Kerala Plus Two Economics Question Paper March 2024 with Answers

Reviewing Kerala Syllabus Plus Two Economics Previous Year Question Papers and Answers Pdf March 2024 helps in understanding answer patterns.

Kerala Plus Two Economics Previous Year Question Paper March 2024

Time: 21/2 Hours
Total Score: 80 Marks

Answer any 8 questions from 1 to 10. Each carries 1 score. (8 × 1 = 8)

Question 1.
“Macro Economics” emerged as a separate branch of Economics after the publication of the book
a) Wealth of Nations
b) Principles of Economics
c) The General Theory
d) Nature and significance of Economic Science
Answer:
c) The General Theory

Question 2.
GNP-Depreciation is
a) NNP
b) NDP
c) Gross Value Added
d) National Income
Answer:
a) NNP

Question 3.
The demand curve of normal goods shifts rightward, when
a) Income increases
b) Population increases
c) Taste and preference increases
d) All of the above
Answer:
d) All of the above

Question 4.
Cost per unit of the output is
a) Variable cost
b) Marginal cost
c) Average cost
d) Fixed cost
Answer:
c) Average cost

Question 5.
‘Market price’ implies
a) Factor Cost – Depreciation
b) Factor Cost + Net Indirect Tax
c) Factor Cost + Depreciation
d) Factor Cost – Net Indirect Tax
Answer:
b) Factor Cost + Net Indirect Tax

Question 6.
Point on the supply curve at which firm earns only normal profit is
a) Break-even point
b) Shutdown point
c) Both(a) & (b)
d) None of the above
Answer:
a) Break-even point

Question 7.
If the Cash Reserve Ratio is 10%, the value of money multiplier will be
a) 2.5
b) 7.5
c) 10
d) 5
Answer:
c) 10

Question 8.
Money is
a) A medium of exchange
b) A unit of account
c) Both (a) & (b)
d) None
Answer:
c) Both (a) & (b)

Question 9.
Slope of the Indifference curve
a) Marginal Rate of Substitution
b) Marginal Opportunity Cost
c) \(\frac{-P_1}{P_2}\)
d) None
Answer:
a) Marginal Rate of Substitution

Question 10.
Difference between value of export and import is
a) Balance of Payment
b) Balance of Trade
c) Current Account Surplus
d) Capital Account Surplus
Answer:
b) Balance of Trade

Answer any 4 questions from 11 to 15. Each carries 2 scores. (4 × 2 = 8)

Question 11.
Define production possibility curve. Name the slope of the PPC.
Answer:
The Production Possibility Curve (PPC) is a graphical representation of all possible combinations of two goods or services that can be produced in an economy with a given level of resources and technology. It is also known as the production possibility frontier (PPF). The shape of PPC is concave to the origin.
Slope = Marginal Opportunity cost.

Question 12.
State how the following factors affect the supply curve of a firm:
a) Technological Progress
b) A rise in input price
Answer:
a) rightward shift
b) Leftward shift

Question 13.
Name the four major Macro Economic Sectors in an economy.
Answer:
Household, firms, govt sector, external sector are the major sector of an economy.

Question 14.
Distinguish between ’Stock’ and ‘Flow’ variables, with one example each.
Answer:
Stock is measured at a point in time, e.g., wealth, capital, etc.
Flow is measured over a period of time. E.g., income, speed, etc.

Question 15.
Define ’budget’. State any two objectives of the budget.
Answer:
Budget is the annual financial statement of a government related to its receipts and expenditures.

Objectives of the budget –

1. Allocation function. (Related to the provision of public and merit good)
2. Redistribution function. (Taxes are distributed to poor section from rich)
3. Stabilisation function (Govt, stabilise the booms and depression in the economy)

Answer any 4 questions from 16 to 20. Each carries 3 scores. (4 × 3 = 12)

Question 16.
Match column A with B & C.

A	B	C
Micro Economics	Pricing of a Firm	Desirability of a Mechanism
Macro Economics	What ought to be	Salary of a worker
Normative Economics	Inflation	Per capita income

Answer:

A	B	C
Micro Economics	Pricing of a Firm	Salary of a worker
Macro Economics	Inflation	Per capita income
Normative Economics	What ought to be	Desirability of a Mechanism

Question 17.
(a) Name the term used to denote the power of the commodity to satisfy wants. (1)
(b) Write any two features of it. (2)
Answer:
a) Utility

b)

• It can be measured numerically called as a cardinal utility.
• It can be ranked or compared known as ordinal utility.

Question 18.
(a) Differentiate between AR & MR. (2)
(b) Prove that AR = P (1)
Answer:
a) AR = revenue per unit of output sold;
AR = TR/q:
MR = a ratio of change in total revenue to a unit change in output sold;
MR = Δ TR/Δ q

b) Average Revenue (AR) is defined as total revenue (TR) divided by the quantity sold (Q):
AR = TR/Q
Price (P) is defined as the amount of money paid by the buyer to the seller for each unit of a good or service:
P = Total Revenue / Quantity [TR/Q]
Since total revenue (TR) is equal to price (P) multiplied by quantity (Q), we have: TR = P × Q
Now, we substitute TR = P × Q into the formula for AR:
AR = TR /Q
AR = P × Q / Q
Cancelling out Q from the numerator and denominator,
we get:
AR = P

Question 19.
Draw the diagram showing circular flow in a two sector model.
Answer:

Question 20.
(a) What is consumption function? (1)
(b) From the following equation of consumption function, identify \(\bar{C}\) & c :(2)
C = \(\bar{C}\) + cY
Answer:
a) consumption function shows the relationship between consumption and income.
b) \(\bar{C}\) = autonomous consumption c = mpc

Answer any 4 questions from 21 to 25. Each carries 4 scores. (4 × 4 = 16)

Question 21.
A consumer bought 5 kg of onion at a price of ₹ 30/kg. But, when the price increased to ₹ 40, he bought only 2 kg.
a) Calculate the price elasticity of demand. (2)
b) Name any two factors affecting elasticity of demand for a good. (2)
Answer:
A) ed = (Δ q/Δ p) × ( p/q)
\(\frac{3}{10}\) × \(\frac{30}{5}\) = \(\frac{90}{50}\) = 1.8

B) nature of goods, availability of substitutes, income, etc..

Question 22.
Write any four short run costs with equations.
Answer:

• TC = TFC + TVC
• TFC = TC – TVC
• TVC = TC – TFC
• AFC = TFC/q
• AVC = TVC/q
• SAC = TC/q or AFC + AVC
• SMC = Δ TC/Δ q or Tcn-Tcn-1

Question 23.
Elucidate the features of perfect competition.
Answer:
Features of perfect competition market:

• Large number of buyers and sellers.
• Homogeneous products.
• Firm is ‘price taker’.
• Perfect knowledge of buyers and sellers about market conditions.
• Freedom of entry and exit of firms.

Question 24.
(a) Find the equilibrium income from the following information:
Autonomous expenditure (\(\bar{A}\)) = 90 crores; MPC = 80%
(b) How the equilibrium income is determined in an economy? Explain with diagram.
Answer:
a) Y = \(\bar{A}\) / (1 – c)
1 – c = 1 – 0.8 = .2
= \(\frac{90}{2} \)= 450

OR

Determination of Equilibrium Level of Income: The equilibrium level of income in an economy is determined by the aggregate demand and aggregate supply. The equilibrium level of income is based on income, and employment is provided in the chart.

In the above chart, income and employment are indicated on the X axis and consumption and investment on the Y axis. Aggregate Demand (AD) is indicated with the straight line curve C+l. It is the sum total of consumption expenditure and investment expenditure. The 450 line Y passes through point O, showing the aggregate supply. Here, Y equals C+S. The point at which AD equals AS at point E is called effective demand. At this point, the income and expenditure of the entrepreneurs become equal.

Question 25.
(a) Distinguish between revenue receipts and capital receipts. (2)
(b) Write two examples each for revenue and capital receipts. (2)
Answer:
A) Revenue receipts: Receipts that neither create liability nor create assets to the government. They are non-redeemable receipts. Such receipts include Tax revenue and Non-Tax revenue sources.
Capital receipts: Receipts that create liability or reduce assets to the government.

b) Revenue receipts: Direct taxes – income taxes, corporation tax, wealth tax, etc…
Indirect taxes – customs duty, service tax, excise duty, etc.
Non-tax revenue sources – Interest, Profit & dividend, Fees, Fine, Penalties etc.
Capital receipts – Borrowings, Disinvestment, Recoveries of loans, etc.

Answer any 4 questions from 26 to 30. Each carries 5 scores. (4 × 5 = 20)

Question 26.
State the law of variable proportions with the help of a diagram.
Answer:
The Law of Variable Proportions: When more and more units of a variable input are added to the fixed input, the marginal product will increase only up to a certain point. There after, the marginal product declines. This phenomenon is known as the Law of Variable Proportions. It is also known as returns to a factor. The shape of TP, AP and MP suggests that they are specifically passing through three phases.

They are:
First phase: In the first stage, both AP and MP increase. As a result, TP also increases at an increasing rate. This stage is known as the stage of increasing return to a factor. AP reaches the maximum level in this stage.

Second phase: Both AP and MP decrease at this stage. The TP increases at a decreasing rate. More importantly, TP reaches a maximum, and MP touches zero. This stage is also known as the stage of diminishing returns to a factor.

Third phase: At this stage, the MP becomes negative. As a result, TP also starts declining. The decline of AP is continuous. In the graph, when TP reaches maximum and MP touches zero. When MP becomes negative, TP starts declining. This stage is known as the stage of negative returns to a factor.

Question 27.
Examine the profit maximisation conditions of the firm under perfect competition.
Answer:
Every producer produces goods and services to maximise profit. Profit is the difference between Total Revenue and Total Cost. It can be written as PROFIT (π )= TOTAL REVENUE (TR) – TOTAL COST (TC).

• A firm under perfect competition reaches maximum profit (equilibrium) when the following conditions are satisfied.
• The price, P, must equal MC(P = MC)
• Marginal cost must be non-decreasing at equilibrium.
• For the firm to continue to produce, in the short run, the price must be greater than the average variable cost (p > AVC); in the long run, the price must be greater than the average cost (p > AC). The profit maximisation of a firm under perfect Competition in the short run is illustrated with the following diagram.

In the diagram, AVC, AC, and MC represent the Average Variable Cost Curve, Average cost curve, Marginal cost curve, respectively. At point A, MC Curve interest price line (P = MC). After that, the Point MC Curve is rising. At point A Price is greater than AC, so point A is considered as the equilibrium point. At point A, the firm enjoys maximum profit. Profit is the difference between TR and TC. At point A, TR = P × Q. Here P = OP × OQ= OPEQ. TC = AC × Q = OBAQ . PROFIT = TR – TC = OPEQ – OBAQ = BPEA.

Question 28.
What will happen to the equilibrium price and output, when
a) Demand increases (2 1/2)
b) Supply decreases (2 1/2)
(Explain your answer with the help of diagrams.)
Answer:
a) rightward shift of DD; equilibrium price & output increase Fig:(A).
b) leftward shift of ss; equilibrium price increases, equilibrium output decreases Fig: (B).

Question 29.
Find saving, ape, mpe, aps and mps in the given table.

Answer:

Question 30.
Explain how the exchange rate is determined in flexible exchange rate system.
Answer:
In a system of flexible exchange rates, the exchange rate is determined by the forces of market demand and supply. In this case of flexible exchange rates without central bank intervention, the exchange rate moves to clear the market, to equate the demand for and supply of foreign exchange. In the following figure equilibrium exchange rate is e*, which is determined by the forces of demand and supply.

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

Question 31.
a) Write any three properties of indifference curves. (3)
b) Explain the optimal choice of the consumer, with the help of a diagram. (5)
Answer:
a) negative slope, convex to origin, never intersects, never tangent to each other.

b) A consumer is said to be in equilibrium when he attains maximum satisfaction from his limited income. At the consumer’s equilibrium Indifference curve should be tangent to the budget line, and the slope of the indifference curve is equal to the slope of the budget line.

Point ‘E’ shows an optimal choice of the consumer.

Question 32.
(a) What is GDP? Differentiate between nominal and real GDP. (3)
(b) Can the GDP of a country be taken as an index of the welfare of the people of that country? Explain. (5)
Answer:
a) The total monetary value of all final goods and services produced in the domestic territory of a country in a financial year.
GDP at current year prices is called as nominal GDP. But GDP at base year prices is called as real GDP.

b) Yes, GDP increases welfare and also increases limitations; unequal distribution of income and wealth, externalities, value of non-marketed goods & services

Distribution of GDP – How uniform is it: This is because the rise in GDP maybe concentrated in the hands of very few individuals or firm.

Non-Monetary exchanges: Many activities in an economy are not evaluated in monetary terms.
Externalities: If refers to benefit (or harm) a firm or an individual causes to another for which they are not paid.

Question 33.
(a) “Control of Money Supply” is one of the functions of central bank. Mention other functions. (3)
(b) Examine the various tools used by the Reserve Bank of India to control money supply in India. (5)
Answer:
Quantitative Measures

• Open market operations
• Bank rate policy
• Varying reserve requirement

Qualitative measures: 1. Moral suasion The instruments that RBI uses for conducting monetary policy are as follows.

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.

Bank Rate Policy: As mentioned earlier, RBI can affect the reserve deposit ratio of 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 a smaller (or greater) proportion of their deposits as reserves since borrowing from RBI is now less (or more) costly than before.

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

Sterilisation by RBI: RBI often uses its instruments of money creation to stabilise the stock of money in the economy from external shocks. This operation of RBI is known as sterilisation.