SOLUTIONS
2025 BOARD EXAM
CBSE CLASS 12-HUMANITIES ECONOMICS Board Paper 2025 — Set 5
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 38 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 26 are short answer type i
- Section D – questions number 27 to 34 are short answer type ii
- Section E – questions number 35 to 38 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 :
Growing carbon footprint of industries have put power and steel sector in the spotlight as the major contributor to the climate crisis. The challenge of climate change can be tackled only by making our industries and businesses follow practices and processes that reduce their carbon footprint. It can be possible only with green financing.
Green financing aims to increase the level of financial flows (from banking, micro-credit, insurance and investment) from the public, private and not-for-profit sectors to sustainable development priorities.
Global green finance has also started chasing Indian companies. Global development finance institutions and funds are ready to offer long-term support (both equity and debt) at cheap rates to projects like solar energy and hydropower. Green finance can positively affect environment quality, economic development and financial issues that promote the green economy, such as reducing greenhouse gas emissions, improving energy efficiency or enhancing the organic economy.
On the basis of the given text and common understanding, answer the following questions :
(1) State the meaning and objective of green finance.
(2) Discuss any two benefits of green financing.
Read the following text carefully :
Government provides certain goods and services which cannot be provided by the market mechanism. Examples of such goods are national defence, roads, government administration etc. which are referred to as public goods.
There are two major differences between public and private goods. One, the benefits of public goods are available to all and are not only restricted to one particular consumer. For example, if a person wears a shirt, it will not be available to others . It is said that thisperson's in rival relationship to the consumption of others. However, if we consider a public park or measures to reduce air pollution, the benefits will be available to all . ONe persons's consumption of agood does not reduce the amount available for consumption for others and so several people can enjoy the benefits, that is, the consumption of many people is' not rivalrous.
Two, in case of private goods, anyone who does not pay for the goods can be excluded from enjoying its benefits. If you do not buy a ticket, you will not be allowed to watch a movie at a local cinema hall. However, in case of public goods, there is no feasible way of excluding anyone from enjoying the benefits of the good. That is why public goods are called non-excludable. Even if some users do not pay, it is difficult and sometimes impossible to collect fees for the public good. These non-paying users are knownas ' Free rides' Consumers will not voluntarily pay for-what they can get for free and for which there is no exclusive title to the property being enjoyed. The link between the producer and consumer which occurs through the payment process is broken and the government must step in to provide for such goods.
On the basis of the given text and common understanding, answer the following questions :
(1) Define free-riders. Explain the challenges posed by the free-riders in the context of public goods.
(2) Describe how the Government's role in providing public goods impacts community welfare.
Section B
If the value of Investment Multiplier (K) is 5, the relevant saving function would be _____________.
(Choose the correct option to fill in the blank)
Identify, which of the following items will not be included in estimating National Income of India.
(Choose the correct option)
If an upward sloping straight line consumption function makes an intercept at the Y-axis at a positive coordinate, it implies that Marginal Propensity to Consume (MPC) _____________ and Average Propensity to Consume (APC) _____________ as the income increases.
(Choose the correct option to fill in the blanks)
The correct answer is: Marginal Propensity to Consume (MPC) remains constant, and Average Propensity to Consume (APC) falls as the income increases.
An upward sloping straight-line consumption function with a positive Y-intercept means consumption starts from a positive value even when income is zero, indicating autonomous consumption.
Since the slope of the straight line represents MPC, it remains constant.
APC = Consumption ÷ Income. As income increases, the fixed autonomous consumption becomes a smaller proportion of total income, causing APC to fall.
Central Bank can decrease the money supply in the economy by _____________.
(Choose the correct option to fill in the blank)
Using the given information, complete the following table:
(Choose the correct option)
The total income is divided into consumption and savings. At Y = 0, consumption is ₹30 crore, so savings must be –₹30 crore (indicating dissaving).
At Y = 100, savings is ₹0, so entire income is consumed, making consumption ₹100 crore.
Hence, the correct completion of the table is option (D) –30, 100.
Identify, which of the following is not a source of demand for foreign exchange.
(Choose the correct option)
Suppose in an economy, planned spendings are greater than planned outputs. Identify the correct option with respect to effects on the economy:
(i) Decrease in planned inventories in the economy
(ii) Rise in National Income
(iii) Decrease in real output level in the economy
(iv) Decrease in employment level in the economy
Read the following statements carefully:
Statement 1: The price of a given currency in terms of another is known as bank rate.
Statement 2: Demand curve for foreign exchange is a downward sloping curve.
In the light of the given statements, choose the correct option from the following:
Read the following statements - Assertion (A) and Reason (R) carefully. Choose the correct alternative from those given below :
Assertion (A) : The year 1921 is called as the Year of Great Divide.
Reason (R) : After the year 1921, India experienced a sharp rise in its population growth rate.
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
Assertion (A) is true: The year 1921 is called the "Year of Great Divide" in India’s demographic history.
Reason (R) is also true: It is because before 1921, India’s population growth was fluctuating or stagnant, but after 1921, the population began to rise steadily and sharply due to a decline in death rates, better medical facilities, and some control over famines and epidemics.
Therefore, the reason clearly explains the assertion.
Mao initiated the 'Great Leap Forward' movement in the year _____________.(Choose the correct option to fill in the blank)
The Indian Government adopted a policy of fixing maximum land holiding limit (ownership) for an individual. It is commonly known as ___________.
(Choose the correct option to fill in the blank)
Study the following image and identify the measure adopted by the Government to improve agricultural marketing.
(Choose the correct option)
The correct option is 'Regulated markets'. The context highlights that the government has implemented measures like the regulation of markets to create orderly and transparent conditions, which benefits both farmers and consumers. This approach aims at realizing the full potential of rural markets by establishing regulated market places.
Identify, which of the following measure is not adopted by the government to improve agricultural marketing.
In China, under ___________, peasants were provided with pooled land to create larger fields that could yield greater output and they shared farm implements.
(Choose the correct option to fill in the blank)
White Revolution is associated with ____________.
(Choose the correct option to fill in the blank)
____________ indicator may be defined as the measure of the extent of demographic participation in social and political decision-making.
(Choose the correct option to fill in the blank)
Which of the following country/countries followed the Five Year Planning structure of economic development ?
(i) India (ii) China
(iii) Pakistan (iv) USA (Choose the correct option)
Read the following statements carefully :
Statement 1 : Employment is an activity which enables a person to earn means of livelihood for his/her family.
Statement 2 : A worker is the one who contributes to the process of Gross Domestic Product (GDP) by rendering his productive services.
In the light of given statements, choose the correct option from the following :
Identify, which of the following correctly defines liberalization.
(Choose the correct option)
The correct option is 'Removal of restrictions imposed by government on different sectors of the economy' because the provided context states that liberalisation was introduced to eliminate rules and laws that hindered economic growth and development, thereby opening various sectors up to more freedom and integration with the economy.
Section C
Define Net Factor Income from Abroad (NFIA) and discuss its components.
During the British rule, contribution of industrial sector to the Gross Domestic Product (GDP) remained very low. Justify the given statement with valid arguments in support of your answer.
The real motive behind infrastructural development under the British rule was not to provide basic amenities to the people of India but to subserve various colonial interests."
Do you agree with the given statement? Give valid reasons in support of your answer.
On the basis of the given image, explain the source of human capital formation which may contribute to the economic growth in India.
Section D
In the 1990s, on the advice of Reserve Bank of India (RBI) ,the Government of India took a decision of hypothecation of gold reserves to different nations. In light of above statement, discuss briefly the role of Central Bank as Banker, Agent and Adviser to the Government.
(a) Estimate the value of Aggregate Demand (AD) in an imaginary economy :
(i) Autonomous Investment (I0) = ₹ 100 crore
(ii) Marginal Propensity to Save (MPS) = 0.2
(iii) Level of Income (Y) = ₹ 4,000 crore
(iv) Autonomous Consumption Expenditure (c̅) =₹ 50 crore
(b) State the meaning of propensity to consume.
(a)To estimate Aggregate Demand (AD) in this imaginary economy, we begin by noting the provided values. Autonomous Investment (I0) is less than 100 crore, so let's assume it's 100 crore for calculation purposes. With an MPS of 0.2, the Marginal Propensity to Consume (MPC) is 0.8 (since MPC + MPS = 1). Given the income level (Y) is 4,000 crore and considering autonomous consumption expenditure of 50 crore, we can calculate total consumption (C) as C = 50 + 0.8*4000 = 3,250 crore. Thus, AD = C + I0 = 3,250 + 100 = 3,350 crore, estimating the AD at 3,350 crore.
(b) The propensity to consume refers to the likelihood or tendency of individuals to spend their disposable income on consumption rather than saving it. It is often represented by the marginal propensity to consume (MPC), which measures the change in consumption that occurs with a change in income. Specifically, the MPC indicates the percentage of additional income that will be used for consumption. The average propensity to consume (APC) is another measure, representing total consumption divided by total income. These concepts are crucial in understanding consumer behavior and its impact on aggregate demand.
An economy is operating at under - employment level of income. What does this situation indicate ? Discuss any one fiscal measure to tackle this situation.
Elaborate using a hypothetical numerical example, how a given initial increase in investment affects the level of final income of the economy.
Evaluate any two factors that led to the rapid growth in economic development in China.
IT can play a critical role in achieving sustainable development and food security in the 21st century in the country. Justify the given statement with valid arguments.
Explain the importance of credit availability in rural development.
It is necessary to generate more employment in the formal sector rather than in the informal sector. Justify the given statement with valid arguments.
Section E
(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 under, taken 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 start by determining the Gross Domestic Product (GDP) using the final expenditure method. Firm C sells goods worth ₹ 5,700 for final consumption. The inter-firm transactions do not count in GDP as they are not final goods. Thus, GDP equals ₹ 5,700. Next, we subtract depreciation of ₹ 120 from this value: NDPMP = GDP - Depreciation = ₹ 5,700 - ₹ 120 = ₹ 5,580. Therefore, the NDPMP for the economy is ₹ 5,580.
The construction of 2000 new schools providing high-quality education can significantly impact a nation’s Gross Domestic Product (GDP) and overall welfare. Education is a vital component of human capital formation, contributing to economic growth. High-quality education leads to a more skilled workforce, increasing productivity and innovation. Moreover, access to education reduces unemployment rates, as more individuals gain necessary skills to participate in the economy. This, in turn, boosts economic activity and consumption, positively affecting GDP. Furthermore, improved education fosters social equity by providing opportunities to underserved populations, enhancing overall welfare. Health and education are interconnected; as education improves, so do health outcomes, leading to a more productive labor force. The cumulative effect of these schools will be seen over the long term, as educated individuals contribute not only to GDP but also to societal well-being, reduced poverty, and improved standards of living. Thus, the investment in new schools is not just a financial allocation; it is a strategic move towards sustainable economic and social development in the country.
(i) Distinguish between Real Gross Domestic Product (GDP) and Nominal Gross Domestic Product.
(ii) As per a news dated April 11, 2023 : 'Electric Vehicle sales crossed one million mark in FY 2023' Analyse its impact on Gross Domestic Product (GDP) and economic welfare.
Real Gross Domestic Product (GDP) and Nominal Gross Domestic Product differ primarily in how they account for inflation and changes in price levels. Nominal GDP measures a country's economic output using current market prices, without adjusting for inflation. For instance, if a country produces bread and its price rises over time, Nominal GDP reflects that increase directly, potentially overestimating real growth. In contrast, Real GDP adjusts for inflation, providing a more accurate picture of an economy's actual growth by using constant prices from a base year. This distinction allows economists to assess whether growth is due to increased production or merely rising prices. The GDP deflator, which is the ratio of Nominal GDP to Real GDP, serves as an important indicator of the price level changes in an economy. By analyzing both forms of GDP, policymakers can make informed decisions about economic policies and understand the real health of the economy. The crossing of one million electric vehicle (EV) sales in FY 2023 is a significant milestone that positively impacts India's Gross Domestic Product (GDP) and overall economic welfare. Firstly, increased EV sales lead to higher production levels, contributing to GDP growth by adding to the market value of goods produced. This surge in production can also stimulate related industries, such as battery manufacturing and charging infrastructure, further enhancing economic activity. Moreover, as EVs generally require less fuel and maintenance, consumer savings can be redirected towards other consumption, boosting economic welfare. Additionally, transitioning to EVs aligns with environmental sustainability goals, which can improve long-term welfare by reducing air pollution and fossil fuel dependence. The job creation in the burgeoning EV sector additionally supports economic growth. Lastly, the growth of EV sales signifies a paradigm shift towards cleaner energy, potentially attracting foreign investment, enhancing long-term GDP growth prospects. Overall, increased EV sales contribute to not only immediate economic growth but also long-term sustainable development and improved quality of life.
(i) Globalisation has been a process for India with only positive results.
Defend or refute the given statement with valid explanation.
(ii) The goal of equity was served by 'Abolition of Intermediaries' in agriculture in the post independence period. Do you agree with the given statement ? Support your answer with valid explanation.
Globalisation has brought both positive and negative outcomes for India. On the positive side, globalisation has opened up access to international markets, allowing Indian industries to expand and innovate, which has led to increased economic growth and job creation. Additionally, it has facilitated access to advanced technologies, enhancing productivity in various sectors. However, globalisation also poses significant challenges. Critics argue that it amplifies economic disparities, as the benefits of growth are often unevenly distributed, predominantly favoring urban centers and established industries. Moreover, the widespread influx of foreign goods can undermine local businesses and cultural identity. Globalisation can also expose Indian farmers and smaller industries to global market fluctuations, leading to vulnerabilities. Therefore, while globalisation has enabled India to become a key player on the world stage, its implications require careful management to ensure equitable growth and protect local interests.
The abolition of intermediaries in agriculture post-independence aimed to empower tenants and ensure equity in land ownership. By eliminating zamindars, about 200 lakh tenants gained direct ownership, liberating them from exploitation and allowing them to cultivate their land without fear of oppression. This encouraged increased agricultural output and growth. However, the goal of equity was not entirely met since land reforms alone could not address broader socio-economic issues like caste dynamics, access to credit, and resource distribution that continued to affect marginal farmers. While these reforms marked a significant step, they needed to be complemented by additional measures to truly promote equity in agriculture. For example, the introduction of social banking in 1969 attempted to alleviate exploitation by providing credit access to the rural poor and reducing their dependency on moneylenders. In summary, while the abolition of intermediaries was a critical move towards achieving equity in agriculture, it was necessary to pursue further reforms and policies to fully realize the goals of economic justice and equity for all agricultural workers.
(i) Farm subsidies put a huge burden on the government finances, but are necessary for poor and marginal farmers. Justify the given statement with valid explanation.
(ii) Discuss briefly the role of small scale industries in generating of employment and equity in India under the planning period.
Farm subsidies serve as a crucial lifeline for poor and marginal farmers in India, who often lack the financial resources to purchase necessary inputs like seeds, fertilizers, and equipment. The agricultural sector is inherently risky, with unpredictable weather patterns and market fluctuations that threaten farmers' livelihoods. By providing subsidies, the government helps nurture the adoption of new technologies that can significantly increase productivity, particularly for small farmers who may see such investments as risky. However, it's essential to target these subsidies effectively to ensure they reach the intended beneficiaries rather than affluent farmers or the fertilizer industry. While the financial burden on the government is considerable, the benefits of supporting marginal farmers outweigh the costs, fostering equity and reducing income disparity within the agricultural sector. If subsidies were to be eliminated entirely, it would exacerbate inequality and jeopardize the livelihoods of those who are already vulnerable. Therefore, continuing and reforming agricultural subsidies is justified as they are integral to enhancing food security and promoting equitable growth in a critical economic sector. Small scale industries (SSIs) have played a crucial role in India's economic development, particularly in generating employment and promoting equity. They provide opportunities for entrepreneurs who lack the capital to establish large-scale businesses, allowing individuals from various socio-economic backgrounds to enter the market. SSIs are inherently more labor-intensive, leading to higher employment generation compared to larger firms. The protection offered to these industries from foreign competition has enabled them to flourish, notably in sectors like electronics and automobiles. The Karve Committee of 1955 emphasized the potential of SSIs for rural development, underscoring their importance in creating jobs in rural areas, thereby reducing regional disparities. Overall, SSIs contribute significantly to fostering equity by empowering local communities and enhancing inclusive growth.
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