ICSE Class 10 Economics Sample Paper 2022 with Solutions

ICSE SEMESTER 2 EXAMINATION
SPECIMEN QUESTION PAPER
ECONOMICS

Maximum Marks: 40
Time allowed: One and a half hours

SECTION A

(Attempt all questions)

Question 1
Choose the correct answers to the questions from the given options. (Do not copy the question, Write the correct answer only.) [10]

(i) Inflation means __________ rise in price. [1 Mark]
(a) Continuous
(b) Sustainable
(c) No
(d) High

Answer: (a) Continuous

Inflation is defined as a persistent and continuous upward movement in the general price level.

Teacher's Note:
a) Remember that inflation requires a continuous increase in prices over time, not just a one-time price hike.
b) Students often confuse a high price level with inflation; inflation refers to the process of rising prices.

(ii) The debt which yields income to the government is called as: [1 Mark]
(a) Gross
(b) Productive
(c) Unproductive
(d) Internal

Answer: (b) Productive

Productive debt creates capital assets or generates revenue for the government.

Teacher's Note:
a) Productive loans are self-liquidating as they yield direct income to pay off principal and interest.
b) Do not confuse productive debt with internal debt, which relates to the source of borrowing rather than its utility.

(iii) Capital expenditure is __________ in nature. [1 Mark]
(a) Non-recurring
(b) Recurring
(c) Simple
(d) Complex

Answer: (a) Non-recurring

Capital expenditures create assets or reduce liabilities and are incurred occasionally rather than regularly.

Teacher's Note:
a) Capital expenditure is non-recurring because it involves long-term investments like building infrastructure.
b) Revenue expenditure is recurring in nature, meant for day-to-day administrative expenses.

(iv) Public Distribution system is a __________ measure of government to protect the consumers. [1 Mark]
(a) Administrative
(b) Technical
(c) Collateral
(d) Demonstrative

Answer: (a) Administrative

The Public Distribution System (PDS) is an administrative price control and food security measure.

Teacher's Note:
a) Administrative measures are direct actions taken by the government to regulate markets and protect consumers.
b) Ensure you distinguish between legislative, administrative, and economic measures of consumer protection.

(v) Under Right to Information any citizen of India may request information from a __________ authority. [1 Mark]
(a) Public
(b) Private
(c) Personal
(d) Professional

Answer: (a) Public

The Right to Information (RTI) Act applies strictly to public authorities funded or controlled by the government.

Teacher's Note:
a) Public authorities include bodies owned, controlled, or substantially financed by the government.
b) Private bodies generally do not fall under the direct purview of standard RTI requests unless specified.

(vi) Public debt whose principal amount is not refunded by the government is: [1 Mark]
(a) Redeemable debt
(b) Irredeemable debt
(c) Social
(d) Public

Answer: (b) Irredeemable debt

Irredeemable debt carries no fixed maturity date for the repayment of the principal amount.

Teacher's Note:
a) The government only pays periodic interest on irredeemable debt without a promise to repay the principal.
b) Redeemable debt has a fixed schedule and date for principal repayment.

(vii) Goods and Services Tax (GST) is an example of: [1 Mark]
(a) Direct tax
(b) Indirect tax
(c) Income tax
(d) Local tax

Answer: (b) Indirect tax

GST is levied on the supply of goods and services and is ultimately borne by the final consumer.

Teacher's Note:
a) An indirect tax is characterized by the shifting of the tax burden from the seller to the ultimate consumer.
b) Income tax is a direct tax because its burden cannot be shifted to another person.

(viii) Revenue which is derived by the government from Railway fares is: [1 Mark]
(a) Commercial revenue
(b) Administrative revenue
(c) Social revenue
(d) Welfare revenue

Answer: (a) Commercial revenue

Commercial revenue is earned by the government through the sale of goods and services produced by public enterprises.

Teacher's Note:
a) Railway fares, postal charges, and electricity bills are classic examples of commercial revenue.
b) Administrative revenue arises from the sovereign functions of the state, such as fees, fines, and penalties.

(ix) Overdraft facility is available on: [1 Mark]
(a) Saving account
(b) Current account
(c) Posting account
(d) Time deposit

Answer: (b) Current account

Current account holders are business entities that enjoy the privilege of withdrawing more than their deposit balance up to a sanctioned limit.

Teacher's Note:
a) Overdraft is a short-term credit facility extended primarily to current account holders.
b) Savings bank accounts generally do not feature an overdraft facility under normal terms.

(x) Bank having power of note issue in India is: [1 Mark]
(a) State Bank of India
(b) Reserve Bank of India
(c) Canara Bank
(d) Federal bank

Answer: (b) Reserve Bank of India

The Reserve Bank of India (RBI) holds the sole monopoly for issuing currency notes in the country.

Teacher's Note:
a) The Central Bank acts as the sole currency authority in the economy.
b) Commercial banks like SBI accept deposits and grant loans but do not have the right to issue currency notes.

SECTION B

(Attempt any three questions.)

Question 2

(i) What is the meaning of consumer awareness? [2 Marks]

Answer:
Consumer awareness is the knowledge that a consumer should have about his or her legal rights and duties. An aware consumer is able to make informed choices while purchasing various goods and services of appropriate quality and at appropriate prices.

Teacher's Note:
a) Consumer awareness protects buyers from exploitation, unfair trade practices, and sub-standard goods.
b) Mention both rights and duties for complete credit in a two-mark question.

(ii) Define public debt [2 Marks]

Answer:
Public debts are the loans taken by the government. Such loans can be taken internally from the residents of the country as well as externally from foreign governments, institutions, and people. Public debt carries an interest burden and must be repaid along with the principal amount at a mutually agreed date.

Teacher's Note:
a) Public debt represents financial liabilities incurred by public authorities.
b) Clearly state that public debt includes both internal and external borrowings.

(iii) Differentiate between Demand deposit and Fixed deposit (Three points) [3 Marks]

Answer:

Teacher's Note:
a) Tabular form is ideal for differentiation questions, ensuring all three distinct points are clearly contrasted.
b) Students must specify liquidity and interest rate differences as core distinguishing features.

(iv) Explain any three duties of a consumer. [3 Marks]

Answer:
Following are the three duties of a consumer:
1. To check the Maximum Retail Price of the product: A consumer must not pay a price higher than the MRP.
2. Take a proper bill of the purchase: Insisting on a cash memo or receipt serves as proof of purchase in case of complaints.
3. If the product is found defective or non-performing, take up the matter first with the manufacturer and then with the courts if not resolved.

Teacher's Note:
a) Consumer duties complement consumer rights to ensure fair market transactions.
b) Always list distinct and practical responsibilities such as checking bills and reporting defects.

Question 3

(i) Give one point of difference between creeping and running inflation. [2 Marks]

Answer:
Creeping inflation generally consists of a 2 to 3 percent annual rise in prices and is considered conducive to economic progress and growth. On the other hand, running inflation consists of a sustained rise in prices ranging from 8 percent to 20 percent per annum, serving as a warning signal that affects the poor and middle class adversely.

Teacher's Note:
a) The rate of price increase is the primary basis of differentiating various types of inflation.
b) Highlight the economic impact or percentage range to secure full marks.

(ii) Why is central bank called as a 'lender of last resort' for a commercial bank? [2 Marks]

Answer:
The Central Bank of the country is called the "Lender of the Last Resort" because it provides financial help to commercial banks in times of emergency. When a commercial bank faces a liquidity shortage and cannot secure funds from other sources, the Central Bank grants loans or purchases securities from it to bail it out.

Teacher's Note:
a) This function prevents systemic financial collapse during banking panics or liquidity crunches.
b) Ensure you explain that this assistance is provided only when commercial banks fail to secure funds elsewhere.

(iii) Explain any three rights of a consumer. [3 Marks]

Answer:
Following are the three rights of a consumer:
1. Right to choose: A consumer has every right to choose the product he desires and cannot be compelled to buy unwanted items.
2. Right to information: A consumer has the right to know about the contents, MRP, manufacturing and expiry dates, and directions for use.
3. Right to safety: A consumer has the right to be protected against products, production processes, and services which are hazardous to health or life.

Teacher's Note:
a) Consumer rights are enshrined under the Consumer Protection Act to safeguard consumer interests.
b) Provide brief and accurate definitions for each named right.

(iv) Differentiate between revenue and capital expenditure. (Three points) [3 Marks]

Answer:

Teacher's Note:
a) Emphasize asset creation as the primary dividing line between capital and revenue expenditures.
b) Present distinctions clearly in tabular form with corresponding points.

Question 4

(i) Define public expenditure. [2 Marks]

Answer:
Public expenditure is the expenditure incurred by public authorities (central, state, and local governments) to satisfy those common wants which people in their individual capacity are unable to satisfy efficiently. It thus satisfies collective social wants.

Teacher's Note:
a) Public expenditure reflects government priorities in resource allocation and welfare.
b) Mention that it is incurred by governments for collective social welfare.

(ii) What does public finance mean? [2 Marks]

Answer:
Public finance is the study of the financial aspects of the government. The financial aspects studied under public finance include the revenues, expenditures, and public debts of central, state, and local governments along with their financial administration.

Teacher's Note:
a) Public finance deals with the income and expenditure of public authorities.
b) Mention all three core components: revenue, expenditure, and debt.

(iii) (a) Mention two sources of public revenue. [1½ Marks]

Answer:
Following are two sources of public revenue:
1. Tax: Compulsory contributions collected by the government from residents to meet general expenses without any direct quid pro quo.
2. Fines: Monetary penalties collected from citizens for violating laws and regulations such as traffic rules.

Teacher's Note:
a) Public revenue comprises all income earned or collected by the government.
b) Taxes and administrative fees or fines are major classifications of revenue sources.

(iii) (b) Explain the term Internal debt. [1½ Marks]

Answer:
Internal debt refers to loans taken by the government from residents, individuals, households, and institutions within the country. Internal debt may be voluntary or compulsory.

Teacher's Note:
a) Internal debt involves borrowing from domestic entities in domestic currency.
b) Distinguish clearly between internal borrowing (within the nation) and external borrowing (from foreign entities).

(iv) Explain any three causes of cost push inflation. [3 Marks]

Answer:
Following are three causes of cost push inflation:
1. Fluctuations in Output and Supply: Wide fluctuations in agricultural production, power breakdowns, strikes, and lockouts lower the output of goods, driving up costs.
2. Rise in Wages: Higher cost of living leads workers to demand higher wages, which when met increases production costs and prices.
3. Increases in Profit Margins: High profit margins charged by producers due to monopolistic positions or emergency situations push up final prices.

Teacher's Note:
a) Cost push inflation originates from the supply side due to rising production costs.
b) Explain each cause concisely, focusing on elements like wages, supply shocks, and profit markups.

Question 5

(i) Explain the term progressive tax. [2 Marks]

Answer:
A progressive tax refers to a tax system in which the rate of tax increases with the rise in the taxpayer's income. Under this system, a person with a lower income pays a smaller percentage of income as tax, while a person with a higher income pays a higher percentage.

Teacher's Note:
a) Progressive taxation promotes economic equality by reducing income disparities.
b) Emphasize that both the tax amount and the tax rate increase as income rises.

(ii) What does Consumer price index mean? [2 Marks]

Answer:
Consumer Price Index (CPI), also known as the cost of living index, is a measure that represents the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Teacher's Note:
a) CPI serves as an important indicator to measure retail inflation.
b) Mention that it tracks a specific basket of consumer goods over time.

(iii) (a) What is the full form of COPRA? [1 Mark]

Answer:
Consumer Protection Act

Teacher's Note:
a) COPRA stands for the Consumer Protection Act.
b) Ensure correct spelling of the full form to secure full marks.

(iii) (b) Mention any two features of COPRA. [2 Marks]

Answer:
Following are two features of COPRA:
1. It provides consumers the right to seek redressal against unfair trade practices or exploitation by businessmen.
2. This Act covers almost all goods and services across public, private, and cooperative sectors.

Teacher's Note:
a) COPRA established a three-tier quasi-judicial machinery for consumer dispute redressal.
b) Highlight consumer protection and universal coverage of goods and services as key features.

(iv) (a) Define inflation [1½ Marks]

Answer:
Inflation means a state of general and continuous rise in prices. It is a situation in which prices of goods and services constantly rise at a fast pace, representing a process of rising prices rather than simply a high level of prices.

Teacher's Note:
a) Inflation is characterized by persistence and generality across commodities.
b) Emphasize that inflation is a dynamic process of rising prices, not just a static high price level.

(iv) (b) What does hyper inflation mean? [1½ Marks]

Answer:
Hyperinflation, also known as galloping inflation, occurs when the annual increase in prices exceeds 20 percent to 100 percent or even more, rendering money almost worthless and disrupting economic and political life.

Teacher's Note:
a) Hyperinflation is an extreme and runaway form of price rise that destroys the value of currency.
b) Mention the severe economic consequences, such as monetary collapse.

Question 6

(i) Explain the term food basket. [2 Marks]

Answer:
Food basket refers to the combination of various food items included as part of a person's diet to fulfill everyday nutritional requirements. It is generally prepared with the objective of determining the poverty line for various groups in the country.

Teacher's Note:
a) A food basket establishes standard caloric intake benchmarks.
b) Connect the concept to poverty line estimation to provide a complete economic context.

(ii) What are the demerits of indirect tax? [2 Marks]

Answer:
Following are the demerits of indirect taxes:
1. Regressive: Indirect taxes are regressive as they are paid equally by the rich and poor on essential commodities, lacking equity.
2. Inflationary: Imposing indirect taxes raises market prices, pushing up the cost of living and triggering demands for higher wages.

Teacher's Note:
a) Indirect taxes burden poorer sections disproportionately.
b) State both regressive nature and inflationary impact clearly for full marks.

(iii) Explain the different rights of a consumer. [3 Marks]

Answer:
Different rights of a consumer include:
1. Right to be Heard: Consumer grievances receive due consideration at appropriate forums through consumer organizations.
2. Right to Seek Redressal: Consumers have the right to seek legal remedy against unfair trade practices and exploitation.
3. Right to Consumer Education: Consumers have the right to acquire knowledge and skills to remain informed throughout life and prevent exploitation.

Teacher's Note:
a) Consumer rights empower buyers to fight against unscrupulous business practices.
b) List and briefly define distinct rights like redressal, hearing, and education.

(iv) Why are the consumers exploited by retailers? [3 Marks]

Answer:
Consumers are exploited by retailers due to the following reasons:
1. Low Literacy: Lack of awareness regarding weights, measures, and standards leads to consumer exploitation.
2. Lack of Bargaining Power: Individual consumers often lack bargaining strength against organized retailers.
3. Emergencies: Retailers frequently manipulate pricing during emergencies and times of crisis in the absence of market controls.

Teacher's Note:
a) Retailer exploitation stems from information asymmetries and market vulnerabilities.
b) Mention practical factors like illiteracy, weak bargaining power, and emergency profiteering.