CUET 2025 Economics Question Paper with Answers & Solutions

Correct answer: B

Deciding whether resources go into education/health or military is a choice about which goods/services and in what quantity to produce. This is the 'What to produce' central problem of allocation.

Correct answer: C

NCERT defines the collection of ALL possible combinations of goods producible from given resources and technology as the Production Possibility Set. The frontier (PPF) is only the boundary of this set.

Correct answer: A

Wait—logical sequence on a leftward demand shift: first (A) at any given price demand is less, leading to (B) excess supply, then (C) producers cut prices, finally (D) new equilibrium with lower price and quantity. That is (A),(B),(C),(D), which is not an option. Among options, (A)=(B),(A),(C),(D) places excess supply then less demand then price cut then new equilibrium — closest valid causal chain ending correctly at (D). Selecting (A).

Correct answer: B

(A) utility expressed in numbers = Cardinal Utility (I); (B) change in total utility per additional unit = Marginal Utility (III); (C) MU declines as consumption rises = Law of Diminishing Marginal Utility (II); (D) goods foregone keeping utility same = Marginal Rate of Substitution (IV). Matches option B.

Correct answer: D

NCERT: the budget set is the set of all bundles available to (affordable by) the consumer given prices and income. Option D states this. B describes a single affordable bundle, not the set.

Correct answer: A

(A) correct: jointly consumed goods are complements. (C) correct: price elasticity measures responsiveness of demand to price. (B) wrong: market demand is HORIZONTAL summation. (D) wrong: favorable preference shift moves demand RIGHTWARD. So only (A) and (C).

Correct answer: B

The relation between a consumer's optimal (chosen) quantity of a good and its price is the demand function.

Correct answer: A

(A) relation between variable input and output = Total Product (IV); (B) output per unit of variable input = Average Product (I); (C) change in output per unit change in input = Marginal Product (II); (D) MP initially rises then falls = Law of Variable Proportions (III). Matches option A.

Correct answer: B

In the long run all factors of production are variable; there are no fixed factors. This distinguishes it from the short run.

Correct answer: D

Profit = Total Revenue - Total Cost. The difference between revenue and cost is profit.

Correct answer: A

Marginal Product = change in output per unit change in one input, holding other inputs constant. $MP = \Delta Q/\Delta L$.

Correct answer: C

Decreasing returns to scale: scaling inputs by $t$ raises output by less than $t$ times, i.e. $f(tx_1,tx_2) < t\,f(x_1,x_2)$. Option C. (B = constant returns, D = increasing returns.)

Correct answer: D

Change in total cost per unit change in output is Marginal Cost. In short-run context this is the Short Run Marginal Cost. $SMC = \Delta TC/\Delta q$.

Correct answer: C

AFC = TFC/q; as output rises AFC falls continuously, tracing a rectangular hyperbola (never touching the axes).

Correct answer: B

MC cuts AC at AC's minimum point. When MC<AC, AC falls; when MC>AC, AC rises; they are equal at the lowest point of AC.

Correct answer: A

The point where the firm earns only normal profit (price = minimum average cost, zero economic profit) is the break-even point.

Correct answer: D

Profit-maximising conditions for a competitive firm: (A) P = SMC; (B) SMC is non-decreasing at that output; (D) P >= AVC (so production is worthwhile). (C) P<=MC is wrong. So (A),(B),(D) — option D.

Correct answer: A

Technological progress lowers costs, increasing supply at every price, so the supply curve shifts rightward.

Correct answer: C

$\%\Delta Q = \frac{24-30}{30}=-20\%$; $\%\Delta P = \frac{14-10}{10}=40\%$. Elasticity $= |{-20\%}/{40\%}| = 0.5$.

Correct answer: A

A price floor is a government-set minimum price. The Minimum Support Price (MSP) for foodgrains is the classic example of a floor price.

Correct answer: D

John Maynard Keynes wrote 'The General Theory of Employment, Interest and Money' (1936), the foundation of macroeconomics.

Correct answer: B

This is the Paradox of Thrift: a general rise in saving rate lowers income so much that total saving does not rise.

Correct answer: B

CPI compares the cost of the basket in the current year against the base year: $CPI = \frac{\text{cost in current year}}{\text{cost in base year}}\times100$. Only current and base years are used.

Correct answer: A

The price index of a basket of commodities bought by a representative consumer is the Consumer Price Index (CPI).

Correct answer: B

(A) GDP_MP = C+I+G+(X-M) = (III); (B) NDP_FC = NDP_MP - net product taxes - net production taxes = (I); (C) GVA at FC = GVA at basic prices - net production taxes = (II); (D) GNP_FC = GNP_MP - net product taxes - net production taxes = (IV). Matches option B.

Correct answer: D

GDP measured at constant (base-year) prices is Real GDP; at current prices it is Nominal GDP.

Correct answer: A

Functions of money: medium of exchange (A), unit of account (B), store of value (D). Bartering (C) is what money replaces, not a function. So (A),(B),(D).

Correct answer: C

Deposits are owed by the bank to depositors, so they are liabilities of the bank.

Correct answer: D

(A) CRR = % of deposits kept as cash reserve with central bank = (III); (B) SLR = reserves in liquid form (short term) = (IV); (C) Lender of last resort = Central Bank = (I); (D) Repo Rate = interest rate at which central bank lends = (II). Matches option D.

Correct answer: A

Currency notes and coins are accepted as money by government fiat (legal tender, not backed by commodity), hence called fiat money (also legal tender).

Correct answer: A

Ex-post refers to realised/actual values — what actually has happened. Ex-ante refers to planned/intended values.

Correct answer: C

Intervening to expand or contract aggregate demand to stabilise output/employment/prices is the stabilisation function of the government.

Correct answer: A

Balance of Trade (BOT) = value of exports of goods minus value of imports of goods. (BOP is broader, including invisibles and capital flows.)

Correct answer: C

Income method sequence: (A) identify/classify producing firms; (D) classify factor incomes; (B) estimate NDP_FC by summing factor incomes; (C) estimate NNP_FC (national income) by adding net factor income from abroad. Order (A),(D),(B),(C) = option C.

Correct answer: B

Money measures by decreasing liquidity: M1 = (C) Currency+DD (most liquid); M2 = (A) M1 + savings deposits with Post Office savings banks; M3 = (D) M1 + net time deposits of commercial banks; M4 = (B) M3 + total Post Office deposits (least liquid). Order (C),(A),(D),(B) = option B.

Correct answer: B

Acquiring a foreign firm (foreign direct investment / purchase of foreign assets) is a capital transaction recorded in the Capital Account of the BOP.

Correct answer: A

When the central bank sells foreign exchange from its reserves to finance a BOP deficit, it is an official reserve sale (drawing down official reserves).

Correct answer: C

Spending on imports (foreign goods) is a leakage from the circular flow of domestic income, as it diverts demand abroad.

Correct answer: C

When G rises with T constant: (A) planned aggregate expenditure rises; (B) government runs a deficit when G exceeds T; (D) the AD schedule shifts upward; (C) equilibrium income increases. Sequence (A),(B),(D),(C) = option C.

Correct answer: C

Value-added (product) method: (B) estimate value of output; (A) deduct intermediate cost to get GVA/GDP_MP; (D) deduct depreciation and net indirect taxes to get NDP_FC; (C) add net factor income from abroad to get national income (NNP_FC). Order (B),(A),(D),(C) = option C.

Correct answer: A

The passage states 'The equilibrium output in the economy also determines the level of employment.' Hence level of employment is determined by output equilibrium.

Correct answer: C

Passage: 'Full employment level of income is that level of income where all the factors of production are fully employed in the production process.' Option C is verbatim.

Correct answer: D

Passage: 'the level of output determined by the equality of Y with AD'. So output is determined by equality of income (Y) with aggregate demand (AD).

Correct answer: A

Passage: if equilibrium output is less than full employment output, 'This situation is called the situation of deficient demand.'

Correct answer: C

Passage: excess demand occurs because 'the demand is more than the level of output produced at full employment level.' Option C.

Correct answer: A

Passage: GST 'is a destination based consumption tax.' It is an indirect, destination-based tax. Option A.

Correct answer: C

Passage: under GST 'the credit of tax paid at the previous stage is available for set off at the next stage,' i.e. Input Tax Credit removes the cascading (tax-on-tax) effect.

Correct answer: C

Passage: GST 'has amalgamated a large number of Central and State taxes and cesses' (indirect taxes like excise, service tax, VAT, octroi). Option C.

Correct answer: D

Among these, petroleum, alcohol and tobacco products lie outside/partly outside GST; tobacco also attracts central excise over and above GST, so it is treated as kept out of the pure GST ambit. Gold and silver are within GST. Option D.

Correct answer: C

Passage: GST 'is applicable throughout the country with one rate for one type of goods/service' establishing 'parity in taxation across the country' — uniform tax rate nationwide makes it a unified system. Option C.