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Economics · 2026 · 6 marks
CBSE 2026 · Region 3 · Set 2 · Q17
(a) (i) “If in a locality a new park is developed by the Municipal Corporation, it will have some external effects.” State one example of each type…
(i)
“If in a locality a new park is developed by the Municipal Corporation, it will have some external effects.”
State one example of each type of externality with valid explanation.
(ii)
Explain the components of ‘Net Factor Income from abroad’.
Calculate Net Domestic Product at Market Price ($\displaystyle \mathrm{NDP}_{\mathrm{MP}}$) and Gross National Product at Market Price ($\displaystyle \mathrm{GNP}_{\mathrm{MP}}$) from the following data :
| S. No. | Particulars | Amount (in ₹ crore) |
| (i) | Rent | $\displaystyle 120$ |
| (ii) | Profits | $\displaystyle 200$ |
| (iii) | Domestic Income | $\displaystyle 720$ |
| (iv) | Mixed Income | $\displaystyle 70$ |
| (v) | Wages and Salaries | $\displaystyle 300$ |
| (vi) | Indirect Taxes | $\displaystyle 150$ |
| (vii) | Subsidies | $\displaystyle 50$ |
| (viii) | Consumption of fixed capital | $\displaystyle 200$ |
| (ix) | Interest | $\displaystyle 30$ |
| (x) | Dividend | $\displaystyle 120$ |
| (xi) | Net factor income from abroad | $\displaystyle 20$ |
Marking-scheme solution
(i)
If a Municipal Corporation develops a new park in a locality, it leads to both positive and negative externalities.
As a positive externality, residents living nearby benefit from cleaner air and better surroundings which enhances their health and well-being without any additional expense.
As a negative externality, the park may draw large crowds, resulting in noise and traffic congestion. This can cause inconvenience to nearby residents without being compensated for the same.
(ii)
Components of Net Factor Income from Abroad (NFIA) are :
Net Compensation of Employees (COE) refers to the difference between compensation earned by normal residents from abroad and compensation paid to non-residents working within the domestic territory.
Net Income from Property and Entrepreneurship refers to difference between income earned by residents from rent, interest and profits from abroad and similar payments made to non-residents within the domestic territory.
Net retained earnings refers to difference between retained earnings of resident companies overseas and foreign companies operating domestically.
Net Domestic Product at Market Price ($\displaystyle \mathrm{NDP}_{\mathrm{MP}}$) = (iii) + {(vi) – (vii)}
= $\displaystyle 720$ + {$\displaystyle 150$ – $\displaystyle 50$}
= ₹ $\displaystyle 820$ crore
Gross National Product at Market Price ($\displaystyle \mathrm{GNP}_{\mathrm{MP}}$) = (iii) + (viii) + {(vi) – (vii)} + (xi)
= $\displaystyle 720$ + $\displaystyle 200$ + {$\displaystyle 150$ – $\displaystyle 50$} + $\displaystyle 20$
= ₹ $\displaystyle 1040$ crore
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CBSE Class 12 Economics past-paper question from the 2026 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.