Kerala Plus Two Economics Board Model Paper 2021 with Answers

Teachers recommend solving Kerala Syllabus Plus Two Economics Previous Year Question Papers and Answers Pdf Board Model Paper 2021 to improve time management during exams.

Kerala Plus Two Economics Board Model Paper 2021 with Answers

Answer any number of questions from 1 to 41 upto a maximum score of 80. Questions from a to / carry 1 score each. (12 × 1 = 12)

Question 1.
a. Who is the founding father of modem economics?
(i) Adam Smith
(ii) J.M.Keynes
(iii) Alfred Marshall
(iv) PaulA.Samuelson
Answer:
(i) Adam Smith

b. ‘Problem of Choice’ arises out of
(i) Scarcity of resources
(ii) Abundances of resource
(iii) Limited wants
(iv) Growth of resources
Answer:
(i) Scarcity of resources

c. Want satisfying capacity of a commodity is known as
(i) Demand
(ii) Supply
(iii) Utility
(iv) Production
Answer:
(iii) Utility

d. The difference between gross investment and depreciation is
(i) Inventory
(ii) Saving
(iii) Consumption
(iv) Net Investment
Answer:
(iv) Net Investment

e. Total revenue per unit of output is called
(i) Marginal Revenue
(ii) Total Revenue
(iii) Total Cost
(iv) Average Revenue
Answer:
(iv) Average Revenue

f. Supply remains constant and demand declines, the equillibrium price
(i) Constant
(ii) Decreases
(iii) Increases
(iv) First increases then constant
Answer:
(ii) Decreases

g. Central Bank of India is:
(i) Reserve Bank of India (RBI)
(ii) State Bank of India (SBI)
(iii) CanaraBank
Answer:
(i) Reserve Bank of India (RBI)

h. Which among the following mentions the concept of Average Propensity to Consume (APC)?
(i) \(\frac{\Delta C}{\Delta Y}\)
(ii) \(\frac{\Delta S}{\Delta Y}\)
(ii) \(\frac{C}{Y}\)
(iv) \(\frac{S}{Y}\)
Answer:
(i) \(\frac{\Delta C}{\Delta Y}\)

i. Two sector economy includes
(i) Firms and Government
(ii) Firms and Households
(iii) Firms and External Sector
(iv) Households and Government
Answer:
(ii) Firms and Households

j. The market structure in which there are only two sellers is called
(i) Monopoly
(ii) Perfect competition
(iii) Duopoly
(iv) Monopolistic competition
Answer:
(iii) Duopoly

k. What does a point inside the production possibility frontier represent?
(i) The maximum use of resources
(ii) Under utilisation of resources
(iii) The over use of resources
(iv) The optimum use of resources
Answer:
(ii) Under utilisation of resources

l. Identify ‘Capital Receipts’ from the following
(i) Personal Income Tax
(ii) Service Tax
(iii) Sale of shares in Pdblic Sector Undertakings
(iv) Customs duties
Answer:
(iii) Sale of shares in Pdblic Sector Undertakings

Questions from 2 to 13 carry 2 scores each. (12 × 2 = 24)

Question 2.
Complete the table given below:

Factors of Production	Remuneration
Land
Labour
Capital
Organisation

Answer:

Factors of Production	Remuneration
Land	Rent
Labour	wages
Capital	Interest
Organisation	Profit

Question 3.
Write any two features of ‘Centrally Planned Economy1.
Answer:
Welfare motive is centralized planning.

Question 4.
Recognise the type of utility analysis from the following statements.
(a) The level of utility can be expressed in numbers.
(b) The level of utility can be expressed in rank.
Answer:
Centralised planning
a. Cardinal analysis
b. Ordinal analysis

Question 5.
Classify the following into consumption goods and capital goods.
(a) Food
(b) Implements
(c) Machines
(d) Clothing
Answer:
Food clothing : consumption goods
Implements machines : capital goods

Question 6.
What do you mean by ‘Long Run’ in production function?
Answer:
Long run is a time period when all the factors of production becomes variable.

Question 7.
Write any two reasons for rightward shift of demand curve.
Answer:
Increase in the income of the consumers. An increase in the price of substitute goods.

Question 8.
List out the four major sectors of the economy.
Answer:
Household, Firms, Government, External sector.

Question 9.
What is ‘final goods’? Give an example.
Answer:
sector Final goods are those goods that are ready to be consumed. They need not go through any more production process, eg. shirt.

Question 10.
Distinguish between Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS).
Answer:
Marginal propensity to consumer (MPC) refers to the extra spending on consumption when one unit in-crease in income. Marginal propensity to save (MPS) refers to the extra saving due to one unit increase in Income.
MPC = \(\frac{\Delta C}{\Delta Y}\)
MPS = \(\frac{\Delta S}{\Delta Y}\)

Question 11.
Write any two factors which determine price elasticity ofdamand.
Answer:
The nature of the product i.e. necessity or luxury goods. The number and closeness of subtitutes.

Question 12.
What is the difference between ’Devaluation’ and ‘Revaluation’?
Answer:
Devaluation refers to the deliberate reduction in the value of the currency. Revaluation refers to the delib-erate raise in the value of the currency.

Question 13.
Define ‘Break even point’.
Answer:
It is a point where a firm operates under the situation of no loss or no profit. TR = TC, or AR = AC.

Questions from 14 to 23 carry 3 scores each. (10 × 3 = 30)

Question 14.
What are the basic economic problems of an economy?
Answer:
What to produce?
Howto produce?

Question 15.
Define substitute goods. Give two examples.
Answer:
Substitute goods are those goods that can be sub-stituted each other.
eg: black pen and blue pen Rail journey and Road journey

Question 16.
Write any three features of ‘Perfectly Competitive Market’.
Answer:
Very large number of buyers and sellers.
Homogenous products
Free entry and exit
Firm as a price taker

Question 17.
Write a short note on ‘ex-ante’ and ‘ex-post’ concept with suitable examples.
Answer:
Ex-ante refers to the expected or an eg: ex ante consumption, ex ante investment.
Ex-post refers to the actual or realised, eg: expost consumption, ex post investment.

Question 18.
Complete the chart given below:

Answer:
A. Revenue > expenditure → Surplus budget
B. Revenue < expenditure → Deficit budget
C. Revenue = expenditure → Balanced budget

Question 19.
Prepare a brief note on intermediate goods with suitable examples.
Answer:
Intermediate goods are in between raw materials and final goods. They are raw materials gone through some production process yet cannot be consumed directly. eg: Steel sheets for making cars.

Question 20.
List out the profit maximising condition of a firm in a perfectly competitive market.
Answer:
MC = MR
Slope of MC positive
P ≥ AVC
MC = MR

Question 21.
List three different ways in which ‘oligopoly firm may behave.
Answer:
They may be in equillibrium as a monopolist. They will achieve equilibrium as in the case of per-fect competition. In practice their equillibrium will be amidst these two.

Question 22.
Write any three impacts of the Great Depression of 1929.
Answer:
Huge unemployment. Unemployment increased from 3 to 25 percentage. Output fell. 33% fall in output. Demand was low.

Question 23.
Explain the concept of liquidity trap.
Answer:
Liquidity trap refers to a situation wher at a lower rate of interest the speculative demand for money becomes perfectly elastic.

Questions from 24 to 31 carries 4 scores each. (8 × 4 = 32)

Question 24.
Observe the following diagram which shows circular flow of income.

(a) What does ’A’ and ‘D’ indicate? (2)
(b) Identify the methods of National Income calcula-tion corresponding to ‘B’ and ‘C.
Answer:
A → spending on goods and services.
D → factor services
B → Total output/Gross value added method
C → Income Method

Question 25.
Analyse the effect of changes in consumption and investment on Aggregate Demand.
Answer:
An increase in consumption or investment will lead to an increase in Aggregate Demand.
AD = C + 1

Aggregate demand will shift from AD to AD₁. This will lead to an increase in national income from OY₁

Question 26.
What is ‘Indifference Curve’? Write three features of Indifference curve.
Answer:
Indifference curve shows the different combinations of two commodities that give the consumer the same level of satisfaction. Indifference curves are convex to the point of origin. Indifference curve do not intersect. Higher the indifference curve higher will be the satis-faction.

Question 27.
Observe the diagram given below:

(a) Identify the diagram which shows price floor and price ceiling. (2)
(b) What is price ceiling and price floor? (2)
Answer:
A. Ceiling price
B. Price floor
C. Ceiling is the price fixed by the government below the market price to suppot the consumers. Price floor is the price fixed by the government to support the producers above the market price.

Question 28.
Write any two objectives of government budget. Ex-plain any one. of them.
Answer:

• Allocation function
• Distribution function
• Stabilization function

Allocation function refers to the provision of public goods.
Distribution function refers to the imposition of taxation and government expenditure.
Stabilisation function refers to the adjustment of Aggregate demand through fiscal policy.

Question 29.
Differentiate ‘Balance of Payments’ and ‘Balance of Trade’.
Answer:

1. Balance of payment refers to the all economic transactions of an economy with the rest of the world. It has two components that is current account and capital account.
2. Balance of trade refers to the difference between export and import in the trade in goods of the current account of the balance of payment.

Question 30.
Write a brief note on different types of price elasticity of supply.
Answer:

1. Elastic supply pes > 1
2. Inelastic supply pes < 1
3. Unitary Elastic supply pes = 1

Question 31.
What is monopoly? Write any three features of mo-nopoly market.
Answer:
Monopoly is a market structure with a single producer.

1. Single producer
2. Unique product
3. No entry
4. The firm is a price marker.

Questions from 32 to 37 carry 5 scores each. 32 (6 × 5 = 30)

Question 32.
Various concepts are given in Column A. Match them suitably with Column B.

(A)	(B)
Marginal Product	Change in Total Cost per unit of change in output
Short Run	Relationship between inputs used and output produced by a firm.
Production function	Change in output per unit of change in the inputs.
Marginal cost	Change in output per unit of change in the inputs.
Average product	Output per unit of variable inputs.

Answer:

(A)	(B)
Marginal Product	Change in output per unit of change in the output.
Short Run	At least one factor remains fixed.
Production function	Relationship between inputs used and output
Marginal cost	Change in Total Cost per unit of change in output
Average product	Output per unit of variable inputs.

Question 33.
Observe the following diagram that shows Average Product (AP), Marginal Product (MP) and Total Prod-uct (TP) curves.

(a) Identify Total Produdt, Average Product and Mar-ginal Product curves. (3)
(b) State the law of variable proportion.
Answer:
A → Total product
B → Average product
C → Marginal product
Law of variable proportion states that into a fixed factor if more and more variable factors are added initially the total product increases, at an increasing rate, then the rate of reverse falls and reaches the maximum and declines after that.

Question 34.
Explain the components of government budget.
Answer:
Budget is the annual financial statement of the government. Budget has two components. Revenue budget and capital budget. Revenue budget includes revenue receipts and revenue expenditure. Capital budget includes capital receipts and capital expenditure. In revenue receipts tax and non tax revenue are included. In reverse expenditure salary, pension, interest payment included. Capital receipts include loans and revenue from the sale of public sector units Capital expenditure includes the expenditure on land acquisition, buying of machinery etc.

Question 35.
Explain market equilibrium. Describe how supply and demand determines equilibrium price and quantity in competitive market.
Answer:
Market equilibrium is a situation where the quantity demanded and supply are exactly equal. This is shown in the diagram below.

D is the demand curve, S is the supply curve, ‘c’ is the point of equilibrium, OP is the market price and OP is the equilibrium quantity.

Question 36.
Write any two characteristics of public goods and private goods. Classify the following into public goods and private goods.
(a) National Defense
(b) Clothes
(c) Government administration
(d) Foods items
(e) Public Transport
(f) Car
Answer:
Public goods → Non rivalry, non excludability
Private goods → Rivalrous, excludable
Public goods → National defence, govt administra-tions, Public transport.
Private goods → Clothes, food items, car

Question 37.
How the exchange rate determined under a fixed exchange rate system with the help of diagram.
Answer:
Fixed exchange rate is also known as pegged ex-change rate system. Under this system, the exchange rate will be determined by central bank. The intervention made in the foreign exchange market by the central bank to keep exchange rate fixed is known as pegging. This can be explained with the help of diagram which is given below.

Here e* is the market determined exchange rate. Suppose that government fixes exchange rate as e,.
At e₁ exchange rate the demand for foreign exchange is greater than the supply of foreign exchange. If there is no control over exchange rate it will increase to e*. In order to maintain the exchange rate at e₁ the central bank will sell AB amount of foreign exchange in the market. So the exchange will be maintained at e*.

Questions from 38 to 41 carry 8 scores each. (4 × 8 = 32)

Question 38.
Describe ’Income method’ and ’Expenditure method’ for calculating National Income.
Answer:
ii) Income method : The income method ap-proaches national income from the income side. National income is the sum total of the rewards earned by the factors of production in an economy in the form of rent, wage, interest and profit.

GDP = W + P + ln + R

iii) Expenditure method : Expenditure method is an alternative way to calculate the GDP and it looks at the demand side of the production. The expenditure method estimates national income by measuring final expenditure on gross domestic product.
GDP = C + I + G + X – M

Question 39.
List the ’quantitative’ and ’qualitative’ tools used for control the extent of money supply. Explain any two quantitative tools.
Answer:
Quantitative Measures
1. Open market operations
2. Bank rate policy
3. Varying reserve requirement
Qualitative measures
1. Moral suasion
The instruments which RBI uses for conducting monetary policy are as follows.
1) Open Market Operations : It refers to the sale and purchase of government securities by the central bank. RBI purchases government securities to the general public in a bid to increase the stock of high powered money in the economy.

2) Bank Rate Policy: As mentioned earlier, RBI commercial banks by adjusting the value of the bank rate – which is the rate of interest commercial banks have to pay RBI – if they borrow money from it in case of shortage of reserves. A low (or high) bank rate encourages banks to keep smaller (or greater) proportion of their deposits as reserves, since borrowing from RBI is now less (or more) costly than before.

3) Varying Reserve Requirements : Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) also work through the rdroute. A high (or low) value of CRR or SLR helps increase (or decrease) the value of reserve deposit ratio, thus diminishing (or increasing) the value of the money multiplier and money supply in the economy in a similar fashion.

4) Sterilization by RBI: RBI often uses its instruments of money creation for stabilizing the stock of money in the economy from external shocks. This operation of RBI is known as sterilization.

Question 40.
Explain Average Fixed Cost (AFC) and Average Vari-able Cost (AVC). Calculate Total Variable Cost (TVC), Average Variable Cost (AVC) and Short Run Marginal Cost (SMC) from the following:

Output (Q)	TFC	TVC	TC	AVC	SMC
0	10		10
1	10		18
2	10		24
3	10		29
4	10		35
5	10		43
6	10		53

Answer:

Output (Q)	TFC	TVC	TC	AVC	SMC
0	10	0	10	–
1	10	8	18	8	10
2	10	14	24	7	6
3	10	19	29	6.3	5
4	10	25	35	6.25	6
5	10	33	43	6.6	8
6	10	43	53	7.16	10

Average fixed cost is the fixed cost per unit. Average variable cost is the variable cost per unit. AFC can be calculated by dividing the total fixed cost with the quantity. Average variable cost can be calculated by dividing the Total variable cost with quantity.
AFC = \(\frac{T F C}{Q}\)
AVC = \(\frac{T V C}{Q}\)
AFC AFC is a rectangular hyperbola. AVC is a ‘U’ shaped curve.

Question 41.
Observe the diagram given below:

(a) Write the equation of budget line. (1)
(b) Explain why the budget line is downward sloping. (2)
(c) Describe optimal choice of the consumer with the help of diagram. (5)
Answer:
a) P₁ x₁ + P₂ x₂ = M
b) Diminishing Marginal Rate of substitution
c)

E is the optimal choice of the consumer. At point E the budget line is tangent with the indifference curve.