Kerala Plus Two Economics Board Model Paper 2022 with Answers

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

Kerala Plus Two Economics Board Model Paper 2022 with Answers

Part – I

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

Question 1.
The relationship between inputs used and output produced:
a) Revenue function
b) Cost function
c) Production function
d) Demand function
Answer:
c) Production function

Question 2.
Steel sheets used for making automobiles is an ex-ample of:
a) Consumer durables
b) Final goods
c) Consumption goods
d) Intermediate goods
Answer:
c) Consumption goods

Question 3.
J.M. Keynes is associated with
a) Macro Economics
b) Welfare Economics
c) Environmental Economics
d) Behavioural Economics
Answer:
a) Macro Economics

Question 4.
The difference between a firm’s Total Revenue and its Total Cost:
а) Average product
b) Profit
c) Average cost
d) Average variable cost
Answer:
b) Profit

Question 5.
The rate at which one exchanged for another cur-rency:
a) Rate of interest
b) Rate of unemployment
c) Rate of inflation
d) Rate of exchange
Answer:
d) Rate of exchange

Question 6.
The change in Total uitlity due to consumption of one additional unit of commodity.
a) Average utility
b) Marginal utility
c) Total utility
d) Marginal rate of substitution
Answer:
b) Marginal utility

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

Question 7.
GDP (Gross Domestic Product) + NFIA (Net Faction Income from Abroad) =?
a) Gross National Product
b) Depreciation
c) Net Indirect Taxes
d) Net National Product (NNP)
Answer:
a) Gross National Product

Question 8.
Price Elasticity of a Unity Elastic Demand curve:
a) ed = 1
b) ed = 0
c) ed > 1
d) ed > 1
Answer:
a) ed = 1

Question 9.
The number of sellers in an oligopoly market
a) Very large
b) large
c) Few
d) One
Answer:
c) Few

Question 10.
Which of the following will be determined at the point where the labour supply curve and labour demand curve intersect?
a) Rent
b) Wage rate
c) Rate of interest
d) Profit
Answer:
b) Wage rate

Part – II

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

Question 11.
Elucidate normal goods with example.
Answer:
The goods whose demand increases as income of consumer increases and vice versa are called normal goods. So here existing a positive relationship between income of the consumers and their demand, eg. TV, Computer.

Question 12.
Identify the following concepts:
a) The time period where at least one of the factors of production is dixed.
b) The time period where all the factors of production can be varied.
Answer:
a) Short run
b) Long run

Question 13.
Define the following:
a) Investment
b) Depreciation
Answer:
a) The part of final output that comprises capital goods is called investment.
b) The wear and tear of capital goods is called depreciation or consumption of fixed capital.

Question 14.
Distinguish between Excess demand and Excess supply.
Answer:
a) The situation where market demand is higher than market supply is known as excess demand.
b) The situation where market supply is higher than market demand is known as excess supply.

Question 15.
What do you mean by Marginal Propensity to Con-sume (MPC)?
Answer:
The ratio of change in consumption to change in income is known as MPC. ie. impact of change in income on consumption.

B. Answer any 2 questions from 16 to 18. Each carries 2 scores, (2 × 2 = 4)

Question 16.
List any two motives for which people desire to hold money balance.
Answer:
1. For transaction purpose/motive
2. For speculation purpose / motive

Question 17.
Identify four sectors of the economy from macro-economic point of view.
Answer:
From Macroeconomic point of view an economy has four sectors, they are
Households

Question 18.
Mention any two factors determining the supply curve of a firm.
Answer:
Factors affecting supply curve of a firm
1. Price of input
2. Technology of production.

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

Question 19.
Explain any two central problems of economy re-gaining the allocation of resources.
Answer:
All economies in the world address almost same issues related to economic affairs, these issues are known as central problems of an economy they are (two problems)
1. What to produce
2. How to produce

1. What to produce:
Every economy needs lakhs of goods and services. Since the resources are scarce, all these goods and services cannot be produced. That’s why the question What to produce’ arises. So it is very Important to decide what to produce before the production starts.

2. How to produce:
This problem is related to the selection of production technique. Economies can select their production technique which suits best. They can choose labour intensive technique or capital intensive technique.

Question 20.
The table shows the price and quantity of a com-modity sold in a monoploy.
Answer:

Price	Quality
10	1
8	2
6	3
4	4
2	5

TR = Prise x Quantity
AR = \(\frac{\text { TR }}{\text { Quantity }}\)

b) I singleseller
2. unique product

Question 21.
Explain the function of money.
Answer:
Money plays an important role in the modern word. 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. Storeof value
  2. Standard of differed payment
  3. Transfer of value
• Contingent functions
  1. Basis of credit
  2. Liquidity
  3. Distribution of National income
  4. Guarantor of solvency

Question 22.
With the help of a diagram analyse the ‘Law of vari able proportion’.
Answer:
Short run production function is known as law of variable proportion or law of returns to a factor. Here only one factor is variable and all other factors are fixed. This law is otherwise known as law of diminishing marginal product. It explains the situation. when more and more units of variable factors are added to fixed factors then total product and marginal product will pass through three stages. They are
1. Increasing returns to a factor
2. Diminishing return to a factor
3. Negative returns to a factor

(1) Stage I : Increasing returns to a factor From the graph we can understand that total product, marginal product and average products are increasing s more variable factors are added. Here in this stage marginal product reaches its maximum.

(2) Stage II : Diminishing returns to a factor Here in this stage total product increases but at a decreasing rate. Both MP and AP declines and marginal product becomes zero, when variable inputs increases.

(3) Stage III : Negative returns to a factor In this stage, total product starts declining, marginal product becomes negative and average product continues to decline but it never becomes zero.

Question 23.
Explain the components of Aggregate Demand (AD)
Answer:
Aggregate demand (AD) is the total demand of an economy.
AD = C + I
C – Consumption
I – Investment

Consumption:
Consumption spending is the largest component of an economy’s aggregate demand, it refers to the total spending of indMduals and households or goods and services in the economy.

Investment:
Investment spending is the total expenditure on new capital goods and services such as machinery, equipment, changes in inventories.

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

Question 24.
Match the following:

A	B
Long Run Average Cost (LRAC)	Input Combination giving same output
Long Run Marginal Cost (LRMC)	Tc/q
Cobb Douglas. Production Function	Passing through the minimum of LRAC
Isoquant	Long Run Production Function

Answer:

A	B
Long Run Average Cost (LRAC)	Tc/q
Long Run Marginal Cost (LRMC)	Passing through the minimum of LRAC
Cobb Douglas. Production Function	Long run production function
Isoquant	Input combinations giving same output

Question 25.
Explain any two reasons why GDP cannot be considered as an index of the welfare of the people
of a country.
Answer:
GDP is the money value of final goods and services produced by a nation during a financial year. Nation with high GDP is considered as the best, so we can say that GDP is considered as an index of development but it has certain drawbacks that’s why we cannot consider GDP as a best index of the welfare of the people.

Reasons:
1. Inequality in the distribution of income.
Along with increase in GDP inequalities in income may occur. Even if the majority does not experience any increse in income, the GDP will increase if the income of a minority increases. Here welfare diminishes even when GDP increases.

2. GDP and harmful goods.
While calculating GDP all goods and service are considered. Whether these goods and services are useful or harmful to the people is not taken into consideration. An increase in the production of such harmful products will result in an increase in GDP. But overconsumption of such harmful products result in loss of welfare, eg:-Alcohol, Tubacoo products.

Part – IV

A. Answer any 3 questions from 26 to 29. Each caries6 scores. (3 × 6 = 18)

Question 26.
The diagram shows the relationship between Aver age Cost (AC) and Marginal Cost (MC) curve:

i) Write short notes on:
a) Average Cost (AC)
b) Marginal Cost (MC)
ii) With the help of above diagram identify any two relationships between Average Cost (AC) and Marginal Cost (MC).
Answer:
(i) a) AC (Average cost) Cost per unit of out put is known as average cost
AC = \(\frac{\mathrm{TC}}{\mathrm{Q}}\)

b) MC (Marginal cost)
It is the change in total cost per unit change in output
MC = \(\frac{\Delta \mathrm{TC}}{\Delta \mathrm{Q}}\)

(ii) a) In the initial stage both MC and AC are diminishing (decreasng)
b) MC equals AC at the minimum point of AC.

Question 27.
With the help of diagrams anale ‘Prive Ceiling’ and ‘Price floor’.
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 equilibnum price which is very low. To ensure fair pnœ government fixes floor price above the equilibnum price (P₀). It is the floor price.

Question 28.
Prepare notes on :
a) Revenue receipts
b) Revenue expenditure
Answer:
a) Revenue receipts:
The receipts which do not create liabilities or reduce government assets are known as revenue receipts.
Revenue receipts can be divided in to tax revenue and non tax revenue.

Tax revenue:
Revenue earned from taxes. Taxes are of two types.
1. Direct taxes
2. Indirect taxes

Non tax revenue:
Revenue earned by government from other than taxes, they are

1. Fees
2. Fines and penalties
3. Special assessments
4. Income from public property
5. Grants in aid
6. Escheats
7. Dividends and profits.
8. Interest and loans.
9. Printing of currency.

b) Revenue expenditure
Expenditure that does not create assets or reduce liabilities is called revenue expenditure, eg: interest payments, salaries and pension grants in aid.
The revenue expenditure is classified into two.

1. Plan revenue expenditure
2. Non plan revenue expenditure.

Question 29.
Explain the objectives of government budget.
Answer:
Budget is a nation’s yearlong financial report explaining itemwise calculations of expected revenue
and expenditure. Budget has some important objectives they are given below.

1. Attain economic growth. A nation’s economic growth is based on the rate of investments and savings. Budget focuses on preparing adequate resources for investing in the public sector and rising the overall rate of investments and savings.

2. To attain economic stability Policies such as deficit budget during deflation and surplus budget during inflation will help in balancing the prices in the economy.

3. Reduce inequalities in income and wealth. Through progressive taxation and productive public expenditure government tries to reduce inequalities in income and wealth.

4. Reallocation of resources. Through budget government tries to manage resources to locate one place to other ie. from surplus area to deficit area.

5. To reduce regional disparities. Through budget government tries to bring development in backward areas through this government aims reduce regional disparities.

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

Question 30.
i) What do you mean by Price Elasticity of Demand(PED)?
ii) Graphically explain the perfectly elastic and perfectly inelastic demand curves.
Answer:
i) Price elasticity of demand It is the degree of responsiveness of quantity demanded of a commodity with respect to change in tis price. It is obtained by dividing the percentage change in quantity demanded by the percentage change in price. On the basis of degree of change in the quantity demand, elasticity can be classified into a five types, they are

1. Elastic demand
2. Unitary elastic demand
3. Inelastic demand
4. Perfectly elastic demand
5. Perfectly inelastic demand.

ii) Perfectly elastic demand

When a small change in price leads to infinite change in demand, this type of demand elasticity is known as perfectly elastic demand. Here the value of elasticity is infinite; demand curve would be parallel to x axis.

Perfectly inelastic demand

Here in this case price has no effect on demand, so the value of elasticity is zero. In this case demand curve is a vertical straight line parallel to y axis.

Question 31.
RBI publishes figures for four alternative measures of money supply.
i) Elucidate four measures of Money Supply in India.
ii) Identify Narrow Money and Broad Money.
Answer:
a) Supply of money in our nation is entirely controlled by RBI. RBI publishes four different measures of money supply under the heads M₁ M₂, M₃ and M₃

M₁ = CU + OD ie currency notes and coins held by the public + net demand deposits of the people held by commercial banks.

M₂ = M₁ + saving deposits with post office – savings banks.

M₃ = M₁ + Net time deposits of commercial banks

M₄ = MM₃ + Total post office deposits except national savings certificates

b) Here M₁and M₂ are known as narrow money
M₃ & M₄ are known as broad money has thethighest liquidity M4 has least liquidity.

Question 32.
i) Distinguish between open economy and closed economy.
ii) Product market is one of the linkages through which open economies establish economic relation with rest of the World. Explain the other two linkages.
Answer:
(i) Open economy
An economy which has economic relations with other countries through exchanging goods and services financial assets etc. can be termed as an open economy. This type of economy will function freely without much regulations and control.

Closed economy
An economy without economic relations with other countries through exchanging goods and services financial assets etc. can be termed as a closed economy.

(ii) This openness can be attained through different types of linkages (ie. – connections) They are:

1. Product market linkage
2. Financial market linkage
3. Factor market linkage

Financial market linkage:
Through this investors can invest in domestic economy and foreign economy; this will result in creation of a friendly environment and co-operation at global level.

Factor market linkage:
This means factors of production are transferable between nations. This will improve the relationship between different nations in the world.

Part – V

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

Question 33.
i) Mention the properties of Indifference curves.
ii) Diagrammatically explain the optimal choice of 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 is 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.
With the help of diagrams analyse the profit maximisation conditions of a firm under perfectcomPetition in short run.
Answer:
Perfect competition. It is a market situation where large number of buyers and sellers operate freely perfect competition is anextreme 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 know’edge 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
ie. OPAQ – OEBQ = EPAB

Question 35.
What do you mean by GDP? Explain any two methods of calculating GDP.
Answer:
a) GDP
Money value of all final goods and services produced by a nation during a financial year is known as national income (GDP). 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) 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 grossprofit. ie.GDP = W +R + l + P