*TOP - QUESTIONS FOR MID TERM REVISION*

XII – ECONOMICS ( 2025-26)

1. Stock and Flow
2. Precautions of income method (in national income calculations)
3. Limitations of GDP Calculations
4. Nominal GDP vs Real GDP
5. Final vs intermediate goods from a given list.
6. What are depreciation and example
7. Functions of money
8. Functions of RBI
9. Differentiate between Central Bank and Commercial Banks
10. Quantitative and Qualitative Measures of Credit Control
11. Mention any four major causes of India’s low level of economic development under colonial rule.
12. Explain the condition of industrial sector in India on the eve of independence.
13. What is the role of the public sector in the Indian economy (1950–1990)?
14. Distinguish between land reforms and technical reforms in Indian agriculture.
15. What are the four major long term objectives of five year plans in india
16. Industrial Policy Resolutions 1956
17. Write a Note on the Green Revolutions
18. What is the meaning of inward looking trade policy
19. List the advantages of small scale industries
20. Write any three negative effects of Globalisation on Indian economy.
21. Discuss the role of WTO in promoting Indian economy under globalisation.
22. The impact of Economic Reforms on Indian Agriculture
1. Stock and Flow
Stock:
 Measured at a particular point in time.
 It shows the quantity that exists.
 Example: Capital, wealth, population.
Flow:
 Measured over a period of time.
 It shows change over time.
 Example: Income, investment, production.

2. Precautions of Income Method (National Income)

Do not include:
 Transfer incomes (pensions, scholarships, gifts).
 Illegal incomes (smuggling, black money).
 Windfall gains (lottery winnings).
 Second-hand goods (only brokerage included).
 Intermediate goods (to avoid double counting).
 Self-consumed production of services (like household work).

3. Limitations of GDP Calculations

 Excludes non-monetary exchanges (home production).
 Ignores inequality in income distribution.
 Doesn't account for environmental degradation.
 Doesn't measure welfare or happiness.
 May include defensive expenditures (e.g., pollution control).

4. Nominal GDP vs Real GDP

Nominal GDP Real GDP
Measured at current prices Measured at constant prices
Affected by inflation Adjusted for inflation
Overstates economic growth Gives a true picture of growth

5. Final vs Intermediate Goods

Final Goods:
 Ready for final use.
 Included in national income.
 Example: A car bought by a family.
Intermediate Goods:
 Used to produce final goods.
 Not included in national income.
 Example: Steel used in making a car.

6. Depreciation
 Also called consumption of fixed capital.
 Refers to loss in value of fixed assets due to:
o Wear and tear,
o Time,
o Obsolescence.
 o
7. Functions of money
1. Medium of Exchange
 Money is used to buy and sell goods and services.
 It removes the need for barter system (direct exchange of goods).
 Example: You can buy a book for ₹200 instead of exchanging it with other goods.
2. Measure of Value
 Money helps in measuring the value of goods and services.
 It expresses value in monetary units (rupees, dollars, etc.).
 Example: A pen costs ₹20, and a notebook costs ₹50.
3. Store of Value
 Money can be saved and stored for future use.
 It doesn’t lose its value quickly and is easily storable.
 Example: Saving ₹500 today to buy something later.
4. Standard of Deferred Payments
 Money helps in making payments in the future.
 It is useful in credit transactions (like loans or EMIs).
 Example: Buying a phone today and paying in monthly installments.

8. Functions of Reserve Bank of India (RBI)

RBI is the central bank of India. It performs various functions to manage the economy.
1. Currency Issuing Authority
 RBI has the sole right to issue currency notes in India (except ₹1 notes/coins, issued by the
Government of India).
 Follows the Minimum Reserve System (keeps ₹200 crore: ₹115 crore in gold + ₹85 crore in foreign
securities).
 Ensures uniformity of currency and public confidence.
2. Banker to the Government
 Manages accounts of central and state governments.
 Performs functions like:
o Accepting deposits,
o Making payments,
o Managing public debt (borrowing on behalf of government),
o Issuing treasury bills, etc.
3. Banker’s Bank
 Maintains cash reserves of commercial banks (CRR – Cash Reserve Ratio).
 Provides loans to banks as a lender of last resort.
 Regulates banking system by setting rules and conducting inspections.
4. Custodian of Foreign Exchange
 Manages Foreign Exchange Reserves of India.
 Controls exchange rate through the Foreign Exchange Management Act (FEMA).
 Ensures stability of the rupee in international markets.
5. Controller of Credit (Monetary Policy Function)
 Controls inflation and liquidity using monetary policy tools:
o Quantitative Tools:
 CRR (Cash Reserve Ratio)
 SLR (Statutory Liquidity Ratio)
 Bank Rate
 Repo Rate / Reverse Repo Rate
 Open Market Operations (OMO)
Qualitative Tools:
 Moral suasion, margin requirement, selective credit control.
9. Central Bank vs Commercial Bank
Basis Central Bank Commercial Bank
Apex monetary authority that Financial institution that accepts deposits and
Definition
controls the banking system gives loans
Owned and operated by the
Ownership Can be privately or government owned
government
Public welfare and economic
Main Objective Earning profit through banking operations
stability
Has sole authority to issue
Currency Issue Cannot issue currency
currency
Accounts of Does not deal with the general
Deals directly with individuals and businesses
Public public
Credit Control Controls credit in the economy Creates credit by lending money

10. 1. Quantitative Measures (General Credit Control)

These are general tools used to control the total volume of credit in the economy.
They affect all sectors equally.
A. Bank Rate Policy
 Bank Rate = Rate at which RBI lends money to commercial banks.
 🔼 If RBI increases bank rate, borrowing becomes costly, credit supply falls.
 🔽 If RBI lowers bank rate, borrowing becomes cheaper, credit supply rises.
B. Open Market Operations (OMO)
 RBI buys or sells government securities in the open market.
 � Buying securities → Injects money → More credit available.
 🔴 Selling securities → Absorbs money → Less credit available.
C. Cash Reserve Ratio (CRR)
 % of net demand and time liabilities (NDTL) that banks must keep with RBI.
 🔼 High CRR = Less money to lend = Credit contraction.
 🔽 Low CRR = More money to lend = Credit expansion.
D. Statutory Liquidity Ratio (SLR)
 % of NDTL to be kept in the form of gold, cash, or government securities.
 🔼 Increase in SLR → Less funds to lend → Credit contracts.
 🔽 Decrease in SLR → More funds to lend → Credit expands.

2. Qualitative Measures (Selective Credit Control)

These are selective tools used to control credit for specific purposes or sectors.
A. Margin Requirements
 Margin = Difference between the loan amount and the value of security.
 🔼 RBI increases margin → Borrower gets less loan → Credit contraction.
 🔽 RBI reduces margin → Borrower gets more loan → Credit expansion.
B. Moral Suasion
 RBI persuades banks (through letters, meetings, suggestions) to follow a certain policy.
 Not legally binding but morally effective.
C. Credit Rationing
 RBI fixes credit limits for certain sectors or banks.
 Prevents excess credit flow to speculative or risky sectors.
11. British Colonial Rule in India – Key Points
1. Stagnant Economy:
o India had a stagnant and backward economy under British rule.
o Low growth of agriculture and industrial sectors.
2. Drain of Wealth:
o A large part of India’s wealth was transferred to Britain
(called "Drain of Wealth") without any economic return.
3. Agricultural Backwardness:
o Focus was on cash crops (like indigo, cotton) instead of
food crops.
o Frequent famines due to neglect of irrigation and food
security.
4. Deindustrialisation:
o Indian handicrafts and industries declined due to cheap
British machine-made imports.
o No support for modern industrialisation in India.
5. Limited Infrastructure:
o Railways, ports, roads were developed, but mainly to serve
British economic interests.
o No focus on improving the Indian economy or public
welfare.
6. Poor Social Indicators:
o High illiteracy rate.
o Low life expectancy and poor health conditions.
7. Monopoly Trade:
o British had monopoly control over trade – exports were raw materials, and imports were
finished goods from Britain.
8. No Capital Formation:
o Lack of investment in Indian industries and infrastructure.
o Very low savings and investment rates.
9. Revenue System:
o Exploitative land revenue systems like Zamindari System ruined farmers and led to rural
poverty.
10. Neglect of Human Capital:
 Education and health sectors were ignored.
 Minimal efforts were made in building institutions of higher learning.

12. Condition of Industrial Sector on Eve of Independence

 Underdeveloped and small scale.
 Mostly British-owned.
 Focused on basic goods (cotton, jute).
 Lacked diversification and modern technology.
 Low employment and productivity.

13. Role of Public Sector (1950–1990)

1. Set up infrastructure (roads, dams).
2. Started basic and heavy industries.
3. Generated employment.
4. Helped in regional development.
5. Reduced income inequalities.
14. Land Reforms vs Technical Reforms
Basis Land Reforms Technical Reforms
Changes in land ownership and Use of modern technology in
Meaning
tenancy laws agriculture
To ensure equitable distribution of
Main Objective To increase agricultural productivity
land
- Abolition of Zamindari - Use of HYV seeds
Examples - Land ceiling - Fertilizers and pesticides
- Tenancy reforms - Tractors and irrigation
Focus Area Ownership and control over land Production techniques and inputs
Mainly through government policies Through both government schemes
Implemented By
and laws and private efforts
- Reduced inequality - Increased crop yield
Benefits
- Empowered small farmers - Modernized farming

15. Long-term Objectives of Five-Year Plans

1. Growth – Increase in GDP.
2. Modernization – Use of new technology.
3. Self-reliance – Reduce import dependence.
4. Equity – Reduce poverty and inequality.

16. Industrial Policy Resolution, 1956

 Gave major role to public sector.
 Classified industries into:
o Schedule A – Government monopoly (e.g., railways).
o Schedule B – Joint sector.
o Schedule C – Private sector.

License System:
 Industrial licensing was introduced to regulate private sector.
 Aim: To avoid monopoly and ensure balanced regional growth.
Promotion of Small-Scale Sector:
 Encouragement through financial support, training, and protection from large industries.

17. Green Revolution (Short Note)

 Launched in 1960s.
 Introduced HYV seeds, fertilizers, irrigation.
 Boosted food grain production.
 Focused on Punjab, Haryana, western UP.
 Helped in agricultural self-sufficiency.

18. Inward-Looking Trade Policy

 Focused on import substitution.
 Encouraged domestic production.
 Imposed high tariffs on imports.
 Reduced dependency on foreign goods.

19. Advantages of Small Scale Industries, Karve Committee 1955

1. Generate employment.
2. Promote regional balance.
3. Use local resources.
4. Require less capital.
 5. Encourage entrepreneurship.

20. Three Negative Effects of Globalisation on Indian Economy

1. Threat to small businesses due to MNC competition.
2. Wider income inequality.
3. Over-dependence on foreign technology and capital.

21. Role of WTO in Globalisation

1. Promotes free trade globally.
2. Settles trade disputes among countries.
3. Helps India access world markets.
4. Reduces trade barriers.

22. Impact of Economic Reforms on Agriculture

1. Reduction in subsidies on inputs.
2. Less government investment in irrigation & research.
3. Neglected public distribution system.
4. Increased input costs for farmers.
5. No clear benefit from globalization for rural farmers.