CBSE(NCERT) GRADE 12 ECONOMICS 2026 SET4 — CBSE 12th Economics Previous Year Question Paper with Solutions

Q1 mcq 1 mark

Choose the correct consumption function from the options given below with reference to the illustrated given diagram. If marginal propensity to consume (MPC) is 0.6 and dissavings is 100, then what will be the corresponding savings function?

A. C = 100 + 0.7Y
B. C = 100 + 0.8Y
C. C = 100 – 0.7Y
D. C = 100 – 0.8Y

Solution hidden

Q1 mcq 1 mark

Choose the correct consumption function from the options given below with reference to the illustrated given diagram.

A. C = 100 + 0.7Y
B. C = 100 + 0.8Y
C. C = 100 - 0.7Y
D. C = 100 - 0.8Y

Solution hidden

Q2 mcq 1 mark

Income generated from Aircrafts of Air India operating between Canada and England would be added to the domestic income ($NDP_{FC}$) of ________. (Choose the correct option to fill in the blank)

A. Canada
B. England
C. Both Canada and England
D. India

Solution hidden

Q3 mcq 1 mark

Identify that function of money which has effectively solved the problem of ‘double coincidence of wants’ in a transaction.

A. Standard of deferred payments
B. Store of value
C. Measure of value
D. Medium of exchange

Solution hidden

Q4 mcq 1 mark

Read the following statements carefully: Statement 1: Under the flexible exchange rate system, a deficit/surplus in the Balance of Payments is automatically corrected. Statement 2: Under the flexible exchange rate system, there is always a possibility of over/under valuation of currency. In the light of the above given statements, choose the correct option from the following:

A. Statement 1 is true and Statement 2 is false.
B. Statement 1 is false and Statement 2 is true.
C. Both Statements 1 and 2 are true.
D. Both Statements 1 and 2 are false.

Solution hidden

Q5 mcq 1 mark

Read the following Flow chart carefully and choose the correct option:

A. Transfer goods
B. Capital goods
C. Non-durable goods
D. Semi-durable goods

Solution hidden

Q6 mcq 1 mark

The Aggregate Demand (AD) curve lies parallel to consumption curve, indicating that both have ______

A. same component
B. different slope
C. same slope
D. inverse relation

Solution hidden

Q7 mcq 1 mark

Read the following statements carefully: Statement 1: Brokerage earned by dealers of old cars is included in the estimate of national income. Statement 2: The imputed value of self-consumption output is included in national income. In the light of the above statements, choose the correct option from the following:

A. Statement 1 is true and Statement 2 is false.
B. Statement 1 is false and Statement 2 is true.
C. Both Statements 1 and 2 are true.
D. Both Statements 1 and 2 are false.

Solution hidden

Q9 mcq 1 mark

Read the following statements – Assertion (A) and Reason (R). Choose the correct option from those given below: Assertion (A): Increase in exchange rate implies that the price of foreign currency in terms of domestic currency has increased. Reason (R): Balance of trade records the inflows and outflows of foreign exchange.

A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true, but Reason (R) is false.
D. Assertion (A) is false, but Reason (R) is true.

Solution hidden

Q10 mcq 1 mark

Identify which one of the following is not a function of Reserve Bank of India as a bank, agent and advisor to the government.

A. Carries out banking business of the government.
B. Manages national debt.
C. Advises on financial matters.
D. Conducts periodic inspections.

Solution hidden

Q11 short answer 3 marks

Calculate compensation of employees from the data given below: S. No. | Particulars | Amount (in ` crore) (i) Interest 45 (ii) Profits after tax 20 (iii) Consumption of fixed capital 50 (iv) Gross Domestic Product at market price (GDPMP) 200 (v) Rent 25 (vi) Corporate tax 5 (vii) Goods and Services tax 10

Solution hidden

Q12 long answer 3 marks

(A) “When initial deposits in the credit creation process remains same, the total amount of credit created rises as the value of money multiplier increases.” Defend or refute the above statement with the help of hypothetical numerical example. OR (B) “The Central Bank maintains reserves of all commercial banks and use to settle interbank claims.” Do you agree with the given statement? Give valid explanation in support of your answer.

Solution hidden

Q13 short answer 2 marks

The value of Nominal Gross National Product (GNP) of an economy was ` 2,500 crore in a particular year. The value of Gross National Product (GNP) of that country during the same year, estimated at the prices of base year was ` 3,000 crore. Estimate the value of Gross National Product (GNP) deflator (in percentage).

Solution hidden

Q14 short answer 2 marks

"The price level has risen between the base year and the year under consideration." Defend or refute the statement with suitable argument.

Solution hidden

Q14 short answer 4 marks

(a) Explain the likely impacts of the ‘Make in India’ policy initiated by Government of India on the Balance of Payments (BoP) of India (assuming all other factors constant). (b) State the meaning of Balance of Payment (BoP) surplus and deficit.

Solution hidden

Reading Passage

“The Reserve Bank of India (RBI) announced a 50 basis point Repo Rate cut to 5.50% from 6%.”

Q15 short answer

Read the following text carefully: “The Reserve Bank of India (RBI) announced a 50 basis point Repo Rate cut to 5.50% from 6%.” In the light of the given text and common understanding, answer the following questions: (i) Identify the economic issue indicated in the above text. (ii) Explain the likely causes and consequences of this step of RBI on the economy.

Solution hidden

Q17 short answer 3 marks

Estimate the value of subsistence level of consumption expenditure from the following data about an economy which is in equilibrium: (i) National Income (Y) = ` 1,200 crore (ii) Marginal Propensity to Save (MPS) = 0.20 (iii) Investment Expenditure (I) = ` 100 crore

Solution hidden

Reading Passage

The government has allocated ` 15.27 lakh crore for major sectors, ranging from defence to rural development to social welfare to commerce and so on. Government expenditure goes to paying states’ share of taxes and duties. Around 19% is spent on interest payments and 16% on central sector schemes, with subsidies, pension and other payments contributing 19%. Government revenue is divided between borrowings and other liabilities, which account for massive 27% of the incoming cash, Income tax revenue of around 19% Goods and Services Taxes (GST) and other taxes of around 18%; Corporation taxes account for around 17%. The next highest provision on this list is ` 2.66 lakh crore for rural development. This will include expenditure on rural infrastructure project and increased outlay for the popular MGNREGA scheme.

Q17 short answer

Read the following text carefully: The government has allocated ` 15.27 lakh crore for major sectors, ranging from defence to rural development to social welfare to commerce and so on. Government expenditure goes to paying states’ share of taxes and duties. Around 19% is spent on interest payments and 16% on central sector schemes, with subsidies, pension and other payments contributing 19%. Government revenue is divided between borrowings and other liabilities, which account for massive 27% of the incoming cash, Income tax revenue of around 19% Goods and Services Taxes (GST) and other taxes of around 18%; Corporation taxes account for around 17%. The next highest provision on this list is ` 2.66 lakh crore for rural development. This will include expenditure on rural infrastructure project and increased outlay for the popular MGNREGA scheme. On the basis of given text and common understanding, answer the following questions: (i) Identify the major sources of government revenue and state what percentage does each one of them contribute. (ii) Discuss the need to allocate funds among different sectors of the economy.

Solution hidden

Q18 short answer 3 marks

"An economy facing an increase in unintended accumulation of inventories would try to reduce Aggregate Demand." Defend or refute the above statement with valid arguments.

Solution hidden

Q18 mcq 1 mark

"In the formative stages of reforms development of credit markets, administrative intervention in interest rates is both necessary and desirable." Identify the sector under which the aforesaid reform was introduced. (Choose the correct option)

A. Tax reforms
B. Industrial sector reforms
C. Financial sector reforms
D. Foreign sector reforms

Solution hidden

Q19 short answer 3 marks

Complete the following table: Situation | Change in Investment (ΔI) | Change in Income (ΔY) | Marginal Propensity to Consume (MPC) | Investments Multiplier (K) (a) 200 | (i) | 0.8 | (ii) (b) (iii) | 2000 | (iv) | 4 (c) 1000 | (v) | 0.5 | (vi)

Solution hidden

Q19 mcq 1 mark

Read the following statements – Assertion (A) and Reason (R). Choose the correct option from those given below: Assertion (A): The dynamic sub-sectors like agro-processing industries, food processing industries, etc. have potential to create alternative employment opportunities. Reason (R): Men usually seek non-farm jobs, but recently, women have also started looking for such jobs.

A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true, but Reason (R) is false.
D. Assertion (A) is false, but Reason (R) is true.

Solution hidden

Q20 short answer 3 marks

Identify the monetary measures being referred to in the following statements. Discuss whether the tool would be used during a situation of excess demand or deficient demand. (i) Selling off government securities (G-Sec) to public by the central bank. (ii) Encourage commercial banks to park their surplus funds with the Reserve Bank of India (RBI).

Solution hidden

Q20 mcq 1 mark

The steep Indian education pyramid indicates _________. (Choose the correct option to fill in the blank)

A. equal distribution of students across all levels
B. increase in number of people reaching higher education
C. low unemployment among educated youth
D. few/less number of people reaching higher education

Solution hidden

Q20 mcq 1 mark

The steep Indian education pyramid indicates _________.

A. equal distribution of students across all levels
B. increase in number of people reaching higher education
C. low unemployment among educated youth
D. few/less number of people reaching higher education

Solution hidden

Q21 mcq 1 mark

_________ estimates India’s national and per capita income during the colonial era was considered very significant.

A. William Digby
B. V.K.R.V. Rao
C. Findlay Shirras
D. R.C. Desai

Solution hidden

Q24 mcq 1 mark

Identify that strategy given in the image that can be utilised for sustainable development.

A. Non-conventional source of energy
B. Wind power
C. CNG in urban areas
D. Gobar Gas in rural areas

Solution hidden

Q25 mcq 1 mark

Carefully read the following statements: Statement 1: There are limited options of non-gasmous crop production in organic farming. Statement 2: Organic farming helps to revert to local levels of production and improve productivity from organic inputs. In the light of the above statements, choose the correct option from the following:

A. Statement 1 is true and Statement 2 is false.
B. Statement 1 is false and Statement 2 is true.
C. Both Statement 1 and 2 are true.
D. Both Statement 1 and 2 are false.

Solution hidden

Q25 mcq 1 mark

Read the following statements carefully : Statement 1 : The option for producing off-season crops are quite restricted in organic farming. Statement 2 : Organic agriculture helps in substituting costlier agricultural inputs with locally produced organic inputs. In the light of the above statements, choose the correct option from the following :

A. Statement 1 is true and Statement 2 is false.
B. Statement 1 is false and Statement 2 is true.
C. Both statements 1 and 2 are true.
D. Both statements 1 and 2 are false.

Solution hidden

Q26 mcq 1 mark

China adopted _________ strategy in which farmers and industries bought and sold certain quantities at government fixed prices, while remaining transactions occurred at market prices. (Choose the correct option to fill in the blank)

A. Dual Pricing
B. Special Economic Zones
C. Great Proletarian Cultural Revolution
D. Great Leap Forward

Solution hidden

Q27 mcq 1 mark

Education provides _________. (Choose the correct option to fill in the blank)

A. (i) and (ii)
B. (i) and (iii)
C. (ii) and (iii)
D. (i), (ii) and (iii)

Solution hidden

Q28 mcq 1 mark

If a nation fails to enforce the regulations of the Montreal Protocol, the likely long term environmental and biological consequence of this will be _________.

A. Rapid deforestation
B. Increased possibility of skin cancer
C. Greenhouse effect causing rise in global temperature
D. Possibility of acid rain

Solution hidden

Q28 long answer 3 marks

“In the late 1970s and 1980s, Pakistan experienced significant changes in its policies, incentives and new investments.” Do you agree with the above statement ? Justify your answer with valid arguments.

Solution hidden

Q34 long answer 3 marks

(A) Distinguish between formal and informal sector of employment with the help of suitable examples.

Solution hidden

Q35 long answer 3 marks

(B) Discuss the long term implications of increased demand for environmental resources exceeding their natural regenerative capacity.

Solution hidden

Q36 short answer 3 marks

Refer the given image carefully : Compare and analyse the distribution of work force with respect to gender. Note : The following question is for the Visually Impaired Candidates only in lieu of Q. No. 31(a). “Compared to 1970’s, there has hardly been any change in the distribution of workforce across various industries.” Defend or refute the above statement with valid explanation.

Solution hidden

Q37 short answer 1 mark

State the meaning of worker-population ratio.

Solution hidden

Q38 short answer 1 mark

State the meaning of ‘Commune system’.

Solution hidden

Q39 short answer 3 marks

Explain any two reasons for the slow economic growth in Pakistan.

Solution hidden

Reading Passage

“In India, high -yielding seed varieties were initially brought to the State of Punjab, Haryana and portions of western Uttar Pradesh.”

Q40 short answer 1 mark

Read the following text carefully and answer the questions given below : “In India, high -yielding seed varieties were initially brought to the State of Punjab, Haryana and portions of western Uttar Pradesh.” Identify the approach initiated by Indian Government in 1966.

Solution hidden

Q41 short answer 1 mark

State the primary goal of this approach.

Solution hidden

Q42 long answer 4 marks

Describe any two impacts of this approach.

Solution hidden

Reading Passage

“It is an arrangement in which a firm hires some specialized firm(s) to carry out some of its activities (which were earlier being performed by itself). These service hirings could be from local / international markets.”

Q43 short answer 1 mark

Identify the indicated outcome of the globalisation process.

Solution hidden

Q44 short answer 2 marks

State any two factors responsible for making India as an important source of these activities.

Solution hidden

Q45 long answer 3 marks

Explain examples of services that have expanded due to advancements in information technology.

Solution hidden

Reading Passage

The central government has proposed a major package for rural India in the Union Budget 2025-26, with an allocation of ₹1.88 lakh crore to encourage inclusive development. This budget gives impetus to job creation, women’s employment, education and infrastructural framework in rural areas, which reflects the government’s commitment to a strong and self-reliant rural economy. The Jal Jeevan Mission has been extended till 2028, with the target of achieving 100% rural tap water coverage and strengthening essential infrastructure. Along with this, emphasis has also been laid on major rural schemes – Pradhan Mantri Gram Sadak Yojana (PMGSY), which connects rural areas with all-weather roads; Pradhan Mantri Gramin Awas Yojana (PMGAY), which economically weaker sections have been provided housing; and Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which, with an allocation of ₹86,000 crore, continues to protect rural livelihoods in the financial year 2024-25. Based on the above text and general knowledge, answer the following questions:

Q46 short answer 2 marks

Explain the importance of rural development.

Solution hidden

Q47 long answer 4 marks

Discuss any two policies initiated by the government for rural development.

Solution hidden