Economics (318) - April' 2014 | NIOS SENIOR SECONDARY Solved Papers

Note : (i) This Question Paper consists of two Sections, viz., ‘A’ and ‘B’.

(ii) All questions from Section ‘A’ are to be attempted.

(iii) Section ‘B’ has got more than one option. Candidates are required to attempt questions from one option only.

SECTION–A

2. A firm’s opening stock and stock investment are R 2,000 and R 1,000 respectively. Calculate its closing stock.                2

Ans.:-Closing stock = opening stock +stock investment – sales

                                       = 2000 + 1000 – 0

                                       = 3000

8. Calculate a firm’s value of output from the following data : 2

	Rs. (in lakhs)
1)            Gross value added at market price 2)            Intermediate consumption expenditure	75 35

9. State the law of supply.    2

Ans.:- Law of supply states the direct relationship between price and quantity supplied, keeping other factors constant.

10. Give the meaning of sustainable development. State four strategies of sustainable development.      5

Ans.:- Sustainable development refers to that development strategy which manages resources for increasing long term well being of people.

                Four strategies of sustainable development are:-

1.       Use of Non Conventional Sources of Energy:- India heavily depends on thermal and hydro power plants to meet its power needs. Both these types of plants pollute the environment. Wind power and solar energy can be effectively used to replace thermal and hydro power.

2.       Use of Gases:- Rural households I India generally use wood, dung cake (upla) and other biomass as fuel. This practice has led to several problems like deforestation reduction In green cover wastage of animal’s dung and air pollution. To meet this situation, subsidized LPG is being provided by the government. Besides it, govar gas plants are being encouraged through easy loans and subsidy.

3.       Establishment of Mini Hydel Plants:- Hilly areas have streams everywhere. Most of such streams are perennial. Mini hydel plants can be set up to use the energy of such streams to move small turbines. The electricity so generated can gbe used locally. Mini hydel plants are environment friendly as they do not change the land use pattern. Moreover, large scale transmission towers and cables are also not required in such plants.

4.       Use of Bio-compost :-  As we know that Indian farmers have switched over to the use of chemical fertilizers particularly since mid1960s. they have neglected the use of bio-compost fertilizers. The reckless use of chemical fertilizers has adversely affected the fertility of land and water bodies including ground water system. In recent years, the demand for organic food is on a rise. Therefore, famers again have started using organic manure.

11. From the following frequency distribution, prepare a ‘more than’ cumulative frequency distribution :          5

Class	Frequency
0-20 20-40 40-60 60-80 80-100	16 20 24 14 6

 

Class	Frequency	More than Cumulative frequency
0-20 20-40 40-60 60-80 80-100	16 20 24 14 6	More than 0 = 16+20+24+14+6 = 80 More than 20 = 20+24+14+6 = 64 More than 40 = 24+14+6 = 44 More than 60 = 14+6 = 20 More than 80 = 6 More than 100=0

12. Distinguish between the following : 5

a)            Domestic product and National product

b)            Open economy and Closed economy

Ans.:- a) Domestic product and National product:-

National Product	Domestic Product
1.       NP is the money value of all the final goods and services produced by the normal residents of a country.	1.       DP is the money value of all the final goods and services produced within the domestic territory of a country.
2.       National product is a national concept as it relates to the normal residents.	3.       Domestic product is a geographical concept as it related to the domestic territory.

b) Open economy and closed economy:-

Open Economy	Closed Economy
1.       An open economy is the economy which has economic relations with other countries of the world.	1.       A closed economy is that economy which has not economic relations with other countries of the world.
2.       In open economy the domestic product and national product may be different.	3.       In a closed economy the domestic product and natural product are equal.

13. Calculate ‘national income’ from the following data : 5

	Rs. (in crores)
1)      Rent 2)      Interest 3)      Net indirect taxes 4)      Net factor income from abroad 5)      Compensation of employee 6)      Profit 7)      Mixed income of self-employed	50 40 10 20 200 80 300

14. Explain the effect of excess demand of a commodity on its price, quantity demanded and quantity supplied.            5

Ans.:-

15. Give the meaning of fiscal deficit. Describe the ways of financing it.  5

Ans.:- Fiscal deficit is defined as excess of total expenditure over total receipts excluding borrowings during a fiscal year.

                The following are the ways of financing fiscal deficit :-

(i)                  Fiscal deficit can be financed by borrowing from domestic sources, e.g., public and commercial banks and from external sources e.g., borrowing from World Bank, IMF and foreign banks.

(ii)                Fiscal deficit can also be met by selling government equity in public sector undertakings.

(iii)               Another measure to meet fiscal  is by borrowing from Reserve Bank of India. Government issues treasury bills which RBI buys in return for cash from the government. This cash is created by RBI by printing new currency notes against government securities.

16. Describe the problems faced by the Indian economy during 1991. 5

Ans.:- The following are the problems faced by the Indian economy during 1991 :-

1.       Reforms and Agriculture:- There has been significant rise in the prices of food grains which is a result of not merely physical storage of food grains but the policy of curtailing food subsidy and increasing the minimum support price. At high prices of food grains , poor people can not afford to buy it. Further, public investment in agriculture sector especially in infrastructure (e.g., irrigation, power, roads, research etc.) which played a crucial role in the Green Revolution period has bee reduced in the reform period.

2.       Reforms and industry:- Reforms in India have challenged the very existence of our industries especially small scale industries. Due to the policy of de-reservation of items along with removal of quantitative controls our, SSI units have to compete with multi nationals. MNCs are establishing their units. Consequently, demand for domestic goods has declined which has adversely affected domestic developed countries.

3.       Disinvestment:- Under its policy of disinvestment, the assets of PSUs have been undervalued and sold to the private sector.  This means  a substantial loss to the government. Moreover, the proceeds from disinvestments were not used for the development of PSUs and for building social infrastructure in the country. Rather, it was used to meet the deficit in government revenues.

4.       Control over the Economy by MNCs:- Now MNCs have dominating role in the Indian economy. They are successfully exploiting the Indian market and are selling their products. They are, thus, making huge profits and sending to their origin country. Indian people sometimes wastefully spend their money on a varity of global brands in the market.

5.       Poverty is still Widespread:- Rate of growth in the economy has picked up; standards of living have improved specially in urban India. Poverty is still widespread in the country. About one-fourth of the total population is not in position to earn their even bare means of subsistence. Reduction in public expenditure on projects meant for the poor and cut in subsidies on food and agricultural inputs are considered the principal factors behind Indian poverty.

17. Explain the achievements of economic planning in India. 8

Ans.:- The achievements of economic planning in India are as follows:-

1.       Increase in National Income:- Increase in national income is the best indicator of economic development of a country. During the period of British rule in India, our economy was a stagnant economy. According to M. Mukerjee, the annual growth rate of real per capita income during 1857-1956 was just 0.5 percent. But since the beginning of planning our per capita income has increased at the rate of 1.8 percent per annum. Rate of increase in national income has been around 3.8 percent per annum.

2.       Increase in Rate of Capital Formation:- Capital formation plays a very significant role in the economic development of a country. It increases both production and productivity in agriculture, industry, mining, plantation etc.  According to Prof. Nurkse, the vicious circle of poverty in an underdeveloped country can be broken with the help of capital formation. During the planning period (1951-1991) rate of capital formation has significantly increased.

3.       In the Field of Agriculture:- Our plans have contributed to the development of agriculture . since the beginning of planning in 1951 improvement in yield per hectare of land is the most important indicator of our agriculture progress. The increase in productivity has been experienced by all of our major crops. For example, our average per hectare production of wheat increased from 663 kg in 1951 to 2281 kg in 1990-91. Likewise, per hectare production of rice has increased from 668 kg to 1740 kg during the same period. Per hectare production of cotton, sugarcane, jute etc. has also increased considerably.

4.       In the Field of Industry:- Industries play a significant role in the economic development of a country. Industrial development in India during the pre independence period was very slow and that too was restricted to particular areas only. But after achieving freedom, our industrial sector started making progress at a considerably higher rate.

industrial progress made during the planning period becomes evident from the following facts:

(i)                  During the whole planning period (1951-1991) the overall industrial growth rate has been about 6.0 percent per annum.

(ii)                India’s industrial structure during the plan period has been stronger and diversified. There has been phenomenal growth of capital goods and basic industries. The development of small scale industries has also been significant.

(iii)               Our industrial production during the five year plans increased substantially.

18. Calculate the arithmetic mean by ‘step-deviation’ method from the data given below : 8

Class	Frequency
0-20 20-40 40-60 60-80	5 6 15 4

19. Explain the following methods of regulating money supply : 8

a)            Open market operations

b)            Selective credit control

Ans.:- a) Open Market Operations:-  Open market operations (OMO) refer to the buying and selling of government securities by the central bank from/to the public and banks. OMO are used to influence money supply in the country. If does not matter whether the securities are bought and sold to the public or banks. Money ultimately comes to or transferred from the banks. When central bank buys securities, it adds to cash balances in the economy. And when central bank sells government securities, it withdraws cash balances from the economy. Cash balances are high powered money on the basis of which commercial banks create credit. If cash balances are increased in the economy, there will be more deposits with commercial banks  and hence more flow of credit. Similarly, if cash balances are reduced, deposits with commercial banks decrease and hence flow of credit will decrease.

c)       Selective Credit Controls (SCCs):- These can be used in both a positive as well as a negative manner. In a positive manner, measures can be used to encourage credit to particular sectors, usually the priority sectors.

20. Complete the following table : 8

Output (units)	Marginal Cost (Rs.)	Average Cost (Rs.)	Total Cost (Rs.)
1 2 3 4	10 8 9 13	- - - -	- - - -

Ans.:-

 

Output (units)	Marginal Cost (Rs.)	Average Cost (Rs.)	Total Cost (Rs.)
1 2 3 4	10 8 9 13	10 9 9 10	10 18 27 40

SECTION–B

OP TION–I

( Role of Agriculture and Industry in India’s Economic Development )

21. Give the meaning of intensive cultivation and extensive cultivation. 2

Ans.:-  Intensive cultivation:- Intensive cultivation implies constant raising of crops from the same plot of land. Thus, if more and more capital and labour are applied to the same plot of land, the system of cultivation is known as intensive.

Extensive cultivation:-  Extensive cultivation, implies use of land on a large scale. Here, the farmer can have as much land as he can manage. The method of cultivation may be primitive and un-scientific. The yield per acre may be comparatively low. The farmer may move from one plot of land to another.

22. What measures have been taken by the government to promote small-scale industries? 5

Ans.:- The following measures have been taken by the government to promote small-scale industries:-

(i)                  National Bank for Agriculture and Rural Development (NABARD) NABARD was setup in 1982, to promote integrated rural development. Apart from agriculture, it supports small industries, cottage and village industries, and rural artisans. It provides credit and offers counseling and consultancy services and organizes training and development programs for rural entrepreneurs.

(ii)                The Rural Small Business Development Centre (RSBDC) it was set up by the world association for small and medium enterprises and sponsored by NABARD.  It works for the benefit of socially and economically  disadvantaged individuals and groups. It aims at providing management  and technical support to current and prospective micro and small entrepreneurs in rural areas.

(iii)               Small Industries Development Bank of India (SIDBI) SIDBI was set up as an apex bank to provide direct/indirect financial assistance under different schemes, to meet credit needs of small business organizations and to coordinate the functions of other institutions in similar activities.

(iv)              The National Commission for Enterprises in the Unorganized Sector (NCEUS) The NCEUS was constituted in September, 2004, with the objectives of recommending measures considered necessary for improving the productivity of small enterprise in the informal sector and to enhance the competitiveness  of the sector in the emerging global environment by developing linkages of the sector with other institutions in the areas of credit, raw materials, infrastructure, technology up gradation, marketing, etc.

(v)                Rural and Women Entrepreneurship Development (RWED) The Rural and Women  Entrepreneurship Development programme aims at promoting a conducive business environment and at building institutional and human capacities that will encourage and support the entrepreneurial initiatives of rural people and women by providing training and advisory services. 

23. How is agriculture sector dependent on industrial sector for funds and marketing? Explain. 8

Ans.:- .:- Industry which is, no doubt, important, will not progress unless agriculture is sound, stable, and progressive. Because of this interdependence these sectors are complementary, and not competitive. In the development of an underdeveloped economy, there is as such no conflict between agricultural and industrial development.

                Interdependence between agriculture and industry becomes strengthened through various linkages generated in these two sectors. The three most important linkages are : production linkages, demand linkages, and saving-investment linkages.

                Production linkages arise from the interdependence between agriculture and industry through the use of productive inputs. Many raw materials and inputs used in industrial production, e.g., cotton, jute, sugarcane, tobacco, etc., is supplied by the agriculture sector. Such production linkages demonstrate the at a 10 percent increase in agricultural output results in a increase in industrial output by as much as 5 percent.

                Demand linkages, in the urban areas, we see some sort of demand saturation of some of  products of consumer goods industries. The impact of rising urban income and industrialization has a favorable impact on demand for food, vegetable, fruits, various raw materials produced in the agricultural sector. It has been an article of faith in India that the demand stimulus for industrial expansion would likely come mainly from agriculture with low social and economic costs.

                Finally, there is a savings-investment linkage between these two sectors. A self-reliant agriculture capable of exporting surplus food-grains helps in saving scarce foreign exchange resources of the country. Now these resources can be better utilized for importing capital goods and crucial raw materials needed for industrialization effort.

                As agricultural production and productivity rises above the subsistence requirement, the volume of marketable surplus increases which provides sinews of industrialization, particularly in the rural sector. Again, the rising volume of savings and capital formation consequent upon rising farm incomes give strong stimulus to demand for manufactured goods. Investment of other sectors up thereby accelerating overall growth rate of the economy.

OPTION–II

( Population and Economic Development )

21. Define dependency ratio and sex ratio.   2

Ans.:- Dependency ratio:- The dependency ratio is a measure showing the ratio of the number of dependents  aged zero to 14 and over the age of 65 to total population aged 15 to 64.

Sex Ratio:- The sex ratio is the ratio of males to females in a population. In most sexually reproducing species, the ratio tends to be 1:1. This tendency is explained by Fisher’s principal.

22. Describe the role of family planning programme in controlling population growth. 5

Ans.:- Family planning helps people have the desired number of children, which as a result improves the health of mothers and contributes to the nation’s social and economic development. In most developing countries, including ETHIOPLA, It is common practice for women to have too  many children, too close to one another. As a consequence, the population size of the country has grown dramatically but economic growth has not kept in parallel with it. Such an unbalanced population size will inevitably have a negative impact on the wellbeing of the nation. Family planning is one of the strategies which is proving to be effective in tackling these problems. 

The initiatives taken by the Government in implementing the Family Planning Programme have significant impact on the country as a whole. India was the first country in the world to establish a government family planning program way back in 1952. According to 2011 Family Welfare Programme, some major achievements are as follows:

Awareness of one or more methods of contraception.

Increase in contraceptives use over the years.

Knowledge of female sterilization, which is considered to the most safest and popular method of modern family planning.

23. Explain the effects of high rate of growth of population on human resources.   8

Ans.:- The concern of this discourse on social development planning was that individuals be part of human resources development population growth is an obstacle to social development, but so is national expenditures on the military rather than diverting funds for social improvements. There are important benefits for society in social development: a valued consumption good, increased productivity, and reduced fertility. Dissatisfaction with an economic growth model of development occurred during the 1960s and by the mid-1980s, human resource development was capsuled in Asia and the Pacific Region in the Jakarta Plan of Action on Human Resources Development and adopted in 1988. Earlier approaches favored the supply side. This article emphasizes “human” development which considers people as more than inputs to productivity. The quality of human resources is dependent on the family and society, the educational system, and individual levels of health and nutrition. Differences in income levels between East and South Asia have been attributed by Oshima to full use of the labor force and mechanization and training of workers. Ogawa, Jones, and Williamson contend that huge investment in infrastructure, efficient absorption of advanced technology, a stable political environment, and commitment to human capital formation are key to development. Demographic transition and decline in fertility at one point reflect growth and engagement in the labor force and resource accumulation.  Although East Asia had higher levels of literacy and educational attainment than many developing countries, South Asia still has high fertility. Human resource development is dependent on reduced population growth rates, but rapid population growth is not an insurmountable obstacle to achieving higher levels of education.

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