NIOS Economics 214 Solved Paper’ April 2016, NIOS Secondary Solved Papers

NIOS Economics 214 Solved Paper’ April 2016

NIOS Secondary Solved Papers

Day and Date of Examination …………………………………………………………………

Signature of Invigilators 1. ……………………………………

        2. ……………………………………

General Instructions :


[Time : 3 Hours ]                                                                                                                               [Maximum Marks : 100]

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.


1. Distinguish between consumer services and producer services.                          2

Ans. When services are used directly by consumers to satisfy their wants, they are called consumer services. When services are used by producers to produce other goods and services, they are called producer services.

2. Why does an economic problem arise?                          2

Ans. Economic problems arises because of the scarcity of resources and resources have their alternative uses. An economic problem is basically the problem of choice which arises because of scarcity of resources. Human wants are unlimited but means to satisfy them are limited.

3. State any two changes that an economy experience with economic development.              2

Ans. The following are the changes that an economy experience with economic development:-

GDP increases:-  The gross domestic product is the economic value of a country’s output of goods and services and indicates the strength of its economy. A higher GDP per capital is a sign of a more sophisticated stage of economic development.

Poverty rate declines:- as a country’s GDP per capita grows, the poverty rate declines. People earn more money, become more prosperous and being to accumulate wealth.

4. Show under utilization of resources with the help of a production possibility curve.           2

Ans. In an economy, if national resources are not fully utilized, then the total output in the economy will be less than the potential output.

In the diagram above, any point such as E,F inside the curve AB shows under utilization of the available, resources. In this situation, the actual output is less than the potential output. For example, in India, labour is under-utilized or less than fully employed, therefore mass unemployment.

5. Explain the role of statistical data in construction of economic theories.                   2

Ans. In the construction of Economic theories, the statistical data is applied for the construction of economy by identifying its problems, in evaluating the policies of the government and planning  for the future going through the economic variables and last but not least to level up the structure of the economy.

6. Who generates factor income?                2

Ans. Factor income is income received from the factors of production- land, labor, and capital. Factor income on the use of land is called rent, income generated from labor is called wages, and income generated from capital is called profit.

7. State any two precautions which must be taken while estimating national income by income method.                   2

Ans. Two precautions which must be taken while estimating national income by income method are:-

Transfer of payments should not be includes as there is no value addition in the economy.

Capital gains from sale of old goods should not be included. Commission etc of brokers on sale of old goods should be included as these are reward for rendering factor services.

8. How are national income estimates used as an indicator of success or failure of planning?      2

Ans. National income as an indicator of success or failure of planning – if a country has adopted planning as a means of economic growth then national income data can help in assessing the achievements of planning or vice versa.

9. State two necessary conditions for maximization of profit according to marginal revenue and marginal cost approach.             2

Ans. The profit Maximization Rule states that if a firm chooses to maximize its profits, it must choose that level of output where Marginal Cost (MC) is equal to Marginal Revenue (MR) and the marginal cost curve is rising. In other worlds, it must produce at a level where MC = MR.

10. Explain the central problem ‘How to Produce’ with the help of an example.                            5

Ans. How to produce:- This studies how to organize production. It is the second basic economic problem of resource allocation. It is concerned with the choice of technique production. For example, production of cloth is possible either by handlooms or by modern machines.

This problem is concerned with the efficient use of resources which implies more production with low cost. Thus, one needs to decide the efficient technique of production which uses the least amount of scarce resources to provide the same amount of output.

11. From the data given below calculate arithmetic mean using step deviation method.                  5


No. of Students















No. of students







A= assumption (75)


i= common factor (10)







































  12. Total fixed cost is Rs. 60. Calculate Average fixed cost and Average variable cost at various levels of output in the following schedules:                   5

Output (units)






TC (Rs.)







Output (units)

TC (Rs.)

FC (Rs.)

Average fixed cost (AFC)

Average variable cost (AVC)


























 13. Explain the meaning of revenue receipts and capital receipts in a government budget. Give one example of each.                5

Ans. Capital Receipts:- Receipts which are non-recurring (not receipts again and again) by nature and whose benefit is enjoyed over a long period are called “Capital Receipts” e.g. money brought into the business by the owner (capital invested),loan from bank, sale proceeds of fixed assets etc. Capital receipts are shown on the liabilities side of balance sheet.

Revenue Receipt:-  Receipts which are recurring (received again and again) by nature and which are available for meeting all day to day expenses (revenue expenditure) of a business concern are known as “Revenue receipts”, e.g. sale proceeds of goods, interest received, commission received, rent received, dividend received etc.

14. Can we say that with the New Economic Policy 1991, the role of the government has reduced? Justify your answer.               5

Ans. We can say that with the New Economic Policy 1991, the role of the government has reduced. The main objectives to launch new economic policy (NEP) in 1991 are as follows:-

The main objective was to plunge Indian economy in to the field of ‘Globalization and to give it a new drive on market orientation. The new economic policy intended to reduce the rate of inflation and to remove imbalances in payment.

It intended to move towards higher economic growth rate and to build sufficient foreign exchange reserves.

New economic policy aimed to accomplish economic stabilization and to convert he economic policies in to a market economy by removing all kinds of unnecessary restrictions.

New economic policy wanted to permit the international flow of goods, services, capital, human resources and technology, without many restrictions.

In the mid-1991, the government has made some drastic changes in its policies bearing on trade, foreign investment exchange rate, and industry, fiscal of fairs. The various elements constitute an economic policy. It has been documented in literature that economic development ultimately depends on industrialization. Industrial policy is meant for all those principles, rules, regulations and procedures concerning the rate of growth, ownership ,  location
pattern, and function of industrial undertakings in the country in a way to industrialization.

15. The following table shows the number of students appearing in an examination from two universities. Represent this information through a component bar chart.                           8

of Students appearing in examination


University – A

University – B
















 (For Blind Candidates only in lieu of Q. No. 17)

Write the steps involved in preparation of component
bar chart from the information given above.

16. Distinguish between ‘expansion of demand’ and ‘increase in demand’.                    8

Ans. Expansion of demand – Change in demand caused only due to fall in the price of the good.

It involves a movement down the demand curve.

It leads to increase in quantity demanded of that commodity.

It refers to the larger quantity being purchased due to fall in the price of the commodity.

Increase in demand – change in demand caused due to factors other than the change in the price of the good.

It involves a rightward shift in the demand curves.

It leads to increase in demand of the commodity, which means that it involves a change in the demand pattern as a whole.

It refers to more being purchased at the same price.


Expansion in demand

Increase in demand


When the quantity demanded rises due to a decrease in price keeping other factors constant, it is known as expansion in demand.

When the demand rises due to a change in the other factors, at the same price, it is known as increase in demand.

on demand curve

There is a downward movement along the same demand curve.

There is a rightward shift in the demand curve.


It occurs due to decrease in the price of the given commodity.

It occurs due to the change in the other factors like increase in price of substitutes, decrease in the price of complementary goods, increase in income
in case of normal goods.

 17. How do banks create credit? Explain with the help of a numerical example.                       8

Ans. There are two ways in which a bank create credit :-

By advancing loans on the cash credit basis or by an overdraft arrangement:

By purchasing securities and paying for them with its own cheques.

In both these cases, deposits are created (or credit is crated for the borrower), and the credit of the bank is embodied in a definite transaction. In all, a very small cash reserve is kept by the bank to meet the obligations arising out of these transactions, and the credit aggregates to a very big amount.

Let us see the actual process. Suppose a customer deposits Rs.1000 in a bank. The bank has to pay him interest, therefore the bank must seek a safe and profitable investment for this amount. That is, it must lend it to somebody in order to earn interest. But this amount is not actually paid out to the borrowers, it is retained by the bank to meet its obligations, i.e., to pay to those of its depositors who need cash, and draw cheques for the purpose.

Suppose the bank in which a depositor has deposited Rs.1,000 keeps 20 per cent-cash reserve to meet the demand of depositors. This means that, as soon as the bank has received a deposit of Rs.1,000, it will, make up its mind to advance loans up-to the amount of Rs.5,000 (only one-fifth reserve is kept). When, therefore, a businessman comes to the bank with a request for a loan of Rs. 5,000, he may be sure of being granted accommodation to this extent, provided, of course, his credit is good.

The bank lends Rs. 5,000 although it has only Rs. 1,000 in cash. It is here that credit comes in this transaction is rendered possible because the borrower is not given the loan in cash, only an account is opened in his name (if he has not one already), and the amount is credited to that account. He is simply given a cheque book, i.e., the right to draw cheques as and when he needs money up to the amount of the loan.



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NIOS Secondary and Senior Secondary Solved Question Papers

18. What is economic planning? Why did Indian policy makers adopt economic planning for the development of India?               8

Ans. Economic planning means utilization of country’s resources into development activities in accordance with national priorities. Planning thus, implies deliberate control and direction of the economy by a central planning authority (e.g. planning commission in India) for the purpose of achieving definite targets and objectives within a specified period of time.

Indian policy makers adopt economic planning for the development of India for the following reasons:-

Limitation of Market Mechanism:- In a free market economy, there is least intervention of the government in economic activities. Hence, all economic problems are solved through the free play of market forces of demand and supply.  This market based economy, though maximizes private profits, but disregards social benefits. It neither protects the environment nor provides guidance for the use of scarce resources like rare minerals, land, water etc. Therefore, planning is needed to avoid the adverse effects of a market economy.

Establishment of Social Justice:- In the earlier times, it was believed that with the growth (or increase) in gross domestic product (GDP), all sections of the society would be automatically benefited. This was known as the Trickle Down Theory. But  this theory proved wrong in less developed countries of the world including India. Hence direct government intervention in form of development planning was needed to establish social justice.

Use of Resources in National Interests:- India’s resources are limited in relation to her needs of development. Therefore, resources available in the country need to be used efficiently. The economic and human resources available in the country can be utilized in the national interest through economic planning, planning facilities increase in output according to national priorities.

Creation of Economic and Social Infrastructure:- Infrastructure refers to all the facilities and services which support the production and distribution activities in the economy. These include power, transport, communication, irrigation, educational institutions, health and family welfare. We have to plan to build a strong infrastructure. Private investors are generally reluctant to invest in them due to low rate of return on one hand and heavy investments on the other.

Reduction in Regional Disparities:- Large disparities in the development between regions exist in India. For instance, the states of West Bengal, Maharashtra, Gujarat etc. were industrially more advanced than the economically backward states like Bihar, Orissa and the North-Eastern states. Therefore, planning was needed to properly manage the flow of resources across different regions of the country so as to reduce regional disparities. At present our plans do provide some special area programmes such as Hill Area Plan, Tribal Area Plan and Programmes for Economically Backward Regions.



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

19. What is meant by land productivity?                         2

Ans. Land productivity is a continuous variable, which represents land cover through vegetation density and vigour. Land productivity can indicate the land’s ability to support and sustain life and is useful for identifying land degradation.

20. State any five problems faced by public sector enterprises in India.                        5

Ans. Problems faced by public sector enterprises in India are:-

Inefficient Management:- It has been found that these enterprises are managed by public savants. They are not professionally qualified nor expert in the management of industrial enterprises. Public enterprises always suffer from delayed decision making .

Lack of Efficiency:- They are not run on commercial principles. Their main motto is social welfare, not the profit earning. If a public enterprise in –cursed losses due to efficiency. It is overlooked. Whereas private enterprises are run for profit.

Delayed Decisions:– Delayed in decision making is one of the key problems. Lack of personal interest  no one wanted to take responsibility for making decisions.

Lack of Innovations:– Innovations are essential for economic development. Public enterprise lacks it due to monopoly or lack of competition. The private sector is always busy with innovating new techniques, new production methods etc.

21. Explain technological measures to increase agricultural productivity.                          8

Ans. Technological Measures:- The government of India initiated a number of technological measures to raise agricultural productivity. Since the mid 1960s, some measures were undertaken to introduce modern methods of cultivation in Indian agriculture. In view of the limited availability of agricultural land, intensive cultivation was emphasized. Under intensive cultivation more and more of labour and capital is applied to a given piece of land to obtain more output. Such intensive cultivation became possible only through technological up-gradation in the process of cultivation. These technological up-gradations consisted of better irrigation facilities, use of HYV seeds, increased availability of chemical fertilizers and improved agricultural implements.

Use of HYV Seeds:-  The core of new technology is the application of HYV seeds in place of low yielding varieties of seeds.  HYV seeds give large proportion of output and thus are known as miracle seeds. These seeds grow quickly and the crops can be harvested in shorter span of time. So the farmers can  have two or more crops in a year.

Use of Chemical Fertilizers:- The HYV seeds need huge amount of soil nutrients. The new technology emphasizes the application of chemical fertilizers, which contains nutritional elements in concentrated form.

Proper Irrigation:- The HYV seeds can be effectively used only when there is adequate availability of regular water supply. That is why, the new technology is described as ‘seed-fertilizer-water technology.’

Application of Pesticides:- Since weeds also absorb a part of chemical fertilizers, they should be regularly uprooted. Again to protect the plants from diseases, the use of pesticides was emphasized.


(Population and Economic Development)

19. What is meant by density of population?                     2

Ans. Density population is a measurement of population per unit area or unit volume; it is a quantity of type number density. It is frequently applied to living organisms, and most of the time to humans.

20. Why is there a need to reduce the birth rate? Explain.                           5

Ans. The rate of growth of population is more than the sustainable growth of earth and environmental. The natural resources being in limited is available for limited population to survive. Population has led to many problems such reduction in green covers, encroachment of land and other water bodies. Population explosion has led to global warming and other natural phenomenon which has decreased the capacity of the earth. Birth rate needs to be controlled to provide sustainable development and proper growth.

As like other countries, India is also have limited resources such as land , water etc. due to the effect of excess population over successive years the ratio of resources to the users is disturbed which leads to over exploitation of such resources. So, in order to maintain a healthy ratio of the same which can come across an efficient use of such resources, it is necessary for India to control the birth rate.

21. Explain the effect of economic growth on the growth rate of population.       8

Ans. The effect of economic growth on the growth rate of population:-

The last two centuries have witnessed a fall in the death rate and the consequent growth of population in today’s economically advanced countries. The birth rate also fell. Economic development bought in its wake higher standards of living, better food, adequate clothing and shelter, as also protection from the natural disasters of drought and famine.

There also occurred improvement in medical facilities and health care. All these led to a fall in infant mortality and healthier people and longer life-expectancy. These were closely related to the economic progress that these countries were making. “In general, therefore,….the modem increase in population in the developing countries of Europe and North America occurred along with and was really part and parcel of a more general process of rising living standards, industrialization, and technological progress.”

when we turn to the population explosion problem of developing countries, we see that these countries have shown very little economic growth. Yet their populations are expanding rapidly. These countries are importing Western technology to start modem industrialization programmes but are unable to emulate or import the growth process itself.

The spread of Western techniques of health care, sanitation and medicine to such counties has brought about sharply falling death rates and rapid population growth. But the standard of living is yet to achieve any appreciable improvement. The other accompaniments of economic development are also conspicuous by their absence.


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