12th Economics Important 1 Mark Questions Chapter Wise (Samacheer Kalvi)

Every chapter of Class 12 Economics carries twenty book back MCQs, and they draw on a consistent set of facts. Below is what each chapter tests, so you can check your preparation chapter by chapter.

Unit 1: Introduction to Macro Economics

• Economics has two branches, micro and macro; macro economics is also called income theory and studies aggregates
• Ragnar Frisch coined the word "macro"; J M Keynes, author of the General Theory, is the father of modern macro economics
• Adam Smith is the father of capitalism and Karl Marx the father of socialism
• A mixed economy has both private and public sectors; a four sector model represents an open economy
• A quantity at a point of time is a stock; income is a flow

Unit 2: National Income

• NNP at factor cost is national income, measured by three methods
• GNP = GDP + net factor income from abroad; depreciation is deducted to get net values
• Per capita income is national income divided by population
• The expenditure method is used for the construction sector; the tertiary sector is the service sector
• India's financial year runs from April 1 to March 31; PQLI indicates economic welfare

Unit 3: Theories of Employment and Income

• In disguised unemployment, the marginal productivity of labour is zero
• J B Say was a classical economist; the law of markets is the core of classical theory
• Classical theory assumes the economy is always in equilibrium and favours a balanced budget
• Keynes attributes unemployment to a lack of effective demand and emphasises short-run equilibrium
• Aggregate supply = C + S + T + Rf

Unit 4: Consumption and Investment Functions

• APC = C/Y and MPC = ΔC/ΔY; MPC + MPS = 1
• A higher MPC makes the consumption function steeper
• The multiplier is 1/MPS or 1/(1 − MPC), so an MPC of 0.5 gives a multiplier of 2
• Imports reduce the multiplier in an open economy
• J R Hicks first used the term super multiplier; Keynes introduced MEC

Unit 5: Monetary Economics

• Money is the most liquid asset; the RBI headquarters is in Mumbai
• Irving Fisher's quantity theory was popularised in 1911; in MV = PT, V is the velocity of circulation
• Cost-push inflation comes from rising production costs; hyperinflation seriously depreciates money
• Debtors gain during inflation; disinflation is a fall in the rate of inflation; stagflation combines inflation with stagnation
• Crowther gave the "generally acceptable" definition of money; a debit card is plastic money

Unit 6: Banking

• Credit creation means multiplication of loans and advances; an NBFI has no banking licence
• The RBI is banker to the government and lender of last resort
• The repo rate is the rate at which the RBI lends to commercial banks; moral suasion means persuasion
• ARDC began on July 1, 1963; NABARD was set up in July 1982 and EXIM Bank in March 1982
• The 2016 demonetisation covered ₹500 and ₹1000 notes

Unit 7: International Economics

• Nations trade because resources are not equally distributed
• The factor endowment theory is a modern theory of trade
• Flexible exchange rates are set by supply and demand in the foreign exchange market
• Jacob Viner gave the single factoral terms of trade
• BOT records goods only; BOP includes visible and invisible items; tourism belongs in the services account
• Buying overseas bonds or shares is not FDI; FDI is not permitted in atomic energy

Unit 8: International Economic Organisations

• The IMF came out of the Bretton Woods conference and is headquartered in Washington D.C.
• IBRD is the World Bank, which gives long-term loans; IDA is its affiliate; SDRs are called paper gold
• TRIPS covers patents and copyrights; the first WTO ministerial meeting was in Singapore
• ASEAN was created in 1967 with headquarters in Jakarta
• The term BRIC was coined in 2001, and the New Development Bank belongs to BRICS
• Japan and China are not SAARC members; BENELUX is a customs union

Unit 9: Fiscal Economics

• The modern state is a welfare state; publicity is not a feature of private finance
• Adam Smith's canons are equality, certainty, convenience and economy, so simplicity is not one of them
• Income tax is a direct tax; agricultural income tax is not a Union list tax
• Revenue deficit is revenue expenditure minus revenue receipts; fiscal deficit does not count borrowing as a receipt
• "Budget" comes from the French "bougette", a small bag; the Finance Commission decides resource transfers to the states

Unit 10: Environmental Economics

• Kneese and Ayres developed the material balance model
• Environmental goods are non-market goods; a pure public good is non-rival
• Negative externalities are a major market failure; automobiles are the main source of carbon monoxide
• Nutrient enrichment of water is eutrophication; the SDGs are to be achieved by 2030

Unit 11: Economics of Development and Planning

• Economic growth measures an increase in output and is the narrower concept
• The vicious circle of poverty characterises underdevelopment
• The Gandhian Plan focused on agriculture; M N Roy drafted the People's Plan; J P Narayan advocated the Sarvodaya Plan
• France follows indicative planning; long-term plans are perspective plans
• The Planning Commission was set up in 1950; NITI Aayog was formed by a cabinet resolution and is chaired by the Prime Minister

Unit 12: Introduction to Statistical Methods and Econometrics

• "Statistics" is used in both singular and plural senses; questionnaire data is primary data
• The correlation coefficient r lies between −1 and +1, and is positive when both variables move together
• Galton first used the term regression; Y is the dependent variable and X the independent variable
• Ragnar Frisch coined "econometrics", which combines economics, mathematics and statistics
• U_i is the stochastic error term and represents omitted variables

How to revise this section

Revise one chapter a day by testing, not reading: answer twenty MCQs against a timer and note the misses. The solved sets, with explanations, are on the Class 12 Economics section.