CBSE Class 12 Economics National Income Accounting VBQs Set 04

Multiple Choice Questions

Question. Quantity measured at a particular point of time is called:
(a) flow variable
(b) stock variable
(c) fixed inventory
(d) None of the options
Answer: (b) stock variable

Question. The non-stop continuity of intersectoral flows is called:
(a) circularity of flows
(b) real flows
(c) money flows
(d) None of the options
Answer: (a) circularity of flows

Question. Money flows refer to the:
(a) flow of goods across different sectors of the economy
(b) flow of services across different sectors of the economy
(c) flow of money across different sectors of the economy
(d) flow of income across different sectors of the economy
Answer: (c) flow of money across different sectors of the economy

Question. Flow of goods and services across different sectors of the economy is called:
(a) real flow
(b) circular flow
(c) monetary flow
(d) inventory flow
Answer: (a) real flow

Question. The producer sector depends on the household sector for the supply of:
(a) goods and services
(b) factors of production
(c) both (b) and (c)
(d) None of the options
Answer: (b) factors of production

Question. Money flows are the reciprocal of:
(a) monetary flows
(b) real flows
(c) circular flows
(d) inventory flows
Answer: (b) real flows

Question. Which of the following is a stock variable?
(a) Interest on capital
(b) Distance between Delhi and Goa
(c) Expenditure of money
(d) All of the options
Answer: (b) Distance between Delhi and Goa

Question. Which of the following is not a flow variable?
(a) Income
(b) Capital formation
(c) Supply of money in a country
(d) Leakage of water from the overhead tank
Answer: (c) Supply of money in a country

Question. A thousand rupee note is an example of:
(a) stock variable
(b) flow variable
(c) either stock or flow
(d) neither stock nor flow
Answer: (a) stock variable

Question. Which of the following is an example of flow variable?
(a) Production of rice
(b) Import of machinery
(c) Change in capital stock
(d) All of the options
Answer: (d) All of the options

Fill in the Blanks

Question. _______ is a example of stock variable. (Wealth/Income)
Answer: Wealth

Question. _______ flows refer to the flow of money across different sectors of the economy. (Real/Money)
Answer: Money

Question. _______ is a flow concept. (Investment/Capital)
Answer: Investment

Question. Money flows are the reciprocal of _______. (monetary flows/real flows)
Answer: real flows

Question. A thousand rupee note is an example of _______. (stock variable/flow variable)
Answer: stock variable

True or False

Question. Households are the owners of the factors of production.
Answer: True

Question. Production of cement is not a flow variable.
Answer: False

Question. A stock variable has no time dimension.
Answer: True

Question. Real flows and money flows both are same concepts.
Answer: False

Question. Capital formation is a stock variable.
Answer: False

Very Short Answer Questions

Question. Define stock variables.
Answer: Stock variables are those variables which are measured at a particular point of time.
Example: Wealth and capital.

Question. Define flow variables.
Answer: Flow variables are those variables which are measured per unit of time period.
Example: Income and investment.

Question. What is meant by intersectoral flows?
Answer: Intersectoral flows refer to the flow of goods and services as well as the flow of money among different sectors of the economy.

Question. What is meant by circular flow of income?
Answer: Circular flow of income refers to unbroken circularity of real flows and money flows across different sectors of the economy.

Question. Define monetary flow.
Answer: Monetary flow (or money flow) refers to the flow of factor incomes, viz., rent, interest, profit and wages from the producing sector to the household sector as monetary rewards for their factor services. The households spend their incomes on the goods and services produced by the producing sector. Accordingly, money flows back to the producing sector as household expenditure.

Question. Define real flow.
Answer: Real flow refers to the flow of factor services from the household sector to the producing sector and the corresponding flow of goods and services from the producing sector to the household sector.

Question. What is the principle of circular flow of income and product?
Answer: The circular flow of income and product involves two basic principles:
(i) Real flows (in terms of goods and services) are opposite to the money flows.
(ii) Flow of income across different sectors always implies the identity between payments and receipts.

Question. State whether the following are a stock or a flow?
(i) Income of a household.
(ii) Consumption expenditure of a household.
Answer: Both are flows, as these are measured per unit of time period.

Question. State which of the following is a stock and which is flow?
(i) Wealth.
(ii) Cement Production.
Answer: (i) Stock, (ii) Flow.

Question. State whether the following is a stock or a flow?
(i) Money supply or quantity of money of the nation.
(ii) Change in nation's money supply.
Answer: (i) Stock, (ii) Flow.

Reason-based Questions 

Question. A stock is a quantity measured at a specified period of time.
Answer: False. A stock is a quantity measured at a particular point of time.

Question. Capital formation is a stock variable.
Answer: False. Capital formation is a flow variable. It refers to addition to the stock of capital and is measured per unit of time period.

Question. Population of a country and number of births both are stock variables.
Answer: False. Population of a country is a stock variable because it is measured at a point of time. Number of births is a flow variable because it is measured per unit of time period.

Question. Export is a flow variable.
Answer: True. Export is a flow variable because it is measured per unit of time period.

Question. Producer sector supplies the factor services to the household sector.
Answer: False. Producer sector supplies goods and services to the household sector.

Question. Flow of factor services rendered by the households to the producers are real flows.
Answer: True. Flow of factor services rendered by the households to the producers are real flows because these flows involve the movement of goods and services from one sector to the other.

Question. Money flows are opposite to real flows.
Answer: True. Money flows are opposite to real flows. Because money flows are in response to the real flows. Money flow from households to the producers is a reciprocal to the real flow of goods from the producers to the households. Likewise, money flow from producers to the households is a reciprocal of the real flow of factor services from the households to the producers.

Question. A car covering a distance of 300 km in 5 hours includes both stock as well as flow variable.
Answer: True. Because (i) Distance is a stock variable.
(ii) Speed \( \left( \frac{300 \text{ km}}{5 \text{ hours}} \right) \) is a flow variable.