Chapter 1

Chapter-1 National Income and Related Aggregates
1. Inventory is a ___________ concept whereas the change in inventory is a __________ concept
(a) stock, flow (b) flow, stock

(c) stock, stock (d) flow, flow
2.If in an economy the value of Net Factor Income from abroad is 200 crores and the value of Factor
Income to Abroad is 40 crores. Identify the value of Factor Income from Abroad
(a) ₹200 crore (b) ₹160 crore

(c) ₹ 240 crore (d) ₹180 crore
3. GNP deflator is represented by which of the following formula?

(a) Nominal GNP/Real GNP x100
(b) Real GNP/Nominal GNP x100
(c) Real GNP/Change in rate of inflation x100
(d) Change in rate of inflation/Real GNP x100
4. A car purchased by a household is a _______________

(a) Single use capital good (b) Single use consumer good
(c) Durable consumer good (d) Semi-Durable consumer good
5. ₹2000 note lying in wallet of rohini a student is an example of ___________ variable

(a) Stock (b) Flow
(c) Fixed (d) None of these
6. The sum of the factor payments is equal to_______________________.

(a) Domestic Income (b) National Income
(c) Per Captial Real Income (d) Per Capital Nominal Income
7. When Nominal Gross Domestic Product (GDP) is ₹840 Crores and price index is 120 then the Real
Gross Domestic Product (GDP) will be ___________________.
(a) ₹700 Crores (b) ₹900 Crores
(c) ₹800 Crores (d) ₹500 Crores
8. Which of the following statement is incorrect?

(a) Gross Domestic Product (GDP) at Market price = GDP at factor cost plus Net Indirect taxes
(b) Net National Product (NNP) at Market price = NNP at factor cost.
(c) Gorss National Product (GDP) at Market price = GDP at market price + Net factor income from
abroad.
(d) Net National Product (NNP) at factor cost = National Income
9. Which of the following is not a factor payment?

(a) Free unifrom to defence personnel (b) Rent paid to the owner of a building
(c) Salaries to the members of parliament (d) Scholarship given to the students
10. Net Domestic Fixed Capital Formation + Change in stock =_________

(a) Gross Domestic Capital Formation (b) Net Domestic Capital Formation
(c) Gross Domestic Fixed Capital Formation (d) National Income
11.Rent and Royalty + Interest + Profit =_______.
(a) Operating surplus (b) Income from property and entrepreneurship
(c) Mixed Income of Self Employed (d) Domestic Factor Income
12. If tea leaves are used in a restaurant for tea brewing, and the drinkable tea is sold to the customers,
then the tea leaves will be_________________.
(a) Final goods (b) Intermediate goods
(c) Consumption goods (d) Capital goods
13. Which of the following does not explain the concept of depreciation?
(a) an annual allowance for wear and tear for a capital good
(b) cost of the capital good (minus scrap value) divided by the number of years of its useful life
(c) unexpected or sudden destruction or disuse of capital as can happen with accidents, natural disasters
(d) maintenance and replacement cost of existing capital goods.
14. a firm produces ₹100 worth of goods per year, ₹20 is the value of intermediate goods used by it
during the year and ₹10 is the value of capital consumption. The net value added will be:
(a) ₹100 (b) ₹80
(c) ₹70 (d) ₹130
15. Production of a firm during a year – Sale of the firm during the year= _________________.
(a) Change in inventories of the firm during a year
(b) Value added
(c) Value of output
(d) Intermediate consumption
16. Market Prices include:

(a) Subsidies (b) Indirect uses
(c) Intermediate uses (d) Depreciation
17. That part of NNP which actually accrues to the owners of factors of production is called_________.
(a) National Incomes (b) National Disposable Income
(c) Domestic Factor Income (d) Mixed Income
18. ____________ 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.
(a) Net National Product at factor cost (b) Net Domestic Product at factor cost
(c) Gross Domestic Product at factor cost (d) Gross National Product at factor cost
19. _______ is the value of all the final goods and services that are produced by the normal residents of
India and is measured at the market prices, in a year , regardless of whatever they are located within the
economic territory or abroad
(a) GDP at market prices (b) NDP at factor cost
(c) GNP at market prices (d) National Income
20. Suppose a country produces bread only. In the year 2020-21 it had produced 1000 units of bread
price was ₹10 per bread. In 2021-22, it produced 1100 units of bread at ₹12 per bread. In 2021-22, the
nominal and real GDP are :
(a) ₹10,000 and ₹10,000 (b) ₹10,000 and ₹11,000
(c) ₹13,200 and ₹10,000 (d) ₹13,200 and ₹11,000
21. The ratio of nominal to real GDP is a well-known index of prices, called_____________
(a) Consumer price index (b) Producer Price Index
(c) GNP deflator (d) GDP deflator
22. If the Gdp deflator is 150% and real GDP is ₹1,100 the nominal GDP will be:
(a) ₹733 (b) ₹1,650
(c) ₹1,100 (d) ₹1,280
23. A representative consumer had to spend ₹1,400 on purchase of a given basket of commodities in
the year 2017-2018. Due to inflation, CPI of the year 2021-22 (taking 2017-18 as base year) was 120.
How much amount the consumer had to spend on purchase of the same basket of commodities in the
year 2021-22?
(a) ₹1,167 (b) ₹1,680
(c) ₹1,520 (d) ₹1,280
24. Which of the following is a flow concept?
(a) Foreign exchange reserve (b) Inventory
(c) Capital (d) Exports
25. Which of the following will be included in gross national product of India?
(a) Profits earned by a foreign company in India
(b) Salary paid to Americans working in Indian Embassy in America
(c) Earnings from sale of bonds to the investors
(d) None of the above
26.Which of the following will be included in national income?
(a) Money receipt from sale of old car (b) Scholarships received by students
(c) Remittances from abroad (d) Free services of owner occupied building
27. Losses are classified as:
(a) Stock variable (b) Flow variable
(c) Either (a) or (b) (d) Neither (a) or (b)
28. Unforeseen obsolescence of fixed capital assets during production is:
(a) Consumption of fixed capital (b) Capital Loss
(c) Income Loss (d) None of these
29.Foreign Embassies in India are a part of India’s:
(a) Economic territory (b) Geographical territory
(c) Both (a) and (b) (d) None of these
30. Goods purchased for the following purpose are final goods:
(a) For satisfaction of wants (b) For investment in firm
(c) Both (a) and (b) (d) None of these
31. Market price and factor cost will be equal when__________.
(a) Depreciation is zero (b) Indirect tax is zero
(d) subsidy is zero (d) Net indirect tax is zero
32. Which of the following transactions is not included in national income:
(a) Payment of interest by a private firm
(b) Payment of interest by banks on deposits
(c) Interest paid by an individual on a car loan taken from a bank
33. Which of the following transactions is not included in national income?
(a) Brokerage paid to broker for facilitating sale of second hand goods
(b) Payment of corporation tax by firms to the government
(c) Interest paid by productions units to households
(d) Interest paid by banks on deposits by individuals
34. Which one of the following is not a part of a country’s Net Domestic Product at market price?
(a) Depreciation (b) Indirect Tax
(c) Net exports (d) Net change in stocks
35. Which one of the following is an intermediate expenditure?
(a) Expenditure on purchase of furniture by a firm for its own use
(b) Expenditure on maintenance by a firm
(c) Expenditure on a purchase of a tractor by a firm for its own use
(d) Machine bought by household
36. National income is the sum of factor incomes accruing to:
(a) Nationals (b) Economic territory
(c) Residents (d) Both residents and non-residents
37. Gross Domestic Capital Formation is less than Gross Fixed Capital Formation when____________.
(a) there is no depreciation (b) Net change in stock is zero
(c) Net change in stock is negative (d) Net change in stock is positive
38.GDP can be greater than GNP when ______________.
(a) Net factor income from abroad is negative (b) Net factor from abroad is positive
(c) Net change in stock is negative (d) Net change in stock is positive
39. National Income at current prices is higher than national income at constant prices during a period
of:
(a) Rising prices (b) Falling prices
(c) Constant prices (d) Both (a) and (b)
40. Nominal GDP can be less than Real GDP when____________.
(a) Prices in the current year are less than the prices in the base year
(b) Prices in the current year are more than the prices in the base year
(c) there is no depreciation
(d) Net factor income from abroad is negative
41. Net value added at factor cost = ₹100 crores, Depreciation = ₹30 crores, Subsidies = ₹15 crores
and Intermediate Consumption = ₹185 crores, then “Gross value of output”
(a) ₹300 crores (b) ₹330 crores
(c) ₹130 crores (d) ₹230 crores
42. Construction of a school building by the government will be part of:
(a) Domestic fixed capital formation (b) Government final consumption expenditure
(c) Change in stock (d) Residential construction investment
43. Depreciation is also knows as:
(a) Capital Loss (b) Unforeseen obsolescence
(c) Capital allowance (d) Both (a) and (b)
44. If Net factor income to abroad is (-)₹120 crores, factor income from abroad is ₹150 crores and
domestic income is ₹4,500 crores, National Income will be:
(a) ₹4,380 crores (b) ₹4,620 crores
(c) ₹4,700 crores (d) ₹4,300 crores
45. If GDPmp is ₹5,000 crores, intermediate consumption is ₹2,500 and the ratio of sales to change in
stock is 2:1, then sales will be :
(a) ₹4,000 (b) ₹5,000
(c) ₹3,000 (d) ₹2,000
46. While calculating gross domestic capital formation, exports are included because:
(a) Exporters are paid for it. (b) it is an expenditure on domestic product
(c) It is a final expenditure by the buyers (d) Exports result in expenditure
47. Match the following:
(A) Value addition (I) Net factor income from abroad

(B) Income from property and entreprenuership (ii) Excess of value of output over the value of
intermediate consumption
© Excess of factor incomes (iii) Operating surplus
(rent,wages,interest,profit) earned from abroad
over factor incomes paid to abroad
(D) Excess of the value of exports over the value (iv) Net exports
of imports of a country in an accounting year
(a) (A)-(i);(B)-(iii);(C)-(ii);(D)-(iv) (b) (A)-(ii);(B)-(i);(C)-(iii);(D)-(iv)

(c) (A)-(ii);(B)-(iii);(C)-(iv);(D)-(i) (d) (A)-(ii);(B)-(iii);(C)-(i);(D)-(iv)
48. Identify the correct pair by matching column (I) and column (II):
(A) Purchase of food products by household (I) Intermediate goods

(B) Milk purchased by a tea-seller (ii) Final goods
© Market Value of goods and services produced (iii) Value of output
by a firm during an accounting year
(D) Money value of all final goods and services (iv) Domestic Income
produced in an economy during an accounting
year
(a) (A)-(i) (b) (B)-(ii)

(c) (C)-(iii) (d) (D-(iv)
49. According to a report forwarded by the Reserve Bank of India, there was a fall in rate of inflation as
measured by Consumer Price Index (CPI) on year-on-year basis to 5% from 8% in the previous year.
Which of the following statements represents the situation?
(a) CPI has fallen (b) CPI has risen at a rate lower than the preceding year
(c) CPI is constant (d) None of the above
50. __________ is the market value of the final goods and services produced within the domestic
territory of a country during an accounting year, as estimated at the current year prices.
(a) Normal GDP (b) Real GDP
(c) National Income (d) Domestic Factor Income
51.Which of the following formula is correct?
(a) Real GDP = Price Index x100 (b) Real GDP = Nominal GDP x100
Nominal GDP Price Index
(c) Nominal GDP = Real GDP x100 (d) Nominal GDP = Price Index x100
Price Index Real GDP
52. If the GDP deflator is 150% and real GDP is ₹1,100 the nominal GDP will be:
(a) ₹733 (b) ₹1,650
(c) ₹1,100 (d) ₹2,750
53. _______ takes into account all the goods and services produced in a country
(a) GDP deflator (b) Consumer Price Index
(c) Producer Price Index (d) Wholesale Price Index
54. Which one of the following is not included in national income?
(a) Payment of indirect tax by a firm (b) Bonus paid to employees
(c) Addition to stocks during a year (d) Purchase of a taxi by a taxi driver
55. _______________(Exports/Imports), which denotes aggregate expenditure incurred by the
foreigners on the final goods and services produced in domestic territory of the country__________ is
(included/not included) in national income.
(a) Exports, included (b) Imports, included
(c) Exports, not included (d) Imports, not included
56. Which one of the following is not included in compensation of employees?
(a) House rent allowance by the employer (b) Payment of bonus by a firm to its employees
(c) Free medical facilities by the employer (d) Festival gift from the employer
57. Which of the following is not included in compensation of employees?
(a) Wages and Salaries in cash
(b) Wages and Salaries in kind
(c) Employees’ contribution to social society schemes
(d) Employers’ contribution to social society schemes
58. Broker’s commission on sale and purchase of second hand goods is included in national income
because:
(a) It is a part of compensation to the employees
(b) It is a part of gross domestic capital formation
(c) It is an income earned for rendering productive services
(d) None of these
59. ____________ is what production units acctually receive for distribution of income among the
owners of factors of production.
(a) GDPmp (b) NDPfc
(c) NNPfc (d) NNPmp
60. In a simple economy, suppose there are only two producers/firms – the farmers who produce wheat
and the bakers, i.e. the bread makers. The total value of wheat produced by the farmers is ₹100, for
which they do not need any input other than human labour. Out of this, the farmers would have sold
₹50 worth of wheat to the bakers, who have used it completely during the year and have produced
₹200 worth of bread. The aggregate value of final goods produced by this simple economy will be:
(a) ₹300 (b) ₹250
(c) ₹350 (d) ₹ 200
61. A firm wants to raise the inventories from 100 to 200 shoes during the year. Expecting sales of
1,000 shoes during the year, the firm produces 1,100 shoes. The sales are actually 1,000 hoes and the
firm ends up with an inventory of 200 shoes. This rise in inventories is called_____.
(a) Planned accumulation of inventories (b) Unplanned decumulation of inventories
(c) Unplanned accumulation of inventories (d) Planned decumulation of inventories
62. A firm produces computers. It has openinf inventory of 100 computers. During the coming year it
expects to sell 1,000 computers. Hence, it produces 1,000 computers expecting to keep and inventory
of 100 at the end of the year. But the sales during the year is 1,050 computers. The reduction in
inventory by __________ computers is called ______ of inventories
(a) 50, Planned accumulation of inventories
(b) 100, Unplanned decumulation of inventories
(c) 100, Unplanned accumulation of inventories
(d) 50, Planned decumulation of inventories
63. Which of the following is within the domestic territory of India?
(a) State bank of India in UK (b) Google office in India
(c) Office of Tata Motors in USA (d) Russian Embassy in India
64. Which of the following will be included in gross national product of India?
(a) Profits earned by a foreign company in India
(b) Salary paid to Americans working in Indian Embassy in America
(c) Salaries received by Indians working in Russian Embassy in India
(d) Salaries received by Indians working in Indian Embassy in Korea
65.Which of the following will be included in Gross Domestic Product (GDP) of India?
(a) Rent received by an Indian resident from his property in Singapore
(b) Salaries received by Indian residents working in Russian Embassy in India
(c) Profits earned by a branch of State Bank of India in Japan
(d) Profits earned by Standard Chartered Bank in India
66. Factor income earned by the domestic factors of production employed in the rest of the world –
Factor income earned by the factors of production of the rest of the world employed in the domestic
economy = ?
(a) Net exports (b) Net factor income from abroad
(c) Net compensation of employers (d) Net retained earnings
67. The durable goods which undergo wear and tear with gradual use, and thus are repaired or
gradually replaced over time are:
(a) Intermediate goods (b) Capital goods
(c) Consumer durables (d) Both (b) and (c)
68. Which of the following defines ‘Investment’ in Economics
(a) Purchase of share or property
(b) Having an insurance policy
(c) Using money to buy physical or financial assets
(d) Capital formation
69. Total final output produced in an economy in a given year are used:
(a) To substain the consumption of the entire population of the economy
(b) For maintenance and replacement of the existing capital stock
(c) For new addition to the capital work
(d) All of the above
Assertion -Reasoning
1. Read the following statements carefully – Assertion (A) and Reason ® and choose the correct
alternative:
Assertion (A): Purchase of car by a household is a part of gross domestic capital formation.
Reason ® : It is a private final consumption expenditure.
(a) Both assertion and reason are true and reason is the correct explanation of assertion.
(b) Both assertion and reason are true but reason is not the correct explanation.
(c) Assertion is true but Reason is false.
(d) Assertion is false but Reason in true
2. Statement I: Industrial waste driven into rivers is an example of positive externality
Statement II: Inventory is a stock variable
(a) Both statements are true (b) Both statements are false
(c) Statement 1 is true but statement 2 is false (c) Statement 1 is false but statement 2 is true
3. Statement I: Expected obsolescence is included in depreciation
Statement II: Wages earned by a citizen of India working in Saudi Arabia will be included In GDP of
India
(a) Both the statements are true (b) Both statements are true
(c) Statement I is true but statement II is false (d) Statement I is false but statement II is true
4. Statement I: Unexpected obsolescence is a component of depreciation
Statement II: Purchase of machinery by a producer is an intermediate good.
5. Statement I: Combined factor income which cant be separated into various factor income
components is known as Mixed income of self employed
Statement II: All the capital goods produced in a year do not constitute net addition to the capital stock
already existing
6. Statement I: The profits earned by the Korean-owned Hyundai car factory in India will be included
in the National income of India.
Statement II: Market Price is less than factor cost if subsidy is more than indirect taxes
7. Assertion (A): Depreciation is deducted from GDP while calculating national income
Reason ® : Depreciation does not become a part of anybody’s income.
(a) Both assertion and reason are true and reason is the correct explanation of assertion.
(b) Both assertion and reason are true but reason is not the correct explanation.
(c) Assertion is true but Reason is false.
(d) Assertion is false but Reason in true
8. Assertion (A): Indirect taxes are deducted from NNP at market prices to calculate national income.
Reason (R): Indirect taxes accrue to the government. It is a transfer payment, not a factor payment.
(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, 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.
9. Assertion (A): Prizes received by the household from government and firms are included in National
Income. Reason (R): It is a transfer payment.
(A),
Assertion (A),
(c)Assertion (A) is true, but Reason (R) is false.

10. Statement I: GDPmp includes market value of all final goods and services produced by the normal
residents or the non-residents in a country.
Statement II: If the nominal GDP of the current year is double the nominal GDP of the base year, the
volume of production of the country must have doubled
(a) Both the statements are true. (b) Both the statements are false.
(c) Statement I is true, Statement II is false. (d) Statement Il is true, Statement I is false.
11. Assertion (A): National income is always more than the domestic income.
Reason (R): National income can be less than domestic income when net factor income from abroad
(NFIA) negative. National income can also be equal to domestic income if NFIA is zero,
(A).
Assertion (A).
12. Assertion (A): Free services provided by the government will be included in national income.
Reason (R): It will be included in national income as it is government final consumption expenditure.
(A).
Assertion (A)
13. Statement I: NDPmp is the sum up of operating surplus, compensation of employees, mixed income
and Net Indirect Tax
Statement II: Salary of an Indian working in Russian embassy in India is included in National Income
of India
(c) Statement I is true, Statement Il is false. (d) Statement Il is true, Statement I is falseI
14. Statement I: Raw materials or non-factor inputs purchased for producing
Statement IL Printer purchased by a lawyer for office use is a final product.
(a) Both the statements are true. (b) Both the statements are false
(c) Statement I is true, Statement II is false. (d) Statement II is true, Statement I is false.
15. Assertion (A): Mobile sets purchased by a mobile dealer are final products
Reason (R): Because these are purchased for resale.
(A)
Assertion (A).
16. Assertion (A): Steel sheets used for making automobiles and copper used for making utensils are
intermediate goods.
Reason (R): They are purchased with the purpose of using them completely during the same year for
production of steel gates/utensils
(A).
Assertion (A).
17. Statement I: National income includes the value of final goods only.
Statement II: Capital goods are also called durable use producer goods.
(c) Statement. I is true, Statement II is false. (d) Statement II is true. Statement I is false.
18. Statement 1: Stocks are economic variables measured at a given point of time.
Statement II: Flows are economic variables measured over a period of time.
(a) Both the statements are true. (b)Both the statements are false.
(c) Statement I is true. Statement II is false. (d)Statement II is true, Statement I is false
19. Assertion (A): The value of intermediate goods is included in the national income estimates.
Reason (R): Including intermediate goods separately will inflate or overestimate the national income.
(A)
(b) Both Assertion (A) and Reason (R) are true, bur Reason (R) is not the correct explanation of
Assertion (A).
20. Statement I: That part of final output which comprises of capital goods constitutes gross investment
of an economy.
Statement II: Depreciation is an annual allowance for normal weat and tear and foreseen obsolescence
of a fixed capital asset.
21. Statement I: A part of the capiral goods produced this year goes for maintenance or replacement of
existing capital goods, called capital lou.
Statement II: Depreciation does not take into account unexpected/unforeseen obsolescence or sudden
destruction or disuse of capital as can happen with accidents, natural calamities or other such
extraneous circumstances.
(c)Statement I is true. Statement II is false. (d) Statement II is true. Statement I is false.

22. Assertion (A) Inventory is a stock variable.
Reason (R): It is measured at a given point of time.
(A).
Assertion (A)
23.Statement I: Inventory is treated as capital. So, it is a stock variable.
Statement II: Change in the inventory of a firm is treated as investment. So, it is a flow variable.
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement I is true, Statement II is false
(d) Statement II is true, Statement I is false.
24.Statement I: National income includes only factor payments which are received in return for the
factor services provided in production of goods and services.
Statement II: The stock of unsold finished goods, or semi-finished goods, or raw materials which a firm
carries from one year to the next is called change in inventory.
25.Assertion (A): Transfer payment is not included in national income.

Reason (R): Any payment for which no service is rendered is called a transfer payment.
(A).
Assertion (A).
26. Statement I: Capital goods purchased by business enterprises such as machines make production of
other goods feasible, however, they themselves don't get transformed in the production process.
Statement II: Depreciation is an accounting concept. No real expenditure may have actually been
incurred each year yet depreciation is annually accounted for.
27. Statement I: The U.S. embassy in India is a part of economic territory of India.
Statement II: Branch of an American Bank in India is included in the domestic territory of India
(c) Statement 1 is true, Statement II is false. (d) Statement 11 is true, Statement I is false.
28.Assertion (A): Indians working in the office of the United Nations Organisation (UNO) in India are
normal residents of India.
Reason (R): They live in India and their centre of economic interest also lies in India.
(A).
Assertion (A).
(d) Assertion (A) is false, but Reason (R) is true

29. Statement I: A person can be a citizen of one country and at the same time a resident of another
country.
Statement II: National product includes production activities of residents and non-residents irrespective
of whether performed within the economic territory or outside it.
30.Statement I: The concept of national product is based on the production units located within
economic territory, operated both by residents and non-residents.
Statement II: The concept of domestic product is based on residents, and includes their contribution to
production both within and outside the economic territory.
(c) Statement I is true, Statement II is false (d) Statement II is true, Statement I is false.
31. Statement I: The residents' contribution outside the economic territory is called factor income
received from abroad and the non-residents' contribution inside the economic territory is called factor
income paid to residents.
Statement II: Factor income received from abroad is added to domestic product because this
contribution of residents is in addition to their contribution to domestic product.
(c) Statement I is true, Statement II is false. (d) Statement II is true, Statement 1 is false.
32. Statement I: Nominal Flow is the flow of factor payments and payments for goods and services
between households and firms.
Statement II: Real Flow is the flow of goods and services only berween households and firms.
33. Statement I: The value of output of a firm is distributed among its four factors of production,
namely, labour, capital, entrepreneurship and land. made by a firm is called its 'value added
Statement II: The term that is used to denote the net contribution
(c) Statement 1 is true, Statement II is false. (d) Statement II is true. Statement I is false.
34. Statement I: The sum of factor payments equals Gross Value Added at Factor Cost (GVAfc)
Statement II: The components of National Income are compensation of employees, operating surplus
and mixed Income.
35. Statement I: Contribution to provident fund or insurance premium paid by employees is not
included in national income because it is paid out of compensation of employees, which is already
included.
Statement II: Gifts received from employer, e.g. festival gift, gifts on independence day, etc. is not
included in national income as it is a transfer payment.
(c) Statement I is true, Statement II is false. (d) Statement II is true. Statement I is false
36. Statement I: Operating surplus is defined as the sum of rent, royalty, interest and profits.
Statement II: Operating surplus can also be termed as 'Income from property and entrepreneurship’, ie
income earned by property owners.
(c) Statement I is true, Statement II is false (d) Statement II is true, Statement I is false.
37. Assertion (A): Payment of interest by banks to its depositors is included in national income.
Reason (R): It is Factor payment. The borrowed money is used for carrying out production of goods
and services
(A).
Assertion (A),
(c) Assertion (A) is true, bur Reason (R) is false.

38. Assertion (A): Payment of interest on a loan taken by an employee from the employer will be
included in national income.
Reason (R): There is no contribution to production of goods and services. Therefore, it is not a factor
payment.
(A).
(b) Both Assertion (A) and Reason (R) are true, bur Reason (R) is not the correct explanation of
Assertion (A).
39. Assertion (A): Payment of corporate tax by a firm is also not included in national income.
Reason (R): It is a transfer payment and is already included in profits. Corporate tax accrues to the
government. It is not received by the owners of factors of production. Hence, it is not a factor income.
(A).
Assertion (A).
40. Statement 1: Expenditure on advertisement and scientific research by a firm is an intermediate

expenditure
Statement II: Expenditure by a firm on payment of fees to a chartered accountant is a final expenditure.
(a) Both the statements are true. (b) Both the statements are false
(c) Statement I is true. Starement II is false. (d) Statement II is true, Statement I is false.
41. Assertion (A): Real GDP is a better indicator of economic growth and welfare of people of the
country thanNominal GDP
Reason (R): Real GDP is not affected by changes in general price level. Secondly, because increase in
real GDP means more goods and services are available to the society during the year, thus, welfare
increases.
(A).
Assertion (A).

42.Assertion (A): GDP Deflator gives the change in price level berween the base year and current year.
Reason (R): This is because in the calculation of real and nominal GDP of the current year, the volume
of production is fixed. Therefore, if these measures differ it is only due to change in the price level
between the base year and the current year.
(A).
Assertion (A).
43.Statement I: If the GDP of the country is rising, the welfare may not rise as a consequence, if the
rise in GDP may be concentrated in the hands of very few individuals or firms.
Statement II: Non-monetary exchanges like domestic services women perform at home etc. are
registered as part of economic activity.
Case Study
Case-Study 1: Read the following News Report and answer Q. 1-4 on the basis of the same:
The Budget Estimate of Total Spending for 2021-2022 is ₹34.83 lakh crore
The Revised Estimate (RE) for total cnetral spending in 2020-2021 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 ____________.
(a) rises (b) falls
(c) remains the same (d) rises in the same proportion
Q.2 If GDP Deflator = 125, Nominal GDP = ₹15000 crores. Then Real GDP is equal to____________.
(a) ₹11,259 crore (b) ₹18,750 crore
(c) ₹12,000 crore (d) ₹15,125 crore
Q.3 Read the following statements – Assertion (A) and Reason ®
Assertion (A): Real GDP is always equal to Nominal GDP
Reason ®: Real GDP is a better measure to make periodic comparison in the physical output o goods
and services over different years
(a) Assertion (a) is true but Reason (R) is false
(b) Assertion (a) is false but Reason (R) is true
(c) Both Assertion and Reason are false
(d) Both Assertion and Reason are true
Q.4 Which of the following statements highlights the significance of GDP Deflator?
(a) GDP Deflator shows changes in the price level of the economy between the base year and current
year
(b) GDP Deflator is an indicator of economic growth and welfare of people of the country
(c) GDP Deflator shows changes in the output level of the economy between the base year and current
year
(d) GDP Deflator eliminates the effect of change in prices and output between the base year and current
year
Case-Study 2: Read the following News Report and answer Q. 5-8 on the basis of the same:
India GDP Q1 Data: India’s economic growth slips 23.9% in Q1 of 2020-21
Owing to a strict nationwide lockdown due to the novel coronavirus (COVID-19) during the bulk of the
first quarter of the financial year 2020-21, India’s Gross Domestic Product (GDP) for the April-June
quarter (Q1) slipped by a sharp 23.9 percent, as per provisional estimates released by Ministry of
Statistics and Programme Implementation (MoSPI) on Monday. The GDP had expanded by 5.2 percent
in the corresponding year 2019-20.
The June quarter GDP data is the worst contraction in the history of the Indian economy mainly
because the central government on March 25 had ordered a complete lockdown of most of the
manufacturing and service sectors owing to the spread of COVID-19. Only essential services like food
items and medicine were allowed during this period as the country tried to curb the spread of the virus
across the country.
The GDP for the preceding January-March quarter (Q4) of 2019-20 had witnessed a growth of 3.1
percent.
As per the government data, the gross value added (GVA) at basic price at constant prices during the
June quarter shrunk 22.8 percent. The GVA at Basic Price at Current Prices slipped 20.6 percent in Q1
2020-21
Q.5” India’s economic growth slips 23.9% in Quarter 1 of 2020-21.” _____ measures economic growth
(a) GVA at basic price at constant price (b) GVA at basic price at current price
(c) GDP at market price (d) GVA at market price
Q.6” As per the government data, GVA at basic price at constant prices during the June quarter shrunk
22.8 percent.” It must have ________ the welfare of people of the country.
(a) increased (b) decreased
(c) doubled (d) none of these
Q.7” The June quarter GDP data ………… COVID-19”. The employment and output in the economu
must have __________.
(a) increased (b) decreased
(c) doubled (d) none of these
Q.8 During the situations above described, what should be the first policy of the government?
(a) Decrease taxes and increase government expenditure
(b) Increase taxes and reduce government expenditure
(c) Decrease taxes and reduce government expenditure
(d) Increase taxes and increase government expenditure
CASE STUDY 3. Read the following News Report and answer Q. 9-12 on the basis of the sames The
six-member RBI panel expects the real GDP growth to be negative for the year 2020-21 as a whole.
"An early containment of the Covid-19 pandemic may impart an upside to the outlook. A more
protracted spread of the pandemic. deviations from the forecast of a normal monsoon and global
financial market volatility are the key downside risks," the Monetary Policy Committee (MPC) said.
The RBI panel, which slashed the repo rate, the main policy instrument by 115 basis points to 4 per
cent since February this year, noted that like elsewhere, in India too, economic activity had started to
recover from the lows of April-May, but wiges of fresh infections have forced re-clamping of
lockdowns in several cities and states. "Consequently, several high frequency indicators have levelled
off," it underlined.
The RBI Governer, Shaktikanta Das said the economy is experiencing unprecedented stress in an
austere global environment. "Extreme uncertainty characterises the outlook, which is heavily
contingent upon the intensity, spread and duration of the pandemic particularly the heightened risks
associated with a second wave of infections and the
discovery of the vaccine," he said. 0.9 Which of the following highlights the meaning of real GDP?
(a) Real GDP is the market value of the final goods and services produced within domestic territory of
a country during an accounting year, as estimated ar the current year's prices.
(b) Real GDP is the market value of the final goods and services produced within the domestic territory
of a country during an accounting year, as estimated at the constant prices.
(c) Increase in real GDP means more goods and services are available to the society during the year.
(d) Change in real GDP may include both change in prices and change in flow of goods and services.
Q.10 Which of the following is not correct?
(a) GDP Deflator = Nominal GDP/ Real GDP x100
(b) Real GDP = Nominal GDP/ Price Index -×100
(c) Real GDP = Price Index/Nominal GDP ×100
(d) All of these
Q.11 The real GDP growth to be negative for the year 2020-21 as a whole." Which of the following is a
fiscal measure that may be taken by the Government of India to correct the Covid-19 pandemic?
(a) Cut in Repo Rate by the RBI.
(b) Decrease the taxes.
(c) Increase in public expenditure.
(d) Both (b) and (c)
Q.12 What does negative real GDP growth for the year 2020-21 signify?
(a) Real GDP of the year 2020-21 has decreased as compared to 2019-20.
(b) Real GDP of the year 2020-21 has become negative.
(c) Real GDP of the year 2020-21 is less than Nominal GDP of the same period.

Some Important Questions
Q.1 Answer the following:
(a) Giving valid reasons, state how the services of a 'School Teacher' will be undertaken in estimation
of National Income.
(b) Discuss briefly how the money received from the sale of a second-hand car will be undertaken in
estimation of National Income
Q.2 Gross investment is always greater than net investment." Defend or refute the given statement with
valid argument.
Q.3 Net factor income from abroad can never be negative." Defend or refute the given statement with
valid argument
Q.4 Final goods are those goods which are consumed only by the households." Defend or refute the
given statement with a valid argument.
Q.5 State with valid reason, which of the following statement is true or false:
(a) Gross Value Added at market price and Gross Domestic Product at market price are one and the
same thing.
(b) Intermediate goods are always durable in nature.

Q.6 (a) 'Domestic/household services performed by a woman may not be considered as an economic
activity. Defend or refute the given statement with valid reason.
(b) 'Compensation to the victims of a cyclone is an example of a welfare measure taken by the
government'. State with valid reason, should it be included/not included in the estimation of national
income of India.
Q7."India's GDP is expected to expand 7.5% in 2022-23, World Bank"

Does the given statement mean that welfare of people of India increase at the same rate? Comment
with reason.
Q.8 Real Gross Domestic Product is a better indicator of economic growth than Nominal Gross
Domestic Product. Do you agree with the given statement! Support your answer with a suitable
numerical example.
Q.9 Circular flow of income in a two sector economy is based on the axiom that one's expenditure is
other's income. Do you agree with the given statement! Support your answer with valid reasons.
Q.10 "Management of a water polluting oil refinery says that it (oil refinery) ensures welfare through
its contribution to Gross Domestic product." Defend or refute the argument of management with
respect to GDP as a welfare measure of the economy
Q.11 'Subsides to the producers, should be treated as transfer payments. Defend or refute the given
statement with valid reason.
Q.12 State giving reasons whether the following statements are True or False:
(a) Capital goods are used up to produce other goods.
(b) Machine purchased is always a final good.
Q.13 "Higher Gross Domestic Product (GDP) means greater per capita availability of goods in the
economy." Do you agree with the given statement? Give valid reasons in support of your answer

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Chapter-1 National Income and Related Aggregates

1. Inventory is a ___________ concept whereas the change in inventory is a __________ concept

(a) stock, flow (b) flow, stock

(a) ₹200 crore (b) ₹160 crore

3. GNP deflator is represented by which of the following formula?

4. A car purchased by a household is a _______________

5. ₹2000 note lying in wallet of rohini a student is an example of ___________ variable

6. The sum of the factor payments is equal to_______________________.

8. Which of the following statement is incorrect?

9. Which of the following is not a factor payment?

10. Net Domestic Fixed Capital Formation + Change in stock =_________

16. Market Prices include:

(A) Value addition (I) Net factor income from abroad

(a) (A)-(i);(B)-(iii);(C)-(ii);(D)-(iv) (b) (A)-(ii);(B)-(i);(C)-(iii);(D)-(iv)

(A) Purchase of food products by household (I) Intermediate goods

(a) (A)-(i) (b) (B)-(ii)

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

(c)Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

14. Statement I: Raw materials or non-factor inputs purchased for producing

Statement IL Printer purchased by a lawyer for office use is a final product.

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

(c) Statement I is true. Statement II is false. (d)Statement II is true, Statement I is false

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

(c)Statement I is true. Statement II is false. (d) Statement II is true. Statement I is false.

Reason (R): It is measured at a given point of time.

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

23.Statement I: Inventory is treated as capital. So, it is a stock variable.

(a) Both the statements are true.

(b) Both the statements are false.

(c) Statement I is true, Statement II is false

(d) Statement II is true, Statement I is false.

25.Assertion (A): Transfer payment is not included in national income.

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

(d) Assertion (A) is false, but Reason (R) is true

(c) Assertion (A) is true, bur Reason (R) is false.

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

40. Statement 1: Expenditure on advertisement and scientific research by a firm is an intermediate

(d) Assertion (A) is false, but Reason (R) is true

(c) Assertion (A) is true, but Reason (R) is false.

(d) Assertion (A) is false, but Reason (R) is true.

Q.10 Which of the following is not correct?

(a) GDP Deflator = Nominal GDP/ Real GDP x100

(b) Real GDP = Nominal GDP/ Price Index -×100

(c) Real GDP = Price Index/Nominal GDP ×100

(d) All of these

(b) Decrease the taxes.

(c) Increase in public expenditure.

(d) Both (b) and (c)

1. Inventory is a _ concept whereas the change in inventory is a concept