National income: concepts and measurement. - Question Bank

1. Which of the following is a reason for the existence of discrepancies between different methods of national income calculation?
A) Accurate accounting of all transactions
B) Inclusion of all intermediate goods
C) Differences in data collection and estimation techniques
D) Perfect understanding of the informal economy
2. National Income is the sum of:
A) Wages, rent, interest, profit, and net factor income from abroad
B) Wages, rent, interest, profit, and depreciation
C) Consumption, investment, government spending, and net exports
D) Expenditure on final goods and services
3. Which indicator is often used to compare the economic performance of countries with different price levels?
A) Nominal GDP
B) Real GDP
C) GDP at Purchasing Power Parity (PPP)
D) GNP per capita
4. What is the main difference between the product method and the income method of national income calculation?
A) Product method sums final goods, while income method sums factor incomes
B) Product method sums intermediate goods, while income method sums transfer payments
C) Product method sums all goods, while income method sums all services
D) Product method sums imports, while income method sums exports
5. Which of the following is a measure of national income that reflects the total income available to residents, after accounting for depreciation and net indirect taxes?
A) GDP at market prices
B) GNP at market prices
C) NNP at factor cost
D) NDP at market prices
6. The term 'final goods' in national income accounting includes:
A) Goods used for further production
B) Goods purchased by consumers and for investment
C) Goods sold by one producer to another
D) Raw materials used in production
7. If GDP at factor cost is Rs. 700 crore and Net Indirect Taxes are Rs. 80 crore, what is GDP at market prices?
A) Rs. 620 crore
B) Rs. 780 crore
C) Rs. 700 crore
D) Rs. 80 crore
8. Which of the following is a component of 'Net Indirect Taxes'?
A) Indirect taxes minus subsidies
B) Subsidies minus indirect taxes
C) Direct taxes minus indirect taxes
D) Wages minus profits
9. When calculating national income using the income method, 'profits' typically refer to:
A) Gross profits before taxes and depreciation
B) Net profits after taxes and depreciation
C) Undistributed profits only
D) Dividends paid to shareholders
10. Which of the following is a limitation of GNP as a measure of economic welfare?
A) It does not account for depreciation
B) It includes income earned by foreigners within the country
C) It does not account for the distribution of income
D) It only measures market transactions
11. The concept of 'value added' in national income accounting refers to:
A) The total revenue of a firm
B) The difference between the value of a firm's output and the value of its intermediate inputs
C) The profit earned by a firm
D) The total cost of production for a firm
12. Which of the following is a measure of national income that excludes the impact of depreciation?
A) Gross Domestic Product (GDP)
B) Gross National Product (GNP)
C) Net National Product (NNP)
D) Net Domestic Product (NDP)
13. If Net Exports decrease by Rs. 50 crore, while other components of GDP remain unchanged, what will be the impact on GDP?
A) GDP will increase by Rs. 50 crore
B) GDP will decrease by Rs. 50 crore
C) GDP will remain unchanged
D) The impact cannot be determined
14. What is the primary purpose of differentiating between GDP at market prices and GDP at factor cost?
A) To measure inflation accurately
B) To understand the true cost of production by removing the impact of government taxes and subsidies
C) To compare GDP across countries with different tax systems
D) To calculate the national debt
15. Which of the following is a method used to estimate the size of the informal economy for national income accounting?
A) Direct surveys of all informal sector participants
B) Using proxy indicators and statistical techniques
C) Ignoring the informal sector completely
D) Assuming it is a fixed percentage of the formal economy
16. Disposable income is the income available to households for:
A) Investment only
B) Consumption and saving
C) Paying taxes
D) Saving only
17. Which of the following would lead to an increase in GDP?
A) A decrease in government spending
B) An increase in imports
C) An increase in business inventories
D) A decrease in net exports
18. The value of output method is also known as:
A) Income method
B) Expenditure method
C) Value added method
D) National income method
19. If GNP at factor cost is Rs. 600 crore and NFIA is Rs. 30 crore, what is GDP at factor cost?
A) Rs. 570 crore
B) Rs. 630 crore
C) Rs. 600 crore
D) Rs. 30 crore
20. What does 'Net Factor Income from Abroad' (NFIA) represent?
A) The difference between exports and imports of goods and services
B) The difference between income earned by resident factors of production abroad and income earned by non-resident factors of production domestically
C) The sum of wages, rent, interest, and profit earned by citizens abroad
D) The net change in a country's foreign exchange reserves
21. Which of the following is a component of 'Government Purchases' in GDP calculation?
A) Transfer payments to individuals
B) Salaries of government employees
C) Interest paid on government debt
D) Subsidies to businesses
22. The difference between Gross Investment and Net Investment is:
A) Depreciation
B) Capital gains
C) Subsidies
D) Indirect taxes
23. Which of the following activities is NOT a part of the production boundary for national income accounting?
A) Services of domestic servants paid in cash
B) Growing vegetables for self-consumption
C) Services of a housewife
D) Production of goods for sale in the market
24. What does NDP at factor cost represent?
A) The total income earned by factors of production within a country, including depreciation
B) The total income earned by factors of production within a country, excluding depreciation
C) The total market value of goods and services produced within a country, excluding depreciation
D) The total market value of goods and services produced by a country's residents, excluding depreciation
25. Which of the following is a direct method of calculating national income?
A) Expenditure method
B) Income method
C) Product method
D) All of the above
26. If GDP at current prices is Rs. 1000 crore and GDP at constant prices is Rs. 800 crore, what is the GDP deflator?
A) 100
B) 125
C) 80
D) 150
27. The GDP deflator is a measure of:
A) The average price level of all goods and services produced in an economy
B) The price level of consumer goods only
C) The price level of intermediate goods only
D) The rate of unemployment
28. Real GDP is adjusted for:
A) Inflation
B) Changes in exchange rates
C) Government spending
D) Depreciation
29. Nominal GDP is measured in:
A) Constant prices of a base year
B) Current market prices
C) Factor cost prices
D) Purchasing power parity
30. Which of the following is a limitation of using GDP as a measure of economic welfare?
A) It includes the value of illegal activities
B) It does not account for income inequality
C) It includes transfer payments
D) It does not account for depreciation
31. What is the main purpose of calculating national income?
A) To measure the level of poverty
B) To assess the economic growth and performance of a country
C) To determine the distribution of wealth
D) To track international trade balances
32. Personal Disposable Income (PDI) is calculated as:
A) National Income - Corporate Taxes - Undistributed Profits + Transfer Payments
B) National Income + Corporate Taxes + Undistributed Profits - Transfer Payments
C) GDP - Depreciation - Indirect Taxes
D) GNP + Net Factor Income from Abroad
33. Which of the following is a component of 'Gross Private Domestic Investment'?
A) Government purchases of new machinery
B) Household spending on new cars
C) Business spending on new factories and equipment
D) Net exports
34. If NNP at factor cost is Rs. 500 crore, indirect taxes are Rs. 50 crore, and subsidies are Rs. 20 crore, what is NNP at market prices?
A) Rs. 470 crore
B) Rs. 530 crore
C) Rs. 550 crore
D) Rs. 430 crore
35. What does 'factor cost' refer to in national income accounting?
A) The cost of producing goods and services including indirect taxes and subsidies
B) The cost of producing goods and services excluding indirect taxes and subsidies
C) The market price at which goods and services are sold
D) The total expenditure by households
36. Transfer payments, such as pensions and unemployment benefits, are excluded from national income calculations because:
A) They represent a drain on the economy
B) They do not represent the production of any good or service
C) They are paid by the government
D) They are received by individuals
37. Which of the following is NOT included in the calculation of GDP?
A) Services of a lawyer
B) Rent of a house
C) Value of illegal drug sales
D) Wages paid to an employee
38. The value of 'consumption of fixed capital' is synonymous with:
A) Net investment
B) Gross investment
C) Depreciation
D) Capital gains
39. Which of the following is considered an intermediate good?
A) A car purchased by a household
B) Flour purchased by a bakery to make bread
C) A tractor purchased by a farmer
D) A computer purchased by a student
40. What is the primary challenge in using the product method to calculate national income?
A) Difficulty in measuring depreciation
B) Avoiding double counting of intermediate goods
C) Accurately estimating net factor income from abroad
D) Accounting for the informal sector
41. The product method (or value added method) of calculating national income focuses on:
A) The total spending in the economy
B) The sum of all incomes generated
C) The market value of all final goods and services produced
D) The difference between exports and imports
42. Which method of national income accounting sums the incomes of all factors of production?
A) Product method
B) Income method
C) Expenditure method
D) Value added method
43. The expenditure method of calculating national income sums up:
A) Consumption, investment, government spending, and net exports
B) Wages, rent, interest, and profit
C) Value added at each stage of production
D) Income earned by residents abroad
44. National Income (NI) is equivalent to:
A) NNP at market prices
B) NNP at factor cost
C) GDP at factor cost
D) GNP at market prices
45. Which of the following represents the income earned by factors of production within a country's borders?
A) Gross National Product (GNP)
B) Net National Product (NNP)
C) Net Domestic Product (NDP)
D) National Income (NI)
46. Net National Product (NNP) is calculated by:
A) Adding depreciation to GDP
B) Subtracting depreciation from GDP
C) Adding subsidies to GDP
D) Subtracting indirect taxes from GDP
47. What is the relationship between GDP and GNP if a country has significant income earned by its citizens abroad?
A) GDP will be greater than GNP
B) GNP will be greater than GDP
C) GDP and GNP will be equal
D) The relationship cannot be determined
48. Which component of GDP measures the total value of goods and services produced by a country's citizens and companies, regardless of location?
A) Gross Domestic Product (GDP)
B) Gross National Product (GNP)
C) Net National Product (NNP)
D) Net Domestic Product (NDP)
49. GDP at market prices includes:
A) Indirect taxes only
B) Subsidies only
C) Indirect taxes and subsidies
D) Neither indirect taxes nor subsidies
50. Which of the following is the most comprehensive measure of a nation's economic performance?
A) Gross Domestic Product (GDP)
B) Gross National Product (GNP)
C) Net National Product (NNP)
D) National Income (NI)
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