“Gross Domestic Product (GDP) and sum of Gross Value Added (GVA) in an economy are always equal.”Justify the given statement with valid arguments.
Official Solution
Correct Option: (1)
Gross Domestic Product (GDP) measures the total monetary value of all final goods and services produced within a country during a given period. Gross Value Added (GVA) refers to the value of output minus the value of intermediate consumption across all economic sectors. Justification:
- If Net Indirect Taxes (Taxes - Subsidies) = 0, then GDP and sum of GVA are equal. - GDP represents the total economy, while GVA measures the contribution of different sectors. Conclusion: GDP and sum of GVA are equal only if Net Indirect Taxes are zero; otherwise, they differ by the tax component.
02
PYQ 2024
medium
economicsID: cbse-cla
State any three precautions to be taken while estimating National Income by Expenditure Method.
Official Solution
Correct Option: (1)
While estimating National Income through the Expenditure Method, the following precautions must be taken: 1. Avoid Double Counting: - Only final expenditure should be included, excluding intermediate goods and resale transactions. 2. Exclude Transfer Payments: - Payments such as pensions, scholarships, and social security benefits should not be counted, as they are not part of actual production. 3. Include Imputed Values: - The value of self-consumed goods, owner-occupied houses, and free public services should be estimated and included. Conclusion: Proper precautions ensure accurate measurement of national income and prevent overestimation or underestimation.
03
PYQ 2024
medium
economicsID: cbse-cla
On the basis of the given data, estimate the value of National Income:
Official Solution
Correct Option: (1)
National Income (NNPFC) is calculated using the following formula: Step 1: Calculate GDPMPStep 2: Convert GDPMP to NNPFCFinal Answer:
04
PYQ 2024
medium
economicsID: cbse-cla
Identify which of the following statements is incorrect with reference to an economy.
1
Excess of Gross National Product (GNP) over Gross Domestic Product (GDP) is possible.
2
Excess of Gross Domestic Product (GDP) over Gross National Product (GNP) is possible.
3
Equality between Gross National Product (GNP) and Gross Domestic Product (GDP) is possible.
4
Sum of Gross National Product (GNP) and Gross Domestic Product (GDP) is always equal to zero (0).
Official Solution
Correct Option: (4)
Gross National Product (GNP) and Gross Domestic Product (GDP) are related, but their sum cannot be zero. Key Difference:
- If NFIA is positive, GNP will be greater than GDP. - If NFIA is negative, GNP will be less than GDP. - If NFIA is zero, GNP will be equal to GDP. Thus, option (D) is incorrect, as the sum of GDP and GNP is not necessarily zero but depends on NFIA.
05
PYQ 2024
medium
economicsID: cbse-cla
State the meaning of ‘Income from Property and Entrepreneurship’.
Official Solution
Correct Option: (1)
- Income from Property: Earnings from ownership of assets such as rent from land, interest on capital, and royalties. - Income from Entrepreneurship: Profits earned by business owners after paying all costs, including wages, rent, and interest.
06
PYQ 2024
medium
economicsID: cbse-cla
“Gross Domestic Product (GDP) Deflator Deflator is represented by the ratio of Real GDP and Nominal GDP.”Do you agree with the given statement? Justify your answer with valid arguments and a hypothetical numerical example.
Official Solution
Correct Option: (1)
Yes, GDP deflator is used to measure the effect of price changes on GDP by comparing Real GDP and Nominal GDP.
Formula:
Example:
Interpretation: - In 2010, the GDP deflator is 100, meaning the base year price level. - In 2015, the GDP deflator rises to 150, indicating a 50 percent increase in price level, despite no change in output.
Conclusion: The GDP deflator is a useful measure of inflation, showing how much of the GDP growth is due to price changes rather than real output growth.
07
PYQ 2024
medium
economicsID: cbse-cla
Explain the concept of circular flow of income in a two-sector economy.
Official Solution
Correct Option: (1)
The circular flow of income in a two-sector economy refers to the continuous movement of goods, services, and money between households and firms. Key Components:
1. Households: Own the factors of production (land, labor, capital, and entrepreneurship) and provide them to firms.
2. Firms: Use these factors to produce goods and services, generating income in the form of wages, rent, interest, and profit. Flow of Income:
- Households receive factor payments from firms and use their income to purchase goods and services.
- Firms receive revenue from sales, which they use to pay for factor inputs. Conclusion: In a two-sector economy, the income generated by production is fully circulated between households and firms, ensuring a balanced economic system.
08
PYQ 2024
easy
economicsID: cbse-cla
State the steps pertaining to the estimation of National Income by the Value Added Method.
Official Solution
Correct Option: (1)
09
PYQ 2024
easy
economicsID: cbse-cla
Estimate the value of Net National Product at Factor Cost (NNP ), using the following information:
Official Solution
Correct Option: (1)
The formula for Net National Product at Factor Cost (NNP ) is: Substituting the given values:
Thus, the estimated value of NNP is Rupees2,150 crore.
10
PYQ 2024
medium
economicsID: cbse-cla
Read the following statements carefully: Statement 1: Consumption and Savings are the components of National output of an economy. Statement 2: Higher level of Income often leads to lower savings. In the light of the given statements, choose the correct alternative from the following:
1
Statement 1 is true and Statement 2 is false.
2
Statement 1 is false and Statement 2 is true.
3
Both Statement 1 and 2 are true.
4
Both Statement 1 and 2 are false.
Official Solution
Correct Option: (1)
Statement 1 is correct as National output is derived from Consumption and Savings. However, Statement 2 is false because higher levels of income generally lead to higher savings due to increased disposable income.
11
PYQ 2024
medium
economicsID: cbse-cla
Read the following statements—Assertion (A) and Reason (R). Choose one of the correct alternatives given below: Assertion (A): Real Gross Domestic Product is a better indicator of economic growth of a nation as compared to Nominal Gross Domestic Product. Reason (R): Real Gross Domestic Product measures the value of goods and services at current year prices.
1
Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
2
Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
3
Assertion (A) is true, but Reason (R) is false.
4
Assertion (A) is false, but Reason (R) is true.
Official Solution
Correct Option: (3)
Assertion (A) is correct because Real GDP adjusts for inflation, making it a better measure of economic growth compared to Nominal GDP. However, Reason (R) is incorrect as Real GDP measures the value of goods and services at constant (base year) prices, not current year prices.
12
PYQ 2025
easy
economicsID: cbse-cla
Calculate the value of Net Value Added at Factor Cost (NVAFC):
S. No.
Particulars
Amount (in ₹ crore)
(i)
Operating Surplus
3,740
(ii)
Increase in unsold stock
600
(iii)
Sales
10,625
(iv)
Purchase of raw materials
2,625
(v)
Consumption of fixed capital
500
(vi)
Subsidies
400
(vii)
Indirect taxes
1,200
Official Solution
Correct Option: (1)
Formula:Calculation:Therefore, Net Value Added at Factor Cost (NVAFC) = ₹ 7,300 crore.
13
PYQ 2025
medium
economicsID: cbse-cla
On the basis of the following data, estimate the value of National Income (NNPFC):
S.No.
Items
Amount (in ₹ crore)
(i)
Household Consumption Expenditure
(ii)
Gross Business Fixed Capital Formation
(iii)
Gross Residential Construction Investment
(iv)
Government Final Consumption Expenditure
(v)
Excess of Imports over Exports
(vi)
Inventory Investments
(vii)
Gross Public Investments
(viii)
Net Indirect Taxes
(ix)
Net Factor Income from Abroad
(x)
Consumption of Fixed Capital
Official Solution
Correct Option: (1)
First, we calculate Gross Domestic Product at Market Price (GDP\textsubscript{MP}) using the expenditure method: Where, (Household Consumption Expenditure) (Gross Investment) (Government Final Consumption Expenditure) (Excess of Imports over Exports) Now, Now, calculate Net Domestic Product at Market Price (NDP\textsubscript{MP}):
Next, calculate Net Domestic Product at Factor Cost (NDP\textsubscript{FC}):
Finally, calculate National Income (NNP\textsubscript{FC}):
Final Answer: ₹ 1415 crore
14
PYQ 2025
medium
economicsID: cbse-cla
Calculate Net Domestic Product at Market Price (NDPMP) from the data given below:
S. No.
Particulars
Amount (in ₹ lakh)
(i)
Gross Domestic Product at Factor Cost
2200
(ii)
Subsidies
50
(iii)
Indirect Taxes
70
(iv)
Net Factor Income from Abroad
100
(v)
Consumption of Fixed Capital
150
(vi)
Net Exports
40
Official Solution
Correct Option: (1)
Step 1: Understand the formula
To calculate the Net Domestic Product at Market Price (NDPMP), we need to adjust the Gross Domestic Product at Factor Cost (GDPFC) by considering indirect taxes and subsidies. The formula is:
Gross Domestic Product at Factor Cost (GDPFC) = 2200 lakh
Indirect Taxes = 70 lakh
Subsidies = 50 lakh
Step 3: Apply the formula
Now, we substitute the given values into the formula:
NDPMP = 2200 + 70 - 50
Step 4: Simplify the equation
First, add the indirect taxes (70) and subtract the subsidies (50) from the Gross Domestic Product at Factor Cost (2200):
2200 + 70 = 2270
2270 - 50 = 2220
Step 5: Final result
The Net Domestic Product at Market Price (NDPMP) is 2220 lakh.
15
PYQ 2025
easy
economicsID: cbse-cla
Elaborate the likely impact of construction of two new Express Highways on the Gross Domestic Product (GDP) and Welfare in an economy.
Official Solution
Correct Option: (1)
The construction of two new Express Highways will have the following likely impacts: Impact on Gross Domestic Product (GDP): The construction activity will contribute directly to the GDP by increasing Gross Capital Formation. It will generate employment opportunities and increase the income of workers, suppliers, and contractors. This will enhance overall production and demand in the economy, thereby boosting the GDP. Impact on Welfare: Improved road infrastructure will reduce travel time and transportation costs, improving connectivity and accessibility. It will facilitate faster movement of goods and people, enhance trade, and contribute to better health, education, and employment opportunities in the connected areas, thereby improving the overall welfare and standard of living of the people.
16
PYQ 2025
easy
economicsID: cbse-cla
Distinguish between Net Factor Income from Abroad (NFIA) and Net Exports (X -- M).
Official Solution
Correct Option: (1)
NFIA
Net Exports (X – M)
It is the difference between factor income earned from abroad and factor income paid to abroad.
It is the difference between exports of goods and services and imports of goods and services.
Includes wages, rent, interest, and profit received from abroad and paid to abroad.
Includes trade in visible and invisible items (goods and services).
Component of National Income.
Component of Domestic Product.
17
PYQ 2025
hard
economicsID: cbse-cla
On the basis of the given data, estimate the value of National Income (NNPFC):
S.No.
Items
Amount (in ₹ Crore)
(i)
Household Consumption Expenditure
1,800
(ii)
Gross Business Fixed Capital Formation
1,150
(iii)
Gross Residential Construction Expenditure
1,020
(iv)
Government Final Consumption Expenditure
2,170
(v)
Excess of Imports over Exports
720
(vi)
Inventory Investments
540
(vii)
Gross Public Investments
1,300
(viii)
Net Indirect Taxes
240
(ix)
Net Factor Income from Abroad
(-) 250
(x)
Consumption of Fixed Capital
440
Official Solution
Correct Option: (1)
National Income (NNPFC) is calculated by subtracting the depreciation (Consumption of Fixed Capital) from the Gross National Product (GNP). First, let's calculate the Gross National Product (GNP) at factor cost: Where: - is the Household Consumption Expenditure = ₹1,800 crore - is the Gross Business Fixed Capital Formation + Gross Residential Construction Expenditure + Inventory Investments + Gross Public Investments = ₹1,150 + ₹1,020 + ₹540 + ₹1,300 = ₹4,010 crore - is the Government Final Consumption Expenditure = ₹2,170 crore - is the Excess of Imports over Exports = ₹720 crore - Net Factor Income from Abroad = ₹-250 crore Substituting these values into the GNP equation: Now, to calculate National Income (NNPFC), we subtract the consumption of fixed capital (depreciation): NNPFC = GNP - Consumption of Fixed Capital NNPFC = 8,450 - 440 = 8,010 crore Thus, the value of National Income (NNPFC) is ₹8,010 crore.
18
PYQ 2025
easy
economicsID: cbse-cla
Suppose there are only three firms in an imaginary economy, viz. X, Y and Z. During a year, the following transactions took place in the economy:
(I) Firm X sold goods worth ₹ 20,000 to Firm Y and ₹ 12,000 to Firm Z.
(II) Firm Y sold goods worth ₹ 11,000 to Firm X and ₹ 35,000 to Firm Z.
(III) Firm Z sold goods worth ₹ 57,000 to households for final consumption. On the basis of the given transactions, calculate the value of Gross Domestic Product at Market Price (GDP\textsubscript{MP}) in the economy.
Official Solution
Correct Option: (1)
To calculate the value of Gross Domestic Product at Market Price (GDP\textsubscript{MP}), we consider the value of final goods and services produced within the domestic territory during a year. Only the final sale to households is counted, while intermediate transactions between firms are excluded to avoid double counting. Value of goods sold by Firm Z to households = ₹ 57,000 Therefore, Final Answer: ₹ 57,000
19
PYQ 2025
hard
economicsID: cbse-cla
To arrive at the value of Net Value Added at Market Price (NVA ), ....... must be ....... to/from Gross Value Added at Market Price (GVA ). (Choose the correct option to fill in the blanks)
1
Depreciation, added
2
Depreciation, subtracted
3
Net indirect taxes, subtracted
4
Net indirect taxes, added
Official Solution
Correct Option: (4)
To calculate Net Value Added at Market Price (NVA ), we need to adjust Gross Value Added at Market Price (GVA ) by considering the net indirect taxes. Net indirect taxes (taxes minus subsidies) are added to GVA to arrive at NVA , as they are considered part of the value created in the economy that affects the market price of output.
20
PYQ 2025
easy
economicsID: cbse-cla
calculate the value of Net Value Added at Factor Cost (NVAFC):
S. No.
Particulars
Amount (In ₹ crore)
(i)
Operating Surplus
3,740
(ii)
Increase in unsold stock
600
(iii)
Sales
10,625
(iv)
Purchase of raw materials
2,625
(v)
Consumption of fixed capital
500
(vi)
Subsidies
400
(vii)
Indirect taxes
1,200
1
Export of goods and services are recorded as credit items.
2
Import of goods and services are recorded as debit items.
3
All transfer payments are recorded as debit items.
4
All transfer receipts are recorded as debit items.
Official Solution
Correct Option: (4)
In the Current Account of the Balance of Payment (BOP), export of goods and services are recorded as credit items because they bring foreign exchange into the country. Import of goods and services are recorded as debit items since they involve outflow of foreign exchange. Similarly, transfer payments like gifts, donations, and remittances sent abroad are debit items as they involve outflow of money. However, transfer receipts are credit items as they represent inflow of money from abroad. Hence, the incorrect statement is option (D).
21
PYQ 2025
hard
economicsID: cbse-cla
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:Estimate the value of Net Domestic Product at Market Price (NDPMP), assuming depreciation to be ₹120.
Official Solution
Correct Option: (1)
To calculate Net Domestic Product at Market Price (NDPMP), we follow these steps: 1. Calculate Gross Domestic Product (GDPMP) at Market Price: GDPMP is calculated by adding all transactions in the economy. The formula is: The total value of sales to households = ₹5,700. The intermediate transactions (sales between firms) = ₹2,000 (Firm A to Firm B) + ₹1,200 (Firm A to Firm C) + ₹1,100 (Firm B to Firm A) + ₹3,500 (Firm B to Firm C) = ₹7,800. Therefore, GDPMP = ₹5,700 + ₹7,800 = ₹13,500. 2. Subtract Depreciation: To find the Net Domestic Product (NDPMP), we subtract depreciation from GDPMP. NDP = GDPMP - Depreciation NDPMP = ₹13,500 - ₹120 = ₹13,380 Thus, the Net Domestic Product at Market Price (NDPMP) is ₹13,380 crore.
22
PYQ 2025
easy
economicsID: cbse-cla
``All producer goods are essentially capital goods.''
Defend or refute the given statement, with the help of a suitable example.
Official Solution
Correct Option: (1)
The given statement is refuted. Not all producer goods are capital goods. While both are used in the production of other goods and services, their classification depends on their nature and purpose. Capital Goods: These are durable goods used repeatedly in the production process for several years. Example: machinery, tools, and equipment. Producer Goods: These include both capital goods and single-use producer goods like raw materials and intermediate goods that are used up in the process of production. Example: raw cotton used by a textile mill, which is completely consumed in production. Example: A machine used in a factory for production is a capital good. However, the fuel used to run the machine is a producer good but not a capital good since it is consumed in one production cycle. Hence, the statement is incorrect as all producer goods are not capital goods.
23
PYQ 2025
easy
economicsID: cbse-cla
On the basis of the following hypothetical data:
Year
Nominal GDP (in ₹ crores)
Real GDP (Adjusted to base year prices, in ₹ crores)
2020 – 21
2022 – 23
Calculate the percentage change in Real Gross Domestic Product (GDP) in the year 2022 – 23 using 2020 – 21 as the base year.
Official Solution
Correct Option: (1)
The formula for calculating the percentage change in Real GDP is: From the data, we have: Substituting these values into the formula: Therefore, the percentage change in Real GDP in the year 2022 – 23 is 20\%.
24
PYQ 2025
easy
economicsID: cbse-cla
Explain any two precautions pertaining to the Value Added Method of Estimation of National Income in a country.
Official Solution
Correct Option: (1)
The Value Added Method of National Income estimation involves calculating the value added at each stage of production. However, there are certain precautions to be kept in mind while using this method: 1. Double Counting: Care should be taken to avoid double counting. This occurs when the value of intermediate goods is included in the value of final goods. Only the value added at each stage of production should be counted, not the value of intermediate goods used in the production process. 2. Exclusion of Non-Market Transactions: Non-market transactions, such as household work or services provided without monetary exchange, should not be included in the calculation of national income. Only market transactions involving the exchange of goods and services should be considered. These precautions are necessary to ensure that the calculation of national income is accurate and reflects the actual productive activity in the economy.
25
PYQ 2025
medium
economicsID: cbse-cla
Discuss the likely impact of the construction of 20 new hospitals in a country on the Gross Domestic Product (GDP) and Welfare in the economy.
Official Solution
Correct Option: (1)
The construction of 20 new hospitals will have a significant impact on both GDP and welfare: 1. Impact on GDP:
The construction of new hospitals will contribute to GDP through the increase in investments (capital formation) in the economy. The construction process will generate demand for labor, materials, and services, thereby contributing to economic output. Furthermore, the hospitals will provide services that contribute to the economy's healthcare sector. The spending on hospital construction will increase gross fixed capital formation and thus increase GDP. 2. Impact on Welfare:
The construction of new hospitals will directly enhance the welfare of the population by improving access to healthcare services. This will lead to improved health outcomes, greater productivity, and a higher quality of life. Healthier individuals are more productive and can contribute more effectively to the economy. Thus, the construction of hospitals is beneficial not only for GDP but also for the long-term well-being of the population. In conclusion, the construction of new hospitals contributes to both the immediate increase in GDP and the long-term improvement in societal welfare.
26
PYQ 2025
medium
economicsID: cbse-cla
``Disposition phase of circular flow of income involves flow of factor income from firms to households.''
Justify the statement giving valid reason.
Official Solution
Correct Option: (1)
The statement is justified. In the disposition phase of the circular flow of income, production generates income for households, as they provide factors of production like land, labor, capital, and entrepreneurship to firms. Firms pay wages, rent, interest, and profits to households, which are forms of factor income. This flow from producers (firms) to factor owners (households) represents the disposition or distribution of income in the economy.
27
PYQ 2025
medium
economicsID: cbse-cla
Assuming the following for a hypothetical economy, estimate the Break-even level of Income and Equilibrium level of Income: [(i)] Autonomous Consumption Expenditure ( ) = ₹ 50 crore [(ii)] Marginal Propensity to Save (MPS) = 0.2 [(iii)] Autonomous Investments ( ) = ₹ 100 crore
Official Solution
Correct Option: (1)
1. Break-even Level of Income: At the break-even point, Income (Y) = Consumption (C) Given: Autonomous Consumption Expenditure ( ) = ₹ 50 crore At break-even point, no savings means:
2. Equilibrium Level of Income: We know that: Substituting the given values:
Therefore, the Equilibrium Level of Income is ₹ 750 crore.
28
PYQ 2025
medium
economicsID: cbse-cla
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 the interests of India. In the light of the given statements, choose the correct alternative from the following :
1
Statement 1 is true and Statement 2 is false.
2
Statement 1 is false and Statement 2 is true.
3
Both Statements 1 and 2 are true.
4
Both Statements 1 and 2 are false.
Official Solution
Correct Option: (4)
Statement 1 is false because British policies did not lead to significant employment generation in India’s secondary and tertiary sectors. Instead, they primarily focused on exploiting India’s resources for the benefit of the British economy, which led to limited industrialization in India. Statement 2 is also false because the colonial government’s infrastructural development was mainly aimed at serving British economic and strategic interests, not benefiting India’s economy. The focus was on facilitating British trade and control.
29
PYQ 2025
medium
economicsID: cbse-cla
"All consumption goods are durable in nature."
Defend or refute the given statement with a valid argument.
Official Solution
Correct Option: (1)
This statement is False. Not all consumption goods are durable in nature. Consumption goods can be classified into two types: durable goods and non-durable goods. 1. Durable Goods: These are goods that have a long life span and provide utility over a long period of time, such as cars, refrigerators, and electronics. They are typically used for several years and do not need to be replaced frequently. 2. Non-Durable Goods: These are goods that are consumed quickly and have a short life span, such as food, beverages, and toiletries. These goods are used up in a short period and need to be repurchased frequently. Thus, the statement is false because only a subset of consumption goods are durable. Many essential consumption goods are non-durable.
30
PYQ 2025
medium
economicsID: cbse-cla
From the items given in Column-I and Column-II, choose the correct pair.
Column-I
Column-II
(a) Income from Property
(iv) Interest from capital
(b) Income from Entrepreneurship
(ii) Profit
(c) Mixed Income
(iii) Rent free accommodation from an employer
(d) Compensation of Employees
(i) Old age pension
1
(a) -- (i)
2
(b) -- (ii)
3
(c) -- (iii)
4
(d) -- (iv)
Official Solution
Correct Option: (2)
Income from entrepreneurship is typically classified as profit, as it represents the reward for the risk and initiative undertaken by the entrepreneur. Hence, the correct pair is option (B).
31
PYQ 2025
medium
economicsID: cbse-cla
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.
Year
Nominal GDP
Nominal GDP (Adjusted to Base Year Price)
2020–21
3,000
5,000
2022–23
4,000
6,000
Official Solution
Correct Option: (1)
The percentage change in Real GDP is calculated using the following steps: 1. Real GDP for 2022-23 (Adjusted to Base Year Price): The Real GDP is adjusted for inflation using the base year's prices. For 2022-23, the Real GDP is ₹ 6,000 crore (already adjusted). 2. Real GDP for 2020-21 (Adjusted to Base Year Price): Similarly, for 2020-21, the Real GDP is ₹ 5,000 crore. 3. Formula for Percentage Change in Real GDP: 4. Calculation: Therefore, the percentage change in Real GDP in 2022-23, using 2020-21 as the base year, is 20%. %Quicktip
32
PYQ 2025
medium
economicsID: cbse-cla
State the steps pertaining to the estimation of National Income, under the Income Method.
Official Solution
Correct Option: (1)
The steps for estimating National Income under the Income Method are as follows: 1. Calculate Compensation of Employees (CE): This includes the total remuneration (wages and salaries) paid to employees for their contribution to the production process. 2. Add Gross Profits of Enterprises (GP): The profits earned by firms after paying wages and other expenses. These profits represent the income generated in the economy. 3. Add Rent and Interest (R + I): Income generated from land (rent) and capital (interest) is added here. This includes income from property and investments. 4. Add Net Indirect Taxes (NIT): Net indirect taxes (taxes minus subsidies) are added as they reflect the difference between market prices and factor cost. 5. Sum of all Incomes: The final National Income is calculated by summing the compensation of employees, gross profits, rents, interests, and net indirect taxes. This gives the total income of the economy.
33
PYQ 2025
medium
economicsID: cbse-cla
Identify, which of the following does not represent a public good. (Choose the correct option)
1
Free vaccines provided by the government
2
Defence services provided by the military
3
Purchase of railway ticket by an individual
4
Street light installed by a city municipality
Official Solution
Correct Option: (3)
Public goods are characterized by non-excludability and non-rivalry. This means that once the good is provided, everyone can access it without reducing its availability to others. The purchase of a railway ticket by an individual is a private transaction and involves both excludability and rivalry, meaning it does not represent a public good.
34
PYQ 2025
medium
economicsID: cbse-cla
On the basis of the given data, estimate the value of Net Domestic Product at Factor Cost (NDPFC):
Given Data:
S.No.
Items
Amount (in ₹ Crore)
(i)
Household Consumption Expenditure
1,800
(ii)
Gross Business Fixed Capital Formation
1,150
(iii)
Gross Residential Construction Expenditure
1,020
(iv)
Government Final Consumption Expenditure
2,170
(v)
Excess of Imports over Exports
720
(vi)
Inventory Investments
540
(vii)
Gross Public Investments
1,300
(viii)
Net Indirect Taxes
240
(ix)
Net Factor Income from Abroad
-250
(x)
Consumption of Fixed Capital
440
Official Solution
Correct Option: (1)
The formula for calculating Net Domestic Product at Factor Cost (NDP ) is: We know that: Substituting the values from the given data: Now, to calculate NDP , we subtract depreciation (if given or assumed). Since depreciation is not provided, we assume it’s a known value, say ₹250 crore. Thus, Therefore, the value of NDP = ₹7,030 crore.
35
PYQ 2025
medium
economicsID: cbse-cla
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 Gross Domestic Product at Factor Cost (GDP ), assuming the value of Net Indirect Taxes to be ₹240.
Official Solution
Correct Option: (1)
To calculate GDP at Factor Cost, we use the value-added approach. This involves summing the value added by each firm, where value added is the value of output minus the value of intermediate inputs. Then, we adjust for Net Indirect Taxes to obtain GDPFC.
Step-by-Step Calculation
Step 1: Calculate Value of Output for Each Firm
Firm A: Sold ₹2,000 to Firm B + ₹1,200 to Firm C = ₹3,200
Firm B: Sold ₹1,100 to Firm A + ₹3,500 to Firm C = ₹4,600
Firm C: Sold ₹5,700 to households = ₹5,700
Step 2: Calculate Intermediate Inputs for Each Firm
Firm A: Purchased ₹1,100 from Firm B
Firm B: Purchased ₹2,000 from Firm A
Firm C: Purchased ₹1,200 from Firm A + ₹3,500 from Firm B = ₹4,700
Step 3: Calculate Value Added by Each Firm
Value Added = Value of Output − Value of Intermediate Inputs
Firm A: ₹3,200 − ₹1,100 = ₹2,100
Firm B: ₹4,600 − ₹2,000 = ₹2,600
Firm C: ₹5,700 − ₹4,700 = ₹1,000
Step 4: Calculate GDP at Market Price (GDPMP)
GDPMP = Sum of Value Added by all firms
= ₹2,100 (Firm A) + ₹2,600 (Firm B) + ₹1,000 (Firm C) = ₹5,700
Step 5: Calculate GDP at Factor Cost (GDPFC)
GDPFC = GDPMP − Net Indirect Taxes
= ₹5,700 − ₹240 = ₹5,460
Final Answer
The Gross Domestic Product at Factor Cost (GDPFC) is ₹5,460.
36
PYQ 2025
medium
economicsID: cbse-cla
Explain the likely impact of construction of 100 new super specialty hospitals in a nation on Gross Domestic Product (GDP) and welfare in the economy.
Official Solution
Correct Option: (1)
The construction of 100 new super specialty hospitals will result in an increase in GDP, as it will lead to more investments in infrastructure, creating employment opportunities, and generating income. The increased expenditure in construction and healthcare will have a multiplier effect on the economy, driving higher consumption and business activities. Moreover, these hospitals will improve the healthcare infrastructure of the country, leading to better health outcomes, reduced mortality rates, and improved labor productivity, thereby boosting overall welfare. The establishment of these hospitals will also lead to an increase in the availability of healthcare services, which can improve the quality of life for the citizens.
37
PYQ 2025
medium
economicsID: cbse-cla
State the steps pertaining to the estimation of National Income, under the Expenditure Method.
Official Solution
Correct Option: (1)
The steps to estimate National Income using the Expenditure Method are as follows: 1. Consumption Expenditure (C): This includes all the expenditures on goods and services by households. It consists of durable and non-durable goods and services consumed by the public. 2. Investment Expenditure (I): This includes the total investment made in the economy such as business investments, construction of factories, machinery, and infrastructure. It also includes residential construction. 3. Government Expenditure (G): This includes all government spending on goods and services, excluding transfer payments such as pensions or unemployment benefits. 4. Net Exports (NX): This refers to the difference between a country’s exports and imports. It is calculated as: 5. Total Expenditure (E): The total expenditure is the sum of all the above components: where is the total value of exports and is the total value of imports. The national income is calculated by summing the consumption, investment, government expenditure, and net exports in the economy. This method is based on the principle that the total expenditure on goods and services equals the total income generated from their production.
38
PYQ 2025
medium
economicsID: cbse-cla
"In a two-sector economy, National Income is always equal to Domestic income " Defend or refute the given statement with valid reasons.
Official Solution
Correct Option: (1)
The given statement is false. National Income is not always equal to Domestic Income in a two-sector economy. In a two-sector economy, there are only two sectors: households and firms. The main distinction between National Income and Domestic Income lies in the concept of Net Factor Income from Abroad (NFIA). 1. Domestic Income (DI): - Domestic Income refers to the total income earned within the geographical boundaries of a country. It includes income generated by all the factors of production located within the country, whether owned by residents or foreigners. - Formula: 2. National Income (NI): - National Income refers to the total income earned by the residents of a country, regardless of whether the income is earned inside or outside the country. It includes the income from abroad, i.e., Net Factor Income from Abroad. - Formula: In a two-sector economy, there is typically no distinction between National Income and Domestic Income if we assume that there is no foreign income or payments (i.e., Net Factor Income from Abroad is zero). However, if the economy involves cross-border transactions, such as income from abroad, then the two incomes would differ. Hence, National Income is only equal to Domestic Income in a two-sector economy if there is no foreign income involved. In the general case where there is foreign income, National Income will exceed Domestic Income.
39
PYQ 2025
medium
economicsID: cbse-cla
Define Nominal Gross Domestic Product. How is it different from Real Gross Domestic Product?
Official Solution
Correct Option: (1)
Nominal Gross Domestic Product (Nominal GDP) refers to the total value of all goods and services produced within a country’s borders in a given time period, calculated using current prices. It does not adjust for inflation or deflation and represents the market value at the time of production. Real Gross Domestic Product (Real GDP), on the other hand, is Nominal GDP adjusted for inflation or deflation. It reflects the true value of goods and services produced by removing the effects of price changes, thus enabling better comparisons of economic performance over time. The key difference is that Nominal GDP uses current prices without adjusting for inflation, while Real GDP adjusts for inflation to reflect the true value of goods and services.
40
PYQ 2025
medium
economicsID: cbse-cla
Value Addition = __ Value of Intermediate Consumption. (Choose the correct option(s) to complete the stated formula.)
1
Domestic sales
2
Sales – change in stock
3
Value of output
4
(Number of units produced) × (Price per unit)
Official Solution
Correct Option: (3)
The formula for value addition is given by the difference between the value of output and the intermediate consumption. The appropriate choices are the ones that relate to output and sales change, and exclude intermediate consumption.
41
PYQ 2025
medium
economicsID: cbse-cla
Define Real Gross Domestic Product. How is it different from Nominal Gross Domestic Product?
Official Solution
Correct Option: (1)
Real Gross Domestic Product (Real GDP) is the measure of the value of all goods and services produced within a country's borders in a specific time period, adjusted for inflation or deflation. It is used to compare the economic performance of a country over time by eliminating the effect of price changes. Nominal Gross Domestic Product (Nominal GDP) is the measure of the value of all goods and services produced in a country in a given time period, but without adjusting for inflation or deflation. It is calculated using current prices during the year the goods and services are produced. The key difference between the two is that Real GDP accounts for inflation, while Nominal GDP does not.
42
PYQ 2025
medium
economicsID: cbse-cla
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.
Official Solution
Correct Option: (1)
The classification of goods as Final or Intermediate goods depends on whether the goods are used for further production or are ready for final consumption. 1. Sewing Machine: - Classification: Final Good - Reason: The sewing machine is a durable capital good used by Gauhar to produce dresses. It is not used for resale or further processing. Hence, it is classified as a final good. 2. Fabric: - Classification: Intermediate Good - Reason: Fabric is used as an input in the production of dresses, which is the final product. It is a part of the production process and will be transformed into finished dresses. Thus, fabric is an intermediate good. 3. Buttons: - Classification: Intermediate Good - Reason: Buttons are used as a component to make the finished dress. They are essential in the production process and are not intended for final consumption in their current form. Therefore, buttons are classified as intermediate goods. 4. Thread: - Classification: Intermediate Good - Reason: Like fabric and buttons, thread is used in the production process to make the final product, the dresses. Thus, thread is an intermediate good.
43
PYQ 2025
medium
economicsID: cbse-cla
Differentiate between Real flow and Money flow.
Official Solution
Correct Option: (1)
Real Flow: - Real flow refers to the flow of goods and services in the economy. - It represents the actual physical movement of products and services between producers and consumers. - In the circular flow model, real flow includes the movement of goods and services from firms to households and the movement of factors of production from households to firms. Money Flow: - Money flow refers to the flow of money or payments in exchange for goods and services, or for the use of factors of production. - It represents the financial transactions that occur in the economy. - In the circular flow model, money flow involves the payment of wages, interest, rent, and profit to the owners of factors of production, and the receipt of payments from households in exchange for goods and services.
44
PYQ 2025
medium
economicsID: cbse-cla
On the basis of the data given below, estimate the value of National Income (NNPFC)
Official Solution
Correct Option: (1)
To estimate the National Income (NNP at factor cost), we can use the following formula:
Formula:
National Income (NNP) = Private final consumption expenditure + Government final consumption expenditure + Net exports + Net indirect taxes + Net factor income from abroad + Gross domestic fixed capital formation - Consumption of fixed capital
1. Given Values:
Private final consumption expenditure: ₹2,000 crore
Government final consumption expenditure: ₹1,500 crore
Gross domestic fixed capital formation: ₹1,000 crore
Addition to stock: ₹400 crore (this is included in the Gross domestic fixed capital formation)
Consumption of fixed capital: ₹50 crore
Net factor income from abroad: ₹100 crore
Net indirect taxes: ₹200 crore
Net Exports: ₹700 crore
2. Calculating the National Income (NNP):
Substituting the values in the formula:
National Income (NNP) = ₹2,000 + ₹1,500 + ₹700 + ₹200 + ₹100 + ₹1,000 - ₹50
National Income (NNP) = ₹5,450 crore
Final Answer:
The National Income (NNP at factor cost) is ₹5,450 crore.
45
PYQ 2025
easy
economicsID: cbse-cla
State the meaning and significance of Gross Domestic Product (GDP) deflator.
Official Solution
Correct Option: (1)
The GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy. It is used to adjust nominal GDP to real GDP. The deflator reflects the price changes of a basket of goods and services produced in the economy and helps determine the impact of inflation on the economy.
46
PYQ 2025
medium
economicsID: cbse-cla
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)
1
(i) and (ii)
2
(ii) and (iii)
3
(ii), (iii), and (iv)
4
(iii) and (iv)
Official Solution
Correct Option: (3)
To calculate value addition, we subtract the value of intermediate consumption from the total output. Intermediate consumption includes domestic sales, sales change in stock, and the value of output, which can be computed by multiplying the number of units produced by the price per unit.
47
PYQ 2025
easy
economicsID: cbse-cla
"National Income is always equal to Domestic income in a two-sector economy." Defend or refute the given statement with valid reasons.
Official Solution
Correct Option: (1)
The given statement is false. National Income is not always equal to Domestic Income in a two-sector economy. In a two-sector economy, there are only two sectors: households and firms. The main distinction between National Income and Domestic Income lies in the concept of Net Factor Income from Abroad (NFIA). 1. Domestic Income (DI): - Domestic Income refers to the total income earned within the geographical boundaries of a country. It includes income generated by all the factors of production located within the country, whether owned by residents or foreigners. - Formula: 2. National Income (NI): - National Income refers to the total income earned by the residents of a country, regardless of whether the income is earned inside or outside the country. It includes the income from abroad, i.e., Net Factor Income from Abroad. - Formula: In a two-sector economy, there is typically no distinction between National Income and Domestic Income if we assume that there is no foreign income or payments (i.e., Net Factor Income from Abroad is zero). However, if the economy involves cross-border transactions, such as income from abroad, then the two incomes would differ. Hence, National Income is only equal to Domestic Income in a two-sector economy if there is no foreign income involved. In the general case where there is foreign income, National Income will exceed Domestic Income.
48
PYQ 2025
hard
economicsID: cbse-cla
To arrive at the value of Gross Value Added at Factor Cost (GVA ), .......... must be ................. to/from Gross Value Added at Market Price (GVA ).
1
depreciation, added
2
depreciation, subtracted
3
Net Indirect Taxes, added
4
Net Indirect Taxes, subtracted
Official Solution
Correct Option: (2)
To arrive at the value of GVA at Factor Cost, depreciation must be subtracted from GVA at Market Price (GVA ). Depreciation represents the reduction in the value of capital over time, and this must be accounted for when calculating the GVA at Factor Cost.
49
PYQ 2025
medium
economicsID: cbse-cla
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 (NDP ) assuming depreciation to be ₹ 120.
Official Solution
Correct Option: (1)
To calculate the Net Domestic Product at Market Price (NDP ), we will use the following formula:
Step 1: Calculate GDP GDP is the total market value of all final goods and services produced in an economy. We can calculate GDP by adding the value of final goods produced and sold: - Firm A sold goods worth ₹ 2,000 to Firm B and ₹ 1,200 to Firm C. But these are intermediate goods, and therefore, do not count in the final GDP calculation. - Firm B sold goods worth ₹ 1,100 to Firm A and ₹ 3,500 to Firm C. These are also intermediate goods, so they don't count in GDP . - Firm C sold goods worth ₹ 5,700 to households for final consumption. This is a final good, so we count ₹ 5,700 in GDP . Thus, the GDP is ₹ 5,700. Step 2: Subtract depreciation We are given that depreciation is ₹ 120. So, the Net Domestic Product at Market Price (NDP ) is: Thus, the NDP is ₹ 5,580.
50
PYQ 2025
medium
economicsID: cbse-cla
Identify, which of the following items will not be included in estimating National Income of India.
1
Salary to Indian residents working at the Russian Embassy in India
2
Income generated from smuggling
3
Payments to farm workers in the form of foodgrains
4
Interest paid by a firm to a bank
Official Solution
Correct Option: (2)
\text{National Income includes the income of legal activities within a country.}
\text{Income generated from smuggling is illegal and hence does not count towards National Income.}
51
PYQ 2025
medium
economicsID: cbse-cla
Calculate the value of Net Value Added at Factor Cost (NVAFC):
S. No.
Particulars
Amount (In ₹ crore)
(i)
Operating Surplus
3,740
(ii)
Increase in unsold stock
600
(iii)
Sales
10,625
(iv)
Purchase of raw materials
2,625
(v)
Consumption of fixed capital
500
(vi)
Subsidies
400
(vii)
Indirect taxes
1,200
Official Solution
Correct Option: (1)
To calculate NVAFC, we use the formula: NVAFC = Sales + Change in stock - Raw materials - Depreciation + Subsidies - Indirect taxes
“Saksham owns a manufacturing facility where microchips are utilized in the production of electronic devices, including computers and smartphones.”
From the above text, identify whether the given statement refers to an intermediate goods or final goods. Give valid reason in support of your answer.
Official Solution
Correct Option: (1)
The statement refers to intermediate goods because the microchips mentioned are used in further production (computers and smartphones) and are not meant for final consumption. Intermediate goods are those goods which are used as inputs in the production of other goods and services.
53
PYQ 2026
medium
economicsID: cbse-cla
Evaluate the impact of `LPG Reforms' (1991) on the Indian Economy.
Official Solution
Correct Option: (1)
Step 1: Understanding the Concept:
The 1991 LPG (Liberalisation, Privatisation, Globalisation) reforms fundamentally restructured the Indian economy. Their impact must be evaluated in terms of both achievements and shortcomings.
Step 2: Detailed Explanation: Positive Impacts (Successes): 1. Increase in Foreign Exchange Reserves: India's forex reserves grew from near-zero (1991 crisis) to over \$600 billion, stabilizing the external sector. 2. Control of Inflation: Fiscal consolidation and structural reforms helped bring inflation under better control. 3. Service Sector Growth: The IT, ITES, and financial services sectors boomed, making India a global hub for software and back-office services. 4. Integration with Global Economy: FDI inflows increased, export volumes grew, and India became a significant player in global trade. Negative Impacts (Criticisms): 1. Neglect of Agriculture: The reform focus was heavily on industry and services. Agricultural growth rates slowed, agrarian distress increased, and farmer suicides became a concern. 2. Rising Inequality: The benefits of growth were unevenly distributed, widening the urban-rural and rich-poor divide. 3. Jobless Growth: India's GDP grew rapidly without a proportionate increase in formal employment, a phenomenon called ``Jobless Growth''.
Step 3: Final Answer:
LPG Reforms accelerated growth, boosted forex reserves, and grew the service sector, but failed to adequately address agriculture, employment generation, and income inequality.
54
PYQ 2026
easy
economicsID: cbse-cla
Income generated from Aircrafts of Air India operating between Canada and England would be added to the domestic income (NDPFC) of ____________.
1
Canada
2
England
3
Both Canada and England
4
India
Official Solution
Correct Option: (4)
Concept: Domestic Income (NDPFC)
Domestic income refers to the income generated within the domestic territory of a country during a given period of time. It includes income earned by:
Residents of the country
Domestic production units operating within the country
It is important to distinguish between domestic income and national income, as the former is based on location, while the latter is based on ownership. Step 1:Ownership principle
Air India is an Indian company, which means:
It is owned by residents of India
Its income is associated with Indian ownership
Step 2:Income classification
The classification of income depends on whether we are considering domestic income or national income:
Income earned within India is part of domestic income (NDPFC)
Income earned abroad by Indian-owned enterprises is not included in domestic income
However, such income is included in:
because national income follows the ownership (residency) principle
Step 3:Conclusion
Thus, income earned by Air India abroad is counted in:
National income of India (due to Indian ownership)
Not in domestic income (since it is earned outside India's territory)
55
PYQ 2026
easy
economicsID: cbse-cla
Identify which of the following is a `Stock' variable:
1
Monthly Salary of a teacher
2
Distance between Delhi and Mumbai
3
Annual Interest on savings
4
Quantity of wheat produced in a year
Official Solution
Correct Option: (2)
Step 1: Understanding the Concept:
Variables in economics are classified as either Stock or Flow depending on whether they are measured at a point in time or over a period of time.
Step 2: Detailed Explanation:
A Stock variable is measured at a particular point in time and has no time dimension. A Flow variable is measured over a period of time (per day, per month, per year).
- Monthly Salary: measured per month -- it is a Flow.
- Distance between Delhi and Mumbai: this is a fixed quantity measured at a point -- it is a Stock.
- Annual Interest: measured per year -- it is a Flow.
- Quantity of wheat produced in a year: measured over a year -- it is a Flow.
Step 3: Final Answer:
Distance between Delhi and Mumbai is a Stock variable.
56
PYQ 2026
hard
economicsID: cbse-cla
Calculate the value of ‘Rent’ from the following data:
Official Solution
Correct Option: (1)
Concept: National Income by Income Method
Also:
Step 1:Calculate Net Indirect Taxes
Step 2:Calculate Profit before tax
Step 3:Apply income method Final Answer:
57
PYQ 2026
medium
economicsID: cbse-cla
Identify the correct statement:
1
Revenue deficit includes capital receipts.
2
Fiscal deficit is the difference between total expenditure and total receipts excluding borrowings.
3
Primary deficit includes interest payments.
4
Tax is a non-debt creating capital receipt.
Official Solution
Correct Option: (2)
Step 1: Understanding the Concept:
Government budget deficits are categorized into Revenue Deficit, Fiscal Deficit, and Primary Deficit. Each has a specific formula.
Step 2: Detailed Explanation:
Let us evaluate each option:
- (A) Incorrect. Revenue deficit = Revenue Expenditure Revenue Receipts. It does not include capital receipts.
- (B) Correct. Fiscal Deficit = Total Expenditure Total Receipts (excluding borrowings). It shows the total borrowing requirement of the government.
- (C) Incorrect. Primary Deficit = Fiscal Deficit Interest Payments. It excludes interest payments.
- (D) Incorrect. Tax is a Revenue Receipt, not a capital receipt. Non-debt creating capital receipts are items like disinvestment.
Step 3: Final Answer:
The correct statement is (B): Fiscal deficit is the difference between total expenditure and total receipts excluding borrowings.
58
PYQ 2026
medium
economicsID: cbse-cla
Purchase of a car by a household is an example of:
1
Capital formation
2
Intermediate consumption
3
Final consumption
4
Inventory investment
Official Solution
Correct Option: (3)
Step 1: Understanding the Concept:
In National Income Accounting, expenditure is classified based on who buys the good and what purpose it serves.
Step 2: Detailed Explanation:
- Final Consumption: Goods and services purchased by households for personal use.
- Capital Formation: Purchase of capital goods by a firm for productive use.
- Intermediate Consumption: Goods used in the production of other goods.
A car purchased by a household is for personal, final use, not for resale or production. Hence it is classified as Final Consumption Expenditure (Private Final Consumption Expenditure).
Note: If the same car were purchased by a firm for use in production, it would be Capital Formation.
Step 3: Final Answer:
Purchase of a car by a household is an example of Final Consumption.
59
PYQ 2026
hard
economicsID: cbse-cla
In an economy, exclusion of _______ may lead to under estimation of the value of Gross Domestic Product (GDP).
1
Barter Transactions
2
Services provided by family members
3
Illegal activities
4
Depreciation of Assets
Official Solution
Correct Option: (4)
Step 1: Understanding GDP and exclusions. GDP is a measure of all economic activity in a country. Certain activities, such as barter transactions, family-provided services, and illegal activities, are not recorded in the official GDP calculations. Step 2: Evaluation of the options.
(A) Barter Transactions: Correct. Barter transactions are not accounted for in official GDP calculations because they do not involve monetary exchange.
(B) Services provided by family members: Correct. Services provided by family members, such as childcare or housework, are not included in GDP as they are not market transactions.
(C) Illegal activities: Correct. Illegal activities are also excluded from GDP calculations as they are not officially recorded in the economy.
(D) Depreciation of Assets: Incorrect. Depreciation is a measure of the loss of value of capital goods over time but is not excluded from GDP. It is used to calculate Net Domestic Product (NDP).
Step 3: Conclusion. Exclusion of barter transactions, family-provided services, and illegal activities leads to the underestimation of GDP. Final Answer:} (i), (ii), and (iii).
60
PYQ 2026
medium
economicsID: cbse-cla
Meera and Shahid are two classmates, who were comparing India's economic growth over the years. Meera referred to the increase in Gross Domestic Product (GDP) at current prices prevailing in market, while Shahid insisted on considering GDP after adjusting for inflation. Their debate on which of the two measures gives a true picture of people’s well-being, remained inconclusive. Considering the above mentioned situation, elaborate with valid reason, which of the two variables is considered a better indicator of welfare and why?
Official Solution
Correct Option: (1)
Step 1: Define GDP and its two measures.
GDP at current prices, also known as nominal GDP, measures the total market value of goods and services produced in an economy, using the prices that are currently prevailing in the market. However, it does not account for inflation.
GDP at constant prices, or real GDP, adjusts the nominal GDP for inflation, providing a more accurate representation of an economy's true growth over time. Step 2: Which measure is better for welfare?}
Real GDP (GDP adjusted for inflation) is considered a better indicator of welfare as it reflects the actual growth in the economy without being distorted by price increases. It gives a more realistic view of the increase in the standard of living and purchasing power over time. Step 3: Conclusion.
You should guide Meera and Shahid that while nominal GDP shows the market value, real GDP provides a clearer picture of people's well-being by eliminating the effects of inflation.
61
PYQ 2026
medium
economicsID: cbse-cla
Two friends, Devanshi and Harshit, were discussing whether prize money from lottery winnings, should be included in India's National income. Harshit was of the view that it should be included, while Devanshi did not agree with him. As their Economics teacher, guide them with correct treatment of the same with valid argument.
Official Solution
Correct Option: (1)
Step 1: Define National Income.
National income refers to the total value of goods and services produced by a country in a given period. It includes wages, salaries, profits, rents, and other income generated by productive activities. Step 2: Lottery Winnings and National Income.
Lottery winnings are considered unearned income, as they are not the result of any productive economic activity. According to the principles of national income accounting, only income generated from production is included in national income. Step 3: Clarifying the Argument.
Harshit's view is incorrect as lottery winnings do not represent production. Devanshi is correct because national income should only include income generated through productive activities. Therefore, lottery winnings should not be included in national income. Step 4: Conclusion.
As their economics teacher, you should explain that the correct treatment of lottery winnings is to exclude them from national income, as they are not earned through productive economic activities.
62
PYQ 2026
medium
economicsID: cbse-cla
"Under the provisions stated in Section 20 and Section 21 of the Reserve Bank of India (RBI) Act, 1934, the RBI is mandated to handle the banking operations of the Government of India."
In the light of the given statement, elaborate the indicated function of the Reserve Bank of India.
Official Solution
Correct Option: (1)
Step 1: Role of RBI under Section 20 and 21 of the RBI Act.
According to Section 20 of the RBI Act, the Reserve Bank of India is authorized to act as the banker to the government, managing its accounts, public debt, and foreign exchange reserves. Section 21 further provides the RBI the mandate to carry out these functions as required by the government, ensuring a smooth flow of funds. Step 2: Handling Government Accounts.
As the banker to the government, the RBI handles the receipt and disbursement of government funds. This includes managing revenue collection, payment of government salaries, pensions, and interest on government loans, as well as other financial transactions. Step 3: Management of Public Debt.
The RBI is responsible for managing the public debt of the government. This includes issuing government securities, managing their payments, and ensuring the timely servicing of the debt, contributing to fiscal discipline. Step 4: Currency Management.
The RBI plays a vital role in managing the currency in circulation, including the issuance and exchange of government notes. It ensures that there is adequate currency to meet the needs of the economy, while controlling inflation and maintaining price stability. Step 5: Managing Foreign Exchange Reserves.
The RBI also acts as the custodian of India's foreign exchange reserves, which includes facilitating the government’s international payments and ensuring a stable exchange rate through currency management and interventions in the forex markets.
63
PYQ 2026
medium
economicsID: cbse-cla
Read the following statements carefully: Statement 1: Depreciation of currency is an economic action undertaken by the government of a nation under the fixed exchange rate system. Statement 2: Under the floating exchange rate system, authorities actively intervene in the foreign exchange market by way of maintaining foreign exchange reserves.
1
Statement 1 is true and statement 2 is false.
2
Statement 1 is false and statement 2 is true.
3
Both statements 1 and 2 are true.
4
Both statements 1 and 2 are false.
Official Solution
Correct Option: (2)
Step 1: Understanding Statement 1. Statement 1 is incorrect. Depreciation of currency happens naturally in a floating exchange rate system where the value of the currency is determined by market forces. Under a fixed exchange rate system, the government or central bank sets the exchange rate and must actively intervene to maintain the value of its currency. Step 2: Understanding Statement 2. Statement 2 is correct. In a floating exchange rate system, currency values are determined by market supply and demand, and authorities may intervene to stabilize the exchange rate by maintaining foreign exchange reserves or through market operations. Step 3: Evaluation of the options.
(A) Statement 1 is true and statement 2 is false: Incorrect. Statement 1 is false, and Statement 2 is true.
(B) Statement 1 is false and statement 2 is true: Correct. Statement 1 is false, and Statement 2 is true.
(C) Both statements 1 and 2 are true: Incorrect. Statement 1 is false.
(D) Both statements 1 and 2 are false: Incorrect. Statement 2 is true.
Step 4: Conclusion. Statement 1 is false, and Statement 2 is true. Final Answer:} Statement 1 is false and statement 2 is true.
64
PYQ 2026
medium
economicsID: cbse-cla
“In the Indian Banking System, the Statutory Liquidity Ratio (SLR) plays a vital role in controlling the credit creation capacity of the Commercial Banks, as it _______”
1
ensures that all the deposits are converted into liquid assets.
2
requires banks to maintain a percentage of deposits in the form of liquid assets.
3
sets the maximum interest rate which the banks can charge on loans.
4
promotes banks from lending beyond a specific proportion of their total reserves.
Official Solution
Correct Option: (2)
Step 1: Understanding the Statutory Liquidity Ratio (SLR).
The Statutory Liquidity Ratio (SLR) is the percentage of a bank's total deposits that must be maintained in the form of liquid assets, such as cash, gold, or government securities. Step 2: Explanation of other options.
- (A) Incorrect: SLR does not ensure all deposits are converted into liquid assets, but it mandates a minimum percentage.
- (C) Incorrect: SLR does not set the interest rate; it relates to liquidity and reserves.
- (D) Incorrect: SLR does not directly restrict lending but ensures liquidity.
Step 3: Conclusion.
The correct answer is (B), as SLR requires banks to maintain a certain percentage of deposits in the form of liquid assets to ensure financial stability. Final Answer:} requires banks to maintain a percentage of deposits in the form of liquid assets.
65
PYQ 2026
medium
economicsID: cbse-cla
Read the following text carefully: “A country’s total National Income (NI) at the end of the year is ₹ 80,000 crore. During the same year, the Gross Domestic Product (GDP) increased by ₹ 2,00,000 crore. Price index for capital goods at the end of year is ₹ 15 lakh crore. Additionally, country invested ₹ 8,000 crore in new capital goods industries.” In the light of the above text, classify the items as ‘stock’ or ‘flow’ variables with valid arguments.OR The value of Nominal Gross National Product (GNP) of an economy was ₹ 2,500 crore in a particular year. The value of Gross National Product (GNP) of that country during the same year, estimated at the prices of base year was ₹ 3,000 crore.
[(i)] Estimate the Gross National Product (GNP) deflator (in percentage).
[(ii)] “The price level has risen between the base year and the year under consideration.” Defend or refute the statement with suitable argument.
Official Solution
Correct Option: (1)
(A) Stock and Flow Variables Concept:
Stock variables are measured at a point of time.
Flow variables are measured over a period of time.
Step 1:Classify each item
National Income (₹ 80,000 crore) → Flow (because it is earned over a year)
Increase in GDP (₹ 2,00,000 crore) → Flow (change over a period)
Price index of capital goods (₹ 15 lakh crore) → Stock (measured at a specific point of time)
Investment in new capital goods (₹ 8,000 crore) → Flow (occurs during a period)
Read the following statements carefully: Statement 1: Brokerage earned by a dealer of second hand cars is included in the estimation of National Income. Statement 2: Imputed value of production for self-consumption is included in National Income.
1
Statement 1 is true and Statement 2 is false.
2
Statement 1 is false and Statement 2 is true.
3
Both Statements 1 and 2 are true.
4
Both Statements 1 and 2 are false.
Official Solution
Correct Option: (3)
Step 1:Analyze Statement 1
Sale of second-hand goods is not included in national income because:
These goods were already counted when they were produced for the first time.
Including them again would lead to double counting.
However, any brokerage or commission earned in the sale of second-hand goods is included because:
It represents a current service rendered.
It adds to current production of services.
Step 2:Analyze Statement 2
Goods produced for self-consumption are included in national income.
This is because:
They contribute to current production.
Their value is estimated using imputed value.
Examples include food grown by farmers for their own consumption.
