Kerala Plus Two Economics Question Paper March 2023 with Answers

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Kerala Plus Two Economics Previous Year Question Paper March 2023

Answer any 8 questions from 1 to 10. Each carries 1 score:

Question 1.
A good that is non-rival and non-excludable is
(a) Public goods
(b) Inferior goods
(c) Private goods
(d) Capital goods
Answer:
Public goods

Question 2.
The value of Marginal Propensity to Consume (MPC) lies between
(a) 0 and 100
(b)0and1
(c) -1 and +1
(d) 0 and infinity
Answer:
0 and 1

Question 3.
‘For whom to produce’ is the problem related to
(a) Technology of production
(b) Selection of Goods and Services
(c) Distribution of National Income
(d) Price Determination
Answer:
Distribution of National Income

Question 4.
The short run shut-down point of a firm in a perfect competitive market is:
(a) Price = Average Cost
(b) Price = Total Cost
(c) Price = Total Variable Cost
(d) Price = Average Variable Cost
Answer:
rice = Average Variable Cost

Question 5.
The institution that regulates the money supply in India:
(a) NABARD
(b) RBI
(c) WTO
(d) SEBI
Answer:
RBI

Question 6.
If consumer’s income increases, the demand for in-ferior goods
(a) Increase
(b) Constant
(c) Decrease
(d) None of these
Answer:
Decrease

Question 7.
The ratio of Nominal GDP to real GDP is
(a) Consumer Price Index
(b) Wholesale Price Index
(c) Producer Price Index
(d) GDP Deflator
Answer:
GDP Deflator

Question 8.
If export of goods is more than import of goods, then Balance of trade will be:
(a) Surplus
(b) Deficit
(c) Balance
(d) Zero
Answer:
Surplus

Question 9.
The U shape of Long run Average Cost (LRAC) curve is due to
(a) Law of Variable Proportion
(b) Law of Returns of Scale
(c) Law of Demand
(d) Law of Diminishing Marginal Utility
Answer:
Law of Returns of Scale

Question 10.
When output is zero,total Variable Cost (TVC) will be:
(a) Increasing
(b) Decreasing
(c) Zero
(d) One
Answer:
Zero

Answer any 4 questions from 11 to 15. Each carries 2 scroes.

Question 11.
What is intermediate goods? Give one example.
Answer:
It is a good which is used to produce a final good or a finished product. These goods are also known as producers good or intermediate good. Eg : Tyres

Question 12.
If the Cash Reserve Ratio (CRR) of an economy is 25% find the value of money multiplier.
Answer:
Money multiplier = \(\frac{1}{c r r}=\frac{1}{0.25}=\underline{\underline{4}}\)

Question 13.
Write down any two features of Indifference curve.
Answer:
It is the curve representing different combinations of two commodities that give equal satisfaction to a consumer.
Features of Indifference curve
1. Negatively sloping curve
2. Convex to origin

Question 14.
The market demand curve and the market supply curve for wheat are given below: Find the equilibrium price and quantity.
Answer:
Market Equilibrium = Q_d = Q_s Q_d = 50 – 2P,
Q_s = 10 + 2P
50 – 2 P = l0 + 2P
50 – 10 = 2P + 2P
40 = 4P
p = \(\frac{40}{4}\)
so equilibrium Price = 10
To find equilibrium quantity put the value of a P in either demand equation of supply equation.
Q_d = 50 – 2P
= 50 – 2 × 10
= 50 – 20 = 30

Q_s = 10 + 2P
= 10 + 2 × 10
= 10 + 20 = 30
Here the equilibrium quantity is 30

Question 15.
Write down any two objectives of government bud-get.
Answer:
A budget is annual financial statement related to the expected revenue and expenditure of government for a financial year.
Objectives of government budget
1. To attain economic growth
2. To establish equality (through redistribution)

Answer any 4 questions from 16 to 20. Each carries 3 scores.

Question 16.
Write down the three stages of returns to scale.
Answer:
Returns to scale refers to long run production func-tion. In long run all factors are variable, returns to scale explains how output changes according to the changes made in inputs. Here the output changes in three different ways they are as follows.
1. Increasing Returns of Scale (IRS)
2. Constant Returns to Scale (CRS)
3. Diminishing Returns to Scale (DRS)

1. Increasing returns of scale
   • A small increase in input results in a large increase in output.
2. Constant returns to scale
   • Here out put increases in the same proportion as in the input.
3. Diminishing returns to scale

• • Here a large increase in input results only in a small increase in outpout.

Question 17.
List out any three features of perfect competitive market.
Answer:
Features of perfect competition

1. Large number of buyers and sellers
2. Homogenous product
3. Perfect information

Question 18.
Jomon wants to buy rice and wheat with the money income of Rs. 120. Its market Prices are Rs. 15 and Rs. 20 respectively. Find the horizontal Intercept, vertical intercept and slope of the budget line.
Answer:
Take rice as x and wheat as y
Budget line equation = 15 x + 20 y = 120
Horizontal Intercept = 15 x = 120
x = \(\frac{120}{15}\) = 8

Vertical Intercept = 20 y = 120
y = \(\frac{120}{20}\) = 6
Slope = \(-\frac{P x}{P y}=\frac{15}{20}\) = 0.75

Question 19.
Write down the three limitations of Gross Domestic product (GDP) as an indicator of welfare, List out the three ways in which an economy makes economic relations with other economies.
Answer:
We cannot consider GDP as a good indicator of welfare due to following reasons.
1. Inequality in distribution of income:
Even if GDP of a nation is very high we can see people with low income there, so we cannot consider an increase in GDP would promote welfare of a nation.

2. GDP and non monetary exchanges:
Many of the non monetary transactions are not included in GDP: Eg: Service of housewife, Exchange of goods under barter system.

3. GDP and harmful goods:
The value of GDP increases when production increases, it includes the value of harmful prod-ucts.

Answer any 4 questions from 21 to 25. Each carries 4 scores.

Question 20.
List out the three ways in which an economy makes economic relations with other economies.
Answer:
One nation can keep economic relationship with other nation in the following ways
(1) Product Market linkage
(2) Financial market linkage
(3) Factor Market linkage

Answer any 4 questions from 21 to 25. Each carries 4 scores.

Question 21.
Explain the circular flow of income in a two-sector economy with the help of a diagram.
Answer:

• Here households provide factors of production to the firms for this firms provide factor payment.
• Firms provide goods and services required to the household and households give payment as price.

Question 22.
Write a short note on the emergence of macro eco-nomics.
Answer:
Macro economics has emerged as a new branch of economics after global economic crisis of 1928. It was the work done by J.M. Keynes acted as a cata-lyst for the growth of Macro economics. J.M. Keynes criticised classical economists for their unrealistic assumptions related to working of economic factors.

The views of classical economists were wrong and misleading and they failed to solve economic crisis. During this time Keynes published his famous book “General Theory of Employment Interest and Money” in 1936, which acted as a guide to solve the global economic crisis. Later the views of Keynes popularly known as Macro economics.

Question 23.
Write a short note on flexible exchange rate with the help of diagram.
Answer:
Under flexible exchange rate system exchange rate is determined according to changes in demand and supply of foreign exchange.

The above given diagram explains how exchange rate is determined under flexible exchange rate system. D is initial demand curve where ‘e’ is exchange rate when demand increased from D to D₁ as a result exchange rate changed from ‘e’ to e₁.

Question 24.
Explain price ceiling with the help of a diagram.
Answer:
Government Intervention in market against increas-ing price levels of essential commodities by fixing alower price than equilibrium price is known as price ceiling.

‘E’ is the equilibrium in the above given diagram where ‘e_p’ is equilibrium price. When government felt ‘e_p’ is very high and unaffordable for the poor, fixed a new price ‘C_p’ which is ceiling price and lower than ‘e_p’. Through this government protects common people from the adversities of price increase.

Question 25.
Difference between market economy andCentrally planned economy.
Answer:

• We can classify the entire economies in the world into three based on the differences in organization of economic activities, they are
  1. Market economy (Capitalist Economy)
  2. Centrally planned economy (Socialist Economy)
  3. Mixed Economy
• Market Economy (Capitalist Economy)
  1. Means of production are under the ownership of private individuals.
  2. Central economic problems are solved by mar-ket mechanism.
  3. Private property and transfer of wealth to legal heir, e. Profit is the ultimate aim.
  4. Less Government control over economic activities.
• Centrally planned economy (Socialist Economy)
  1.  All means of productions are under Government Ownership and control.
  2. Central economic problems are solved by Gov-ernment through planning.
  3. No private property, all wealths are controlled by government, so there you can see public property.
  4. Maximization of public welfare is the ultimate aim of Socialist Economy.
  5. All economic activities are controlled by government.

Question 26.
Explain the optimal choice of a counsumer (consumer’s equilibrium) with the help of a diagram.
Answer:
Optimal choice of consumer or consumer equilib-rium can be defined as the position of maximum satisfaction attained by a consumer. According to indifference curve approach a consumer attains equilibrium at the point where budget line is tangent to indifference curve. It can be expressed with the help of a diagram.

The above given diagram shows consumer equilibrium. HereAB is budget line of consumer and IC₁, IC₂ and Ic₃ are different indifference curves. Point ‘E’ is the region where highest possible indifference curve (Ic₂) tangents with budget line so that particular point (E) is called consumer equilibrium.

Question 27.
Complete the following flow chart:

Answer:

Answer any 2 questions from 31 to 33. Each carries 8 scores.

Question 28.
Explain the short run equilibrium conditions for profit maximization of firms under perfect competitive mar-ket with the help of diagram.
Answer:
Perfect competition is a market situation where large number of buyers and sellers dealing with homogenous product.
Features of perfect competition:

1. Large number of buyers and sellers
2. Homogenous product
3. Perfect information,
4. Uniform price
5. Freedom of entry and exit

Profit maximisation condition of a firm in short run under Derfect corn Detition.
Three Conditions
1. P= Mc
2. MC should cut MR from below
3. Price should be greater than or equal to AVC Here the above mentioned three conditions follows
le. (1)P = MC
(2) MC cuts MR from below
(3) p ≥ AVC

Question 29.
(a) What do you mean by the price elasticity of demand?
(b) The price of potato falls from Rs. 100 to Rs. 75. As a result of which demand rises from 10 kg to 15 kg. Calculate the price elasticity of demand.
(c) Based on the above information, comment on the nature of the elasticity of demand.
Answer:
Deg ree of responsiveness of quantity demanded of a commodity towards the changes in its price is technically known as price elasticity of demand.
ed = \(\frac{\Delta \mathrm{Q}}{\Delta \mathrm{P}} \cdot \frac{\mathrm{P}}{\mathrm{Q}}\)
a) ∆Q = Change in quantity demanded
∆P = Change in price
p = Original Price (Early Price)
Q = Original quantitydemanded (Early demand)

Here
∆Q = 5 (le. 15-10)
∆P = 25 (le. 100-75)
P = 100
Q = 10
Put the above values in to the equation
ie.ed = \(\frac{\Delta Q}{\Delta P} \cdot \frac{P}{Q}=\frac{5}{25} \cdot \frac{100}{10}\) = 2
ed = 2
b) Based on the answer obtained we can say that elasticity of demand is highly positive and elastic.

Question 30.
(a) Differentiate between Marignal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS)
(b) In a two sector economy, Marginal Propensity to Consume (MPC) is 0.6. Find the investment mul-tiplier.
Answer:
a) Marginal propensity to consume is a concept that explains the impact of change in income on consumption.
MPC = \(\frac{change in consumption }{\mathrm{change in income}}\)
= \(\frac{\Delta C}{\Delta Y}\)
Marginal propensity to save explains the impact of change in income on savings
MPS = \(\frac{change in savings }{\mathrm{change in income}}\)
MPS = \(\frac{\Delta S}{\Delta Y}\)

b) Investment Multiplier = \(\frac{1}{\text { MPS }}\)
As know MPS + MPC = 1
so MPS =1- MPC
MPS = 1- 0.6
= 0.4
Investment multiple = \(\frac{1}{\mathrm{MPS}}=\frac{1}{0.4}\) = 2.5

Answer any 2 questions from 31 to 33. Each carries 8 scores. (2 × 8 = 16)

Question 31.
Explain the three methods of measuring GDP.
Answer:
Money value of all final goods and services produced in a nation during a financial year is known as GDP. Calculation of GDP is an important activity in any economy. GDP Can be calculated in 3 different ways, they are:

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

Product Method:
Here the GDP is calculated through adding the val-ues of all final goods and services produced by a nation during a financial year. This method is other-wise known as value added method.

Income Method:
Under this method GDP is calculated through the summation of all factor incomes earned during a financial year. Factor incomes means rent, wage, interest and profit

Expenditure Method:
Here the GDP is calculated through adding all types of expenditure madefy the nation during a financial year, expenditures made by public and private are included here.

Question 32.
Describe the monetary policy instruments of RBI.
Answer:
The Policy implemented by central bank to stabilize the economy through controlling supply of money is known as monetary policy. In india the above mentioned duty is performed by RBI. RBI controls supply of money through two methods they are:
1. Quantitative credit control methods
2. Qualitative credit control methods

• Quantitative credit control methods
  1. Bank rate
  2. Open market operations
  3. Change in cash reserves ratios
  4. Repo Rate and Reverse repo rate
  5. Statutory liquidity ratio.
• Qualitative credit control methods
  1. Marginal requirements
  2. Regulation of consumer credit
  3. Credit rationing
  4. Moral suasion
  5. Direct action.
• Explain the following method
  1. Bank rate
  2. Reserve ratios,
  3. Open market operations

Question 33.
(a) Calculate Total Variable Cost (WC), Average Cost (AC), Average Fixed Cost (A FC), Average Vari able Cost (AVC) and Short run Marginal Cost (SMC):

Output	TFC	TVC	FC	AC	AFC	AVC	SMC
0	70		70
1	70		100
3	70		115
4	70		125
5	70		145
6	70		180
7	70		250

(b) Draw Total Cost (TC), Total Fixed Cost (TFC) and Total Variable Cost (TVC) in a single diagram by using the above data.
Answer: