Economics Answer Keys Paper Code 58/5/1
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CBSE conducted class 12 economics final exam on 19.03.2025. As usual we are bringing you answer key of the paper. These answer keys cover all the MCQs appeared in the Economics Paper Code 58/5/1.
All the right answers have been briefly explained so that students can learn about the reasoning behind the right answer.
They are reliable as they have been prepared by subject expert having years of experience in teaching economics at school level.
So, below are CBSE Class 12 Economics Answer Keys Paper Code 58/5/1 with brief explanation.
Section - 1 Introductory Macro Economics
Q.1 To arrive at the value of Net Value added at Market Price (NVA at MP), _________must be______to/from Gross Value Added at Market Price (GVA at MP).
ANSWER
Answer: Option (B) is correct – Depreciation, Subtracted.
Brief Explanation: In order to obtain Net from Gross in National Income Accounting, you need to subtract Depreciation from Gross.
Net = Gross – Depreciation
Q.2 Identify which of the following does not represent a public good.
ANSWER
Answer: Option (C) is correct – Purchase of Railway ticket by an individual.
Brief Explanation: All other options are example of Public Goods which are non-rivalrous and non-excludable.
Railway ticket does have features rivalry and exclusion as buying a ticket by one person will decrease the availability of tickets for other person. Moreover, train journey cannot be performed without a valid ticket. So, it is also excludable.
Q.3 Market forces of demand and supply, actively interact under_________exchange rate system to determine the foreign exchange.
ANSWER
Answer: Option (B) is correct – Flexible.
Brief Explanation: It is under flexible exchange rate system that foreign exchange is determined by market forces of demand and supply without any outside intervention. Even in Managed Floating System, Central Bank intervenes to keep the foreign exchange rate in limits. In fixed exchange rate system, the government itself decide the exchange rate.
Q.4 Read the following statement carefully:
Statement 1: During deflationary gap, the central bank of a country may increase the repo rate.
Statement 2: The government can reduce the deflationary gap by purchasing Government Securities in the open market.
ANSWER
Answer: Option (D) is correct – Both statements 1 and 2 are false.
Brief Explanation: Deflationary gap arises in situation of deficit demand in the country. So, Central Bank need to increase money supply in the economy to control deficit demand. Decrease of repo rate is advised not increase in repo rate in such situation.
Increasing repo rate makes it costly for commercial bank to take credit from Central Bank which may result increase of lending rates by Commercial Banks for general public. It would reduce demand for credit and money supply in the economy.
With regard to statement 2, it can be said that it is the central bank not the government which purchase and sell government securities on behalf of the government to control situations of inflation and deflation.
Q.5 Under the Keynesian theory, Reference Line is a straight line passing through the origin drawn at an angle of_______.
ANSWER
Answer: Option (B) is correct – 45
Brief Explanation; Under Keynesian theory, Reference Line is taken as 45 degree in analysis of income and employment determination.
Q.6 According to the data presented in the Union Budget 2023-24, the total receipts of the government (other than borrowings) and the total expenditure are estimated as Rs. 20 lakh crore and Rs. 45 lakh crore respectively. Therefore, the value of_______deficit would be Rs.25 lakh crore.
ANSWER
Answer: Option (B) is correct – Fiscal.
Brief Explanation: Fiscal Deficit Formula is:
Fiscal Deficit = Total Expenditure (revenue expenditure + capital expenditure) – Total Receipts (Revenue receipts + capital receipts other than borrowings)
Fiscal deficit shows borrowing requirements of the government.
Q.7 Read the following statements carefully:
Statement 1: Marginal Propensity to Consume (MPC) exhibits the consumption per unit of income.
Statement 2: As the national income of a country rises, the proportionate increase in the consumption is always more than the increase in the Income.
ANSWER
Answer: Option (D) is correct – Both statements 1 and 2 are false.
Brief Explanation: It is Average Propensity to Consume (APC), not MPC, which exhibits the consumption per unit of income.
APC = C/Y
For the statement 2 – As the national income rise, proportionate increase in consumption is generally lower than the increase in the income as per Keynes Psychological Law of Consumption. However, increase in consumption out of increase in income can be equal to increase in income only in that case when there is no saving.
Q.8 In a two sector economy, Aggregate Supply can be determined by adding______and________.
ANSWER
Answer: Option (C) is correct – consumption, savings
Brie Explanation: In Keynesian Model of determination of Income and Employment, National Income is equal to Aggregate Supply.
AS = Y
Income can either be consumed (spent) or saved. So,
AS = C + S
Q.9 Read the following statements carefully:
Statement 1: Foreign aids are the capital receipts for the government.
Statement 2: Disinvestment may lead to a decrease in the assets of the government.
ANSWER
Answer: Option (B) is correct – Statement 1 is false and Statement 2 is true.
Brief Explanation: Capital receipts affect assets and liabilities of the government. However, Foreign Aids are given without creating any liabilities upon the government. So, they are transfer payments and hence can be categorized as revenue receipts in Budget.
Disinvestment is selling off shares of Public Sector Undertakings to Private Sector. So, it decreases assets of the government.
Q.10 From the following, identify the situation which indicates the Current Account Surplus (CAD) in Balance of Payments (BoP) account of a nation.
ANSWER
Answer: Option (A) is correct – Excess of receipts on current account over the payments on current account.
Brief Explanation: Surplus in Current Account will occur when Receipts are greater than Payment in Current Account while Deficit occurs when Payments are greater than Receipts in Current Account.
Section -2 Indian Economic Development
Q.18 Production of diverse varieties of crops rather than one specialized crop, is known as diversification of_______.
ANSWER
Answer: Option (A) or (B) is correct – Crops/Agricultural Production
Brief Explanation: The definition given in the question is definition of crop diversification. However, crop diversification is also part of diversification of agricultural production.
Q.19 Read the following statements…
Assertion (A): People spend to acquire information related to labour and other markets (like education and health).
Reason (R): Expenditure on information is necessary for efficient utilization of human capital stock.
ANSWER
Answer: Option (A) is correct – Both Assertion and Reason are true and Reason is the correct explanation of Assertion.
Brief Explanation: In order to fully utilize human capital stock, it is very much necessary that people have information about the availability of work. This information will help them get work and hence, their skill and knowledge would be used properly.
Q.20 In the post-independence era, the policy makers of India emphasized on self-reliance for the first________Five Year Plans.
ANSWER
Answer: Option (B) is correct – 7
Brief Explanation: 7th Five-year plan ended in 1990, after which India opened its economy for the world on larger scale. Till then India had followed a policy of self-reliance, especially by adopting import substitution policy.
Q.21 Identify which of the following statements is INCORRECT about the Rural Banking System in India?
ANSWER
Answer: The Rural Banking System in India works under the guidance, instruction and supervision of the State Bank of India.
Brief Explanation: State Bank of India is just a commercial Bank not a supervisory body of banking system. RBI is overall supervisory body of entire banking system in India including Rural Banking System.
However, National Bank for Agriculture and Rural Development (NABARD) was also set up in 1982 as an apex body to coordinate the activities of all institutions involved in the rural financing system.
Q.22 Identify which of the following statements is INCORRECT about the functions of environment.
ANSWER
Answer: Option (D) is correct – Environment deteriorates quality of life.
Brief Explanation: Environment enhances quality of life not deteriorates it.
Q.23 Read the following statements….
Assertion (A): Under the financial Sector Reforms introduced in 1991, foreign investment limit in banks was raised up to around 74%.
Reason (R): Foreign Institutional Investors (FIIs) were allowed to invest in Indian Financial Markets, post-1991.
ANSWER
Answer: Option (B) is correct – Both Assertion and Reason are true but Reason is NOT the correct explanation of Assertion.
Brief Explanation: Post 1991 reforms, foreign investment limit in banks was raised to 74% but allowing investment by FIIs is not suitable reason for that.
Q.24 “Suppose an imaginary economy is experiencing a situation of rise in Real Gross Domestic Product (GDP), without any corresponding adequate rise in the employment opportunities in the economy.”
In economic parlance, such a situation is termed as _______growth.
ANSWER
Answer: Option (D) is correct – Jobless.
Brief Explanation: GDP growth being more that employment generation rate is a case of jobless growth as explained in the question itself. This mainly happens due to increased use of technology in production process which needs less human workers.
Q.25 Read the statements carefully:
Statement 1: The British Policies led to huge employment generation in the secondary and tertiary sectors of the Indian Economy.
Statement 2: The real motive of the colonial government’s infrastructural development was to benefit interests of India.
ANSWER
Answer: Option (D) is correct – Both statements 1 and 2 are false.
Brief Explanation: Whatever infrastructural development British did in India like railways etc, it was only for the interest of Britishers or Britain, not for India. Moreover, their policies also led to rise in percentage of population engaged in Primary sector especially agriculture. Huge employment is secondary and tertiary sector was not generated.
Q.26 Read the following statements carefully:
Statement 1: The purchase of food grains, made by the government on the Minimum Support Price (MSP) is maintained as buffer stock.
Statement 2: Minimum Support Price (MSP) safeguards the farmers against any sharp fall in farm product prices.
ANSWER
Answer: Option (C) is correct – Both statements 1 and 2 are true.
Brief Explanation: MSP has been introduced by the government to safeguard farmers against price fluctuations of farm products. Government purchases certain farm products like wheat and rice on MPS and store it as Buffer Stock which is used in times of need and for Public Distribution System (PDS).
Q.27 Study the following image carefully:
From the following, choose the correct option which indicates similarities in the policies of India and Pakistan, in the post 1947 period.
ANSWER
Answer: Option (c) is correct – Import Substitution
Brief Explanation: After independence, both India and Pakistan adopted nearly similar economic strategies like Five Year Plans, Mixed Economic System, Green Revolution, Import Substitution etc.
Dual Pricing Policy, Commune System and Great Proletarian Cultural Revolution are related to economic history of China.
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