Reg No :………………………………………………………….

ALL KERALA COMMON MODEL EXAMINATION 2023 - 24 ( SET 3 )

ECONOMICS [030]

Time Allowed : 180 Minutes Maximum Marks : 80

General Instructions:

a) This question paper contains two sections:Section A – Macro Economics Section B – Indian Economic
Development

b) This paper contains 20 Multiple Choice Questions type questions of 1 mark each.

c) This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60 to 80
words.

d) This paper contains 6 Short Answer Questions type questions of 4 marks each to be answered in 80 to 100
words.

e) This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100 to 150
words.

SECTION A – MACRO ECONOMICS

1 Statement I:Export of financial services by India will be recorded on credit side of current account. [1]

Statement II: Foreign Direct investments in India will be recorded on credit side of capital account.

a) Both the statements are false.

b) Both the statements are true.

c) Statement I is true, but statement II is false.

d) Statement II is true, but statement I is false.

2 A bank run occurs when a large number of customers of a bank withdraw their deposits simultaneously. [1]
This can cause a bank to become insolvent if they cannot pay back all the depositors. Which of the
following facts about a bank make a bank run possible?

a) Banks hold only about 15 per cent of their deposits as cash. The rest of the deposits are given
out as loans.

b) Banks have to pay a specific amount to the person in whose name a cheque has been issued.

c) Banks charge a higher interest rate on loans than what they offer on deposits.

d) Banks pay an amount to account holders as interest on deposits.

3 Suppose in a hypothetical economy, the income rises from₹ 4,000 crores to₹ 5,000 crores. As a result, the [1]
consumption expenditure rises from₹ 3,000 crores to₹ 3,600 crores. Marginal propensity to consume in
such a case would be ________.
 a) 0.8

b) 0.4

c) 0.2

d) 0.6

4 Price of one currency in relation to another currency, determined by the free market forces, is known as [1]
________.

a) Foreign exchange rate

b) Flexible exchange rate

c) Equilibrium price

d) Fixed exchange rate

5 S = - a + (1 - b) Y is a [1]

a) Linear function of the level of Savings and Consumption expenditure

b) Algebraic function of the level of Savings and capital expenditure

c) Algebraic function of the level of Savings

d) Algebraic function of the level of Savings and Investment expenditure

6 Which of the following statements is not correct regarding Excess Demand? [1]

a) Excess Demand is caused due to reduction in the public expenditure.

b) Excess Demand is the result of decline in exports.

c) Excess Demand raises the market value of output.

d) Excess Demand means Aggregate Demand is more than Aggregate Supply.

7 Derive the multiplier when MPC is 0.6 [1]

a) 3

b) 1

c) 2.5

d) None of these

8 A family’s expenditure is a [1]

a) Flow concept

b) Stock concept

c) Non economic concept

d) Hypothetical concept

9 Supply of money refers to __________________. [1]

 a) Currency held by the public.
b) Currency hedld by Reserve Bank of India.
c) Currency held by the public and demand deposits with commercial banks.
d) Currency held in the government.

10 [1]

The upward - sloping supply curve for foreign exchange reflects:

a) Direct relationship

b) Inverse relationship

c) Exponential relationship

d) Indirect relationship

11 Final goods are those goods which are consumed only by the households. Defend or refute the [3]
given statement with a valid argument.
12 What is meant by visible and invisible items in the Balance of Payments Account? Give two examples of [3]
invisible items.

OR

Distinguish between accommodating items and autonomous items.

13 What is meant by inflationary gap? State three measures to reduce this gap. [4]
14 If in an economy:Change in initial Investments (ΔI) = Rs 500 crores, Marginal Propensity to Save (MPS) [4]
= 0.2. Find the values of the following

a) Investment multiplier (k),

b) Change in final income (Y).

OR

Explain the distinction between ex - ante measures and ex - post measures

15 Explain the banker to the Government function of the Central bank. [4]
16 Answer the following questions: [6]

a)
a. Calculate Gross National Product at market price :

Particulars (Rs. In crore)

Net current transfers to abroad (-) 5
Profits 70
Consumption of fixed capital 30
Rent 40
Indirect tax 20
Interest 100
Royalty 10
Compensation of employees 600
Subsidy 5
 Net factor income from abroad (-)25

b. Calculate National Income.

OR

a. Given the following data, find the missing value of Government Final Consumption
Expenditure and Mixed - Income of Self-employed:

b. Calculate Net Domestic Product at Factor Cost by

i. Income method and

ii. Product method from the following data:

17 Answer the following questions: [6]

a) Giving reason, state whether the following is a revenue expenditure or a capital expenditure in a
government budget

a. Expenditure on scholarships

b. Expenditure on building a bridge

b) From the following data about a government budget, find out the following:

a. Revenue deficit
b. Fiscal deficit
c. Primary deficit

SECTION B – INDIAN ECONOMIC DEVELOPMENT

18 The sources of data on unemployment are: [1]

a) World development indicators

b) UNESCO institute of statistics

c) Reports of Census of India

d) Administrative records from line ministries

19 When was the first five year plan started in China ? [1]
 a) 1952 b)1951 c) 1953 d) 1954

20 Import substitution refers to a policy of substitution of imports by ________ production. [1]

a) State b) Foreign c) Domestic d) District

21 Farmers cannot retain the product for a long time they have to sell it immediately. Which defect of [1]

agriculture is shown in this system?

a) Lack of information

b) Distress sale

c) Unregulated market

d) False weight

22 Assertion (A): Tariffs are taxes imposed to restrict the imports by a country. Reason (R): The purpose [1]
is providing protection to its domestic industries from competition from foreign firms.

a) Both A and R are true and R is the correct explanation of A.

b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
23 Investment in human capital contributes to growth by ________. [1]

a) providing effective utilisation of the physical capital

b) raises the level of both production and productivity
c) promotes innovations and creates ability to apply new technologies
d) all of these

24 In 1958, there were _____communes in China covering the entire farm population. [1]

a) 28,000 b) 24,000 c) 30,000 d) 26,000.

25 The concept of sustainable development was emphasized by ________. [1]

a) Brundtland Commission
b) Edward Barbier
c) United Nations Conference on Environment and Development (UNCED)
d) Ministry of environment
26 Statement I: During the British colonial period, India’s agriculture was starved of investment in [1]
terracing, flood - control, drainage and desalinisation of soil. Statement II: While a small section of
farmers changed their cropping pattern from food crops to commercial crops, a large section of tenants,
small farmers and sharecroppers neither had resources and technology nor had incentive to invest in
agriculture.

a) Statement II is true, but statement I is false.

b) Statement I is true, but statement II is false.

c) Both the statements are true.

 d) Both the statements are false.

27 Select the correct combination between the following columns [1]

a) (a) - (ii), (b) - (iii), (c) - (i), (d) - (iv)

b) (a) - (iv), (b) - (ii), (c) - (i), (d) - (iii)

c) (a) - (iv), (b) - (ii), (c) - (iii), (d) - (i)

d) (a) - (i), (b) - (ii), (c) - (iii), (d) - (iv)

28 Ujjwala Yojana has been a game changer for rural India. State any three conventional fuels being [3]
targeted under the LPG cylinder distribution scheme (Ujjwala Yojana).

OR

A truck driver had to pay₹ 1,000 as challan as his truck was emitting black soot. Why do you think he was
penalised? Was it justified? Discuss.

29 Why is it necessary to generate more employment in formal sector rather than in the informal sector ? [3]
Why ?
30 Does modernisation as a planning objective create contradiction in the light of employment generation? [4]
Explain.
31 What are the benefits of globalisation? [4]

OR

By manipulating statistics, we can prove that economic reforms are great success and we also prove that
economic reforms are a total failure. So, are they a success or a failure?

32 Education is a challenging proposition for Indian economy. Discuss. [4]

33 Answer the following questions: [6]

a)
a. Globalisation of the economy has helped the farmers in marketing their produce and
has helped in raising their standard of living. Do you agree?

b. It has been realised that agricultural finance is not available in sufficient quantity at
right time and at reasonable rate of interest. As an agriculturist, suggest any two
measures to make the existingsystem of agricultural finance serve fully the needs of
agriculture effectively.

b) OR

a. Point out any four concerns for farmers in Indian agriculture.

b. What are the limitations of rural credit in India?

34 Read the following text carefully and answer the questionsgiven below: Strong [6]
fundamentals of China - India trade It is the nature of China - India bilateral trade as a confidence -
building measure that must be underlined to appreciate its interface with their political relations which
remains so critical for its long - term prospects. Therefore, more than being measured in terms of
statistics and profits, it is the political impact of trade that remains the barometer of their economic
engagement. Both sides clearly display that understanding at least in their more recent initiatives.
Moreover, with the inclusion of India’s trade with Hong Kong and Macao (as also India’s rising trade with
Taiwan, and the possibility of eventual unification of Taiwan), Greater China has already emerged as
India’s largest trading partner and one of its kind. Major items of export from India to China remain iron
and chrome ore, plastic and linoleum, marine products, cotton yarn and fabrics, organic and inorganic
chemicals, dye intermediates, bulk drugs and pharmaceuticals, construction quality wire rods, tobacco
and tea, while China’s exports to India include items like raw silk and silk yarn, coking coal, some types of
chemicals, pulses, mercury and antimony, freshwater pearls, pig iron, newsprint and several low -
technology consumer items. Gradually, many new sectors—like border trade or high - tech trade—are
being also explored while information technology and infrastructure development are already emerging as
major areas for cooperation. Thirdly, it is the dynamism of their economies and societies, especially their
young populations and increasingly skilled manpower, that are going to be their critical asset. In absolute
terms, as a proportion of their total trade or even in terms of per capita trade this may present a dismal
picture, yet trends in the growth rate of China - India trade show strong potential and have important
political implications. However, even in terms of its share in their total foreign trade, while India accounts
for little more than 1% in China’s total foreign trade, China now accounts for over 5% of India’s total
foreign trade which creates substantial stakes for mutual co - operation. Finally, their foreign exchange
reserves provide perhaps the easiest layman’s indicator of their international economic standing. China’s
foreign exchange reserves, which stood at a mere USD1.6 billion for 1978, had exceeded USD659 billion
by March 2005. These may not be huge figures compared to those of Japan at USD843 billion yet they
are when compared to India’s USD142 billion. The same also remains true of their foreign direct
investment (FDI) inflows where China and India are often projected as either poles apart or competing
against each other. However, both have again continued to sustain growth simultaneously without any
major friction. Their FDI remains perhaps the strongest mover of their foreign trade and especially in the
case of China, it has come to be known as the main locomotive for their economic
success.(Source:https://journals.openedition.org/chinaperspectives/2853) Questions:

a) What reinforced China’s position as India’s largest trading partner? Compare the share of India
and China to each other’s total foreign trade.

b) Identify the simplest indicator of the international economic position of a country. Also, name the
strongest factor of the foreign trade in India and China.