Kerala Plus Two Economics Question Paper March 2022 with Answers

Teachers recommend solving Kerala Syllabus Plus Two Economics Previous Year Question Papers and Answers Pdf March 2022 to improve time management during exams.

Kerala Plus Two Economics Previous Year Question Paper March 2022

Part – I

A. Answer any 4 questions from 1 to 6. Each caries 1 Score. (4 × 1 = 4)

Question 1.
The book ‘General Theory of Employment, Interest and Money1 was written by
a) Adam Smith
b) Alfred Marshall
c) J.M. Keynes
d) David Ricardo
Answer:
Total revenue and total cost

Question 2.
Profit is the difference between
a) Total Revenue and Total Cost
b) Total Revenue and Total Variable Cost
c) Total Revenue and Total Fixed Cost
d) Marginal Revenue and Marginal Cost
Answer:

Question 3.
At the Break-even-point, the firm faces
a) Super normal profit
b) Normal profit
c) Abnormal profit
d) Loss
Answer:
Normal profit

Question 4.
The want satisfying capacity of a commodity is known as
a) Demand
b) Supply
c) Utility
d) Elasticity of demand
Answer:
utility

Question 5.
Which one of the following is a Stock Variable?
a) Wealth
b) Income
c) Investment
d) GDP
Answer:
wealth

Question 6.
Which of the following is included in the current ac-count of balance of payment (BOP)?
a) External borrowing
b) Purchase of assets
c) Foreign Direct Investment
d) Trade in goods
Answer:
Trade in goods

B. Answer all questions from 7 to 10. Each carries 1 score. (4 × 1 = 4)

Question 7.
The market with a few sellers is known as:
a) Perfect competition
b) Oligopoly
c) Monopolistic competition
d) Monopoly
Answer:
oligopoly

Question 8.
The price elasticity of the following demand curve is.

a) e^D > 1
b) e^D < 1
c) e^D = a
d) e^D = 0
Answer:
c) e^D = a

Question 9.
In a perfectly competitive market with free entry and exit, the equilibrium price is
a) equal tomin AC
b) greater than AC
c) less than AC
d) equal to min MC
Answer:
Equal to minimum of AC

.

Question 10.
The ratio of nominal GDP to real GDP is
a) Consumer Price Index
b) Wholesale Price Index
c) GDP Deflator
d) Producer Price Index
Answer:
GDP Deflator

Part – II

A. Answer any 3 questions from 11 to 15. Each carries 2 scores. (3 × 2 = 6)

Question 11.
Write two examples for substitute goods and complementary goods.
Answer:

• Examples for substitute goods are
  1. Tea and coffee
  2. Eye glasses and contact lenses.
• Examples for complementary goods are
  1. Car and petrol
  2. Bread and butter

Question 12.
Distinguish between short-run and long-run in the production process.
Answer:
Under short run only one factor is variable all other factors are fixed, in long run all factors are variable.

Question 13.
What do you mean by market equilibrium?
Answer:
Market equilibrium is a point where the market supply equals market demand.

Question 14.
Elucidate intermediate goods with example.
Answer:
Goods used as an input for producing new goods are called intermediate goods. For example wheat is an intermediate good in case of a bread making company.

Question 15.
Write the appropriate economic term for the following:
a) The rate of change of consumption as income changes.
b) The rate of change of saving as income changes.
Answer:
(a) Marginal propensity to consume (MPC)
(b) Marginal propensity to save (MPS)

B. Answer any 2 questions from 1.6 to 18. Each caries 2 scores. (2 × 2 = 4)

Question 16.
List the major sectors in an economy according to the macro economic point of view)
Answer:
According to Macro economic point of view the different sectors arei:

1. Firms
2. Households
3. Government
4. External sector.

Question 17.
When the price of Apple increased by 20 percent, the quantity supplied of Apple increased by 30 percent. Calculate the price elasticity of supply.
Answer:

Question 18.
Mention two motives behind the demand for money.
Answer:
Money is demanded for many purposes, but it is mainly demanded for:

1. Transaction purposes
2. Precautionary motive.

Part – III

A. Answer any 3 questions from 19 to 23. Each caries 4 scores. (3 × 4 = 12)

Question 19.
Distinguish between centrally planned economy and ‘ market economy.
Answer:
(a) Centrally planned economy – It is an economic system where all means of production are under the ownership and control of the government. This economy otherwise known as socialist economy.

(b) Market economy – Under this system all means of production are under the ownership and control of private individuals. This economy is otherwise known as capitalist economy.

Question 20.
What are the main functions of money?
Answer:
Money plays an important role in the modern world. The vital role played by money can be termed as functions of money. They are

• Primary functions
  1. Medium of exchange
  2. Measure of value
• Secondary functions
  1. Store of value
  2. Standard of differed payment
  3. Transfer of value
• Contingent functions
  1. Basis of credit
  2. Liquidity
  3. Distribution of Nationalincome
  4. Guarantor of solvency

Question 21.
(a) List the characteristics of monopoly market.
(b) Draw the average revenue and marginal revenue curves of the monopoly market.
Answer:
Monopoly is a market situation where one seller or producer of the commodity exists. The main features of monopoly market are given below.
a)

1. Single seller for a product
2. Absence of substitute products
3. Entry of new firms in the market is denied
4. Monopolist has complete control over supply of the product.
5. Firm and industry are the same
6. Firm is price maker

b) Average revenue and Marginal revenue curves under monopoly

Here MR curve lies below AR curve

Question 22.
Equilibrium output and aggregate demand are deter-mined in the following diagram:
(a) Identify the components of Aggregate Demand.
(b) Show the changes in the equilibrium when au-tonomous expenditure increases.
Answer:
a) Aggregate demand consists of autonomous expenditure (A), Marginal propensity to consume (c) and income (y)

A rise in autonomous expenditure will result in an upward parallel shift in AD which result in a new equilibrium E₁ here income increases from y to y₁

Question 23.
Explain the objectives of government budget.
Answer:
Budget is an annual financial statement of income

B. Answer any 1 Question from 24 to 25. Carries 4 scores. (1 × 4 = 4)

Question 24.
(a) Draw Marginal Product Curve and Average product curve in a single diagram.
(b) Identify any two relationship between them.
Answer:

b) Relationship between AP and MP
1. When a AP increases, MP is greater than AP ie. MP curve is above the AP curve.
2. When AP reaches maximum AP and MP are equal.

Question 25.
Match the following:

A	B
GDPat Factor Cost	NDPFO + NFIA
NNPat Factor Cost	GDPMP – Depreciation
NDPat Market Price	GNPMP – Depreciation
NNPat Market Price	GDPMP – Net indirect Tax

Answer:

A	B
GDP at factor cost	GNPMP – Depreciation
NNP at factor cost	GDPMP – Depreciation
NDP at market price	NDPFO + NFIA
NNP at market price	GDPMP – Net indirect Tax

Part – IV

A. Answer any 3 questions from 26 to 29. Each carries 6 scores. (3 × 6 = 18)

Question 26.
(a) Complete the short-run costs table.

Output	TFC	TVC	TC	SAC	SMC
0	20	0		–	–
1	20	20
2	20	30
3	20	34
4	20	40
5	20	60
6	20	100

(b) Draw SAC and SMC curves in a single diagram,
Answer:

Output	TFC	TVC	TC	SAC	SMC
0	20	0	20	–	–
1	20	20	40	40	20
2	20	30	50	25	10
3	20	34	54	18	4
4	20	40	60	15	6
5	20	60	80	16	20
6	20	100	120	20	40

TC = TVC + TFC, SAC = \(\frac{\mathrm{TC}}{\mathrm{Q}}\)
SMC = \(\frac{\Delta T C}{\Delta Q}\)
Q → output

Question 27.
Distinguish Price Ceiling and Price Floor with the help of diagrams.
Answer:
‘Price ‘ceiling’
It is the upper limit on the price of goods and services imposed by the government to protect the interest of consumers (ie. protection from high price)

Here in the diagram P₀ is equilibrium price which is higher, P_c is the ceiling price fixed by government which is lower than P₀.

‘Price floor’
It is otherwise known as support price, it is the minimum price fixed by government to protect the interest of the producers.

Here in the diagram P0 is equilibrium price which is very low. To ensure fair price government fixes floor price above the equilibrium price (P0). It is the floor price.

Price ceiling:	Price floor:
Upper price limit imposed by government	Lower price limit imposed by „ government
It is less than equilibrium price	It is higher than equilibrium price
This will create excess demand	This will create excess supply
Imposed on necessary commodities	Generally imposed on agricultural goods

Question 28.
Differentiate the following with examples:
1. Revenue Receipts and Capital Receipts.
2. Revenue Expenditure and Capital Expenditure.
Answer:
a) Revenue receipts:
The receipts which do not create liabilities or reduce government assets are known as revenue receipts.

1. Capital receipts:
   The receipts that create liabilities or reduce the assets of the government.

b) Revenue expenditure:
Expenditure that does not create assets or reduce liabilities is called revenue expenditure.

1. Capital expenditure:
   Expenditure which creates assets or reduces liabilities is known as capital expenditure.

Question 29.
(a) What do you mean by Exchange Rate?
(b) Briefly explain Flexible Exchange Rate and Fixed , Exchange Rate.
Answer:
a) Exchange rate: It is the rate at which one currency is exchanged for another currency.

b) Fixed exchange rate : It is otherwise known as pegged exchange rate. Here the exchange rate is fixed by government or central bank.

Flexible exchange rate:
This exchange rate is otherwise known as floating exchange rate. Here exchange rate is fixed by farces of demand and supply.

B. Answer any 2 questions from 30 to 32. Each carries 6 scores. (2 × 6 = 12)

Question 30.
Explain the monetary policy tools of RBI to control money supply in the Indian Economy.
Answer:
Monetary policy:
It is the policy franked and implemented by the central bank, through this policy money supply is regulated according to various situations. For this central bank uses certain tools, they are given below.
1. Bank rate
2. Reserve ratios
3. Open market operations.

1. Bank rate:
It is the rate of interest paid by commercial banks on short term loans borrowed from RBI. An increase in bank rate will result in contraction of credit this would help to control inflation. On the other hand a decrease in bank rate will result in expansion of credit, this would help to overcome depression.

2. Reserve ratios:
This include CRR and SLR cash Reserve Ratio (CRR) statutory Liquidity Ratio (SLR) Reserve bank increases both CRR and SLR to control inflation, to control depression reserve bank reduces both CRR and SLR.

3. Open market operations.:
Purchase and sale of government securities by the RBI is known as open market operations. To control inflation RBI sells securities this would reduce the volume of credit provided by commercial banks, Because commercial banks purchase the securities issued by RBI with their loanable funds. To control depression RBI , purchases securities sold earlier. So the money comes back to commercial banks, with this the credit supply increases.

Question 31.
(a) Compare Open Economy and Closed Economy.
(b) Explain the three ways in which an economy interact with rest of the world.
Answer:
Open economy
An economy which has economic relations with other countries of the world through exchanging goods and services, financial assets etc…

1. Product market linkage : Country can import and export goods. This will result in more global co-peration.
2. Financial market linkage : Through this investors can invest in domestic economy as well as in other countries.
3. Factor market linkage : This means factors can be easily transfer-from one nation to another nations. This process improved the connection of different nations.

Question 32.
Observe the following diagram:
Answer:
a) When income change from 50 to 70

When income increased from 50 to 70 the budget line shifts upward, b. When price

when price

when price of x₁ decreased, the x intercept moves forward from 5 to 10, there is no change in y intercept.

Part – V

Answer any 2 questions from 33 to 35. Each carries 8 scores. (2 × 8 = 16)

Question 33.
a) What are the features of indifference curve?
b) Diagrammatically explain the optimal choice of the consumer.
Answer:
i) Indifference curve
It is the locus of points of combinations of two goods which give same level of satisfaction to the consumer.

Features of indifference curve.

1. Indifference curve slopes downwards from left to right.
2. Indifference curve ¡s convex to origin.
3. Higher indifference curves represent higher levels of satisfaction.
4. Indifference curves do not intersect each other

ii) Optimal choice of the consumer A consumer prefers a situation where his satisfaction is maximum. According to indifference curve approach, a consumer attains equilibrium at the point where budget line is tangent to highest possible indifference curve.

Here in the diagram point ‘E’ shows optimal choice of the consumer.

Question 34.
a) Identify the three methods of measuring National Income.
b) Explain any two methods of measuring National Income.
Answer:
Money value of all final goods and services produced by a nation during a financial year is known as national income.  Computation of national income is an important activity. To compute national income we can use three different methods they are

1. Product method or value added method
2. Expenditure method or out lay method
3. Income method

b) 1. Product method or value added method:
Here in this method national income is calculated by adding all the final goods and services produced by all production units in a nation during a financial year. But it is not so easy because the final output produced by a firm is used as input in other firms this problem is termed as double counting. To avoid this problem value added method is used to calculate final value of output. As per value added method, GDP is the sum of gross value added by all the producers in the domestic territory.

2. Income method:
Under his method GDP is calculated by adding together all the factor income received by the owners of factors of production, such as land, labour, capital and entrepreneurship. Therefore as per income method the GDP of an economy is the sum total of wages, rent, interest and gross profit.
ie.GDP = W+R+l+P

Question 35.
a) What are the features of a perfect competitive market?
b) Diagrammatically explain the profit maximisation conditions of perfect competitive firm in the short- run.
Answer:
Perfect competition:
It is a market situation where large number of buyers and sellers operate freely perfect competition is an extreme form of market which is rarely existing in the real world.

Features of perfect competition.

1. Large number of buyers and sellers
2. Homogenous products.
3. Perfect mobility of factors of production
4. Perfect knowledge of market condition
5. Freedom of entry and exit
6. Absence of transport cost
7. Uniform price
8. Absence of selling cost
9. Firms are price takers.

Short run equilibrium Conditions of equilibrium.

1. P = MC
2. MC curve should cut MR curve from below.
3. Price should be greater than or equal to AVC

Diagrammatic representation of equilibrium

The above given diagram represents short run equilibrium under perfect competition.
Here TR = OPAQ
TC = OEBQ
Profit = TR – TC
le. OPAQ – OEBQ = EPAB