CBSE Class 12 Economics Question Paper 2026 Solved Code 58-1-1

SECTION A (Macro Economics)

1. In a two sector economy, the flow of factor payments moves from __________ to __________.
(Choose the correct option to fill in the blanks) [1 Mark]
(A) firms, households
(B) firms, government
(C) banks, households
(D) households, firms

Answer: (A) firms, households

Teacher's Note:
a) Households supply factor services (land, labour, capital, entrepreneurship) to firms.
b) In return, firms make factor payments (rent, wages, interest, profit) to households.
c) Do not confuse this money flow with the flow of consumption expenditure, which goes from households to firms.

2. Read the following statements : Assertion (A) and Reason (R). Choose the correct option from those given below :
Assertion (A) : Money is of perishable nature and is generally accepted by all at any point of time.
Reason (R) : Money serves as a store of value, facilitating individuals to transfer purchasing power from the present to the future. [1 Mark]
Options :
(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.

Answer: (D) Assertion (A) is false, but Reason (R) is true.

Teacher's Note:
a) Money is non-perishable; that is exactly why it can work as a store of value.
b) The word "perishable" makes the Assertion false, while the Reason correctly states the store of value function.

3. Read the following statements carefully :
Statement 1 : Depreciation of currency is an economic action undertaken by the government of a nation under the fixed exchange rate system.
Statement 2 : Under the floating exchange Rate system, authorities actively intervene in the foreign exchange market by way of maintaining foreign exchange reserves.
In the light of the given statements, choose the correct option from the following : [1 Mark]
(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.

Answer: (D) Both statements 1 and 2 are false.

Teacher's Note:
a) A deliberate fall in currency value by the government under a fixed rate system is devaluation, not depreciation.
b) Under a floating (flexible) system, the rate is set by market demand and supply without active intervention by authorities.
c) Remember: depreciation and appreciation belong to the flexible system; devaluation and revaluation belong to the fixed system.

4. In an economy, when __________ is insufficient to achieve the level of output corresponding to the full employment, the difference is termed a deflationary gap. (Choose the correct option to fill in the blank) [1 Mark]
Options :
(A) ex-ante Aggregate Demand
(B) ex-post Aggregate Demand
(C) ex-ante Aggregate Supply
(D) ex-post Aggregate Supply

Answer: (A) ex-ante Aggregate Demand

Teacher's Note:
a) Deflationary gap = full employment output level minus the planned (ex-ante) Aggregate Demand at that level.
b) It is a situation of deficient demand, so the key word is "planned" or "ex-ante" demand.

5. In an economy, exclusion of ___________ may lead to under estimation of the value of Gross Domestic Product (GDP).
(Choose the correct option to fill in the blank)
(i) Barter Transactions
(ii) Services provided by family members
(iii) Illegal activities
(iv) Depreciation of Assets [1 Mark]
Options :
(A) (i) and (ii)
(B) (ii) and (iii)
(C) (iii) and (iv)
(D) (i), (ii) and (iii)

Answer: (A) (i) and (ii)

Teacher's Note:
a) Barter transactions and unpaid services of family members (for example, a homemaker's services) are productive but are not recorded, so GDP is underestimated.
b) Depreciation is already part of GDP (gross value), so it is not an exclusion that causes underestimation.

6. Identify, which of the following is true at the Break Even level of Income. (Choose the correct option) [1 Mark]
Options :
(A) Slope of Consumption Curve = Slope of Saving Curve
(B) Average Propensity to Consume (APC) = Average Propensity to Save (APS)
(C) Slope of Saving Curve = Unity (1)
(D) Average Propensity to Consume (APC) = Unity (1)

Answer: (D) Average Propensity to Consume (APC) = Unity (1)

Teacher's Note:
a) At the break-even point, consumption equals income (C = Y), so saving is zero.
b) Hence \( APC = \frac{C}{Y} = 1 \) and \( APS = 0 \).

7. Read the following statements carefully :
Statement 1 : Final goods are those goods which normally lose their identity in the production process.
Statement 2 : Final goods may get transformed during the consumption process by a consumer.
(Choose the correct option) [1 Mark]
Options :
(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.

Answer: (B) Statement 1 is false and statement 2 is true.

Teacher's Note:
a) Goods that lose their identity in the production process are intermediate goods, not final goods.
b) Final goods are meant for final use; a consumer may transform them while consuming (for example, vegetables cooked at home).

8. Read the following statements : Assertion (A) and Reason (R). Choose the correct option from those given below :
Assertion (A) : Unilateral Transfers are recorded in the Current Account of the Balance of Payments (BoP) of a nation.
Reason (R) : Capital account records transactions which cause a change in the assets or liabilities of the country. [1 Mark]
Options :
(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.

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

Teacher's Note:
a) Unilateral transfers (gifts, remittances) do not change assets or liabilities, so they are recorded in the current account.
b) The Reason describes the capital account, which does not explain why transfers go to the current account.

9. "In the Indian Banking System, the Statutory Liquidity Ratio (SLR) plays a vital role in controlling the credit creation capacity of the Commercial Banks, as it __________." (Choose the correct option to fill in the blank) [1 Mark]
(A) ensures that all the deposits are converted into liquid assets.
(B) requires banks to maintain a percentage of deposits in the form of liquid assets.
(C) sets the maximum interest rate which the banks can charge on loans.
(D) promote banks from lending beyond a specific proportion of their total reserves.

Answer: (B) requires banks to maintain a percentage of deposits in the form of liquid assets.

Teacher's Note:
a) SLR is the minimum percentage of deposits that banks must keep with themselves as liquid assets such as cash, gold and approved securities.
b) A higher SLR leaves less money for lending, so credit creation falls.

10. 'In an economy, the currency held by the public, Net Demand Deposits with Commercial Banks and Net Time Deposits with Commercial Banks stand at Rs. 1,42,000 crore, Rs. 22,000 crore and Rs. 86,000 crore respectively. The value of Money Supply (M₁) would be Rs. __________ crore.
(Choose the correct option to fill in the blank) [1 Mark]
Options :
(A) 2,50,000
(B) 86,000
(C) 1,64,000
(D) 1,42,000

Answer: (C) 1,64,000

Teacher's Note:
a) \( M_1 \) = Currency held by the public + Net demand deposits with banks (+ other deposits with RBI, not given here).
b) \( M_1 = 1,42,000 + 22,000 = \) Rs. 1,64,000 crore; time deposits are not part of \( M_1 \).

11. (A) Meera and Shahid are two classmates, who were comparing India's economic growth over the years.
Meera referred to the increase in Gross Domestic Product (GDP) at current prices prevailing in market, while Sahid insisted on considering GDP after adjusting for inflation. Their debate on which of the two measures gives a true picture of people's well-being, remained inconclusive.
Considering the above mentioned situation, elaborate with valid reason, which of the two variables is considered a better indicator of welfare and why ? [3 Marks]

Answer:
1. GDP after adjusting for inflation, that is Real GDP, is a better indicator of welfare than GDP at current prices (Nominal GDP).
2. Real GDP is calculated at constant (base year) prices, so it changes only when the physical output of goods and services changes. It removes the effect of price changes and shows the real growth of the economy.
3. Nominal GDP can rise due to a rise in output, a rise in prices, or both. A rise caused only by inflation does not mean people have more goods, so it can give a misleading picture of well-being.

Teacher's Note:
a) Name Real GDP clearly first; the identification itself carries 1 mark.
b) Use the keywords "constant prices", "physical output" and "effect of price change removed".

OR

(B) Two friends, Ravi and Harry were discussing whether the money received from sale of an old car should be included in India's National income.
Ravi was of the view that it should be included in India's National income while Harry did not agree with him.
They also had difference of opinion on the treatment of brokerage paid to the car dealer.
As their Economics teacher, state the treatments with valid arguments. [3 Marks]

Answer:
1. Harry's opinion is correct.
2. Money received from the sale of an old car is not included in India's National Income. The value of the car was already counted in the year it was produced, so including it again would be double counting. It adds nothing to the current flow of goods and services.
3. The brokerage paid to the car dealer is included in India's National Income, because it is a payment for a productive service rendered by the dealer in the current year.

Teacher's Note:
a) Second-hand goods are excluded, but the commission or brokerage on their sale is included.
b) Give a reason for each treatment; a bare "included" or "not included" earns little.

12. "Under the provisions stated in the Section 20 and Section 21 of the Reserve Bank of India (RBI) Act, 1934, the RBI is mandated to handle the banking operations of the Government of India."
In the light of the given statement, elaborate the indicated function of the Reserve Bank of India. [3 Marks]

Answer: The indicated function is that the RBI acts as the banker to the government.
1. The RBI manages the accounts of the government. It receives deposits of the government and makes payments on its behalf.
2. It carries out exchanges, remittances and other banking operations for the government.
3. During a financial crisis, the RBI gives credit (loans) to the government so that it can function smoothly and meet its obligations.

Teacher's Note:
a) Begin by naming the function: "Banker to the Government".
b) The answer is marked as a whole, so cover accounts, payments or remittances, and loans to the government.

13. (A) For a hypothetical economy, assuming there are only two firms (X and Y) with equal values of Gross Value Added (GVA).
On the basis of the following data, estimate the value of Domestic Sales of both the firms (X and Y) : [4 Marks]
S. No. | Items | Amount (in Rs. crore)
(i) | Value of Output of firm Y | 700
(ii) | Purchases by firm X from firm Y | 200
(iii) | Exports by firm X | 100
(iv) | Purchases by firm Y from firm X | 150
(v) | Additions to Stock of firm X | 50

Answer:
Gross Value Added of Firm Y = Value of Output of firm Y - Purchases by firm Y from firm X
\( = 700 - 150 \)
= Rs. 550 crore
Domestic Sales of Firm Y = Gross Value Added of Firm Y + Purchases by firm Y from firm X
\( = 550 + 150 \)
= Rs. 700 crore
Gross Value Added of Firm X = Gross Value Added of Firm Y = Rs. 550 crore
Domestic Sales of Firm X = Gross Value Added of Firm X - Exports by firm X - Additions to Stock of firm X + Purchases by firm X from firm Y
\( = 550 - 100 - 50 + 200 \)
= Rs. 600 crore

Teacher's Note:
a) Start with firm Y, because its output is given; then use "equal GVA" to get firm X's GVA.
b) For firm X, Value of Output = GVA + intermediate purchases = 550 + 200 = Rs. 750 crore; remove exports and stock additions to get domestic sales.
c) Write the formula before substituting values; formula steps carry marks.

OR

(B) Ms. Reeta D'Costa, retired from the post of Income Tax Commissioner in the year 2023.
Apart from her pension, she also receives the following from various sources :
Rental income from a flat she owns.
Interest income from her fixed deposits.
Money sent by her children settled abroad.
Identify and classify, her monthly incomes into 'factor income' and 'transfer income', with valid reasons. [4 Marks]

Answer:
Factor Income:
1. Rental income from a flat she owns.
2. Interest income from her fixed deposits.
3. Retirement pension (it is a deferred payment for services she rendered while in employment).
Reason: Factor income is the income earned by factors of production for rendering productive services.
Transfer Income:
4. Money sent by her children settled abroad.
Reason: Transfer income is received without rendering any productive service in return.

Teacher's Note:
a) Remember to classify the pension too; a retirement pension is a factor income (deferred wages).
b) Rent is earned by land or property and interest by capital, so both are factor incomes.
c) Define both terms; the definitions carry 1 mark each.

14. Michel, an entrepreneur of Country Zeta, borrowed $ 5 million from an overseas bank to expand his textile business.
During the same financial year, the Government of Country Zeta secured a loan of $ 30 Billion from an International Financial Institution to manage the ongoing Balance of Payments.
Samuel, an Economics student categorised both of these transactions as 'autonomous transactions' in the BoP account of the country.
Do you agree with his classification ? Justify your answer with valid reasons. [4 Marks]

Answer: No, I do not agree with Samuel's classification.
1. The loan of $ 30 Billion taken by the Government of Zeta is an accommodating transaction. Accommodating transactions are undertaken by the monetary authorities to cover the deficit or surplus in the Balance of Payments. They are not done for any economic motive.
2. The loan of $ 5 million taken by Michel is an autonomous transaction. Autonomous transactions are independent of the state of the BoP and are undertaken with an economic motive, such as earning profit by expanding his business.

Teacher's Note:
a) Autonomous items are "above the line" and cause the BoP imbalance; accommodating items are "below the line" and settle it.
b) Classify each transaction separately and give its meaning; each part carries 2 marks.

15. Refer the given image carefully :
Explain any two measures that can be taken by the Central Bank to control the indicated macroeconomic problem. [4 Marks]

[Figure: A weighing balance with a tilted beam. On the left side is the label "General Price level" with two arrows pointing upward; on the right side is the label "Value of Money" with two arrows pointing downward. The pans hold coins and currency.]

Answer: The image shows a rise in the general price level and a fall in the value of money, that is, the problem of inflation. The Central Bank may use:
1. Repo Rate: The Central Bank can raise the repo rate. Commercial banks then raise their lending rates, so credit becomes costlier for the public and borrowing falls. Aggregate Demand falls, which controls inflation.
2. Open Market Operations: The Central Bank can sell government securities in the open market. This reduces the funds available with commercial banks for lending. Credit and Aggregate Demand fall, which controls inflation.

Teacher's Note:
a) First identify the problem as inflation (excess demand); many students miss this step.
b) For each measure, show the chain: tool - cost or availability of credit - Aggregate Demand - price level.

For Visually Impaired Candidates (in lieu of Q. 15)

State and explain any two measures that can be taken by the Central Bank to control the situation of deficient demand. [4 Marks]

Answer:
1. Repo Rate: The Central Bank can lower the repo rate. Commercial banks then lower their lending rates, so credit becomes cheaper and borrowing by the public increases. Aggregate Demand rises, which corrects deficient demand.
2. Open Market Operations: The Central Bank can buy government securities in the open market. This increases the funds available with commercial banks for lending. Credit and Aggregate Demand rise, which corrects deficient demand.

Teacher's Note:
a) For deficient demand every tool is used in the expansionary direction: lower rates, buy securities.
b) Always end with the effect on Aggregate Demand; that link earns the explanation marks.

16. (A) "Income of an economy increased from Rs. 20,000 to Rs. 50,000 crore. Savings of the economy increased from Rs. 2,000 crore to Rs. 10,000 crore."

(i) Calculate Average Propensity to Consume (APC) and Average Propensity to Save (APS), before and after the rise in income. [4 Marks]

Answer:
Before the rise in income:
Income (Y) = Rs. 20,000 crore, Savings (S) = Rs. 2,000 crore
Consumption \( C = Y - S = 20,000 - 2,000 = \) Rs. 18,000 crore
\( APC = \frac{C}{Y} = \frac{18,000}{20,000} = 0.9 \)
\( APS = \frac{S}{Y} = \frac{2,000}{20,000} = 0.1 \)
After the rise in income:
Income (Y) = Rs. 50,000 crore, Savings (S) = Rs. 10,000 crore
Consumption \( C = Y - S = 50,000 - 10,000 = \) Rs. 40,000 crore
\( APC = \frac{C}{Y} = \frac{40,000}{50,000} = 0.8 \)
\( APS = \frac{S}{Y} = \frac{10,000}{50,000} = 0.2 \)

Teacher's Note:
a) First find consumption as income minus saving; APC and APS use total values, not changes.
b) Check your work: \( APC + APS = 1 \) in both cases (0.9 + 0.1 and 0.8 + 0.2).

(ii) Draw appropriate conclusion regarding the behaviour of Average Propensity to Consume (APC) as his income increases. [2 Marks]

Answer: As income rises from Rs. 20,000 crore to Rs. 50,000 crore, APC falls from 0.9 to 0.8. This shows an inverse relationship between the level of income and APC: as income increases, a smaller proportion of income is consumed.

Teacher's Note:
a) Quote the actual values (0.9 to 0.8) to support your conclusion.
b) Use the keyword "inverse relationship" between income and APC.

OR

(B) "Under a study, examining the spending habits of a hypothetical economy, it was observed that even households with zero income managed to consume basic necessities.
As the income of people increased, their consumption also increased, but not as rapidly as income."
Based on the given text and common understanding, answer the following questions :

(i) Identify and elaborate the type of consumption indicated in the first para of the above text. [3 Marks]

Answer:
1. The type of consumption indicated is Autonomous Consumption.
2. Autonomous consumption is independent of the level of income; it takes place even when income is zero.
3. It is the minimum level of consumption needed for survival, such as basic food and clothing, and is financed from past savings or borrowing.

Teacher's Note:
a) Identification carries 1 mark; the explanation carries 2 marks.
b) In the consumption function \( C = \bar{C} + bY \), autonomous consumption is \( \bar{C} \).

(ii) Explain, the reason behind the positive slope of Aggregate Demand Curve. [3 Marks]

Answer:
1. In a two sector economy, Aggregate Demand is the sum of consumption and investment (AD = C + I).
2. Investment is assumed to be autonomous, so it does not change with income. Consumption, however, rises when income rises.
3. So, as income rises, consumption and hence Aggregate Demand rise. The AD curve therefore slopes upward, showing a direct relationship between income and Aggregate Demand. On a diagram with income on the x-axis and AD on the y-axis, the AD curve starts above the origin (at \( \bar{C} + I \)) and rises from left to right.

Teacher's Note:
a) The key idea is that consumption is income-induced while investment is autonomous.
b) Use the phrase "direct relationship between income and AD" in your answer.

17. Refer the given text carefully :

According to the Economic Survey 2024-25, the government budget's projections for the fiscal year 2025-26 indicate that gross direct tax revenue will rise by 12.7%, while gross indirect tax collections are expected to grow by 8.3% relative to FY 2024-25.
Direct taxes include income tax and corporate tax, reflecting earnings and profits of households and firms. It plays a key role in revenue growth of the government. Indirect taxes encompass Goods and Services Tax (GST), custom duties and other transaction-based levies.
Higher growth rate projected for direct taxes suggests a push to enhance tax buoyancy through improved compliance and reforms. On the other hand, indirect taxes are expected to benefit from consumption trends and Goods and Services Tax (GST) administration improvements. The balance tax strategy aims to mobilise resources while supporting fiscal consolidation and sustainable economic growth.
On the basis of the above passage and common understanding, answer the following questions :

(i) Differentiate between the two types of taxes indicated in the above text, with suitable examples. [4 Marks]

Answer: The two types of taxes indicated are direct taxes and indirect taxes.
1. Direct taxes: The impact and the incidence of a direct tax fall on the same person. The burden of paying it cannot be shifted to others.
2. Example of direct tax: Income tax (also corporate tax).
3. Indirect taxes: The impact and the incidence of an indirect tax may fall on different persons. The burden can be shifted, for example from the seller to the buyer.
4. Example of indirect tax: Goods and Services Tax (GST) (also custom duties).

Teacher's Note:
a) The basis of difference is whether the burden (incidence) of the tax can be shifted.
b) Give one example for each type; each example carries half a mark.

(ii) Elaborate the likely consequences of the tax projections made by the government. [2 Marks]

Answer: The projected rise in tax revenues is likely to strengthen the government's revenue base. This balanced tax strategy will help mobilise resources, support fiscal consolidation (a lower fiscal deficit) and promote sustainable economic growth.

Teacher's Note:
a) Mention the keywords from the passage: revenue base, fiscal consolidation, sustainable growth.
b) Link higher tax revenue with less need for government borrowing.

SECTION B (Indian Economic Development)

18. Read the following statements carefully :
Statement 1 : During the British rule in India, the export surplus was utilised to import of invisible items from Britain.
Statement 2 : Indians paid for the expenses incurred by an office set up by the colonial government in Britain.
In the light of above statements, choose the correct option from the following : [1 Mark]
(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.

Answer: (C) Both statements 1 and 2 are true.

Teacher's Note:
a) India's large export surplus was used to pay for invisible imports such as transport services, insurance and shipping from Britain.
b) It also met the expenses of the colonial office in Britain and the war expenses of the British government, which drained India's wealth.

19. Read the following statements : Assertion (A) and Reason (R), Choose the correct option from those given below :
Assertion (A) : Education facilitates the assimilation of knowledge and competencies. It also fosters inventive capacities and enhances the aptitude to integrate advance technology.
Reason (R) : Education plays a pivotal role in transforming cognitive perspectives and serves as a catalyst for the economic advancement of a nation. [1 Mark]
Options :
(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.

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

Teacher's Note:
a) Both statements describe true benefits of education as human capital.
b) The Reason talks about the effect of education on the nation's economy, which does not explain why education builds individual skills and inventiveness.

20. Read the following text carefully :
"In the recent times, the Government of India, has introduced several measures to encourage greater public participation in the capital market, including both primary and secondary stock markets."
Under which sector have the above mentioned reforms been introduced ? (Choose the correct option) [1 Mark]
Options :
(A) Industrial
(B) Financial
(C) Taxation
(D) Foreign Trade

Answer: (B) Financial

Teacher's Note:
a) The capital market (stock markets) is part of the financial sector, along with banks and other financial institutions.
b) Financial sector reforms since 1991 aimed to make SEBI and the markets more open and transparent.

21. The Montreal Protocol was signed in the year 1987 committing nations to __________. (Choose the correct option to fill in the blank) [1 Mark]
Options :
(A) protect biodiversity from any further losses.
(B) reduce the impact of global warming.
(C) protect ozone layer from depletion incurred due to chlorofluoro carbons .
(D) reduce the impact of deforestation.

Answer: (C) protect ozone layer from depletion incurred due to chlorofluoro carbons.

Teacher's Note:
a) The Montreal Protocol aims to phase out ozone-depleting substances such as CFCs.
b) Do not confuse it with the Kyoto Protocol (1997), which deals with greenhouse gases and global warming.

22. Read the following statements : Assertion (A) and Reason (R), Choose the correct option from those given below :
Assertion (A) : The notion of rural development encompasses a far wider spectrum than agricultural advancement.
Reason (R) : Government interventions in the agricultural sector remain imperative, as it constitutes the primary means of sustanance for the rural population. [1 Mark]
Options :
(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.

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

Teacher's Note:
a) Rural development also covers health, education, infrastructure, credit, marketing and poverty reduction, not only agriculture.
b) The Reason is true but only justifies government support to agriculture; it does not explain the wider meaning of rural development.

23. Identify, which of the following, highlights a highly relevant issue associated with evolving employment trends in India's labour market ? [1 Mark]
Options :
(A) Progressive increase in the share of permanent salaried employees.
(B) Increase in the proportion of casually employed individuals.
(C) Expansion of self-employment avenues in all regions.
(D) Significant rise in job opportunities within the formal sector.

Answer: (B) Increase in the proportion of casually employed individuals.

Teacher's Note:
a) The rising share of casual wage workers is called casualisation of the workforce.
b) It is an issue because casual workers lack job security and social security benefits.

24. Match the terms given in Column-I with their respective meaning in Column-II. Select the correct option : [1 Mark]
Column-I | Column-II
(i) Seasonal Unemployment | (a) Private enterprises hiring less than 10 employees
(ii) Self-employed | (b) Workers using their own resources to earn livelihood
(iii) Unorganised sector | (c) Unemployment occurring in specific season
(iv) Disguised Unemployment | (d) Zero Marginal Productivity
Options :
(A) (i)-(d); (ii)-(a); (iii)-(b); (iv)-(c)
(B) (i)-(b); (ii)-(a); (iii)-(c); (iv)-(d)
(C) (i)-(c); (ii)-(b); (iii)-(a); (iv)-(d)
(D) (i)-(c); (ii)-(d); (iii)-(a); (iv)-(b)

Answer: (C) (i)-(c); (ii)-(b); (iii)-(a); (iv)-(d)

Teacher's Note:
a) Disguised unemployment means extra workers whose marginal productivity is zero.
b) Start with the easiest pair, (i)-(c), to eliminate options (A) and (B) quickly.

25. "Sustainable development refers to the development that meets the need of the present generation without compromising the ability of the future generations, to meet their own needs."
The above mentioned definition has been given by __________. (Choose the correct option to fill in the blank) [1 Mark]
(A) United Nations Conference on Environment and Development
(B) United Nations Committee on Environment and Development
(C) United Nations Committee on Protection of Environment
(D) United Nations Conference on Protection of Environment

Answer: (A) United Nations Conference on Environment and Development

Teacher's Note:
a) The NCERT textbook credits this definition to the United Nations Conference on Environment and Development (UNCED).
b) Watch the exact words "Conference" and "Environment and Development"; the other options are close distractors.

26. Read the following statements : Assertion (A) and Reason (R), Choose the correct option from those given below :
Assertion (A) : The Government of India adopted the measure of regulation of markets to improve marketing conditions for agricultural products.
Reason (R) : Regulation of market ensured transparent pricing, fair trade practices, and protection for farmers against exploitation in agricultural marketing. [1 Mark]
Options :
(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.

Answer: (A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Teacher's Note:
a) Regulation of markets was the first step taken by the government to create orderly and transparent marketing conditions.
b) The Reason states exactly why regulation improves marketing conditions, so it explains the Assertion.

27. Arrange the following events in China's economic development history in correct chronological sequence and select the correct option : [1 Mark]
I. Great Proletarian Cultural Revolution.
II. Great leap forward
III. Introduction of Economic Reforms
IV. Launch of the First Five Year Plan
Options :
(A) II, IV, III, I
(B) IV, II, I, III
(C) II, IV, I, III
(D) IV, I, II, III

Answer: (B) IV, II, I, III

Teacher's Note:
a) Dates: First Five Year Plan 1953, Great Leap Forward 1958, Cultural Revolution 1966-76, Economic Reforms 1978.
b) Remember that China's reforms (1978) came last, well before India's reforms of 1991.

28. (A) "Employment in the formal sector guarantees better income and social benefits compared to informal sector job."
Defend or refute the above statement with valid reason and example. [3 Marks]

Answer: The given statement is defended.
1. Formal sector workers get fair and regular wages along with social security benefits such as pension and provident fund.
2. Informal sector workers do not get regular income or social security benefits, and they can be dismissed without any compensation.
3. Example: A government employee gets a regular salary, pension and other social security, whereas a daily wage worker works without any social security.

Teacher's Note:
a) Begin with a clear stand, "defended", and then give the contrast between the two sectors.
b) The example carries 1 mark, so always compare one formal and one informal worker.

OR

(B) During the 'Mann ki Baat' program aired on 29^th June, 2025, Prime Minister shared that World Health Organisation (WHO) has declared India as a Trachoma free (an eye disease). This achievement, he shared, is a result of sustained efforts in health care, sanitation, awareness and medical access.
In the light of the above statement, explain how investments in health care contributes to a nation's development. Support your answer with valid arguments. [3 Marks]

Answer:
1. Investment in health care ensures a healthy workforce. A healthy person is more productive than an unhealthy person.
2. Healthy people can supply uninterrupted labour for a longer period, as they miss fewer workdays and live longer.
3. Thus, better health care raises labour productivity, promotes human capital formation and supports the economic development of the country.

Teacher's Note:
a) Keywords: healthy workforce, higher productivity, uninterrupted labour supply, human capital formation.
b) The answer is marked as a whole, so link health to productivity and then to development.

29. "In the late 1970's China's population growth rate has sharply declined as compared to India."
Elucidate the reasons and impacts of this situation. [3 Marks]

Answer:
1. Reason: In the late 1970s, China introduced the one-child policy, which sharply reduced its population growth rate compared to India.
2. Impact: This policy led to an ageing population, with a higher proportion of elderly people.
3. The share of young people fell, which may create a shortage of working-age people and a greater burden of caring for the elderly in future.

Teacher's Note:
a) The reason (one-child policy) and the impact (ageing population) carry 1 and a half marks each.
b) Do not forget the "impact" part; many students write only the reason.

30. (A) State and explain any two changes which were observed in India's occupational structure during the British Rule. [4 Marks]

Answer: During British rule, the occupational structure showed growing regional variation:
1. Shift towards industrial and service sectors: In parts of the Madras Presidency, Bombay and Bengal, the dependence of the workforce on agriculture declined, with a matching increase in the manufacturing and services sectors.
2. Rising dependence on agriculture: In states such as Orissa, Rajasthan and Punjab, the share of the workforce in agriculture increased.

Teacher's Note:
a) Give a title for each change and then explain it; the title carries half a mark and the explanation 1 and a half marks.
b) Name the regions correctly; they are the value points examiners check.
c) Overall, agriculture remained the largest employer at about 70-75 percent of the workforce.

OR

(B) "The British sought to achieve their vested interest through their policies of infrastructural development in India."
Do you agree with the given statement ? Justify your answer with valid explanation. [4 Marks]

Answer: Yes, I agree with the statement.
1. The British developed basic infrastructure mainly to serve their own interests, not the welfare of Indians.
2. Roads and railways were built mainly to move the army within India.
3. They also helped carry raw materials from the countryside to the nearest railway station or port, for export to England and other foreign countries.
4. Communication tools such as the electric telegraph were introduced mainly to maintain law and order.

Teacher's Note:
a) Keywords: mobilise army, drain raw materials to ports, telegraph for law and order.
b) State your stand ("Yes") before explaining; the answer is marked as a whole.

31. "At the time of independence, both India and Pakistan inherited similar colonial economic structures. Both the nations adopted many similar economic planning strategies."
Explain any two such similarities in the developmental path of India and Pakistan. [4 Marks]

Answer:
1. Mixed economy: Both nations followed the path of a mixed economic system, in which both the public sector and the private sector play a role.
2. Import substitution: Both India and Pakistan adopted an import substitution policy to protect their domestic industries from foreign competition.

Teacher's Note:
a) Each similarity carries 2 marks, so add one line of explanation after naming it.
b) Other valid points include five year plans and later economic reforms (India in 1991, Pakistan in 1988).

32. (A) State the meaning of 'Disguised Unemployment'. [1 Mark]

Answer: Disguised unemployment is a situation in which a person appears to be employed but does not add to the output, that is, the marginal productivity of the person is zero.

Teacher's Note:
a) The key phrase is "marginal productivity is zero".
b) It is common in family farming, where more people work than are needed.

(B) In the light of the given chart, analyse the gender-wise sectoral distribution of workers. [3 Marks]

[Figure: Bar chart titled "Sector-wise Gender Distribution of Workers (%)" with paired bars for Male Workers (%) and Female Workers (%). The x-axis shows Sectors and the y-axis shows Percentage of Workers (0 to 80). Approximate values (male, female): Manufacturing about 77, 22; Construction about 83, 16; Trade about 76, 23; Transport about 86, 13; Education about 55, 44; Health about 48, 50; Accommodation & Restaurant about 76, 23; IT/BPOs about 62, 37; Financial Services about 62, 37.]

Answer:
1. Male workers dominate most sectors, such as manufacturing, construction, trade and transport.
2. Female participation is especially low in construction and transport, which shows gender inequality in employment.
3. Education and health show a relatively balanced distribution, and female participation there is much higher than in other sectors (in health it is roughly equal to or more than male participation).

Teacher's Note:
a) Quote the chart: the lowest female share is in transport and construction, the highest in health and education.
b) Give three separate observations; each carries 1 mark.

For Visually Impaired Candidates (in lieu of Q. 32 (B))

Elaborate any two reasons behind more women employed in economic activities in Rural areas as compared to Urbans areas. [3 Marks]

Answer:
1. Economic need: Women in rural areas are more actively engaged in economic activities, as poverty and low family income compel them to work.
2. Social attitude in urban areas: In urban areas, men usually earn higher incomes, so families often discourage female members from taking up jobs.

Teacher's Note:
a) Each reason carries 1 and a half marks, so explain both clearly.
b) You may add that rural women also work on family farms, which counts as economic activity.

33. (A) (i) Mr. Ravi, an IT entrepreneur from Bengaluru, observed that several MNC's prefer India as their outsourcing Hub for services like software development, customer support, data management etc.
His friend Priya believes this is due to certain inherent advantages of the Indian economy.
In your opinion, state and explain any two factors that make India a preferred outsourcing destination. [3 Marks]

Answer:
1. Expansion of information technology and communication: The growth of fast modes of communication, especially Information Technology (IT), allows services to be delivered from India to clients anywhere in the world.
2. Availability of skilled manpower: India has a large pool of efficient, skilled and English-speaking workers available at a relatively low cost.

Teacher's Note:
a) State the factor as a heading, then explain it in one or two lines.
b) Keywords: IT revolution, skilled manpower, low cost.

(ii) "In the post-independence era, India adopted a protective tariff policy."
Do you agree with the given statement ? Justify your answer with any two valid arguments. [3 Marks]

Answer: Yes, I agree with the statement. India adopted a protective tariff policy to:
1. Promote domestic production by replacing imports with goods produced within the country (import substitution).
2. Protect infant domestic industries from intense foreign competition, so that they could grow and develop sustainably.

Teacher's Note:
a) Tariffs are taxes on imports; they make imported goods costlier than domestic goods.
b) Mention "import substitution" and "infant industries"; these are the key terms.

OR

(B) (i) 'Strategic sale of a public sector undertaking and minority sale of their shares are methods of disinvestment.' Defend or refute the given statement with valid argument. [3 Marks]

Answer: The given statement is defended.
1. Both strategic sale and minority sale are methods of disinvestment used by the government to reduce its ownership and encourage private participation, which improves the efficiency and performance of public sector enterprises.
2. Strategic sale means transferring a large share of government ownership along with management control to a private entity.
3. Minority sale means selling only a limited portion of shares, while the government keeps control of the enterprise.

Teacher's Note:
a) The difference lies in management control: it passes to the buyer in a strategic sale but stays with the government in a minority sale.
b) The answer is marked as a whole; state your stand first.

(ii) Discuss briefly, how bilateral trade agreements are different from multilateral trade agreements ? [3 Marks]

Answer:
1. Bilateral Trade Agreement: An agreement for the exchange of goods and services between two countries.
2. Multilateral Trade Agreement: An agreement made by a country with more than two nations for the exchange of goods and services, such as agreements under the WTO.

Teacher's Note:
a) The basis of difference is the number of countries involved: two versus more than two.
b) The WTO promotes multilateral trade agreements among its member countries.

34. Read the following text carefully :

To ensure inclusive and quality education for all, the Indian government has launched several important schemes. These schemes aimed at improving access, equity and learning outcomes, especially among disadvantaged group.
The Right to Education (RTE) Act, passed by the India Parliament on August 4, 2009, guarantees free and compulsory education to every child between 6-14 years of age. It ensures that all children have access to education in neightbourhood schools, until they complete elementary education. Another key initiative is Sarva Siksha Abhiyan (SSA). It was introduced in 2001. It is one of India's flagship programmes for the Universalisation of Elementary Education.
Digital India Campaign, launched on July 1, 2015, focuses on transforming India into a digitally empowered society by improving mobile and internet connectivity, particularly in rural and remote regions. This initiative supports digital learning & access to educational resources.
Through these initiatives, the government strives to create an equitable, accessible & quality driven educational environment for all children, laying a strong foundation for national development.
On the basis of the given text and common understanding, answer the following questions :

(i) Identify, which law guarantees free and compulsory education upto the age of 14 years. Explain, how does it help in enhancing access to education. [3 Marks]

Answer:
1. The Right to Education (RTE) Act, 2009 guarantees free and compulsory education up to the age of 14 years.
2. It enhances access to education because every child between 6 and 14 years can attend school without any financial burden.
3. It provides schools in neighbourhood areas, making education easy to reach. This brings in children from disadvantaged groups and helps all children complete elementary education.

Teacher's Note:
a) Naming the RTE Act carries 1 mark; the explanation carries 2 marks.
b) Keywords: free, compulsory, 6-14 years, neighbourhood schools, disadvantaged groups.

(ii) In your opinion, how has the increase in public spending on education contributed to India's social and economic transformation ? Support your answer with valid arguments. [3 Marks]

Answer:
1. Higher government spending has made education more accessible, especially for the weaker sections, which promotes social equality.
2. Education has improved skills and knowledge, leading to better job opportunities and higher productivity.
3. This has raised the standard of living of the people and supported the overall development of the country.

Teacher's Note:
a) Cover both sides: social (equality, access) and economic (skills, productivity, income).
b) The answer is marked as a whole, so link education spending to human capital formation.

Please click the link below to download pdf file of CBSE Class 12 Economics Question Paper 2026 Solved Code 58-1-1