CBSE Class 12 Economics Question Paper 2026 Solved Code 58-1-2

SECTION A (Macro Economics)

1. 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]
(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 is the amount by which planned (ex-ante) AD falls short of AS at full employment.
b) Gaps are always measured with planned (ex-ante) values, never with actual (ex-post) values.

2. 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]
(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 exchanges and family services are productive but are not recorded in money, so GDP is underestimated.
b) Depreciation is not excluded from GDP, since GDP is a gross measure.

3. Identify, which of the following is true at the Break Even level of Income. (Choose the correct option) [1 Mark]
(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 break-even point, \( C = Y \), so \( APC = \frac{C}{Y} = 1 \) and saving is zero.
b) At this point APS = 0, not equal to APC.

4. 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]
(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) It is intermediate goods, not final goods, that lose their identity in the production process.
b) Final goods such as tea leaves may be transformed at home, but that is consumption, not production.

5. 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]
(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 go to the current account.
b) The Reason describes the capital account, so it cannot explain the Assertion about the current account.

6. "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 kept by banks themselves in liquid assets like cash, gold and approved government securities.
b) A higher SLR leaves less money for lending, so credit creation falls.

7. '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]
(A) 2,50,000
(B) 86,000
(C) 1,64,000
(D) 1,42,000

Answer: (C) 1,64,000

Teacher's Note:
a) M1 = Currency with public + Net demand deposits + Other deposits with RBI = 1,42,000 + 22,000 = Rs. 1,64,000 crore.
b) Time deposits are not part of M1; adding them is a common mistake.

8. 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, and firms pay them rent, wages, interest and profit.
b) A two sector economy has only households and firms, so government and banks are ruled out.

9. 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]
(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 act as a store of value.
b) Store of value lets people keep purchasing power for future use.

10. 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 fall in currency value by government action under a fixed rate system is devaluation; depreciation happens through market forces under a flexible system.
b) Under a floating system, the rate is set by demand and supply without active intervention by authorities.

11. "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 function indicated is that of banker to the government. The RBI keeps the accounts of the government, receives deposits from it and makes payments on its behalf. It also handles exchange, remittances and other banking operations for the government. Besides this, during a financial crisis the RBI gives credit (loans) to the government, so that the government can function smoothly and meet its obligations effectively.

Teacher's Note:
a) Name the function clearly: "Banker to the Government" is the key term.
b) Mention both roles: managing government accounts and giving credit in times of need.
c) This answer is marked as a whole, so write it as one connected explanation.

12. (A) Two friends, Devanshi and Harshit, were discussing whether prize money from lottery winnings, should be included in India's National income.
Harshit was of the view that it should be included, while Devanshi did not agree with him.
As their Economics teacher, guide them with correct treatment of the same with valid argument. [3 Marks]

Answer: Devanshi is correct. Prize money from lottery winnings should not be included in the National Income of India because it is a windfall gain. It is income received without rendering any productive service in return. National income includes only those incomes which arise from the production of goods and services. Therefore, lottery winnings are not a part of national income.

Teacher's Note:
a) Start by stating who is correct (Devanshi), then give the reason.
b) Use the keywords "windfall gain" and "no productive service rendered".

OR

(B) 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 (Real GDP, at constant prices) is a better indicator of welfare than GDP at current prices (Nominal GDP).
2. Real GDP 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. In contrast, Nominal GDP may rise due to a rise in output, a rise in prices, or both. A rise in prices alone does not make people better off.

Teacher's Note:
a) Clearly say that Shahid's measure (Real GDP) is better.
b) The key reason: Real GDP changes only with physical output, not with prices.

13. (A) 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:
1. Factor income: Rental income from her flat, interest income from her fixed deposits, and her retirement pension (it is a deferred payment for past services).
2. Transfer income: Money sent by her children settled abroad.
3. Factor income is the income earned by the factors of production for rendering their productive services.
4. Transfer income is the income received without rendering any productive service in return.

Teacher's Note:
a) Pension is a factor income because it is a deferred payment for work done earlier.
b) Remittances from family abroad are unilateral, so they are transfer income.
c) Give the meaning of both terms; each carries 1 mark.

OR

(B) For a hypothetical economy, assuming there are only two firm (X and Y) with equal values of Gross Value Added (GVA).
On the basis of the following data, estimate the values of Domestic Sales by firm X :
S. No. | Items | Amount (in Rs. crore)
(i) | Value of Output of firm Y | 1,400
(ii) | Purchases by firm X from firm Y | 400
(iii) | Exports by firm X | 200
(iv) | Purchases by firm Y from firm X | 300
(v) | Additions to Stock of firm X | 100
(vi) | Consumption of fixed capital | 100 [4 Marks]

Answer:
Step 1: GVA of firm Y = Value of Output of firm Y - Purchases by firm Y from firm X
\( = 1,400 - 300 = \) Rs. 1,100 crore
Step 2: Since both firms have equal GVA, GVA of firm X = Rs. 1,100 crore
Step 3: GVA of firm X = Domestic Sales + Exports + Additions to Stock - Purchases from firm Y
So, Domestic Sales of firm X = GVA of firm X - Exports - Additions to Stock + Purchases by firm X from firm Y
\( = 1,100 - 200 - 100 + 400 \)
= Rs. 1,200 crore

Teacher's Note:
a) Purchases by one firm from the other are intermediate consumption, so subtract them to get GVA.
b) Consumption of fixed capital is not needed, because the question uses gross value added.
c) Write the formula first; the formula step carries the most marks.

14. 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 tilted weighing balance. The left pan holds a large heavy weight and hangs lower, with two upward arrows labelled "General Price level"; the right pan holds a few coins and is raised, with two downward arrows labelled "Value of Money".]

Answer: The image shows rising general price level and falling value of money, that is, inflation (excess demand). The Central Bank may use these measures:
1. Repo Rate: The Central Bank raises the repo rate. Commercial banks then raise their lending rates, so credit becomes costlier and borrowing is discouraged. Aggregate Demand falls, which helps to correct inflation.
2. Open Market Operations: The Central Bank sells government securities in the open market. This reduces the funds available with commercial banks for lending. Credit and Aggregate Demand fall, which helps to control inflation.

Teacher's Note:
a) First identify the problem shown in the image as inflation; many students miss this step.
b) For each measure, show the chain: tool, cost or availability of credit, fall in AD, fall in prices.
c) Direction matters: raise the repo rate and sell securities to fight inflation.

For Visually Impaired Candidates (in lieu of Q. 14)

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 lowers the repo rate. Commercial banks then lower their lending rates, so credit becomes cheaper and borrowing is encouraged. Aggregate Demand rises, which corrects deficient demand.
2. Open Market Operations: The Central Bank buys 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, the direction is opposite: cut the repo rate and buy securities.
b) End each point with "AD rises", since that is how the problem gets corrected.

15. 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.
1. The loan taken by the Government of Zeta is an accommodating transaction. Such transactions are undertaken by the monetary authorities to cover a deficit or surplus in the Balance of Payments. They are not done for any economic motive.
2. The loan taken by Michel is an autonomous transaction. Such transactions are independent of the state of the BoP and are generally done with an economic motive, such as profit from expanding his business.

Teacher's Note:
a) Classify both loans separately; only Michel's loan is autonomous.
b) Keywords: "to cover BoP deficit" for accommodating, "economic motive" for autonomous.

16. 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 are those taxes whose impact and incidence fall on the same person. The burden of paying a direct tax cannot be shifted to others.
2. Example of a direct tax: Income tax.
3. Indirect taxes are those taxes whose impact and incidence may fall on different persons. The burden of paying an indirect tax can be shifted to others.
4. Example of an indirect tax: Goods and Services Tax (GST).

Teacher's Note:
a) The basis of difference is impact and incidence, or whether the burden can be shifted.
b) Give one example for each tax; 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 revenue is likely to strengthen the revenue base of the government. Overall, this balanced tax strategy will help to mobilise resources, support fiscal consolidation (lower deficit) and promote sustainable economic growth.

Teacher's Note:
a) Link higher tax revenue to a stronger revenue base and fiscal consolidation.
b) Use the words from the passage, such as "mobilise resources" and "sustainable growth".

17. (A) Income of an economy increased from Rs. 40,000 to Rs. 1,00,000 crore. Savings of the economy increased from Rs. 4,000 crore to Rs. 20,000 crore.
(i) Calculate Average Propensity to Consume (APC) and Average Propensity to Save (APS) before and after the rise in income. [4 Marks]

Answer:
Formulae: \( C = Y - S \), \( APC = \frac{C}{Y} \), \( APS = \frac{S}{Y} \)
Before the rise in income: \( Y = 40,000 \), \( S = 4,000 \), so \( C = 40,000 - 4,000 = 36,000 \) (Rs. crore)
\( APC = \frac{36,000}{40,000} = 0.9 \)
\( APS = \frac{4,000}{40,000} = 0.1 \)
After the rise in income: \( Y = 1,00,000 \), \( S = 20,000 \), so \( C = 1,00,000 - 20,000 = 80,000 \) (Rs. crore)
\( APC = \frac{80,000}{1,00,000} = 0.8 \)
\( APS = \frac{20,000}{1,00,000} = 0.2 \)

Teacher's Note:
a) Find consumption first as income minus saving.
b) Check your work: APC + APS must always equal 1.

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

Answer: As income increases from Rs. 40,000 crore to Rs. 1,00,000 crore, APS rises from 0.1 to 0.2. This shows a direct relationship between the level of income and APS: APS rises as income rises.

Teacher's Note:
a) Quote the calculated values (0.1 and 0.2) while drawing the conclusion.
b) The word "direct relationship" is the key value point.

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: The type of consumption indicated is Autonomous Consumption. Autonomous consumption does not depend on the level of income; it takes place even when income is zero. It is the minimum level of consumption which is essential for survival, for example basic food and clothing. It is financed from past savings or borrowing.

Teacher's Note:
a) Identification (Autonomous Consumption) carries 1 mark; the explanation carries 2 marks.
b) Stress "independent of income" and "minimum consumption needed for survival".

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

Answer: In a two sector economy, Aggregate Demand (AD) is the sum of consumption and investment (\( AD = C + I \)). Investment is assumed to be autonomous, so it stays the same at all levels of income. But when income rises, consumption also rises. Therefore AD rises as income rises. Hence the AD curve slopes upward, showing a direct relationship between income and AD. It starts from a positive point on the Y-axis (equal to \( \bar{C} + \bar{I} \)) and rises with a slope equal to MPC.

Teacher's Note:
a) Explain that only consumption varies with income, while investment is autonomous.
b) The AD curve runs parallel to the consumption curve, above it by the amount of investment.

SECTION B (Indian Economic Development)

18. 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]
(A) Industrial
(B) Financial
(C) Taxation
(D) Foreign Trade

Answer: (B) Financial

Teacher's Note:
a) The capital market (stock markets) is a part of the financial sector.
b) Financial sector reforms cover banks, stock exchanges and foreign exchange markets.

19. The Montreal Protocol was signed in the year 1987 committing nations to __________. (Choose the correct option to fill in the blank) [1 Mark]
(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 bans the use of CFCs and other ozone-depleting substances.
b) Do not confuse it with the Kyoto Protocol, which deals with global warming.

20. 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]
(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 and non-farm jobs, not only agriculture.
b) The Reason explains why agriculture needs support, not why rural development is wider.

21. Identify, which of the following, highlights a highly relevant issue associated with evolving employment trends in India's labour market ? [1 Mark]
(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) Rising casual work (casualisation) is a key concern, as it means low wages and no job security.
b) Options about more salaried or formal jobs describe positive trends, not issues.

22. Match the terms given in Column-I with their respective meaning in Column-II. Select the correct option :
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 [1 Mark]
(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) Start with the surest pair: disguised unemployment means zero marginal productivity.
b) Seasonal unemployment matches (c), which leaves only option (C).

23. 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]
(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) Regulated markets were set up to create orderly and transparent marketing conditions.
b) The Reason gives the purpose of regulation, so it explains the Assertion.

24. Arrange the following events in China's economic development history in correct chronological sequence and select the correct option :
I. Great Proletarian Cultural Revolution.
II. Great leap forward
III. Introduction of Economic Reforms
IV. Launch of the First Five Year Plan [1 Mark]
(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 1965-66, Economic Reforms 1978.
b) Remember that reforms came last, in 1978.

25. 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 export surplus paid for invisible imports such as shipping, banking and insurance services from Britain.
b) It also paid for the expenses of the office set up by the colonial government in Britain and for war expenses.

26. 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]
(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 benefits of education, but the Reason does not explain why education builds skills and innovation.
b) In A-R questions, check whether R answers "why" A is true.

27. "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 attributes this definition to the United Nations Conference on Environment and Development (UNCED).
b) Note the words "Conference" and "Environment and Development" to pick the right option.

28. (A) During the 'Mann ki Baat' program aired on 29th 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: Investment in health care contributes to a nation's development by ensuring a healthy workforce. A healthy person is more productive than an unhealthy person. Healthy people can also supply labour without interruption for a longer period of time. Thus, better health care raises labour productivity, promotes human capital formation and finally supports the economic development of the country.

Teacher's Note:
a) Link health to productivity, then to human capital formation, then to development.
b) Use the keywords "healthy workforce" and "uninterrupted labour supply".

OR

(B) "Employment within the formal sector ensures better income and social benefits as against the informal sector."
Defend or refute the above statement with valid reason and example. [3 Marks]

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

Teacher's Note:
a) Begin with a clear stand: "defended".
b) The example carries a full mark, so do not skip it.

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's population growth rate fell sharply compared to India because the government introduced the one-child policy, which strictly limited families to one child.
2. Impact: This policy led to an ageing population, with a higher proportion of elderly people compared to young people. In the coming years this means fewer working people to support the elderly.

Teacher's Note:
a) "One-child policy" is the key term for the reason.
b) "Ageing population" is the key term for the impact; each point carries 1.5 marks.

30. "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 India and Pakistan followed the path of a mixed economic system, in which the public sector and the private sector work together.
2. Import substitution: Both countries adopted the policy of import substitution to protect their domestic industries from foreign competition, by producing at home the goods that were earlier imported.

Teacher's Note:
a) Other valid similarities: both started five year plans and both began economic reforms in the late 1980s or 1990s.
b) Name the strategy first and then explain it; each point carries 2 marks.

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

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

Teacher's Note:
a) "Zero marginal productivity" is the must-have keyword.
b) It is common in agriculture, where more family members work on a farm than 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 Sectors on the x-axis and Percentage of Workers (0 to 80) on the y-axis. Hatched bars show Male Workers (%) and vertically striped bars show Female Workers (%). Approximate values (male, female): Manufacturing 77, 22; Construction 83, 16; Trade 76, 23; Transport 86, 13; Education 55, 44; Health 48, 50; Accommodation & Restaurant 75, 23; IT/BPOs 61, 37; Financial Services 61, 37.]

Answer:
1. Male workers dominate in most sectors, such as manufacturing, construction, trade and transport.
2. Female participation is very low in construction and transport, which shows gender inequality in these sectors.
3. Education and health show a more balanced distribution. Female participation here is much higher than in other sectors, and in health it is slightly more than male participation.

Teacher's Note:
a) Quote the chart: for example, transport has the highest male share and the lowest female share.
b) Make one point on male dominance, one on low female share and one on balanced sectors.

For Visually Impaired Candidates (in lieu of Q. 31 (B))

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

Answer:
1. Women in rural areas are more actively engaged in economic activities than women in urban areas because poor economic conditions compel them to work to support the family.
2. In urban areas, men usually earn higher incomes, so families often discourage female members from taking up jobs.

Teacher's Note:
a) Link rural work to poverty and the need for extra family income.
b) Link lower urban participation to higher male income; each reason carries 1.5 marks.

32. (A) State and explain any two features which were observed in the demographic profile of India during the British rule. [4 Marks]

Answer:
1. Low literacy rate: Due to the lack of educational development and limited access to education, the overall literacy rate was very low. Female literacy was even lower.
2. High mortality rate: The mortality (death) rate was very high because of poor health facilities and widespread diseases. The infant mortality rate was also alarmingly high.

Teacher's Note:
a) State the feature (half mark) and then explain it (1.5 marks).
b) Other valid features: low life expectancy and widespread poverty.

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. The British developed basic infrastructure mainly to serve their own interests. Roads and railways were built mainly to move the army within India and to carry raw materials from the countryside to the nearest railway station or port, for export to England and other foreign places. Similarly, communication tools like the electric telegraph were introduced mainly to maintain law and order. The needs of the Indian people were not the main aim.

Teacher's Note:
a) Give examples: roads, railways and telegraph, each linked to a British motive.
b) The answer is marked as a whole, so start with a clear "Yes".

33. 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: The Right to Education (RTE) Act, 2009 guarantees free and compulsory education up to the age of 14 years. It enhances access to education by ensuring that every child between 6 and 14 years can attend school without any financial burden. It also provides schools in neighbourhood areas, which makes education easy to reach. This helps to include children from disadvantaged groups and ensures that all children complete elementary education.

Teacher's Note:
a) Naming the RTE Act, 2009 carries 1 mark; the explanation carries 2 marks.
b) Use the keywords "free", "neighbourhood schools" and "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: Higher government spending on education has played an important role in India's social and economic development. It has made education more accessible, especially for the weaker sections, and so it promotes equality. Education has improved skills and knowledge, which leads to better job opportunities and higher productivity. As a result, it has raised the standard of living of the people and helped the overall development of the country.

Teacher's Note:
a) Cover both sides: social (equality, access) and economic (skills, productivity, jobs).
b) The answer is marked as a whole, so write it as a connected argument.

34. (A) (i) Discuss any two objectives which were aimed at, by the introduction of Financial sector reforms by the Government of India during economic reforms of 1991. [3 Marks]

Answer:
1. To reduce the role of the RBI from regulator to facilitator of the financial sector. The aim was to give the financial sector more autonomy to take its own decisions without consulting the RBI.
2. To allow the establishment of private sector banks, both Indian and foreign, so as to increase competition in the banking sector.

Teacher's Note:
a) "Regulator to facilitator" is the key phrase examiners look for.
b) Other valid points: raising the foreign investment limit in banks and allowing FIIs to invest in Indian markets.

(ii) 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. Growth of Information Technology and Communication: Fast modes of communication, especially the growth of IT, make it easy to provide services from India to any part of the world.
2. Availability of skilled manpower: India has a large pool of efficient and skilled workers who are available at a relatively low cost.

Teacher's Note:
a) State the factor (half mark) and explain it (1 mark) for each point.
b) "Cheap skilled labour" and "IT revolution" are the two standard answers.

OR

(B) (i) "Although the subsidies play a crucial role in giving incentive to farmers to adopt modern agricultural technologies, they simultaneously impose a significant fiscal strain on the resources of the Government."
Justify the given statement with valid argument. [3 Marks]

Answer: Subsidies play a vital role in encouraging farmers to adopt modern agricultural technology, because small and marginal farmers may not be able to afford costly inputs like HYV seeds, fertilisers and pesticides without subsidies. However, subsidies also put a heavy fiscal burden on the government. Large spending on subsidies diverts the resources available for other development activities such as infrastructure, education and health.

Teacher's Note:
a) Cover both sides of the statement: the benefit to farmers and the burden on the government.
b) Mention the opportunity cost: money spent on subsidies is not available for development.

(ii) "The strategic sale of a public sector undertaking and the minority sale of its equity are both established instruments of disinvestment."
Defend or refute, the given statement with valid arguments. [3 Marks]

Answer: The statement is defended. Both strategic sale and minority sale are methods of disinvestment used by the government to reduce its ownership and encourage private participation. This leads to better efficiency and performance of public sector enterprises. In a strategic sale, a large share of government ownership is transferred to a private entity along with management control. In a minority sale, only a small portion of shares is sold and the government keeps control of the enterprise.

Teacher's Note:
a) The key difference is management control: it passes to the buyer only in a strategic sale.
b) Begin with a clear stand ("defended") and then explain both methods.

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