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CBSE PRACTICE PAPER 2026–27 · ECONOMICS (SET – 3)
General Instructions
- This question paper contains 34 questions. All questions are compulsory. (Theory : 80 marks; Project : 20 marks is assessed separately.)
- The paper is divided into two sections : Section A – Introductory Macroeconomics (40 marks) and Section B – Indian Economic Development (40 marks).
- Q. 1–10 (Section A) and Q. 18–27 (Section B) are multiple choice questions of 1 mark each. Q. 9, 10 are Assertion–Reason questions.
- Q. 11, 12 (Section A) and Q. 28, 29 (Section B) are short answer questions of 3 marks each. Answer in about 60 words.
- Q. 13–15 (Section A) and Q. 30–32 (Section B) are short answer / case-based questions of 4 marks each. Answer in about 80 words.
- Q. 16, 17 (Section A) and Q. 33, 34 (Section B) are long answer questions of 6 marks each. Answer in about 120 words.
- Internal choice (OR) is provided in some questions. Use of a calculator is not permitted. Show the working in numerical questions.
- The paper follows the CBSE 2025–26 design : typology 40% remembering and understanding, 30% applying, 30% analysing, evaluating and creating. The answer key with the marking scheme is given at the end of this paper.
SECTION A — INTRODUCTORY MACROECONOMICS (40 Marks)
Q. 1 to Q. 8 : Multiple Choice Questions (choose the correct option)
1. A farmer sells wheat worth ₹ 500 to a miller. The miller sells flour worth ₹ 800 to a baker, who sells bread worth ₹ 1,200 to the consumers. The value added by the miller is
(a) ₹ 800(b) ₹ 300(c) ₹ 500(d) ₹ 1,200
2. Currency notes issued by the Reserve Bank of India are called fiat money because
(a) they are backed by gold reserves(b) they are issued by the commercial banks(c) they have a high intrinsic value(d) they are declared legal tender by the government and have no intrinsic value
3. When the Reserve Bank of India sells government securities in the open market, the money supply in the economy
(a) decreases(b) increases(c) remains unchanged(d) first increases and then decreases
4. The consumption function of an economy is C = 50 + 0.6Y. The saving at the income level of ₹ 500 crore is
(a) ₹ 350 crore(b) ₹ 200 crore(c) ₹ 150 crore(d) ₹ 250 crore
5. The marginal propensity to save is 0.2. To raise the national income by ₹ 1,000 crore through an increase in investment, the additional investment required is
(a) ₹ 5,000 crore(b) ₹ 200 crore(c) ₹ 800 crore(d) ₹ 250 crore
6. Which of the following is a direct tax?
(a) Income tax(b) Goods and Services Tax(c) Excise duty(d) Customs duty
7. The balance of trade is the difference between the
(a) exports of services and the imports of services(b) exports and imports of goods and services together(c) exports of goods and the imports of goods(d) capital inflows and capital outflows
8. In an economy, planned saving is ₹ 120 crore and planned investment is ₹ 150 crore. In this situation,
(a) national income will fall because aggregate demand exceeds aggregate supply(b) the economy is in equilibrium(c) unplanned inventories will accumulate(d) national income will rise because aggregate demand exceeds aggregate supply
Q. 9 and Q. 10 : Assertion–Reason Questions
Options: (a) Both A and R are true and R is the correct explanation of A. (b) Both A and R are true but R is not the correct explanation of A. (c) A is true but R is false. (d) A is false but R is true.
9. Assertion (A): The fiscal deficit is a measure of the borrowing requirement of the government.
Reason (R): The primary deficit is the fiscal deficit minus the interest payments.
Reason (R): The primary deficit is the fiscal deficit minus the interest payments.
10. Assertion (A): The current account of the balance of payments records only the transactions in goods.
Reason (R): Trade in services and transfer payments are also recorded in the current account.
Reason (R): Trade in services and transfer payments are also recorded in the current account.
11. Distinguish between nominal GDP and real GDP. Which of the two is a better indicator of the change in the output of an economy over time? Give a reason.(3)
12. Distinguish between ex-ante and ex-post investment. State the equilibrium condition of income determination in terms of ex-ante saving and investment.(3)
OR
Explain the concept of inflationary gap. State any one effect of it on the economy.
13. Explain any four functions of money.(4)
OR
Explain the meaning of the cash reserve ratio and the statutory liquidity ratio. How does the Reserve Bank of India use them to control credit?
14. Identify the objective of the government budget that is served in each of the following situations, with a reason : (i) The government gives free food grains to poor families; (ii) The government builds street lights and public parks; (iii) The government cuts the taxes and raises its spending during a recession; (iv) The government imposes a higher tax on tobacco and alcohol.(4)
15. Read the case and answer the questions.
The Reserve Bank of India raises the interest rates in the economy. As a result, foreign institutional investors bring more foreign currency into the country to invest in Indian bonds. The exchange rate is determined by the market forces of demand and supply.
The Reserve Bank of India raises the interest rates in the economy. As a result, foreign institutional investors bring more foreign currency into the country to invest in Indian bonds. The exchange rate is determined by the market forces of demand and supply.
(i) State the effect of the change on the supply of foreign currency in the foreign exchange market. (1)
(ii) State the effect on the value of the rupee (the exchange rate in ₹ per dollar). (1)
(iii) State the effect of the change in the exchange rate on the exports and the imports of India. (1)
(iv) Is the capital inflow an autonomous or an accommodating transaction? State one risk of depending on such inflows. (1)
(4)16. From the following data of three firms (₹ crore) calculate (i) the value added by each firm, (ii) the gross domestic product at market price and (iii) the net domestic product at factor cost :
(6)
| Item | ₹ crore |
|---|---|
| Firm A : sales to Firm B (no intermediate purchases, no change in stock) | 500 |
| Firm B : purchases from Firm A | 500 |
| Firm B : sales to Firm C | 900 |
| Firm B : opening stock / closing stock | 50 / 100 |
| Firm C : purchases from Firm B | 900 |
| Firm C : sales to consumers | 1,500 |
| Firm C : opening stock / closing stock | 80 / 60 |
| Consumption of fixed capital (all firms) | 100 |
| Net indirect taxes | 120 |
OR
The net domestic product at factor cost of an economy is ₹ 8,000 crore, net factor income from abroad is ₹ 150 crore, net indirect taxes are ₹ 700 crore and consumption of fixed capital is ₹ 500 crore. Calculate (i) gross domestic product at factor cost, (ii) gross national product at market price and (iii) national income.
17. In an economy, the consumption function is C = 80 + 0.75Y, investment is ₹ 120 crore and government expenditure is ₹ 40 crore. (i) Find the equilibrium level of income. (ii) At the income of ₹ 800 crore, find the planned aggregate demand and explain what will happen to the output. (iii) Find the new equilibrium income if the government expenditure rises by ₹ 20 crore.(6)
OR
Explain any three fiscal measures and any three monetary measures that can be adopted to correct a situation of deficient demand.
SECTION B — INDIAN ECONOMIC DEVELOPMENT (40 Marks)
Q. 18 to Q. 27 : Multiple Choice Questions (choose the correct option)
18. The Planning Commission of India was replaced by the NITI Aayog in the year
(a) 2008(b) 2012(c) 2015(d) 2018
19. Which of the following is a measure of globalisation?
(a) Outsourcing of services to other countries(b) Disinvestment of public sector units(c) Abolition of industrial licensing(d) Reform of the tax system
20. The population of a town is 5,000 and 1,800 persons are workers. The worker–population ratio is
(a) 28%(b) 36%(c) 64%(d) 1.8%
21. Which of the following is not an indicator used in the Human Development Index?
(a) Life expectancy at birth(b) Years of schooling(c) Per capita income(d) Poverty ratio
22. The poverty line in India is determined on the basis of
(a) the minimum consumption expenditure needed to meet basic requirements such as the calorie intake(b) the average income of the country(c) the number of unemployed persons(d) the price of gold
23. The per capita income of a country rises from ₹ 80,000 to ₹ 86,400. The percentage growth in the per capita income is
(a) 7.4%(b) 6.4%(c) 8%(d) 10%
24. Which of the following is a feature of the informal sector?
(a) All workers get a regular monthly salary(b) Firms are registered and pay income tax(c) Trade unions are strong(d) Workers are generally not covered by labour laws or social security
25. Many workers in India remain in agriculture although its share in the GDP has fallen sharply. The most likely reason is that
(a) agriculture has become the most productive sector(b) industry and services have not created enough productive jobs, and many workers lack the skills for them(c) workers prefer agriculture to all other jobs(d) the government has banned industrial jobs
26. In a country, 55% of the workers are self-employed, 20% are regular salaried workers and 25% are casual labourers. Which of the following is the most appropriate conclusion?
(a) Only one-fifth of the workers have regular wage employment(b) Most workers enjoy job security(c) Casual labour is the largest group of workers(d) Self-employment is rare
27. Among India, China and Pakistan, which country has the highest value of the Human Development Index?
(a) India(b) Pakistan(c) China(d) India and Pakistan have equal values
28. Explain any three causes of poverty in India.(3)
29. Explain any three problems created by the one-child norm of China.(3)
OR
Explain any three features of the Special Economic Zones set up by China.
30. Explain how the minimum support price and the fertiliser subsidy helped the farmers to adopt the high-yielding variety technology during the Green Revolution. State one drawback of these policies.(4)
31. Rina, a graduate from a village, wants to work but finds only low-paid farm labour available. Explain any two reasons for the low participation of women in paid work in India and suggest any two measures to improve it.(4)
OR
A government wants to improve the education of girls. Suggest any two policy measures and explain how each will contribute to human capital formation.
32. Read the data and answer the questions.
The table gives illustrative data on the structure of the GDP and of the employment (%) of three countries :
The table gives illustrative data on the structure of the GDP and of the employment (%) of three countries :
| Country | Agriculture in GDP | Industry in GDP | Services in GDP | Agriculture in employment | Industry in employment | Services in employment |
|---|---|---|---|---|---|---|
| P | 15 | 30 | 55 | 45 | 22 | 33 |
| Q | 8 | 41 | 51 | 14 | 36 | 50 |
| R | 22 | 20 | 58 | 42 | 20 | 38 |
(i) Which country has the largest share of its workforce in agriculture? (1)
(ii) Calculate the ratio of the share of agriculture in employment to its share in GDP for Country P and state what it indicates. (1)
(iii) Which country shows the most balanced structural transformation? Support your answer with the data. (1)
(iv) Suggest one policy priority for Country P. (1)
(4)33. Explain any six factors that led to the introduction of the New Economic Policy of 1991.(6)
OR
Explain any three positive and any three negative effects of globalisation on the Indian economy.
34. “Poverty and unemployment are closely linked.” Examine any three ways in which they are related and suggest any three measures to reduce poverty.(6)
OR
Examine any three reasons for the poor state of health infrastructure in India and suggest any three measures to improve it.
ANSWER KEY & MARKING SCHEME · ECONOMICS PRACTICE PAPER (SET – 3)
Note for evaluators : Award marks for any other relevant and correct point or method. In numerical questions, give full credit for the correct answer with working; award part marks for correct steps even if the final answer is wrong.
SECTION A — Answer Key (Q. 1–10, 1 mark each)
| Q.1 | (b) | Q.2 | (d) | Q.3 | (a) | Q.4 | (c) | Q.5 | (b) |
| Q.6 | (a) | Q.7 | (c) | Q.8 | (d) | Q.9 | (b) | Q.10 | (d) |
Reasoning for Q.1–10. (1) Value added by the miller = value of output − intermediate consumption = 800 − 500 = ₹ 300. (2) Fiat money is legal tender by the order of the government and has no intrinsic value. (3) Sale of securities draws money out of the banks ⇒ money supply decreases. (4) C = 50 + 0.6 × 500 = 350; S = 500 − 350 = ₹ 150 crore. (5) Multiplier = 1 ÷ 0.2 = 5; ΔI = 1,000 ÷ 5 = ₹ 200 crore. (6) Income tax is paid directly by the person on whom it is levied. (7) Balance of trade = exports of goods − imports of goods. (8) S < I ⇒ AD > AS ⇒ stocks fall below the planned level (unplanned inventory depletion) ⇒ income rises. (9) (b) : both true, but R does not explain A. (10) (d) : A is false – the current account also records services, income and transfers; R is true.
SECTION A — Marking Scheme (Q. 11–17)
11.
| Value points | Marks |
|---|---|
| Nominal GDP : the value of the final goods and services produced in a year, at current year prices | 1 |
| Real GDP : the value of the same output at constant (base year) prices | 1 |
| Real GDP is the better indicator because it removes the effect of the price changes; nominal GDP may rise only because of a rise in prices | 1 |
12.
OR
| Value points | Marks |
|---|---|
| Ex-ante investment : investment planned at the beginning of the period; ex-post investment : the actual investment at the end of the period, including unplanned changes in stocks | 2 |
| Equilibrium : ex-ante saving = ex-ante investment | 1 |
| Value points | Marks |
|---|---|
| Inflationary gap : the excess of the actual aggregate demand over the aggregate demand required to establish the full employment equilibrium | 2 |
| Effect : a continuous rise in the general price level (inflation) because the output cannot rise beyond the full employment level | 1 |
13.
OR
| Value points | Marks |
|---|---|
| Any four functions (1 mark each, name + explanation) : Medium of exchange – removes the problem of double coincidence of wants; unit of account – values of all goods are expressed in money; store of value – wealth can be stored in money; standard of deferred payments – loans can be repaid in future; transfer of value | 4 |
| Value points | Marks |
|---|---|
| CRR : the percentage of a bank’s deposits that it must keep with the RBI in cash (1); SLR : the percentage of deposits that it must keep with itself in liquid assets such as gold and government securities (1) | 2 |
| Control of credit : an increase in CRR/SLR reduces the lending capacity of the banks and hence the credit; a decrease raises the lending capacity | 2 |
14.
Objective (½) + reason (½) for each.
| Value points | Marks |
|---|---|
| (i) Redistribution of income and wealth – transfer to the poor | 1 |
| (ii) Allocation of resources – provision of public goods that the private sector does not supply | 1 |
| (iii) Economic stabilisation – raising the demand and output to remove the recession | 1 |
| (iv) Allocation of resources – a tax on demerit goods discourages their consumption (also reduces harmful consumption) | 1 |
15.
| Value points | Marks |
|---|---|
| (i) The supply of foreign currency (dollars) increases, since the foreign investors sell dollars to buy rupees for investing in bonds | 1 |
| (ii) The rupee appreciates – fewer rupees are needed to buy a dollar (the exchange rate in ₹ per $ falls) | 1 |
| (iii) Exports become costlier for foreign buyers and fall; imports become cheaper and rise | 1 |
| (iv) Autonomous transaction (made for profit and independent of the BoP position); risk : such short-term “hot money” can flow out suddenly, causing instability in the exchange rate and the economy | 1 |
16.
(i) 2 marks (¾ + ¾ + ½)
(ii) 2 marks; (iii) 2 marks
OR
(2 marks each)
| Firm | Value of output | Intermediate consumption | Value added |
|---|---|---|---|
| A | 500 | 0 | 500 |
| B | 900 + (100 − 50) = 950 | 500 | 450 |
| C | 1,500 + (60 − 80) = 1,480 | 900 | 580 |
| Step | Working | ₹ crore |
|---|---|---|
| (ii) GDP at market price | 500 + 450 + 580 | 1,530 |
| Less : Consumption of fixed capital | (100) | |
| Less : Net indirect taxes | (120) | |
| (iii) NDP at factor cost | 1,530 − 100 − 120 | 1,310 |
OR
| Step | Working | ₹ crore |
|---|---|---|
| (i) GDP at factor cost | 8,000 + 500 | 8,500 |
| (ii) GNP at market price | 8,500 + 700 + 150 | 9,350 |
| (iii) National income (NNP at factor cost) | 8,000 + 150 | 8,150 |
17.
OR
| Value points | Marks |
|---|---|
| (i) Y = C + I + G = 80 + 0.75Y + 120 + 40 ⇒ 0.25Y = 240 ⇒ Y = ₹ 960 crore | 2 |
| (ii) AD = 80 + 0.75 × 800 + 120 + 40 = ₹ 840 crore > 800 ⇒ stocks fall below the planned level (unplanned depletion), producers raise the output, so output and income rise towards 960 | 2 |
| (iii) Multiplier = 1 ÷ 0.25 = 4; ΔY = 20 × 4 = 80 ⇒ new Y = ₹ 1,040 crore | 2 |
| Value points | Marks |
|---|---|
| Fiscal measures (any three, 1 mark each) : increase the government spending; cut the taxes; raise the transfer payments/subsidies; deficit financing | 3 |
| Monetary measures (any three, 1 mark each) : cut the repo rate; cut the CRR and SLR; buy securities in the open market; lower the margin requirements | 3 |
SECTION B — Answer Key (Q. 18–27, 1 mark each)
| Q.18 | (c) | Q.19 | (a) | Q.20 | (b) | Q.21 | (d) | Q.22 | (a) |
| Q.23 | (c) | Q.24 | (d) | Q.25 | (b) | Q.26 | (a) | Q.27 | (c) |
Reasoning for Q.18–27. (18) The NITI Aayog replaced the Planning Commission on 1 January 2015. (19) Outsourcing is a feature of globalisation; disinvestment is privatisation; abolition of licensing and tax reforms are liberalisation. (20) WPR = 1,800 ÷ 5,000 × 100 = 36%. (21) The HDI uses health, education and income; the poverty ratio is not an indicator. (22) The poverty line is based on the minimum consumption expenditure for the basic needs (calorie norm). (23) (86,400 − 80,000) ÷ 80,000 × 100 = 8%. (24) Informal sector workers are mostly outside the labour laws and social security. (25) Industry and services have not absorbed the workers fast enough. (26) Regular wage workers are only 20% (one-fifth). (27) China has the highest HDI value of the three.
SECTION B — Marking Scheme (Q. 28–34)
28.
| Value points | Marks |
|---|---|
| Any three causes (1 mark each) : (1) Low growth rate of the economy over a long period; (2) High population growth; (3) Unequal distribution of land and other assets; (4) Unemployment and low productivity; (5) Lack of education and skills; (6) Regional disparities; (7) The colonial exploitation of the earlier period | 3 |
29.
OR
| Value points | Marks |
|---|---|
| Any three problems (1 mark each) : (1) Ageing population – a growing share of the old and a shrinking working population; (2) Gender imbalance because of the preference for a male child; (3) Labour shortage in the long run; (4) Pressure on the young to support the old parents; (5) Loss of the demographic advantage | 3 |
| Value points | Marks |
|---|---|
| Any three features (1 mark each) : (1) Geographical regions with economic laws more liberal than the rest of the country; (2) Tax holidays and incentives for the foreign investors; (3) Meant to attract foreign investment and boost exports; (4) Better infrastructure and fewer regulations; (5) Set up first in a few coastal regions | 3 |
30.
| Value points | Marks |
|---|---|
| Minimum support price guaranteed the farmers a floor price for their crops; this reduced the price risk and encouraged them to invest in HYV seeds and the inputs | 1½ |
| Fertiliser subsidy lowered the cost of fertilisers, so that even the small farmers could afford the chemical inputs that HYV seeds need | 1½ |
| Drawback (any one) : a heavy fiscal burden on the government; benefits went mainly to the large farmers and to a few crops and regions (wheat/rice); misuse of fertilisers and damage to the soil | 1 |
31.
OR
| Value points | Marks |
|---|---|
| Reasons (any two, 1 mark each) : social norms and household responsibilities; lack of education and skills; safety concerns and poor transport; wage discrimination; few jobs near the village | 2 |
| Measures (any two, 1 mark each) : crèches and child care; skill training; safe transport and workplace; equal pay laws; flexible/home-based jobs | 2 |
| Value points | Marks |
|---|---|
| Any two measures (1 mark each, with the contribution of each to human capital) : free education and scholarships for girls – raise the level of education and skills; mid-day meals and the health care – improve the health and the attendance; separate schools and safe transport – raise enrolment | 4 |
32.
| Value points | Marks |
|---|---|
| (i) Country P (45%) | 1 |
| (ii) Ratio = 45 ÷ 15 = 3 – a large share of the workforce produces only a small share of the output, i.e. low productivity per worker in agriculture (disguised unemployment) | 1 |
| (iii) Country Q – the share of agriculture in employment (14%) is close to its share in GDP (8%); the ratio is only 1.75 (P : 3.0; R : 1.9), and the workforce has moved to industry and services | 1 |
| (iv) Any one : move the surplus labour from agriculture to industry and services through skills and the labour-intensive manufacturing; raise the farm productivity; invest in rural non-farm activities | 1 |
33.
OR
| Value points | Marks |
|---|---|
| Any six factors (1 mark each) : (1) Balance of payments crisis – the foreign exchange reserves fell to a level sufficient for only about two weeks of imports; (2) A rising fiscal deficit and heavy borrowing; (3) High inflation; (4) Poor performance of the public sector undertakings; (5) The Gulf war raised the oil prices and reduced the remittances; (6) Poor export growth and rising imports; (7) The need to obtain the loans from the IMF and the World Bank, who asked for reforms | 6 |
| Value points | Marks |
|---|---|
| Positive effects (any three, 1 mark each) : higher growth and the foreign investment; access to technology and markets; employment in the IT and BPO sectors; greater variety and quality for the consumers | 3 |
| Negative effects (any three, 1 mark each) : threat to the small and domestic industries; widening of income inequality; increased dependence on imports; risk from the global shocks; loss of jobs in the sectors that face competition | 3 |
34.
OR
| Value points | Marks |
|---|---|
| Any three links (1 mark each) : (1) Unemployment deprives people of income, which pushes them into poverty; (2) The poor cannot afford education and health, so they remain unskilled and unemployable (a vicious circle); (3) Disguised unemployment and underemployment keep the incomes of the rural poor low; (4) Poverty forces people into low-paid casual work | 3 |
| Any three measures (1 mark each) : employment generation (e.g. rural works schemes); skill development; land and asset redistribution; improvement of the farm productivity; education and health spending; targeted subsidies | 3 |
| Value points | Marks |
|---|---|
| Any three reasons (1 mark each) : low public spending on health; shortage of doctors, nurses and hospitals in the rural areas; the unequal access of the poor; lack of the preventive care and the sanitation; the growing private sector that is costly | 3 |
| Any three measures (1 mark each) : raise the public health expenditure; build primary health centres and train the health workers; health insurance for the poor; improve sanitation and clean water; telemedicine | 3 |
DESIGN OF THE PAPER — Unit-wise Weightage and Typology (as per CBSE 2025–26)
| Part / Unit | Marks (CBSE) | Marks in this paper | Questions |
|---|---|---|---|
| Part A – National Income and Related Aggregates | 10 | 10 | Q.1, 11, 16 |
| Money and Banking | 6 | 6 | Q.2, 3, 13 |
| Determination of Income and Employment | 12 | 12 | Q.4, 5, 8, 12, 17 |
| Government Budget and the Economy | 6 | 6 | Q.6, 9, 14 |
| Balance of Payments | 6 | 6 | Q.7, 10, 15 |
| Total – Part A | 40 | 40 | |
| Part B – Development Experience (1947–90) and Economic Reforms since 1991 | 12 | 12 | Q.18, 19, 30, 33 |
| Current Challenges facing Indian Economy | 20 | 20 | Q.20–26, 28, 31, 34 |
| Development Experience of India – A Comparison with Neighbours | 8 | 8 | Q.27, 29, 32 |
| Total – Part B | 40 | 40 | |
| Grand total | 80 | 80 |
| Typology of questions | Marks (CBSE) | Marks in this paper | Questions |
|---|---|---|---|
| Remembering and Understanding | 32 (40%) | 32 | Q.2, 3, 6, 7, 11, 12, 13, 18, 19, 21, 22, 24, 27, 28, 29, 33 |
| Applying | 24 (30%) | 24 | Q.1, 4, 5, 8, 14, 16, 20, 23, 30, 31 |
| Analysing, Evaluating and Creating | 24 (30%) | 24 | Q.9, 10, 15, 17, 25, 26, 32, 34 |
| Total | 80 (100%) | 80 |
