CBSE Class 12 2025 Economics 58-1-2 Question Paper Set-2: Download Solutions with Answer Key

APC = \(\frac{C}{Y} = 0.8\), National Income (Y) = Rs. 4,000 crores

Consumption (C) = \(0.8 \times 4,000 = Rs. 3,200\) crores

Savings (S) = \(Y - C = Rs. 4,000 - Rs. 3,200 = Rs. 800\) crores

Wait! This is Rs. 800 — therefore, the correct answer is: (D) 800

% Correct Answer (updated based on calculation)
Correct Answer: (D) 800
Quick Tip: Savings = National Income – Consumption; and \textbf{APC = C / Y}.

Mixed income includes elements like rent-free accommodation provided by an employer. It combines returns to labor, capital, and entrepreneurship typically in the case of self-employed individuals. Quick Tip: \textbf{Mixed Income} arises when all factors of production are used by self-employed individuals, and often includes items like rent-free benefits.

In the Current Account of the Balance of Payment (BOP), exports are recorded as credit items because they bring foreign exchange into the country. Imports are recorded as debit items as they involve foreign exchange outflow. Transfer payments like remittances or donations sent abroad are also debit items. However, transfer receipts (such as remittances from abroad) bring in foreign exchange and are recorded as credit items. Therefore, option (D) is the incorrect statement. Quick Tip: \textbf{Receipts} (exports, inward remittances) are \textbf{credit} items, while \textbf{payments} (imports, outward transfers) are \textbf{debit} items in BOP accounting.

Given:
Consumption function: \( C = 200 + 0.75Y \)
Investment (I) = Rs. 4,000 crore

Step 1: Find Equilibrium Income
At equilibrium, \[ Y = C + I = (200 + 0.75Y) + 4000 \] \[ Y = 200 + 0.75Y + 4000 = 4200 + 0.75Y \] \[ Y - 0.75Y = 4200 \Rightarrow 0.25Y = 4200 \] \[ \Rightarrow Y = \frac{4200}{0.25} = Rs. 16,800 \, crore \]

Step 2: Total Consumption at Equilibrium Income \[ C = 200 + 0.75 \times 16800 = 200 + 12600 = Rs. 12,800 \, crore \]

Therefore, equilibrium income = Rs. 16,800 crore and total consumption = Rs. 12,800 crore. Quick Tip: Use the condition \( Y = C + I \) to find equilibrium income in two-sector models. Plug the equilibrium income back into the consumption function to find total consumption.

The government has set up 140 new price monitoring centres to keep a close watch on wholesale and retail prices of essential commodities. Quick Tip: Key factual data such as figures or statistics mentioned in the passage should be used directly in the answer.

Two proactive measures taken by the government to boost domestic supply and reduce prices are:
1. Banning the export of food items like wheat, broken rice, non-basmati white rice, and onions.
2. Reducing import duties on edible oils and pulses to increase their availability in the domestic market. Quick Tip: Policy measures like export bans and duty reductions are supply-side interventions used to stabilize prices.

One monetary measure used to control inflation is increasing the repo rate.
When the Reserve Bank of India (RBI) raises the repo rate, it becomes costlier for commercial banks to borrow money. This leads to reduced money supply in the economy, thereby decreasing demand and helping control inflation. Quick Tip: Monetary policy tools like repo rate and CRR are used by RBI to regulate inflation and liquidity.

Two precautions while using the expenditure method are:

1. Avoiding transfer payments: Expenditures like scholarships, pensions, or donations should not be included as they are not payments for goods and services.

2. Excluding expenditure on second-hand goods: These do not represent current production and hence must be excluded to avoid double counting. Quick Tip: Always include only final expenditures on currently produced goods and services in the expenditure method.

The statement is only partially true. While higher GDP may indicate a higher availability of goods and services, it does not always reflect increased welfare due to the following reasons:

- Income inequality: GDP may rise, but the benefits might be concentrated in a few hands.

- Non-monetary aspects: Welfare also includes health, education, and environmental quality, which GDP does not account for.

- Population growth: If population increases faster than GDP, per capita availability may fall.

Therefore, GDP alone cannot be a complete indicator of welfare. Quick Tip: Welfare depends on both quantitative and qualitative aspects of economic growth.

Stock Variable: It is measured at a particular point of time.
Example: Capital, wealth, and population.

Flow Variable: It is measured over a period of time.
Example: Income, savings, and investment.

Thus, stock is static and flow is dynamic in nature. Quick Tip: Stock is "as on" a date, while flow is "during" a time period.

The components of 'Profit' under the Income Method include:

1. Corporate Tax: Tax paid by companies on their profits.

2. Dividends: Part of profits distributed to shareholders.

3. Undistributed Profits: Retained earnings kept by firms for future use.

Together, these form the total profit component of factor income. Quick Tip: In the income method, only factor incomes like wages, rent, interest, and profit are included.

India is a member of BRICS (Brazil, Russia, India, China, South Africa), SAARC (South Asian Association for Regional Cooperation), and G-20 (Group of 20 major economies). However, it is not a member of G-7, which comprises Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. Quick Tip: India is not part of G-7, a group of seven advanced economies.

Special Economic Zones (SEZs) are designated areas that offer infrastructure, tax benefits, and relaxed regulations to promote economic activity. Their primary aim is to generate additional economic activities like exports, employment, and investment inflows. Hence, (c) – (iii) is the correct match. Quick Tip: SEZs aim to \textbf{generate additional economic activities} through incentives and infrastructure support.

Frictional unemployment refers to short-term unemployment that arises when individuals are temporarily out of work while transitioning from one job to another or entering the workforce for the first time. It is a natural part of the labor market and does not indicate a lack of job opportunities but a process of adjustment. Quick Tip: \textbf{Frictional Unemployment} is temporary and occurs during job changes or new job searches.

Modernisation as a goal of five year plans aimed at changing the social outlook of people by encouraging rational thinking, scientific temper, and adoption of technology. Therefore, the correct match is (iv) – (d). The other pairs are mismatched. Quick Tip: Modernisation in planning refers to a shift in \textbf{social values and adoption of science-based thinking}.

Statement 1 is correct because hired workers can be classified into regular salaried (those with job security and fixed income) and casual workers (daily or temporary basis). However, Statement 2 is incorrect because in rural areas, the majority of employment is in the form of self-employment or casual work, not regular salaried jobs. Quick Tip: Rural employment is mostly \textbf{casual or self-employed}, not regular salaried.

The Great Leap Forward, launched in 1958, was a campaign initiated by the Chinese government to rapidly transform the country from an agrarian economy into a socialist society through rapid industrialization and collectivization. The primary focus was on boosting industrial production, particularly steel output, often through the establishment of backyard furnaces in rural areas. Quick Tip: The \textbf{Great Leap Forward} mainly targeted the \textbf{industrial sector}, especially steel production.

The correct answer is: (B) Environmental crisis

The image shows heavy pollution and industrial waste, indicating an environmental crisis due to overuse and mismanagement of natural resources. Quick Tip: An environmental crisis occurs when the exploitation of natural resources exceeds their regenerative capacity.

Mini-hydel plants are especially suitable for mountainous regions because:


They utilize the natural flow and gradient of mountain rivers and streams, reducing the need for large dams or reservoirs.
These plants require comparatively lower investment, making them cost-effective for remote and hilly areas.
They generate clean and renewable energy, minimizing carbon emissions and pollution.
They help in decentralized power supply, enhancing electricity access in rural and remote regions.
Environmental degradation and displacement of people are minimal compared to large hydel projects. Quick Tip: \textbf{Mini-hydel plants} = ideal for hills: \textbf{low-cost}, \textbf{eco-friendly}, and use \textbf{natural gradients}.

(a) Rationale for Choosing ‘Self-Reliance’ as a Planning Objective:

Self-reliance was chosen as a key objective in India’s economic planning post-independence due to the following reasons:


Reduction of Dependence on Foreign Aid: India aimed to reduce its dependence on foreign countries, especially in the context of food grains, technology, and defence equipment, to preserve its economic and political sovereignty.

Promotion of Indigenous Industries: Encouraging domestic industries was essential to build internal production capacity, generate employment, and foster innovation.

Balance of Payments Stability: Excessive imports, particularly of capital goods and petroleum products, led to balance of payment crises. Self-reliance aimed to strengthen domestic capabilities to reduce import bills.

National Security and Strategic Autonomy: A self-reliant economy could withstand global shocks and maintain strategic autonomy without external pressures.

Long-Term Sustainable Development: Building self-sufficient systems ensured sustainable development without external economic vulnerabilities.


Thus, self-reliance became a foundation of India’s development strategy to ensure economic independence, security, and sustainable growth.



(b) GST and Simplification of Tax System:

Goods and Services Tax (GST), introduced in 2017, is a comprehensive indirect tax that replaced a host of central and state taxes, thereby simplifying the tax structure. The ways in which GST has addressed multiplicity of taxes include:


Unified Tax System: GST has replaced various indirect taxes like VAT, excise duty, service tax, CST, and octroi, creating a single tax system across the country.

One Nation, One Tax: GST created a common national market by eliminating the cascading effect of taxes and different tax rates across states.

Transparency and Simplicity: GST is administered through a transparent digital platform with clear compliance procedures, reducing ambiguity and corruption.

Input Tax Credit (ITC): Seamless flow of ITC across goods and services ensures tax is only paid on value addition, removing tax-on-tax.

Improved Ease of Doing Business: Simplified tax structure and online filing encourage entrepreneurship and foreign investment.


Overall, GST has led to simplification, standardization, and better compliance in the indirect taxation system of India. Quick Tip: \textbf{Self-reliance} aims at economic independence; \textbf{GST} unifies and simplifies India’s complex indirect tax system.

Agro-startups play a vital role in addressing the core issues of the agricultural sector by adopting modern, innovative strategies:


Technological Innovation: They introduce tools like precision farming, IT-based monitoring, and data-driven decision-making systems which improve crop yields and resource efficiency.
Supply Chain Efficiency: These startups streamline the agri-supply chain, enabling better access to markets and reducing post-harvest losses.
Market Linkages: By providing direct market access, agro-startups reduce the dependence on traditional intermediaries and ensure fair prices to farmers.
Rural Employment: They contribute to employment generation in rural areas, helping reduce migration to urban areas.


\begin{quicktipbox
Agro-startups combine technology and innovation to transform traditional farming into efficient and profitable ventures.
\end{quicktipbox Quick Tip: Agro-startups combine technology and innovation to transform traditional farming into efficient and profitable ventures.

The Indian government plays a key role in fostering agro-startups and rural entrepreneurship by providing targeted support through various schemes:


Policy Support: The government has consistently focused on promoting rural enterprises through favourable policy frameworks.
Financial Assistance: Programs like RKVY-RAFTAAR, Agri-Infrastructure Fund, and Agri-SURE provide crucial financial aid and startup incubation.
Capacity Building: These initiatives help build infrastructure, enable training, and improve access to credit and markets.
Encouraging Innovation: Through government support, agro-startups are encouraged to adopt sustainable practices and modern tools to enhance rural productivity.


\begin{quicktipbox
Supportive government schemes are critical in enabling agro-startups to scale and bring lasting change to rural India.
\end{quicktipbox Quick Tip: Supportive government schemes are critical in enabling agro-startups to scale and bring lasting change to rural India.

The Indian government has taken various protective measures to safeguard and promote the interests of small-scale industries (SSIs), including:


Product Reservation Policy: Certain products were reserved exclusively for production by SSIs to avoid competition from large firms.
Concessional Finance: Priority sector lending norms ensured easier access to credit for SSIs from banks and financial institutions.
Skill Development: Technical training and entrepreneurship programs were launched to improve capacity and innovation.
Technology Upgradation: Schemes were introduced to subsidize machinery and improve quality.
Market Support: SSIs were given marketing assistance through trade fairs, exhibitions, and government procurement policies.


These initiatives aimed to protect the SSIs from being outcompeted and to encourage their role in employment generation and equitable growth. Quick Tip: Use bullet points and government schemes to reinforce policy-based answers in distinction questions.