NEB Class 12 Management Economics Question Paper 2082 (Set B) Nepal

Two causes that give rise to the problem of choice are: (i) Unlimited human wants and (ii) Scarcity of resources which have alternative uses. Because resources are limited relative to wants, an economy must choose how to allocate them.

The central bank (in Nepal, the Nepal Rastra Bank) is called the lender of last resort, because it provides loans to commercial banks and financial institutions during a financial crisis or shortage of funds.

The money market deals in short-term financial instruments (maturity of up to one year, e.g. treasury bills, commercial paper), whereas the capital market deals in long-term financial instruments (maturity of more than one year, e.g. shares, debentures, bonds).

Two indicators of human development are: (i) Life expectancy at birth (health/long life) and (ii) Education (measured by mean years of schooling and expected years of schooling). A third common indicator is per-capita income (GNI per capita) reflecting standard of living.

The World Trade Organization (WTO) is the international organisation that deals with the global rules of trade between nations.

Two objectives of Nepal's Sixteenth Plan (FY 2081/82–2085/86) are: (i) to achieve good governance, social justice and prosperity (its overall vision), and (ii) to attain economic, social and cultural transformation through interconnected and high economic growth that helps graduate Nepal toward higher-income status. (Any two relevant objectives are acceptable.)

SDG 6 — Clean Water and Sanitation: "Ensure availability and sustainable management of water and sanitation for all."

In a singular sense, statistics is the science (or methods) of collecting, organising, presenting, analysing and interpreting numerical data to draw valid conclusions. In this sense statistics refers to the statistical methods themselves, not the data.

Primary data is preferred because it is collected first-hand by the investigator for the specific purpose of the study, so it is more original, reliable, accurate and relevant to the research objective than secondary data (which was gathered by others for some other purpose).

Five differences between capitalist and socialist economy:

(Any five of the above are acceptable.)

OR — Division of labour: Division of labour is the splitting of the production process into a number of separate tasks, each performed by a different worker or group of workers who specialise in it.

Four advantages:

1. Increase in productivity/output – specialisation makes workers more efficient.
2. Improvement in skill – repeating the same task develops expertise.
3. Saving of time – no time lost shifting between different jobs.
4. Use of machinery and large-scale production – tasks become suited to mechanisation, lowering cost.

The classical (real) theory of interest, developed by classical economists (Marshall, Pigou, etc.), holds that the rate of interest is determined by the demand for and supply of capital (saving and investment).

• Supply of capital = Saving, which is a positive (increasing) function of the rate of interest: a higher interest rate induces people to save more (reward for waiting/abstinence).
• Demand for capital = Investment, which is a negative (decreasing) function of the rate of interest: a lower interest rate makes more investment projects profitable, so investment rises.
• Equilibrium rate of interest is determined at the point where saving (S) = investment (I), i.e. where the saving and investment curves intersect.

If the interest rate is above equilibrium, saving exceeds investment and the rate falls; if below equilibrium, investment exceeds saving and the rate rises, until $S = I$.

(A simple S–I diagram with interest rate on the vertical axis and saving/investment on the horizontal axis, intersecting at the equilibrium rate, supports the answer.)

Five features of direct tax:

1. Incidence and impact on the same person – the burden of a direct tax cannot be shifted to another person; the person on whom it is levied actually bears it (e.g. income tax).
2. Based on ability to pay – direct taxes are progressive, charged according to the income/wealth of the taxpayer, promoting equity.
3. Paid directly to the government – the taxpayer pays the tax directly to the government/tax authority.
4. Certainty – the amount, time and manner of payment are generally certain and known to the taxpayer.
5. Reduces inequality of income – being progressive, it takes more from the rich and helps redistribute income.

(Other acceptable points: less elastic, may discourage saving/work effort, involves narrow coverage. Any five suffice.)

Five activities that could be suggested to the Rural Municipality to generate employment in the village:

1. Commercial/modern agriculture and livestock farming – promoting vegetable farming, dairy, poultry, goat-rearing and fishery creates self-employment and jobs in the primary sector.
2. Agro-based and cottage/small industries – setting up processing units (dairy, fruit/juice, grain mills, handicrafts) adds value locally and employs many people.
3. Skill-development and vocational training – training the youth in tailoring, electrical work, plumbing, IT, etc., makes them employable and supports self-employment.
4. Tourism and home-stay promotion – developing local tourist sites, home-stays and hospitality services generates jobs in services and trade.
5. Cooperatives and micro-enterprises with easy finance – forming savings/credit cooperatives and providing micro-credit helps villagers start small businesses, reducing the need to migrate for work.

(Other valid suggestions such as small-scale irrigation, road/infrastructure projects under public works, and bee-keeping/herbs cultivation are also acceptable.)

Foreign employment is useful for Nepal for the following five reasons:

1. Source of remittance / foreign exchange – remittances sent by migrant workers are a major source of foreign currency and a large share of Nepal's GDP, helping the balance of payments.
2. Reduction of unemployment – it absorbs the surplus labour force that the domestic economy cannot employ, lowering unemployment and underemployment.
3. Poverty reduction – remittance income raises household consumption, education and living standards, helping reduce poverty.
4. Skill and knowledge transfer – workers acquire new skills, technology and work experience abroad which can be used productively after returning home.
5. Capital formation and investment – remittances are partly saved/invested in land, housing, education, business and banks, contributing to capital formation and economic activity.

(Other valid points: support to government revenue, exposure to international labour markets.)

Free trade is a trade policy under which goods and services move between countries without government-imposed restrictions such as tariffs, quotas, or subsidies — trade is guided purely by the principle of comparative advantage and market forces.

Why developing countries are not always benefited from the expansion of free trade:

1. Unequal level of development – developing countries compete with technologically advanced nations on unequal terms and often lose.
2. Dependence on primary exports – they mainly export low-value primary/agricultural goods while importing costly manufactured goods, worsening the terms of trade.
3. Threat to infant industries – their new, small domestic industries cannot survive cheap foreign competition and may collapse, hindering industrialisation.
4. Unfavourable balance of trade/payments – rising imports relative to limited exports widen the trade deficit and drain foreign exchange.
5. Dumping and unfair competition – advanced countries may dump cheap goods, destroying local production and jobs.
6. Loss of revenue and economic dependence – removal of tariffs reduces government revenue and increases dependence on developed economies and MNCs.

Hence, without adequate protection, capacity-building and fair rules, the expansion of free trade can harm rather than help developing countries.

Causes of increasing trade deficit in Nepal:

1. Narrow and weak export base – Nepal exports a few low-value primary goods, while the export sector is small and uncompetitive.
2. Heavy dependence on imports – large imports of petroleum, vehicles, machinery, consumer and luxury goods far exceed exports.
3. Low industrial production – weak domestic manufacturing forces reliance on imported finished goods.
4. Low productivity and high cost of production – making Nepali goods uncompetitive in international markets.
5. Remittance-led consumption – remittance income raises demand for imported goods rather than domestic production.
6. Poor infrastructure and energy shortage – raising production costs and discouraging exports.
7. Landlocked geography and trade dependence on India – higher transport costs and limited market access.
8. Lack of export diversification and trade promotion – limited products and markets keep export earnings low.

Together these factors make imports grow far faster than exports, continuously widening Nepal's trade deficit.

OR — Achievement of the Fifteenth Plan (FY 2076/77–2080/81):

• Overall economic growth remained below the targeted rate (target ~9.6%; actual much lower, partly due to COVID-19).
• Poverty was reduced and per-capita income rose, though graduation and prosperity targets were only partly met.
• Infrastructure (roads, electricity access, drinking water) and social indicators (health, education, life expectancy) improved.
• Nepal's recommendation for graduation from LDC status is a notable achievement linked to the plan period.
• Weaknesses: targets for high growth, full employment, and large reduction of trade deficit and inequality were not fully achieved; implementation and capital-expenditure capacity remained weak.

Evaluation: The Fifteenth Plan made partial progress — improving social indicators and infrastructure and setting the path toward LDC graduation — but fell short of its ambitious growth and prosperity targets, mainly due to weak implementation and external shocks.