Class 12 Introduction Mock Test (CBSE)

Topics in Introduction

• Emergence of macroeconomics
• Context of the present book of macroeconomics
• Capitalist economy
• Four sectors of the economy

Introduction practice questions with answers

1. Q1Multiple choice·1 mark
   Which statement correctly contrasts a capitalist economy with a socialist economy?

   1. (a)Capitalist economies have no markets, while socialist economies rely on markets.
   2. (b)Both economies rely entirely on the state to decide what is produced.
   3. (c)Socialist economies allow private firms to earn unlimited profit.
   4. (d)Capitalist economies are guided by the profit motive of private firms, while socialist economies emphasise state welfare goals.
   Show answer and step marks

   1. Correct option: (d) Capitalist economies are guided by the profit motive of private firms, while socialist economies emphasise state welfare goals.+1

   Answer: (d)
2. Q2Multiple choice·1 mark
   Why must a capitalist economy have a market for labour?

   1. (a)Workers are forced by law to work for the state.
   2. (b)Machines have replaced all human work in production.
   3. (c)Firms that own capital do not own labour, so they must buy labour services from those who own none.
   4. (d)Households prefer to be paid in goods rather than money.
   Show answer and step marks

   1. Correct option: (c) Firms that own capital do not own labour, so they must buy labour services from those who own none.+1

   Answer: (c)
3. Q3Assertion and reason·1 mark
   Assertion (A): Households in a capitalist economy sell their labour services to firms. Reason (R): Prices of goods are determined in markets where buyers and sellers meet.

   1. (a)Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
   2. (b)Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
   3. (c)Assertion (A) is true but Reason (R) is false.
   4. (d)Assertion (A) is false but Reason (R) is true.
   Show answer and step marks

   1. Correct option: (b) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).+1

   Answer: (b)
4. Q4Assertion and reason·1 mark
   Assertion (A): The four-sector model adds the government and the rest of the world to the household and firm sectors. Reason (R): The four-sector model is used only when an economy has no foreign trade.

   1. (a)Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
   2. (b)Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
   3. (c)Assertion (A) is true but Reason (R) is false.
   4. (d)Assertion (A) is false but Reason (R) is true.
   Show answer and step marks

   1. Correct option: (c) Assertion (A) is true but Reason (R) is false.+1

   Answer: (c)
5. Q5Short answer·2 marks
   During a visit to a dairy cooperative, Anita observed the following. The cooperative collected milk from village families and paid them for every litre. It made butter from the milk and sold part of the butter to a buyer based in another country. It also sold ghee to households in the nearby town. (a) Name the sector to which the buyer based in another country belongs. [1] (b) Name the sector to which the dairy cooperative itself belongs. [1]
   Show answer and step marks

   1. (a) A buyer located in another country belongs to the rest of the world sector. [1]+1
   2. (b) The dairy cooperative produces butter and ghee for sale, so it belongs to the firm sector. [1]+1

   Answer: (a) Rest of the world sector; (b) Firm sector
6. Q6Long answer·5 marks
   Answer the following parts on the emergence of macroeconomics as a separate branch of economic analysis. (a) Define macroeconomics. [1] (b) Name the classical proposition that the total supply of goods and services in an economy creates an equal amount of total demand for them. [1] (c) State the level of employment that classical economists assumed the economy would automatically tend towards in the long run. [1] (d) Identify the variable that classical economists assumed would adjust to equate savings and investment. [1] (e) Identify one aggregate variable studied in macroeconomics, other than the price of a single good. [1]
   Show answer and step marks

   1. (a) Macroeconomics is the branch of economics that studies the economy as a whole through aggregate variables such as national income, total output, total employment and the general price level.+1
   2. (b) Say's law of markets: supply creates its own demand, so general overproduction cannot persist.+1
   3. (c) Full employment of resources.+1
   4. (d) The rate of interest.+1
   5. (e) National income (or total employment, or the general price level).+1

   Answer: (a) Macroeconomics studies the economy as a whole through aggregates such as national income, total output, employment and the general price level. (b) Say's law of markets. (c) Full employment. (d) Rate of interest. (e) National income.

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