CBSE Class 12 Economics National Income Accounting VBQs Set 03

Multiple Choice Questions

Question. Goods that are ready for use by their final users are called:
(a) intermediate goods
(b) final goods
(c) capital goods
(d) consumer goods
Answer: (b) final goods

Question. Intermediate goods are those goods:
(a) which have yet not crossed the boundary line of production
(b) which are purchased by one firm from the other firm for resale
(c) which are not included in the estimation of national product
(d) All of the options
Answer: (d) All of the options

Question. Goods that are used-up in a single act of consumption are called:
(a) durable consumer goods
(b) semi-durable consumer goods
(c) non-durable consumer goods
(d) non-material consumer goods
Answer: (c) non-durable consumer goods

Question. Goods that are used by the producers for several years and are of high value are called:
(a) intermediate goods
(b) final goods
(c) capital goods
(d) both (b) and (c)
Answer: (d) both (b) and (c)

Question. Goods which are not used in the production of other goods are called:
(a) capital goods
(b) consumption goods
(c) producer goods
(d) intermediate goods
Answer: (b) consumption goods

Question. Electric goods like tubelights and bulbs are examples of:
(a) durable consumer goods
(b) semi-durable consumer goods
(c) non-durable consumer goods
(d) All of the options
Answer: (b) semi-durable consumer goods

Question. Milk and ice cream used by the households are examples of:
(a) durable goods
(b) intermediate goods
(c) consumption goods
(d) capital goods
Answer: (c) consumption goods

Question. Expenditure of the producers on the purchase of capital goods causes:
(a) fixed investment
(b) inventory investment
(c) gross investment
(d) net investment
Answer: (a) fixed investment

Question. Gross investment is equal to:
(a) net investment - depreciation
(b) expenditure on the purchase of intermediate as well as final goods
(c) net investment + depreciation
(d) None of the options
Answer: (c) net investment + depreciation

Question. Depreciation is the:
(a) loss of value of fixed assets in use due to normal wear and tear
(b) loss of value of fixed assets in use due to normal rate of accidental damages
(c) loss of value of fixed assets in use due to foreseen obsolescence
(d) All of the options
Answer: (d) All of the options

Question. Which of the following is the cause of unexpected obsolescence?
(a) Natural calamities
(b) Change in demand
(c) Change in technology
(d) Both (b) and (c)
Answer: (a) Natural calamities

Question. Stock of man-made goods which are used for further production is called:
(a) investment
(b) capital stock
(c) capital formation
(d) both (a) and (c)
Answer: (b) capital stock

Question. Loss of value of fixed assets owing to unexpected obsolescence is called:
(a) capital formation
(b) capital loss
(c) unexpected loss
(d) depreciation
Answer: (b) capital loss

Question. Expenditure on Final Goods =
(a) Consumption expenditure + Investment expenditure
(b) Consumption expenditure - Investment expenditure
(c) Consumption expenditure \times Investment expenditure
(d) Consumption expenditure \div Investment expenditure
Answer: (a) Consumption expenditure + Investment expenditure

Question. Which of the following are the final users of consumer goods?
(a) Households
(b) Non-profit private institutions
(c) Government
(d) All of the options
Answer: (d) All of the options

Fill in the Blanks

Question. _______ goods are purchased by one firm from the other for use as a raw material. (Final/Intermediate)
Answer: Intermediate

Question. Consumption goods are also called _______ goods. (producer/consumer)
Answer: consumer

Question. Change in inventory stock during the year is called _______ investment of the producers. (fixed/inventory)
Answer: inventory

Question. _______ lead to unexpected obsolescence. (Natural calamities/Change in demand)
Answer: Natural calamities

Question. Expenditure on Final Goods = Consumption Expenditure + _______ (Investment Expenditure/Net Exports)
Answer: Investment Expenditure

True or False

Question. Only consumers are the final users of final goods.
Answer: False

Question. Final producer goods are used by the consumers.
Answer: False

Question. Intermediate goods are included in the estimation of national income.
Answer: False

Question. All capital goods are producer goods.
Answer: True

Question. Services are tangible in nature.
Answer: False

Question. Capital goods are used in the production process only once.
Answer: False

Question. Capital stock increases as a result of investment.
Answer: True

Question. Gross Investment = Net Investment - Depreciation.
Answer: False

Question. TV is an example of durable consumer good.
Answer: True

Question. Like the households, the government is also the final user of consumer goods.
Answer: True

Very Short Answer Questions

Question. What are final goods?
Answer: Final goods are those goods which are out of the boundary line of production and are ready for use by their final users.

Question. What are intermediate goods?
Answer: Intermediate goods are those goods which are used as raw material or are purchased by the firms for resale.

Question. What are consumption goods?
Answer: Consumption goods (also known as consumer goods) are those goods which are used for the direct satisfaction of human wants. Example: Milk used by households.

Question. What are capital goods?
Answer: Capital goods are fixed assets of the producers which are repeatedly used in the production of other goods and services and which are of high value.

Question. What are producer goods?
Answer: Producer goods are those goods which are used for further production. These may be used either as raw material (like wood used in making chairs) or as fixed assets (like a tractor used in farming).

Question. Name the two types of final goods.
Answer: (i) Final consumer goods, and (ii) Final producer goods.

Question. Define intermediate consumption.
Answer: Intermediate consumption refers to expenditure by the producers on the purchase of intermediate goods during an accounting year.

Question. Define investment.
Answer: Investment refers to expenditure by the producer (during the period of an accounting year) on the purchase of all such goods which add to his stock of capital. It is also called capital formation.

Question. What is fixed investment?
Answer: Fixed investment refers to increase in the stock of fixed assets or capital goods (like plant and machinery) of the producers during an accounting year.

Question. What do you mean by inventory investment?
Answer: Change in inventory stock during the year is called inventory investment of the producers.

Question. Define depreciation.
Answer: Depreciation (or consumption of fixed capital) refers to loss of value of fixed assets (in use) on account of: (i) Normal wear and tear, and (ii) Expected obsolescence, (iii) Accidental damages.

Question. Define depreciation reserve fund.
Answer: Depreciation reserve fund refers to that fund which the producers keep to cope with depreciation losses in the process of production.

Question. Why does an entrepreneur make a provision for consumption of fixed capital?
Answer: An entrepreneur makes a provision for the consumption of fixed capital with a view to replace the worn-out fixed assets.

Question. Define capital loss.
Answer: Capital loss is a loss of value of fixed assets while these are not in use. It occurs on account of: (i) natural calamities, and (ii) fall in market value of the assets during periods of economic recession.

Question. What is current replacement cost?
Answer: Current replacement cost refers to the estimated value of depreciation for all the producing units in the economy, during the period of an accounting year.