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Economics · 2025 · 6 marks
National Income AccountingCircular Flow of Income and Methods of Calculating National Income6 marksApplylong answer
CBSE 2025 · Region 5 · Set 3 · Q17
(i)Explain the likely impact of construction of $\displaystyle 20$ new flyovers in a nation on Gross Domestic Product (GDP) and welfare in the economy.(ii)Suppose, there are only three firms in a hypothetical economy, viz. A, B and C. During a given period of time, the following transactions were undertaken by them :(I)Firm A sold goods worth ₹ $\displaystyle 2,000$ to Firm B and ₹ $\displaystyle 1,200$ to Firm C.(II)Firm B sold goods worth ₹ $\displaystyle 1,100$ to Firm A and ₹ $\displaystyle 3,500$ to Firm C.(III)Firm C sold to households for final consumption, goods worth ₹ $\displaystyle 5$,700.Estimate the value of Gross Domestic Product at Factor Cost (GDP$\displaystyle _{FC}$), assuming the value of Net Indirect Taxes to be ₹ 200.(i)“All consumption goods are durable in nature.”Defend or refute the given statement with a valid argument.(ii)On the basis of the given data, estimate the value of National Income (NNP$\displaystyle _{FC}$) :S.No. Items Amount (in ₹ Crore) (i) Household Consumption Expenditure $\displaystyle 1,800$ (ii) Gross Business Fixed Capital Formation $\displaystyle 1,150$ (iii) Gross Residential Construction Expenditure $\displaystyle 1,020$ (iv) Government Final Consumption Expenditure $\displaystyle 2,170$ (v) Excess of Imports over Exports $\displaystyle 720$ (vi) Inventory Investments $\displaystyle 540$ (vii) Gross Public Investments $\displaystyle 1,300$ (viii) Net Indirect Taxes $\displaystyle 240$ (ix) Net Factor Income from Abroad (–) $\displaystyle 250$ (x) Consumption of Fixed Capital $\displaystyle 440$
(i)
Explain the likely impact of construction of $\displaystyle 20$ new flyovers in a nation on Gross Domestic Product (GDP) and welfare in the economy.
(ii)
Suppose, there are only three firms in a hypothetical economy, viz. A, B and C. During a given period of time, the following transactions were undertaken by them :
(I)
Firm A sold goods worth ₹ $\displaystyle 2,000$ to Firm B and ₹ $\displaystyle 1,200$ to Firm C.
(II)
Firm B sold goods worth ₹ $\displaystyle 1,100$ to Firm A and ₹ $\displaystyle 3,500$ to Firm C.
(III)
Firm C sold to households for final consumption, goods worth ₹ $\displaystyle 5$,700.
Estimate the value of Gross Domestic Product at Factor Cost (GDP$\displaystyle _{FC}$), assuming the value of Net Indirect Taxes to be ₹ 200.
(i)
“All consumption goods are durable in nature.”
Defend or refute the given statement with a valid argument.
(ii)
On the basis of the given data, estimate the value of National Income (NNP$\displaystyle _{FC}$) :
| S.No. | Items | Amount (in ₹ Crore) |
| (i) | Household Consumption Expenditure | $\displaystyle 1,800$ |
| (ii) | Gross Business Fixed Capital Formation | $\displaystyle 1,150$ |
| (iii) | Gross Residential Construction Expenditure | $\displaystyle 1,020$ |
| (iv) | Government Final Consumption Expenditure | $\displaystyle 2,170$ |
| (v) | Excess of Imports over Exports | $\displaystyle 720$ |
| (vi) | Inventory Investments | $\displaystyle 540$ |
| (vii) | Gross Public Investments | $\displaystyle 1,300$ |
| (viii) | Net Indirect Taxes | $\displaystyle 240$ |
| (ix) | Net Factor Income from Abroad | (–) $\displaystyle 250$ |
| (x) | Consumption of Fixed Capital | $\displaystyle 440$ |
Marking-scheme solution
(i)
The construction of $\displaystyle 20$ new flyovers may impact the Gross Domestic Product (GDP) positively as improved infrastructure generally attracts higher investments in an economy and may lead to an increase in employment opportunities. It may also reduce travel time and average transportation costs. Consequently, increasing the well-being of citizens.
(ii)
| Firms | Value of Output (in ₹) (i) | Intermediate Consumption (in ₹) (ii) | Gross Value Added (in ₹) {(i)-(ii)} |
| A | $\displaystyle 2,000$ + $\displaystyle 1,200$ | $\displaystyle 1,100$ | $\displaystyle 2,100$ |
| B | $\displaystyle 1,100$ + $\displaystyle 3,500$ | $\displaystyle 2,000$ | $\displaystyle 2,600$ |
| C | $\displaystyle 5,700$ | $\displaystyle 1,200$ + $\displaystyle 3,500$ | $\displaystyle 1,000$ |
| Gross Domestic Product at Market Price (GDP$\displaystyle _{MP}$) | $\displaystyle 13,500$ | $\displaystyle 7,800$ | $\displaystyle 5,700$ |
Gross Domestic Product at Factor Cost (GDP$\displaystyle _{FC}$) = GDP$\displaystyle _{MP}$ – Net Indirect Taxes
= $\displaystyle 5,700$ – $\displaystyle 200$
= ₹ $\displaystyle 5,500$
(i)
The given statement is refuted. Consumption goods can be categorised as durable and non-durable. Non-durable consumption goods, such as food, have a shorter lifespan. Whereas durable consumption goods, like cars and home appliances, can be used over an extended period usually more than one year. Hence, not all consumption goods are durable in nature.
(ii)
National Income (NNP$\displaystyle _{FC}$) = (i) + (iv) + (ii) + (iii) + (vii) + (vi) – (v) – (x) + (ix) – (viii)
= $\displaystyle 1,800$ + $\displaystyle 2,170$ + $\displaystyle 1,150$ + $\displaystyle 1,020$ + $\displaystyle 1,300$ + $\displaystyle 540$ – $\displaystyle 720$ – $\displaystyle 440$ + (-$\displaystyle 250$) – $\displaystyle 240$
= ₹ $\displaystyle 6,330$ crore
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CBSE Class 12 Economics past-paper question from the 2025board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.