CBSE Class 12 Economics HOTs Economics Forms of Market and Price Determination Set 02

Multiple Choice Questions

Question. The sum total of factor incomes earned by normal residents of a country during the period of an accounting year is called:
(a) national income
(b) domestic income
(c) national product
(d) both (a) and (c)
Answer: (d) both (a) and (c)

Question. Market value of final goods and services produced in the economy during the period of one year is called:
(a) Gross value added at market price
(b) Gross domestic product at market price
(c) Gross national product at market price
(d) both (a) and (b)
Answer: (d) both (a) and (b)

Question. Value Addition =
(a) Value of output + Intermediate consumption
(b) Value of output - Intermediate consumption
(c) Value of output \(\times\) Intermediate consumption
(d) Value of output \(\div\) Intermediate consumption
Answer: (b) Value of output - Intermediate consumption

Question. If the entire output of the year is sold during the year, then:
(a) value of output = intermediate consumption
(b) value of output = intermediate cost
(c) value of output = sales
(d) value of output = change in sales
Answer: (c) value of output = sales

Question. Value of Output = Sales +
(a) Change in stock
(b) Intermediate cost
(c) Closing stock - Opening stock
(d) Both (a) and (c)
Answer: (d) Both (a) and (c)

Question. Expenditure by the foreigners on the domestically produced final goods and services is called:
(a) exports
(b) imports
(c) net exports
(d) None of the options
Answer: (a) exports

Question. Operating Surplus =
(a) Compensation of employees + Rent + Interest + Profit
(b) Rent + Interest + Profit
(c) Compensation of employees + Mixed income of self-employed
(d) Compensation of employees + Rent + Interest + Profit + Mixed income of self-employed
Answer: (b) Rent + Interest + Profit

Question. Which of the following is a component of profit?
(a) Undistributed profit
(b) Dividends
(c) Corporation profit tax
(d) All of the options
Answer: (d) All of the options

Question. Which of the following is not included in inventory investment?
(a) Stock of finished goods
(b) Stock of semi-finished goods
(c) Consumer goods sold to the households during the accounting year
(d) Stock of raw materials
Answer: (c) Consumer goods sold to the households during the accounting year

Question. Which of the following is included in the estimation of national income?
(a) Expenses on electricity by a factory
(b) Gifts from abroad
(c) Free services by the government
(d) Financial help to earthquake victims
Answer: (c) Free services by the government

Question. Which of the following is not included in the estimation of national income?
(a) Brokerage on the sale of bonds
(b) Imputed value of production for self-consumption
(c) Leisure-time activities
(d) Employer's contribution to provident fund
Answer: (c) Leisure-time activities

Question. Which of the following is included in the estimation of national income?
(a) Unemployment allowances
(b) Defence and security services
(c) Expenditure on second-hand goods
(d) Income from illegal activities
Answer: (b) Defence and security services

Question. Retirement pension is:
(a) a kind of transfer payment
(b) a kind of corporate tax
(c) a kind of deferred wage
(d) None of the options
Answer: (c) a kind of deferred wage

Question. If stock at the end of the year is Rs. 37,700 and change in stock during an accounting year is Rs. 12,300, then opening stock in this case will be:
(a) Rs. 12,300
(b) Rs. 25,400
(c) Rs. 37,700
(d) Rs. 50,000
Answer: (b) Rs. 25,400

Question. If \( GDP_{FC} \) = Rs. 24,760, operating surplus = Rs. 13,450, mixed income = Rs. 4,260 and consumption of fixed capital = Rs. 530, then compensation of employees will be:
(a) Rs. 6,520
(b) Rs. 7,050
(c) Rs. 18,240
(d) Rs. 43,000
Answer: (a) Rs. 6,520

Fill in the Blanks

Question. _______ is also called Consumption and Investment Method. (Income Method/Expenditure Method)
Answer: Expenditure Method

Question. To avoid double counting in the estimation of national income, only the value of _______ goods is taken into account. (final/intermediary)
Answer: final

Question. Intermediate consumption refers to value of _______ inputs. (factor/non-factor)
Answer: non-factor

Question. Windfall gains _______ included in national income. (are/are not)
Answer: are not

Question. Sales + Change in Stock = _______. (Value of Output/Value Added)
Answer: Value of Output

Question. _______ is that part of the profit which is retained by the firms. (Distributed profit/Undistributed profit)
Answer: Undistributed profit

Question. Mixed income refers to the incomes of the _______. (self-employed persons/employers)
Answer: self-employed persons

Question. _______ refers to change in stock during the year. (Inventory investment/Fixed investment)
Answer: Inventory investment

Question. _______ is a consumer durable good. (Milk/Washing machine)
Answer: Washing machine

Question. Gifts from abroad are _______. (factor income/transfer income)
Answer: transfer income

True or False

Question. Scholarships granted to the students are included in the estimation of GDP.
Answer: False

Question. Value Added = Value of Output - Intermediate Consumption.
Answer: True

Question. Aggregate of rent, interest and profit is called operating surplus.
Answer: True

Question. Factor incomes are only earned incomes.
Answer: True

Question. Capital gain is not included in national income.
Answer: True

Question. Old-age pension is an unilateral payment.
Answer: True

Question. Rent of self-occupied house is not included in national income.
Answer: False

Question. Exports are not included in GDP.
Answer: False

Question. Value of intermediate goods is reflected in the value of final goods, and therefore not included in the estimation of national income.
Answer: True

Question. Net exports refer to the summation of exports and imports of a country with rest of the world during an accounting year.
Answer: False

Very Short Answer Questions

Question. Name the three methods of measuring national income.
Answer: (i) Product method or value added method, (ii) Income method, and (iii) Expenditure method.

Question. What is meant by primary sector?
Answer: Primary sector is that sector which produces goods by exploiting natural resources. It comprises agriculture, fishing, forestry and mining.

Question. What is meant by secondary sector?
Answer: Secondary sector is that sector in which production is done by using output of primary sector as input.

Question. What is meant by tertiary sector?
Answer: Tertiary sector is that sector in which entrepreneurs provide services such as of banking, insurance, etc.

Question. Define the concept of value added.
Answer: Value added refers to addition of value to a thing with a view to generating income.

Question. What is an alternative name of value added?
Answer: Production.