National Income Questions

Ashok Shakya 8979627339
CHAPTER -12-NATIONAL INCOME AND RELATED

AGGREGATES
(METHODS OF MEASURING NATIONALINCOME)
MULTIPLE CHOICE QUESTIONS
S No. Questions
1 Real flow is the flow of

A. Goods only
B. Money only
C. Services only
D. Goods and services
2 Intermediate goods are those

A. Which are for long term use
B. Which are for resale
C. Which capital can buy
D. Which are sold
3 Final goods are those goods:

A. which are used for final production
B. which are used for investment
C. which are used either for final consumption or investment
D. which are used for final consumption
4 What must be added to domestic factor income to obtain national income?

A. Net factor interest earned from abroad
B. Net taxes earned from abroad
C. Net factor retained earnings from abroad
D. Net factor income earned from abroad

5 Which of the following will you include while estimating domestic product of India? A. Profits
earned by branch of American bank in India.
B. Rent received by a resident Indian from his property in Singapore.
C. Salaries of Indians working in Japanese Embassy in India
D. Salaries paid to Koreans working in the Indian embassy in Korea
6 Which of the following is not included while estimating domestic product of India? A.
Financial help received by flood victims
B. Imputed rent of self occupied houses.
C. Interest received on debentures
D. Capital formation
7 Real GNP is same as

A. GNP at constant prices
B. GNP - Net factor income from abroad
C. Nominal GNP
D. GNP at current prices
8 Which of the following will you not include while estimating national income by expenditure
method?
A. Change in stocks
B. Purchase of fixed asset by a producer
C. Net indirect taxes
D. Purchase of new car by a household
9 Water in a stream is a
A. Stock concept
B. Non economic concept
C. Flow concept
D. Hypothetical concept
10 Operating Surplus is equal to
A. Rent + Profit + Interest
B. Rent + Interest + Compensation of employees
C. Rent + Interest + dividend
D. (B) & (C) both
11 Which one is leads to factor cost?

A. Market price + Indirect Tax
B. Market price + Net Indirect Tax C. Market price + Indirect
Tax D. Market price - Net Indirect Tax
12 Which one is correct?

A. National Income = NDP at Factor cost - Net factor Income from abroad
B. GNP at factor cost = GNP at market price + Net indirect tax.
C. National Income = Domestic Income + NFIA D. GDP at factor cost = NDP at factor
cost - depreciation
13 National income is often estimated as:

A. NDPFC
B. NNPMP
C. NDPMP
D. NNPFC
14 Financial help to a victim is:

A. Transfer payment
B. Factor payment
C. NFIA
D. None of these
15 Which of the following is not a transfer payment? A. Interest on national debt.

B. Retirement pensions
C. Old age pension
D. Donations.
16 NNP according to Income method includes
A. Wages and salaries
B. Royalty

C. Interest
D. All of these
17 Value added refers to

A. Production of durable goods
B. Output - Intermediate consumption
C. Production of Non durable goods
D. Expenditure on intermediate goods
18 Operating surplus =
A. NDPFC - compensation of employee - mixed income of self employed
B. Rent + interest + profit
C. Compensation of employee + interest + profit
D. Both (A) and (B)
19 Problem of double counting can be avoided by using:

A. Final output method
B. Value added method
C. Both (A) and (B)
D. Neither (A) and (B)
20 NNP is equal to
A. GNP - Depreciation
B. GNP + Depreciation
C. GNP - Net export
D. GNP + Net export
21 Which of the following items is excluded in calculation of National income?

A. Unemployment allowance
B. Paid household job
C. Profit of public sector undertaking
D. Royalty
22 The difference between GNP and NNP is:
A. Indirect tax
B. Direct tax
C. Depreciation
D. Net factor income from abroad
23 If nominal GDP is 15000 and real GDP is 12000, GDP deflator :

A. 100
B. 120
C. 125
D. 130
24 The value of intermediate consumption will be _________, if purchase of raw material is 3000,
exports are 1000 and imports are 2000?
A. 1000
B. 2000
C. 3000
D. 4000
25 Net factor income from abroad is taken into account when national income is calculated by :
A. Value added method
B. Income method
C. Expenditure method
D. All of the above
26 Value added by a firm is equal to:

A. Sales
B. Profits
C. Sales - Intermediate consumption
D. Sales + Intermediate consumption
27 Brokers commission on sale and purchase of second hand goods is included in national income
because:
A. It is a part if compensation of employee
B. It is a part of Gross domestic capital formation
C. It is a income earned for rendering productive services

D. None of these
28 If compensation of employees in a firm constitute 55% of net value added at factor cost of a
firm, find the proportion of operating surplus assuming mixed income is zero:
A. 35%
B. 45%
C. 55%
D. 100%
29 If income from property is 100, rent is 75 and entrepreneurial income is 25, find out the
operating surplus.
A. 100
B. 200
C. 300
D. 400
30 If real income is 400 and price index is 100, find out nominal income:
A. 100
B. 200
C. 300
D. 400
31 GNP at MP is =_______
A. GDP at MP - Depreciation
B. GDP at MP + Depreciation
C. GDP at MP / Depreciation
D. GDP at MP + Net factor income from
32 NDP at MP = ______
A. GDP at MP - Depreciation
B. GDP at FC + Net factor income from abroad
C. NNP at FC + Net indirect taxes
D. All of these
33 NNP at MP = ______
A. GNP at MP - Depreciation
B. NDP at MP + Net factor income from abroad.
C. NNP at FC + Net indirect taxes
D. All of these
34 GDP at FC = _______
A. GDPMP - NIT
B. GDPMP + NIT
C. GDPMP + Subsidies
D. GDPMP - IT
35 NDPFC = _______
A. GDPFC - IT
B. GDPFC - Depreciation
C. GDPFC + Economic subsidy
D. All of these
36 NNPFC = ________
A. GNPFC - Depreciation
B. NNPMP + Economic subsidy - indirect taxes
C. NDPFC + Net factor income from abroad D. All of these
37 Remittances from a relative working abroad are:

A. Included in national income
B. Not Included in national income
C. Transfer payment
D. Both (B) and (C)
38 Which of the following items is not included while estimating national income by income
method
A. Rent
B. Mixed income
C. Fixed investment
D. Undistributed profits

39 Which of the following is not an element of final consumption expenditure
A. Household expenditure on food
B. Government final consumption expenditure
C. Household expenditure on education
D. Expenditure on raw material
40 As a result of double counting, national income is

A. Over estimated
B. Under estimated
C. Correctly estimated
D. Not estimated for entire year of accounting
41 Which of the following is not included in inventory investment?

A. Change in stock of finished goods
B. Change in stock of semi-finished goods
C. Change in stock of raw material
D. Change in sales during the year
42 Which of the following is not a part of final expenditure

A. Consumer goods purchased by the governments
B. Consumer goods exported to rest of the world
C. Seeds purchased by the farmers
D. Government fixed investment expenditure
43 Which of the following is irrelevant in the estimation of compensation of employees
A. A free accommodation provided to the school principals
B. Free of education of the students whose parents are working
C. Wages and Salaries in cash
D. Old age pension
44 Which of the following is the method of measuring National Income?

A. Income method
B. Product method
C. Expenditure method
D. All of these
45 Which one is included in National Income?

A. Rent, Wage, Interest
B. Rent, Wage, Salary
C. Rent, Profit, Interest
D. Rent, Wage, Salary, Interest, Profit
46 If for a country net factor income from abroad is negative then?

A. GDP < GNP
B. GDP > GNP
C. GDP ≥ GNP
D. GDP = GNP
47 Which one is a component of profit?

A. Dividend
B. Undistributed Profit
C. Corporate Profit Tax
D. All of these
48 GVAMP Provides solutions to:

A. the problems of double counting
B. the problem of double coincidence of wants
C. undervaluation of national income
D. unequal distribution of wealth

49 Compensation of employees is not stands for?
A. work income
B. transfer income
C. entrepreneurship income
D. income from land
50 which of the following is used for calculating National Income by income method:
A. Income Tax
B. Corporation Tax
C. Sales Tax
D. Net Indirect Tax
51 Difference between closing stock and opening stock during an accounting year is known as
A. Increase in stock
B. Decrease in stock
C. Change in stock
D. None of these
52 Which of the following is not included in the calculation of Gross National Product?
A. Purchase and Sale of Old commodities
B. Intermediate Commodities
C. Both (A) and (B)
D. None of the above
53 GDP deflator is the ratio of?

A. Marginal to Nominal GDP
B. Constant to Real GDP
C. Marginal to Constant GDP
D. Nominal to Real GDP
54 Which of the following are correct for Real GDP?

A. Current year production valued at current prices
B. Current year production valued at base year
C. Current year production valued at last year prices
D. Current year production valued at forecasted prices
55 Which of the following is a part of Gross National Product (GNP)?
A. Imports
B. Exports
C. Money earned by resident abroad
D. All of the above
56 Which of the following is an example of factor income?

A. Interest received by bank from producer
B. Interest on national debt
C. Old age pension
D. Interest received by bank from household
57 Compensation of the employee includes?

A. Wages and salary in cash
B. Wages and salary in kind
C. Pension on retirement
D. All of these.
58 If the Real Gross Domestic Product is ₹200 and the Nominal Gross Domestic Product is ₹210.
Calculate the Price Index (base=100).
A. 105
B. 205
C. 110
D. 210
59 If the real GDP is ₹500 and Price Index ( base=100) is 125, calculate the Nominal GDP. A. 525
B. 625
C. 725
D. 775
60 From the following data, calculate NNP at FC. (₹ in crores)
Depreciation. 2400
Net Indirect Tax. 3300
GNP at MP. 17450
A. 12250
B. 13350
C. 11750
D. 10500
61 From the following data, Find gross value added at market price. (₹ in Lakhs)
Sales 180 Change
in stock 15
Purchase of raw materials 100
A. 85
B. 95
C. 115
D. 105
62 Calculate intermediate consumption from the following data. (₹ in Lakh)

Value of output 200 Gross
value added at market price 80
A. 70
B. 80
C. 90
D. 120
63 Which of the following is not included in the estimation of national income?

A. Sale of second hand goods
B. Value of intermediate goods
C. Sale of shares and bonds
D. All of these
64 Dividend is a component of
a) Compensation of employees
b) Mixed income of self employed persons
c) Operating surplus
d) All of the above
65 Own account of production of services is not included in national income because

A. Services are different from goods
B. Services aren’t productive
C. It is difficult to measure the market value of such services
66 Sugar purchased by a sweet shop is _________ good while it is a __________ good when it is
purchased by a consumer.
A. capital, final
B. final, Intermediate
C. intermediate, final
D. final , producer
67 If the factor income received from abroad is equal to the factor income paid to the abroad, then
which of the following is a valid statement?
A. National income = Domestic income
B. NDP at FC + Depreciation = GNP at FC
C. NNP at FC + Depreciation = GNP at MP
D. All are valid statements
68 Which of the following is a part of Expenditure method?

A. Rent and royalty
B. Mixed income
C. Net exports
D. Sales
69 Change in stock is negative when:
A. Closing stock > opening stock
B. Closing stock < opening stock
C. Closing stock =0
D. Opening stock= 0
70 Net export is calculated as:

A. Exports + imports
B. Exports - imports
C. Imports - exports
D. Exports + NFIA
71 When the entire output is sold in an accounting year, the value of output is equal to:
A. Sales + Change in stock
B. Sales - change in stock
C. Sales
D. Change in stock
72 GDPMP = ₹100 and subsidies = ₹10, than GDPFC will be:

A. 110
B. 90
C. 100
D. 95
73 The value of intermediate consumption will be ___, if purchase of raw material is ₹1000, exports
are ₹500 and imports are ₹200
A. 1700
B. 1500
C. 700
D. 1000
74 The impact of externalities can be:
A. Negative
B. Positive
C. Both (A) and (B)
D. Neither (A) nor (B)
75 The difference between value of output and value added is:

A. Depreciation
B. Net indirect tax
C. Intermediate consumption
D. NFIA
76 National income differs from net national product at market price by the amount of:
A. Current transfer from rest of the world
B. National debt interest
C. Net indirect tax
D. Depreciation
77 Which of the following is not correct?

A. NNPMP = GDPMP - depreciation
B. NNPMP = NNPFC + NIT
C. GDPMP = NDPMP + depreciation D. NDP FC = GDP FC – depreciation
78 Domestic income is :
A. GDP MP
B. GDP FC
C. NDP FC
D. NDP MP
79 If NFIA is negative,
A. Factor income to abroad will be less than factor income from abroad
B. Factor income to abroad will be more than factor income from abroad
C. Factor income to abroad will be equal to factor income from abroad
D. Factor income to abroad cannot be less than factor income from abroad
80 Which of the following statement is false:
A. Use of public park increases welfare
B. Distribution of GDP increases welfare
C. Higher GDP always causes higher welfare D. Decrease in GDP may be due to rise in
price.
81 The output at base year price is called:

A. Nominal GDP
B. Real GDP
C. National GDP
D. Gross GDP
82 What is meant by national income

A. Income of the government
B. Budget of the government
C. Sum total of factor incomes
D. Profit of the public sector units
83 The standard of living is often measured by:

A. Real GDP per capita
B. Real GDP
C. Real GDP x population
D. Real GDP plus depreciation
84 Depreciation expenses are included in:

A. GNPMP
B. NNPMP
C. NNPFC
D. None of these
85 Calculation of National Income at Market Prices is known as _________

A. Money income
B. Real income
C. Non-monetary income
D. None of these
86 The financial year in India is
A. April 1 to March 31
B. January 1 to December 31
C. March 1 to April 30
D. March 16 to March 15
87 Why are the intermediate goods not included in the National Income while measuring National
Income?
A. To avoid double accounting
B. It decreases income
C. Intermediate goods are not good
D. All of these
88 Which is the equilibrium condition of circular flow in the four sector model?
A. C + I
B. C + I + G
C. C + I + G + (X-M)
D. None of these
89 Which of the following is not included in the calculation of Gross National Product?
A. Purchase and Sale of Old commodities
B. Intermediate Commodities
C. (A) and (B) both
90 What is the base year for calculating India's GDP?

A. 2004-05
B. 2010-11
C. 2011-12
D. 2014-15
KEY/ANSWER SHEET
Q.NO. 1 D Q.NO. 26 C Q.NO. 51 C Q.NO. 76 C
Q.NO. 2 B Q.NO. 27 C Q.NO. 52 C Q.NO. 77 A
Q.NO. 3 C Q.NO. 28 B Q.NO. 53 D Q.NO. 78 C
Q.NO. 4 D Q.NO. 29 B Q.NO. 54 B Q.NO. 79 B
Q.NO. 5 A Q.NO. 30 D Q.NO. 55 D Q.NO. 80 C
Q.NO. 6 A Q.NO. 31 D Q.NO. 56 A Q.NO. 81 B
Q.NO. 7 A Q.NO. 32 A Q.NO. 57 D Q.NO. 82 C

Q.NO. 8 C Q.NO. 33 D Q.NO. 58 A Q.NO. 83 A
Q.NO. 9 C Q.NO. 34 A Q.NO. 59 B Q.NO. 84 A
Q.NO. 10 A Q.NO. 35 B Q.NO. 60 C Q.NO. 85 A
Q.NO. 11 D Q.NO. 36 D Q.NO. 61 B Q.NO. 86 A
Q.NO. 12 C Q.NO. 37 D Q.NO. 62 D Q.NO. 87 A
Q.NO. 13 D Q.NO. 38 C Q.NO. 63 D Q.NO. 88 C
Q.NO. 14 A Q.NO. 39 D Q.NO. 64 C Q.NO. 89 C
Q.NO. 15 B Q.NO. 40 A Q.NO. 65 C Q.NO. 90 C
Q.NO. 16 D Q.NO. 41 D Q.NO. 66 C
Q.NO. 17 B Q.NO. 42 C Q.NO. 67 A
Q.NO. 18 D Q.NO. 43 D Q.NO. 68 C
Q.NO. 19 C Q.NO. 44 D Q.NO. 69 B
Q.NO. 20 A Q.NO. 45 D Q.NO. 70 B
Q.NO. 21 A Q.NO. 46 B Q.NO. 71 C
Q.NO. 22 C Q.NO. 47 D Q.NO. 72 A
Q.NO. 23 C Q.NO. 48 A Q.NO. 73 D
Q.NO. 24 C Q.NO. 49 B Q.NO. 74 C
Q.NO. 25 D Q.NO. 50 B Q.NO. 75 C


AGGREGATES
CASE STUDY BASED QUESTIONS

S. No. Questions
1 The Indian Economy saw its worst contraction in decades, with GDP shrinking by a record
23.9% in the April to June quarter in comparison to the same period last year. The contraction
reflects the severe impact of the Covid-19 lockdown, which halted most economics activities
as well as the slowdown trend of the economy even pre Covid-19. The Indian economy is in a
deeply vicious circle, where demand is contracting to heavily, while the capacity to neutralize
this contraction has also contracted equally because of the tax revenue contraction. Agriculture
was the only sector which recorded modest growth of 3.4% in year on year terms and all other
sectors saw contraction.
Q.1. The impacts of Covid-19 on India’s GDP __________.
A. Increasing
B. Decreasing
C. Constant
D. None of these
Q2. Net Indirect Taxes are calculated as _____________ .
A. IT - Subsidies
B. IT + Subsidies C. Subsidies - IT
D. Subsidies + IT
Q3. Firms are considered as the owner of factor of production.
A. True
B. False
Q4. The only sector which recorded modest growth of 3.4% in year.
A. Agriculture
B. Industry
C. Services
D. All of these
2 Income method is that method which measures domestic income as the sum total of factor
incomes generated within the domestic territory of a country during the period of an accounting
year. Net factor income from abroad is added to domestic income to find National income.
While calculating National income by this method, some precautions has to be followed, Such
as avoid transfer payment, do not include income generated through illegal activities etc.
Expenditure method is that method which measures the GDP at MP as the sum total of the
expenditure on the purchase of final goods and services produced within the domestic territory
of the economy during the period of an accounting year. It is adjusted to find national income.
While calculating NI consider only the expenditure on final goods only. Also do not consider
expenditure on second hand goods or on share and bonds.
Q1. Which of the following items is not included while estimating NI by Income method? a.
Rent
b. Mixed Income
c. Fixed Investment
d. Undistributed profits
Q2. Which of the following is not included in NI?
a. Receipt of a gift cheque sent by your parents settled abroad.
b. Repatriation of wages earned by the NRIs to their parents in India.
c. Excise duty on domestic production.
d. All of these.
Q3. Which of the following is irrelevant in the estimation of compensation of employees?
a. Free accommodation provided to the school principal.
b. Free education of the student whose parents are working in schools
c. Wages and salaries in cash
d. Old age pensions
Q4. Gross Domestic Product at market price is equal to :
a. Compensation of employee+ operating surplus+ Mixed income of self-employed.
b. Compensation of employee+ operating surplus+ Mixed income of self-employed+
consumption of fixed capital+ net indirect taxes
c. Compensation of employee+ operating surplus+ net indirect taxes
d. Compensation of employee+ operating surplus
Q5. Expenditure method focuses on measurement of national income at:
a. Phases of production of goods and services
b. Phases of income distribution
c. Phases of income disposition
d. All of the above
3 National Income of India constitutes total amount of income earned by the whole national by
our country and originated both within and outside its territory during a particular year. The
National Income Committee in its first report wrote ‘A national income estimate measures the
volume of commodities and services turned out during a given period, without duplication’.
The estimates of National Income depict the clear picture about standard of living of the
community. The national income statistics diagnose the economic else of the country and at the
same time suggest remedies. The rate of savings and investment in an economy also depends
on the national income of the country.
Moreover, the national income measures the flow of all commodities and services produces in
an economy.
Thus, The National Income is not stocked but a flow. It measures the total productive power of
the community during given period. Further, The National Income Committee has rightly
observed, ‘National Income statistics enable an overall view to be taken of the whole economy
and of the relative positions and inter-relations among its various parts’.
Thus, the computation of national income and its analysis has been considering an important
exercise on economic literature.
Answer the following Questions:-

Q1. Which territory has been referred to in the first passage by the expert?
Q2. Differentiate between Stock and Flow?
Q3. The returns for the productive powers____ income. (Transfer/Factor)

Q4. In a closed economy, what are savings and investment referred to?
4 First Advance Estimates of National Income, 2019-20
The National statistical Office (NSO), Ministry of Statistics Programme Implementation has
released the First Advanced Estimate of national income at both Constant (2011-12) and Current
Prices, for the financial year (2019-20) along with the corresponding estimates of expenditure
components of the Gross Domestic Product (GDP).
Gross domestic product:
Real GDP or GDP at Constant Prices (2011-12) in the year 2019-20 is likely to attain a level of
rupees 147.79 lakh crore as against the Provisional Estimate of GDP for the year 2018-19 of
rupees 140.79 lakh crore, released on 31 st may 2019. The growth in real GDP during 201920 is
estimated at 5.0% as compared to the growth of 6.8 % in 2018-19.
Gross Value Added (GVA) at constant prices
Real GVA at Constant Prices estimated to increase from rupees 129.07 lakh crore in 2018-19
to rupees 135.40 lakh crore in 2019-20. Estimated growth of real GVA in 2019-20 is 4.9% as
against 6.6% in 2018-19
Gross domestic product
GDP at current prices in the year 2019-20 is likely to attain a level of rupees 204.42 lakh crore,
as against rupees 190.10 lakh crore in 2018-19 showing a growth rate of 7.5%
National income
The nominal net National Income (NNI), also known as national income (at current price) is
likely to be rupees 181.10 lakh crore during 2019-20, as against rupees 168.37 lakh crore for
the year 2018-19. In terms of growth rates, The National Income registered a growth rate of
7.6% in 2019-20 as against the previous year’s growth rate of 11.3%.
Answer the following Questions:
Q1. A growing country is one with:

a) Rising GNP at constant prices.
b) Constant GNP at constant prices.
c) Rising GNP at current prices.
d) None of these
Q2. Which of the following statements is correct

a) GDP is derived by subtracting taxes on products net of subsidies on products to GVA at
constant prices.
b) GDP is derived by adding taxes on products net of subsidies on products to GVA at
constant prices.
c) GDP is derives by adding subsidies net of taxes on products to NVA at constant prices.
d) GDP is derives by adding taxes on products net of subsidies on products to GVA at
constant prices.
Q3. National product at current prices is higher than national product at constant prices during
a period of :
a) Rising prices
b) Falling prices
c) Constant prices
d) Both a and b
Q4. Value added means value of:

a) Output at market prices.
b) Output less depreciation.
c) Output less intermediate cost
d) Output plus intermediate cost
5 Read the following hypothetical text and answer the given questions:
The Budget Estimate of total spending for 2021-22 is 34.83 lakh crore. The Revised Estimate
(RE) for total central spending in 2020-21 is 34.5 lakh crore. The Gross Domestic Product
(GDP) deflator — if one takes 14.4% nominal GDP growth projection for 2021-22 given in
the budget and 11% real GDP forecast given in the latest Economic Survey — comes to 3.4%.
This means that central spending should have increased to at least 35.7 lakh crore to keep it
unchanged in real terms. The fact that it has not happened implies that the 2021-22 budget
entails a negative fiscal stimulus to the economy. To be sure, one could argue that 2020-21
was an abnormal year — and, therefore, the government is justified in rolling back its welfare
spending push, as the economy gets unlocked and vaccination gains momentum. Q-1 With
the rise in real national income, the economic welfare of the people__________(rises/falls).
(Choose the correct alternative)
Q-2 If GDP Deflator = 125, Nominal GDP= 15000crs. then Real GDP is equal to
___________ (10000crs / 12000crs/ 20000crs). (Choose the correct alternative)
Q-3 Read the following statements - Assertion (A) and Reason ( R)
Assertion (A): Real GDP is always equal to Nominal GDP.
Reason (R): Real GDP is a better measure to make periodic comparison in the physical
output of goods and services over different years. Select the correct alternative from the
following:
a) Assertion (A) is true and Reason (R) is false.
b) Assertion (A) is false and Reason (R) is true.
Q-4 State the significance of GDP Deflator. (Choose the correct alternative)
(a) GDP Deflator is a tool that shows changes in the price level of the economy over a given
period of time
(b) GDP Deflator is a tool that shows changes in the demand level of the economy over a given
period of time
6 Read the following hypothetical text and answer the given questions:
GDP and Welfare

Can the GDP of a country be taken as an index of the welfare of the people of that country? If
a person has more income, he or she can buy more goods and services and his or her material
well-being improves. So it may seem reasonable to treat his or her income level as his or her
level of well-being. GDP is the sum total of value of goods and services created within the
geographical boundary of a country in a particular year. It gets distributed among the people as
incomes (except for retained earnings). So we may be tempted to treat higher level of GDP of
a country as an index of greater well-being of the people of that country (to account for price
changes, we may take the value of real GDP instead of nominal GDP).
Source: Introductory Macroeconomics Textbook for Class 12, p.27.
Q1. Is it reasonable to treat a person's income level as his or her level of wellbeing?
YES/NO (Choose the correct alternative)
Q2.Nominal GDP is a true indicator of welfare?
True / False (Choose the correct alternative)
Q3. Which of the following are correct for Real GDP?
A. Current year production valued at current prices
B. Current year production valued at base year
C. Current year production valued at last year prices
D. Current year production valued at forecasted prices
Q4.Read the following statements – Assertion (A) and Reason (R)

Assertion (A): Increase in GDP all of the people have not benefited.
Reason (R): The distribution of GDP is not uniform Alternatives:
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion
C. Assertion (A) is true but Reason (R) is false. D. Assertion (A) is false but Reason (R) is
true.
7 Government to give cash vouchers to staff in lieu of LTC this year: Finance Minister As part of a
stimulus package to boost consumption in an economy hit hard by the Covid-19 pandemic, the
government announced an LTC cash voucher scheme for its employees. Central government
employees will be able to opt for cash equivalents of their unused leave travel concession (LTC)
for the 2018-21 period, according to a special cash package announced by the finance ministry
on Monday.
Aimed at boosting consumption expenditure, the scheme requires employees to spend up to
three times the amount they are entitled to by March 31, 2021, in order to avail the tax benefits
accompanying LTC.
"With a view to compensate and incentivise consumption by central government employees
thereby giving a boost to consumption expenditure, it has been decided that cash equivalent of
LTC, comprising leave encashment and LTC fare of the entitled LTC may be paid by way of
reimbursement, if an employee opts for this in lieu of one LTC in the block of 2018-21," said a
finance ministry office memorandum.
The package, which came into force on Monday, requires employees to opt for the cash
equivalent of both leave encashment and travel fare.
Employees will be entitled to reimbursement of the full leave encashment if the entire amount
is spent via digital mode on items that attract goods and services tax (GST) of 12% or higher
only from GST registered vendors.
Answer the following questions after reading the above information:
Q1. The cash package being announced is a _____________(fiscal policy/monetary measure)
Q2. Leave Travel Concessions (LTC) is :
A. Compensation of employees is kind
B. Compensation of employees is cash
C. Employer's contribution to social security scheme
D. Employee's contribution to social security scheme
Q3. Which component of the expenditure method of calculating GDP has been emphasized here
as a measure to revive economy?
Q4.Name any two areas which are going to be benefited most from this measure?
8 In 2015, in the wake of a comprehensive review of its approach to GDP measurement, India
opted to make major changes to its compilation of national accounts and bring the whole process
into conformity with the United Nations System of National Accounts (SNA) of 2008. As per
the SNA, gross value added, is defined as the value of output minus the value of intermediate
consumption and is a measure of the contribution to GDP made by an individual producer,
industry or sector. At its simplest it gives the rupee value of goods and services produced in the
economy after deducting the cost of inputs and raw materials used. GVA can be described as
the main entry on the income side of the nation's accounting balance sheet, and from an
economics perspective represents the supply side. While India had been measuring GVA
earlier, it had done so using 'factor cost' and GDP at factor cost' was the main parameter for
measuring the country's overall economic output till the new methodology was adopted. In the
new series, in which the base year was shifted to 2011-12 from the earlier 2004-05, GVA at
basic prices became the primary measure of output across the economy's various sectors and
when added to net taxes on products amounts to the GDP.
(7 June 2020: The Hindu)
1. The difference between value of output and value added is _________
( depreciation/ intermediate cost)
2. Product method of calculating national income is also known as _____. ( value added method/
Expenditure method)
3. Net value added at factor cost =Net value Addition at market price _______ ( NFIA/NIT)
4. National income is represented by __________. ( NNPFC/ GDPFC)
9 "From April to June 2020, India's GDP dropped by a massive 24.4%. According to the latest
national income estimate, in the second quarter (July to September) the economy contracted by
a further 7.4%. The recovery in the third and fourth quarter is still weak with GDP rising
0.5% and 1.6% respectively. This means the overall rate of contraction in India was 7.3% for
the whole financial year 2020/21.
Q1. There has been ________ (contraction/ expansion) in India's GDP in the financial year
2020/21.
10 The agriculture sector in India has undergone a significant structural change in the form of a
decrease in share of GDP from 30% in 1990-91 to 14.5% in 2010-11, indicating a shift from
traditional agrarian economy towards service dominated economy. This decrease in
agriculture's contribution to GDP has not been accompanied by a matching reduction in the
share of agriculture in employment. About 52% of the total workforce is still employed by the
farm sector, which make more than half of Indian population dependent on agriculture for
sustenance.
Q1. The percentage share of agriculture in India's GDP is ____ during the year 2010-11. Q2.
There has been a _____ (decrease/ increase) in agriculture's contribution in GDP over the
years.
11 India’s Micro, Small and Medium Enterprises (MSME) sector is poised for a mega
transformation in 2020, with the launch of an Alibaba-like e- marketplace, trendy yet affordable
khadi products to appeal to the masses and digital data-based credit ratings to help entrepreneurs
avail loans. However, the MSME sector, often considered the bulwark of the economy as it
contributes around 29% to the GDP and 48% to the Indian exports. There is an urgent need of
major reforms and policy interventions towards ensuring timely availability of low cost credit,
improving ease of doing business and technological up gradation, to take on the formidable
challenge of creating millions of jobs, ensure equitable distribution of national income and
achieving large-scale import substitution. The World Bank has recently approved loan worth
$750 million to address the immediate liquidity and credit needs of India’s MSME sector that
has been severely impacted by the Covid-19 crisis. This will give a push to the Atmanirbhar
Bharat vision of the government.
Q.1 MSME sector suffered to a large extent in COVID-19 pandemic situation due ________.
(fill up the blank with correct answer)
Q.2 Identify which of the following is not an advantage of the MSME sector?
(Choose the correct
alternative) A. It is suited for the utilization of local resources.
B. It is helpful in creation of employment opportunities
C. It requires more capital than labour
D. It ensures equitable distribution of income in the country.
12 Read the following case study paragraph carefully and answer the question on the basis
of the same:
The overall objective of political activities in democratic societies is to ensure the highest
possible level of welfare for the country’s citizens now in the future. When politicians,
macroeconomists and others discuss welfare and economic development they often focus on
gross domestic product GDP.
GDP is a measure for the economic prosperity of the country compiled as output or income
however GDP is regularly criticised for not presenting a fair view of welfare. If GDP is a poor
measure of welfare, focusing one sadly on increasing GDP may lead to misguided political
decisions. For example, Nobel laureate Joseph Stieglitz has argued that the objective of the
highest possible GDP growth will result in reduced welfare.
The criticism of GDP is not view and over the last 30-40 years efforts have been made to put
together alternative objectives the debate has revived recently partly as a result of publication
of a recent report concerning the limitations of GDP as a measure of economic performance and
social progress the report was written bye to nobel laureate for economy Joseph Stieglitz and
Amartya Sen among others.
1. One course of action by one economic agent which has an adverse impact on other
economic agent without cost sharing is known as ……… (Positive / negative) externality.
2. Which of the following measures of GDP considers base year price for calculation of
gross income?
A. Nominal GDP
B. Green GDP
C. Real GDP
D. GDP deflator
3. GDP is not considered as a better measure of development. Which of the following
reasons could be accounted for the same?
A. Externalities
B. Non markable services C. Production and harmful goods.
D. All of these.
4. ……………………. (Real GDP/ Nominal GDP) is considered as a better measure of
economic growth of an economy.
13 Read the following case study paragraph carefully and answer the question on the basis
of the same:
National income and balance of payment are two important macroeconomic variables in an open
economic model national income is the sum of total expenditures of all the sectors of an
economy GDP is probably the most widely reported and close Lee monitored aggregate statistic
GDP is a measure of the size of an economy it tell us the total amount of stuff that Nomi produce
any changes in the demand for domestic goods leads to change in national income of the country
also changes in foreign exchange rates effects trading relation between countries.
1. What will be the impact of increase in imports from the domestic country on the national
income?
A. Increases
B. Decreases
C. Remains constant
D. Depend upon exchange rate.
2. Balance of payment records all transitions between residents of home country and
………………………... (resident/non-residents) of the rest of the world.
3. If GDP of a country is on rise what will be the impact on the foreign exchanges rate?
A. Rise
B. Fall
C. Remain constant
D. Depends of magnitude of change in GDP.
4. …………………….. (Current/ capital) account of BOP records transactions impacting
assets and liabilities of the country.
5.
KEY/ANSWER SHEET
1 1 – B,
2 – A,
3 – B,
4–A
2 1 –C,
2 – D,
3 – D,
4 – B, 5 – C
3 1 - Domestic territory
2 - Stock is measures at a particular point of time and flow is measured for a
particular period of time
3 – Factor
4- Leakages and injections
4 1 – A,
2 – D,
3 – A,
4–C
5 1 - Rises
2 - 12,000 crores
3 - b) Assertion (A) is false and Reason (R) is true.
4 - (a) GDP Deflator is a tool that shows changes in the price level of the economy
over a given period of time
6 1 - NO
2 - False
3 - B] Current year production valued at base year
4 - (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
7 1. Fiscal policy
2. b. Compensation of employees in cash
3. Private final consumption expenditure
4. digitalisation and contribution to GST
8 1. Intermediate cost
2. Value added method
3. NIT
4. NNP at FC
9 Contraction.
10 1 – 14.5% 2 -
DECREASE
11 1-C, 2-CREDIT NEEDS
12 1. Negative
2. C
3. D
4. Real GDP
13 1. Decrease
2. Resident
3. Rise
4. Capital

AGGREGATES
TRUE AND FALSE QUESTIONS
S. No. Questions
1 Change in stock is a flow variable.
A.True
B.False
2 Income from exports is a part of net factor income from abroad.
A.True
B.False
3 Purchase of machinery from abroad is never considered as intermediate consumption. A.True
B.False
4 Free samples distributed by a business enterprise for advertisement will not be included in
National income.
A.True
B.False
5 Owner occupied his own house should not be included in national income.
A.True
B.False
6 Transfer Payments do not cause any value addition in the economy.
A.True
B.False
7 Retirement pension are like a deferred wage.
A.True
B.False
8 Undistributed profit is retained by the firms to meet some contingent expenses.
A.True
B.False
9 In case of mixed income, factors of production are hired/purchased from the market. A.True
B.False
10 Rice produced and consumed by the farming families themselves is not included in national
income. A.True
B.False
11 National Income is always more than the Domestic Income.
A.True
B.False
12 The net export can be negative or positive
A.True
B.False
15 Value added includes the value of intermediate goods used in production.
A.True
B.False
18 Old age pension given by the government is treated in the estimation of domestic factor
income. A.True
B.False
19 Payment of wealth tax is included in national income.
A.True
B.False
20 Purchase of a truck to carry goods by a production unit is included in the estimation of
national income.
A.True
B.False
21 Which statement is correct for nominal GDP?
A- Nominal GDP is calculated based on current prices.
B-Nominal GDP is calculated based on the base prices.
22 National income includes income of only the normal resident of a country.
A.True
B.False
23 Nominal GDP = Real GDP/Price index*100.
A.True
B.False
24 GDP deflator shows change in GDP owing the change in the price level.
A.True
B.False
25 Indian employed in WHO located in India is a normal resident of India.
A.True
B.False
27 Goods used in inputs are called intermediate goods.
A.True
B.False
29 Non-durable consumer goods are repeatedly used for several year.
A.True
B.False
30 Interest is received by the households for the use of their capital by the producing units is a
factor income.
A.True
B.False
31 Rent paid to the land lord by a tenant is an example of real flow.
A.True
B.False
32 Salary received by an employee of state bank of India is an example of factor income.
A.True B.False
33 Broker's commission on the sale /purchase of second hand goods or financial assets like share
and bonds
A.True
B.False
34 National debt interest is part of national income
A.True B.False
35 Rent of owner-occupied house will not be included in estimating in national income.(
A.True B.False
36 Increase
in stock of
goods held by
a consumer
will contribute
to capital
formation.
A.True
B.False
37 National income is affected by both factors as well as transfer incomes.
A.True
B.False
38 Industrial waste driven into rivers is an example of positive externality.
A.True B.False
KEY/ANSWER SHEET
1 True 9 False 17 A 25 True
2 False 10 True 18 True 26 True
3 False 11 False 19 False 27 True
4 True 12 True 20 True 28 False
5 False 13 False 21 True 29 False
6 True 14 False 22 True 30 False
7 True 15 False 23 True 31 false
8 True 16 True 24 True 32 false

AGGREGATES
ASSERTION- REASON QUESTIONS
S.
Questions No.
1 Assertion (A): The goods which are used either for resale or for further production in the same
year are intermediate goods.
Reason(R): Intermediate goods are included in National Income.
A. Both Assertion (A) and Reason(R) are true and Reason(R) is the correct explanation of
Assertion (A).
B. Both Assertion (A) and Reason(R) are true and Reason(R) is not the correct
explanation of Assertion (A).
C. Assertion (A) is true but Reason(R) is false. D. Assertion (A) is false but Reason(R) is
true.
2 Assertion (A): Value addition can also take place even when the commodity does not go
through any transformation.
Reason(R): It happens when a commodity is purchased for resale.
Assertion (A).
true.
3 Assertion (A): Gross Domestic Capital Formation can be less than Gross fixed capital
formation.
Reason(R): Change in stock is negative.
Assertion (A).
true.
4 Assertion (A): The problem of double counting leads to underestimation of the National
Income of the country.
Reason(R): Double counting arises when value of a good is counted more than once while
measuring the value of National Income.
Assertion (A).
true.
5 Assertion (A): Domestic Income of a country can be more than its National Income.
Reason(R): Factor income paid abroad < factor income received from abroad.
Assertion (A).
true.
6 Assertion (A): The problem of double counting leads to under estimation of the national
income of the country.
Reason (R): the double counting arises when value of a good is counted more than once while
measuring the value of national income.
Give the correct option:
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
B. Both assertion (A) and reason (R) are true and Reason (R) is not the correct
C. Assertion (A) is true but Reason (R) is false. D. Assertion (A) is false but Reason (R)
is true.
7 Assertion (A): Nominal value is money value or value measured in term of prices that prevail
at the time of measurement.
Reason (R): GDP is measured at both current prices as well as constant prices.
of Assertion (A).
C. Assertion (A) is true but Reason (R) is false.
D. Assertion (A) is false but Reason (R) is true
8 Assertion (A): Tax is a main source of government revenue which is used to provide services
are included in national income.
Reason (R): Tax is a transfer income.
of Assertion (A).
9 Assertion (A): Compensation to flood victims is not included while national income.
Reason (R): Transfer income does not contribute to current flow of goods and services.
of Assertion (A).
10 Assertion (A): GDPMP= NDPMP
Reason (R): NIT= 0
of Assertion (A).
explanation
of Assertion (A).
11 Assertion (A): NDPFC is the income earned by the factors of production in the form of wages,
profits, rent, interest, etc. within the domestic territory of a country.
Reason (R): Domestic income generated in the production process within the domestic
territory of the country gets distributed among the factors of production.
Alternatives:
of Assertion (A)
B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of Assertion
is true.
12 Assertion (A): Part of the output produced by a farmer and used for his own family
consumption is not included under product method.
Reason (R): One of the ways to avoid double counting, is to take only value added instead of
total output
Alternatives:
of Assertion (A)
is true.
13 Assertion (A): Gross Domestic Product (GDP) does not give us a clear indication of economic
welfare of a country.
Reason (R): GDP may not take into account Non-monetary exchanges like services of
housewife, Externalities i.e. benefits and harms which are caused due to economic activities
and Distribution of income.
Alternatives:
of Assertion (A)
is true.
14 Assertion (A) : Real GNP is used for making comparisons of international standards of living
and rates of economic growth of various countries.
Reason(R): Nominal GNP may be increasing due to rise in price level, the quantity of goods
and services produced may remain constant.
Alternatives:
of Assertion (A)
is true.
15 Assertion(A): Growing vegetables in a kitchen garden of the house is included in national
income
Reason (R): It is difficult to estimate value of production as it is non market transaction
of Assertion (A).
16 Assertion (A): The change of inventories of a firm during a year = production of the firm
during the year- sale of the firm during the year.
Reason (R): Inventory is a stock variable.
of Assertion (A).
17 Assertion (A) : Intermediate goods are not to be included in the national income
Reason (R) : value of only final goods should be added to determine the national income.
A. Both assertion (A) and reason (R) are true and reason (R) is correct explanation of
assertion (A)
B. Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation
of assertion (A)
C. Assertion (A) is true but reason (R) is false
D. Assertion (A) is false but reason (R) is true
18 Assertion (A) :Nominal GDP always equals real GDP
Reason (R): national income at current price may give a misleading picture of economic
performance
assertion (A)
of assertion (A)
19 Assertion (A) :Net exports is a domestic concept
Reason (R) : NFIA is the difference between factor income received from rest of the world
and factor income paid to the rest of the world.
assertion (A)
of assertion (A)
20 Assertion (A) : factor incomes are only earned incomes
Reason (R) : factor incomes do not include incomes which is not earned or for which a factor
service has not been rendered.
assertion (A)
of assertion (A)
21 Assertion (A) : transfer payments do not cause any value addition in the economy
Reason (R): retirement pension is an example of transfer payments
assertion (A)
of assertion (A)
22 Assertion (A): An item that is meant for final use and will not pass through any more stages of
production or transformations is called a final good
Reason (R): It will not undergo any further transformation at the hands of any producer, but
many such final goods are transformed during their consumption
of Assertion (A).
C. Assertion (A) is true but Reason (R) is false D. Assertion (A) is false but Reason (R)
is true KEY/ANSWER SHEET
1 2 3 4 5 6 7 8 9 10 11
C A A D C D B D A C A
12 13 14 15 16 17 18 19 20 21 22
D A A D B B D B A C B

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Ashok Shakya 8979627339

CHAPTER -12-NATIONAL INCOME AND RELATED

MULTIPLE CHOICE QUESTIONS

1 Real flow is the flow of

2 Intermediate goods are those

3 Final goods are those goods:

4 What must be added to domestic factor income to obtain national income?

Ashok Shakya 8979627339

7 Real GNP is same as

11 Which one is leads to factor cost?

12 Which one is correct?

13 National income is often estimated as:

14 Financial help to a victim is:

15 Which of the following is not a transfer payment? A. Interest on national debt.

Ashok Shakya 8979627339

17 Value added refers to

19 Problem of double counting can be avoided by using:

21 Which of the following items is excluded in calculation of National income?

23 If nominal GDP is 15000 and real GDP is 12000, GDP deflator :

26 Value added by a firm is equal to:

Ashok Shakya 8979627339

37 Remittances from a relative working abroad are:

Ashok Shakya 8979627339

40 As a result of double counting, national income is

41 Which of the following is not included in inventory investment?

42 Which of the following is not a part of final expenditure

44 Which of the following is the method of measuring National Income?

45 Which one is included in National Income?

46 If for a country net factor income from abroad is negative then?

47 Which one is a component of profit?

48 GVAMP Provides solutions to:

Ashok Shakya 8979627339

53 GDP deflator is the ratio of?

54 Which of the following are correct for Real GDP?

56 Which of the following is an example of factor income?

57 Compensation of the employee includes?

62 Calculate intermediate consumption from the following data. (₹ in Lakh)

63 Which of the following is not included in the estimation of national income?

65 Own account of production of services is not included in national income because

68 Which of the following is a part of Expenditure method?

70 Net export is calculated as:

72 GDPMP = ₹100 and subsidies = ₹10, than GDPFC will be:

75 The difference between value of output and value added is:

77 Which of the following is not correct?

81 The output at base year price is called:

82 What is meant by national income

83 The standard of living is often measured by:

84 Depreciation expenses are included in:

85 Calculation of National Income at Market Prices is known as _________

90 What is the base year for calculating India's GDP?

Q.NO. 2 B Q.NO. 27 C Q.NO. 52 C Q.NO. 77 A

Q.NO. 3 C Q.NO. 28 B Q.NO. 53 D Q.NO. 78 C

Q.NO. 4 D Q.NO. 29 B Q.NO. 54 B Q.NO. 79 B

Q.NO. 5 A Q.NO. 30 D Q.NO. 55 D Q.NO. 80 C

Q.NO. 6 A Q.NO. 31 D Q.NO. 56 A Q.NO. 81 B

Q.NO. 7 A Q.NO. 32 A Q.NO. 57 D Q.NO. 82 C

Q.NO. 9 C Q.NO. 34 A Q.NO. 59 B Q.NO. 84 A

Q.NO. 10 A Q.NO. 35 B Q.NO. 60 C Q.NO. 85 A

Q.NO. 11 D Q.NO. 36 D Q.NO. 61 B Q.NO. 86 A

Q.NO. 12 C Q.NO. 37 D Q.NO. 62 D Q.NO. 87 A

Q.NO. 13 D Q.NO. 38 C Q.NO. 63 D Q.NO. 88 C

Q.NO. 14 A Q.NO. 39 D Q.NO. 64 C Q.NO. 89 C

Q.NO. 15 B Q.NO. 40 A Q.NO. 65 C Q.NO. 90 C

Q.NO. 16 D Q.NO. 41 D Q.NO. 66 C