities, reflecting a disconnect between economic growth and job creation, as noted in the provided context.
Read the following statements carefully:
Statement 1: The British policies led to huge employment generation in the secondary and tertiary sectors of the Indian Economy.
Statement 2 The real motive of the colonial government's infrastructural development was to benefit interests of Indin.
In the light of the given statements, choose the correct alternative from the following:
Both Statements 1 and 2 are false. The British policies did not lead to employment generation in India's secondary and tertiary sectors; instead, they were focused on de-industrializing the economy and prioritizing British economic interests. The real motive behind infrastructural development was not to benefit India, but rather to serve colonial interests, as highlighted in the provided context.
Read the following statements carefully : 1
Statement 1 : The purchase of food grains, made by the government on the Minimum Support Price (MSP), is maintained as buffer stock.
Statement 2 : Minimum Support Price (MSP) safeguards the farmers against any sharp fall in farm product prices.
In the light of the given statements, choose the correct option from the following :
Study the following image carefully :
From the following, choose the correct option which indicates similarities in the policies of India and Pakistan, in the post-1947 period :
(Choose the correct option)
The correct option is 'Import substitution' as both India and Pakistan adopted this policy framework for industrialization after independence. This approach aimed to reduce dependency on foreign goods by promoting domestic production, which aligns with the mixed economy model both countries implemented.
To arrive at the value of Net Value Added at Market Price (NVA MP), _________ must be _________ to/from Gross Value Added at Market Price (GVA MP).
(Choose the correct option to fill in the blanks)
In the post-independence era, the policy makers of India emphasised on' self-reliance ' for the first _______ Five Year Plans.
(Choose the correct option to fill in the blank)
The correct answer is 7. The context states that the first seven five year plans focused on self-reliance, emphasizing the importance of producing goods domestically and avoiding imports when possible. Therefore, the blank should be filled with 'seven'.
Section C
On the basis of the following hypothetical data, calculate the percentage change in Real Gross Domestic Product (GDP) in the year 2022 23, using 2020 21 as the base year.
Percentage Change in Real GDP=(Real GDP in 2020–21Real GDP in 2022–23−Real GDP in 2020–21/ Real GDP in 2020-21 )×100
Real GDP in 2020–21 = ₹5,000 crore
Real GDP in 2022–23 = ₹6,000 crore
Percentage Change= (6000−5000/5000)×100=(1000 / 5000)×100=20% ,
20% increase in Real GDP from 2020–21 to 2022–23.
As per the Economic Survey of India 2022-23 due to the outbreak of geopolitical conflict, the result was higher international prices for fertilizer and fuel. Thus, there was a higher fuel and fertilizer subsidy requirement for supporting the people. .
On the basis of given text, identify and explain the indicated objective of the government budget.
British colonial rule in India executed a systematic economic exploitation that involved the extraction of India's resources and wealth to benefit Britain.
Justify the given statement with valid explanation.
The disinvestment policy of India under the 1991 reforms involved selling of part of the government's stakes in Public Sector Undertakings (PSUs).
Explain the rationale behind the decision undertaken by the government.
Using the following data, analyse the sectoral contribution of India and Pakistan towards Gross Value Added (GVA).
Section D
The Indian economy has witnessed a sharp turnaround during 2023 24 with Foreign Direct Investments (FDI) inflows of US $ 70·9 Bn and net Foreign Portfolio Investments (FPI) inflowsof US $ 32.4 Bn.
(i) Distinguish between the above mentioned economic variables.
(ii) In which account of Balance of Payments will the given variables be entered and why ?
Explain how Accommodating Transactions differ from Autonomous Transactions.
Suppose for two imaginary economies A and B, the value of Marginal Propensity to Consume (MPC) stands at 0·8 and 0·6 respectively. For both the economies, Autonomous Consumption ( c̅) = 400 crore and Investment Expenditure (I) = 2,000 crore. Calculate the following :
(a) Break-even level of income for Economy A. 2
(b) Equilibrium level of income for Economy B.
Read the following text carefully :
In an economy, a significant reduction in Aggregate demand raised concerns about future growth prospects of the country. This economic downturn underscores the urgent need for strategic measures to boost confidence of households and stimulate economic activities.
Based on the above text and common understanding, explain the measures which the government may take to stabilise the indicated situation.
Read the following text carefully :
China underwent substantial policy changes to stimulate their economy. China's economic growth was rapid in the late 1970s across various sectors. However, India had to wait much longer for its economic transformation. India's significant economic progresss was only realised after the economic reforms of 1991, which were implemented out of compulsion.
On the basis of given text and common understanding, compare the impact of subsequent reforms initiated by China and India.
(i) Distinguish between human capital and physical capital.
(ii) Define Sustainable Development.
(i) Describe briefly the importance of micro-credit programmes in Rural India.
(ii) State any one strategy involved in attaining sustainable development in India.
Section E
(a) In a country, routine economic operation reply on a stable medium, to facilitate transactions for maintaining smooth economic activities. Discuss briefly the indicated function of money.
(b) State the meaning and components of M1 measure of money supply.
(c) State the formula to compute Credit Multiplier.
(i) Suppose, there are only three firms in a hypothetical economy, viz. A, B and C. During a given period of time, the following transactions were undertaken by them :
(I) Firm A sold goods worth ₹ 2,000 to Firm B and ₹ 1,200 to Firm C.
(II) Firm B sold goods worth ₹ 1,100 to Firm A and ₹ 3,500 to Firm C.
(III) Firm C sold to households for final consumption, goods worth ₹ 5,700.
Estimate the value of Net Domestic Product at Market Price (NDPMP), assuming depreciation to be ₹120.
(ii) Explain the likely impact of construction of 2000 new schools providing high-quality education in a nation on Gross Domestic Product and Welfare in an economy.
To calculate the Net Domestic Product at Market Price (NDPMP), we first determine the Gross Domestic Product (GDP) using the final consumption expenditure approach. Based on the transactions, Firm C sold ₹5,700 worth of goods to households, which is final consumption. Thus, GDP is ₹5,700. Next, we account for depreciation of ₹120. Therefore, NDPMP is calculated as NDPMP = GDP - Depreciation = ₹5,700 - ₹120 = ₹5,580. Hence, the NDPMP is ₹5,580.
The construction of 2000 new schools dedicated to providing high-quality education in a nation can significantly impact both Gross Domestic Product (GDP) and the overall welfare of society. Firstly, increased government expenditure on education directly contributes to GDP. Investment in education enhances human capital, which leads to a more skilled workforce capable of more productive work. This increases the output of various sectors, ultimately boosting GDP. Secondly, as education quality improves, literacy rates and employment opportunities rise, leading to better income levels. Higher incomes contribute to greater consumer spending, thereby driving economic growth. Moreover, in terms of welfare, better education results in improved health outcomes, lower crime rates, and enhanced social equity. Well-educated individuals are more likely to contribute positively to society, fostering a cycle of growth that benefits the economy as a whole. Overall, the creation of these schools is not just an investment in education but also a strategic move towards sustainable economic development and increased welfare for the nation.
(i) All consumption goods are durable in nature.
Defend or refute the given statement with a valid argument.
(ii) On the basis of the given data, estimate the value of National Income (NNPFC) :
The statement 'All consumption goods are durable in nature' is inaccurate. While certain consumption goods, such as televisions, automobiles, and home computers, are indeed durable and can last for many years, not all consumption goods share this characteristic. Many consumption goods, particularly perishables like food items and clothing, are not durable; they have a short life span and are consumed quickly. The essential distinction lies in the nature of the goods: durable goods provide long-term utility and serve consumers over extended periods, while non-durable goods are designed for immediate use and typically do not last long. This classification further helps understand different consumer behavior and market dynamics. In summary, while some consumption goods are durable, it is incorrect to generalize that all consumption goods fall into this category.
GDP₍MP₎
= Private Final Consumption Expenditure (i)
Government Final Consumption Expenditure (iv)
Gross Domestic Capital Formation (ii + iii + vi + vii)
Net Exports (Exports - Imports → negative due to excess imports)
GDPMP=1800+2170+(1150+1020+540+1300)+(−720)
GDPMP=1800+2170+4010−720=7260
Convert GDP₍MP₎ to NNP₍FC₎ NNPFC=GDPMP−NetIndirectTaxes−ConsumptionofFixedCapital+NetFactorIncomefromAbroad
NNPFC =7260 -240-440-250 NNPFC =7260-930= ₹ 6,330 crore
(i) Import substitution pilicy, if not applied carefully, can be a double- edged sword for any economy.
Do you agree with the given statement ? Justify your answer with valid arguments.
(ii) State how multilateral trade is different from bilateral trade.
(i) Discuss briefly, causes and consequences of the tax reforms initiated during economic reforms in India.
(ii) Give one example each of a Navratna and a Maharatna company in the public sector in India.
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