“· National Income: Concepts and Measurement.” - Question Bank

1. Which of the following is a primary concern when calculating National Income to avoid double counting?
A) Distinguishing between final and intermediate goods
B) Including transfer payments
C) Accounting for depreciation
D) Calculating net factor income from abroad
2. The value of 'exports minus imports' is known as:
A) Balance of Trade
B) Net Exports
C) Current Account Balance
D) Capital Account Balance
3. If the government increases subsidies to producers, holding other factors constant, what is the likely impact on GDP at factor cost and GDP at market prices?
A) GDP at factor cost increases, GDP at market prices decreases
B) GDP at factor cost decreases, GDP at market prices increases
C) GDP at factor cost is unaffected, GDP at market prices increases
D) GDP at factor cost is unaffected, GDP at market prices is unaffected
4. Which method is most appropriate for measuring the output of the agricultural sector?
A) Income Method
B) Expenditure Method
C) Product Method (Value Added Method)
D) Consumption Method
5. Personal Income (PI) differs from National Income (NI) by excluding:
A) Wages and salaries
B) Retained earnings of corporations and government transfer payments
C) Interest and rent
D) Profits
6. Which of the following represents the total income earned by factors of production within a country, including depreciation and net indirect taxes?
A) National Income
B) Gross Domestic Product at Market Prices
C) Gross National Product at Factor Cost
D) Net National Product at Factor Cost
7. The GDP deflator is a measure of the price level for all domestically produced final goods and services. It is calculated as:
A) (Nominal GDP / Real GDP) * 100
B) (Real GDP / Nominal GDP) * 100
C) (Nominal GDP / Real GDP) / 100
D) (Real GDP / Nominal GDP) / 100
8. Which of the following is a measure of the total output produced within a country's borders, adjusted for the purchasing power of money?
A) Nominal GDP
B) Real GDP
C) GNP deflator
D) GDP per capita
9. The relationship GNI = GDP + Net factor income from abroad implies that GNI is also known as:
A) Gross Domestic Product
B) Gross National Product
C) Net Domestic Product
D) Net National Product
10. Which of the following is a component of Gross National Expenditure (GNE)?
A) Net factor income from abroad
B) Depreciation
C) Private final consumption expenditure
D) Indirect taxes
11. If GDP at market prices is Rs. 10,000 crores and depreciation is Rs. 1,000 crores, what is NDP at market prices?
A) Rs. 9,000 crores
B) Rs. 10,000 crores
C) Rs. 11,000 crores
D) Rs. 1,000 crores
12. What does the 'Income Method' of National Income calculation aim to measure?
A) The total spending in the economy
B) The total value of goods and services produced
C) The total income generated from the production of goods and services
D) The net change in the nation's wealth
13. Which of the following is a transfer payment and thus not included in National Income?
A) Salary of a government employee
B) Profit of a private company
C) Unemployment benefits
D) Interest paid on a loan for a business
14. The term 'factor cost' in National Income accounting refers to:
A) The price at which goods and services are sold in the market
B) The cost of production including indirect taxes and subsidies
C) The sum of payments made to factors of production (land, labor, capital, entrepreneurship)
D) The total expenditure incurred by consumers
15. Which of the following is an example of a final good?
A) Flour purchased by a bakery
B) Wheat purchased by a flour mill
C) A car purchased by a household for personal use
D) Steel purchased by a car manufacturer
16. The concept of 'intermediate goods' is excluded from the calculation of National Income because:
A) They are not produced by firms
B) Their value is already included in the value of final goods
C) They are only used for consumption
D) They are difficult to measure
17. If NNP at factor cost is Rs. 8000 crores and Net Indirect Taxes are Rs. 1000 crores, what is NNP at market prices?
A) Rs. 7000 crores
B) Rs. 8000 crores
C) Rs. 9000 crores
D) Rs. 1000 crores
18. Which component accounts for the difference between Gross National Product (GNP) and Net National Product (NNP)?
A) Indirect taxes
B) Subsidies
C) Depreciation
D) Net factor income from abroad
19. In a simple two-sector economy (households and firms), National Income is equal to:
A) Total consumption + Total saving
B) Total consumption + Total investment
C) Total production + Total income
D) Total expenditure + Total income
20. The Circular Flow of Income model illustrates:
A) The accumulation of national debt
B) The movement of payments and goods/services between sectors of the economy
C) The process of inflation and deflation
D) The impact of international trade on domestic production
21. Which of the following is a measure of the total income available to households for consumption and saving?
A) National Income
B) Personal Income
C) Personal Disposable Income
D) Corporate Profits
22. If Net Indirect Taxes are negative (i.e., subsidies exceed indirect taxes), then:
A) GDP at market prices will be higher than GDP at factor cost
B) GDP at market prices will be lower than GDP at factor cost
C) GDP at market prices will be equal to GDP at factor cost
D) GDP at market prices will be unaffected
23. What is 'Gross Domestic Capital Formation' in the expenditure method?
A) Consumption expenditure by households
B) Government final consumption expenditure
C) Changes in inventories and fixed capital formation
D) Net exports
24. The sum of consumption expenditure and investment expenditure by households is known as:
A) Government Expenditure
B) Net Exports
C) Private Final Consumption Expenditure
D) Gross Domestic Capital Formation
25. If a country has significant net factor income from abroad (positive), its GNP will be:
A) Lower than its GDP
B) Higher than its GDP
C) Equal to its GDP
D) Unrelated to its GDP
26. Which of the following is a key difference between GDP and GNP?
A) GDP measures production within geographical boundaries, while GNP measures production by nationals.
B) GNP measures production within geographical boundaries, while GDP measures production by nationals.
C) GDP includes depreciation, while GNP does not.
D) GNP includes indirect taxes, while GDP does not.
27. Real GDP is a measure of the value of all final goods and services produced in a country using:
A) Current prices
B) Prices of the current year
C) Constant prices of a base year
D) Average prices of the last five years
28. The concept of 'nominal GDP' is measured at:
A) Current market prices
B) Constant prices of a base year
C) Factor cost
D) Factor cost plus subsidies
29. Which of the following is NOT a factor income?
A) Wages
B) Rent
C) Profit
D) Old age pension
30. What is the relationship between NNP at market prices and NNP at factor cost?
A) NNP at factor cost = NNP at market prices + Net Indirect Taxes
B) NNP at market prices = NNP at factor cost + Net Indirect Taxes
C) NNP at factor cost = NNP at market prices - Net Indirect Taxes
D) NNP at market prices = NNP at factor cost - Net Indirect Taxes
31. When calculating National Income using the Expenditure Method, what does 'G' represent?
A) Gross Investment
B) Government Consumption Expenditure and Gross Investment
C) Government Final Consumption Expenditure
D) Government Transfer Payments
32. The Income Method of calculating National Income sums up:
A) Wages, Rent, Interest, Profits, and Indirect Taxes
B) Wages, Rent, Interest, Profits, and Depreciation
C) Wages, Rent, Interest, Profits, and Net Factor Income from Abroad
D) Wages, Rent, Interest, Profits, and Subsidies
33. Which of the following is a direct measure of the welfare of citizens?
A) GDP
B) GNP
C) NNP at factor cost
D) Personal Disposable Income
34. Personal Disposable Income (PDI) is calculated by subtracting which from Personal Income?
A) Corporate Profits
B) Undistributed Profits
C) Indirect Business Taxes
D) Direct Taxes paid by households
35. Which concept measures the total value of goods and services produced within a country's borders in a given period, after deducting depreciation?
A) Gross Domestic Product (GDP)
B) Gross National Product (GNP)
C) Net Domestic Product (NDP)
D) National Income (NI)
36. If GNP at factor cost is Rs. 6000 crores and Net Factor Income from Abroad is Rs. 200 crores, what is GDP at factor cost?
A) Rs. 5800 crores
B) Rs. 6000 crores
C) Rs. 6200 crores
D) Rs. 200 crores
37. If GDP at factor cost is Rs. 5000 crores and Net Indirect Taxes are Rs. 500 crores, what is GDP at market prices?
A) Rs. 4500 crores
B) Rs. 5000 crores
C) Rs. 5500 crores
D) Rs. 500 crores
38. Which of the following is a component of Net Indirect Taxes (NIT)?
A) Direct Taxes
B) Subsidies
C) Indirect Taxes
D) Profits
39. Depreciation refers to:
A) The increase in the value of capital stock
B) The decrease in the value of capital stock due to wear and tear or obsolescence
C) The profit earned by firms
D) The interest paid on loans
40. What does 'Net Factor Income from Abroad' represent?
A) Income earned by domestic residents from foreign investments minus income earned by foreign residents from domestic investments.
B) Income earned by foreign residents from domestic investments minus income earned by domestic residents from foreign investments.
C) Total income earned by domestic residents from all sources.
D) Total income earned by foreign residents within the domestic country.
41. Which of the following is NOT a component of GDP in the expenditure approach?
A) Consumption (C)
B) Investment (I)
C) Government Spending (G)
D) Transfer Payments
42. The 'Value Added Method' of calculating National Income focuses on:
A) The total expenditure of households
B) The total income earned by factors of production
C) The contribution of each producing unit to the economy
D) The total value of final goods and services produced
43. The sum of wages, salaries, profits, interest, and rent in an economy is measured by which method of National Income accounting?
A) Product Method
B) Income Method
C) Expenditure Method
D) Value Added Method
44. Which method of calculating National Income involves summing up all expenditures on final goods and services?
A) Product Method
B) Income Method
C) Expenditure Method
D) Value Added Method
45. 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
46. Net Domestic Product (NDP) is calculated as:
A) GDP + Depreciation
B) GDP - Depreciation
C) GNP - Depreciation
D) GNP + Depreciation
47. Which of the following represents the total value of goods and services produced by a country's citizens and businesses, regardless of location?
A) Gross Domestic Product (GDP)
B) Gross National Product (GNP)
C) Net Domestic Product (NDP)
D) Personal Disposable Income (PDI)
48. What is the difference between GDP and GNP?
A) Net factor income from abroad
B) Depreciation
C) Indirect taxes
D) Subsidies
49. GDP at market prices includes which of the following?
A) Indirect taxes but not subsidies
B) Subsidies but not indirect taxes
C) Both indirect taxes and subsidies
D) Neither indirect taxes nor subsidies
50. Which of the following is the broadest measure of a nation's economic activity?
A) Gross Domestic Product (GDP)
B) Gross National Product (GNP)
C) Net National Product (NNP)
D) National Income (NI)
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