CBSE Class 12 Economics National Income Accounting VBQs Set 05

Multiple Choice Questions

Question. Economic territory of a country in which economic activities of the country generates its domestic income is called:
(a) national territory
(b) domestic territory
(c) political territory
(d) geographical territory
Answer: (b) domestic territory

Question. Which of the following is an example of normal residents of India?
(a) Foreign worker working in WHO located in India
(b) The German working as Director in IMF office located in India
(c) Ambassador in India from rest of the world
(d) Ambassador of India in rest of the world
Answer: (d) Ambassador of India in rest of the world

Question. Domestic income:
(a) is the sum total of factor incomes generated within the domestic territory of a country
(b) is generated by the normal residents as well as non-residents within the domestic territory of a nation
(c) is equal to national income when net factor income from abroad is zero
(d) All of the options
Answer: (d) All of the options

Question. Factor payment received by the households for rendering their services as employees of the producing units is called:
(a) compensation of employees
(b) rent
(c) interest
(d) profit
Answer: (a) compensation of employees

Question. Which of the following leads to market price?
(a) Factor cost - Indirect taxes
(b) Factor cost - Net indirect taxes
(c) Factor cost + Indirect taxes
(d) Factor cost + Net indirect taxes
Answer: (d) Factor cost + Net indirect taxes

Question. Net Indirect Taxes =
(a) Indirect taxes + Subsidies
(b) Direct taxes + Subsidies
(c) Indirect taxes - Subsidies
(d) Direct taxes - Subsidies
Answer: (c) Indirect taxes - Subsidies

Question. \( NDP_{FC} = \)
(a) Compensation of employees + Rent + Interest + Profit + Net factor income from abroad
(b) Compensation of employees + Rent + Interest + Profit + Mixed income of self-employed
(c) \( NDP_{MP} \) - Net indirect taxes
(d) both (b) and (c)
Answer: (d) both (b) and (c)

Question. Which of the following is correct?
(a) \( GDP_{FC} \) = Compensation of employees + Rent + Interest + Profit
(b) \( GDP_{FC} \) = Compensation of employees + Rent + Interest + Profit + Depreciation
(c) \( GDP_{FC} \) = Compensation of employees + Rent + Interest + Profit - Depreciation
(d) \( GDP_{FC} = NDP_{FC} \) - Depreciation
Answer: (b) \( GDP_{FC} \) = Compensation of employees + Rent + Interest + Profit + Depreciation

Question. Which of the following is incorrect?
(a) \( GDP_{MP} = NDP_{MP} \) + Depreciation
(b) \( GNP_{FC} = GNP_{MP} \) + Net indirect taxes
(c) \( NNP_{MP} = NDP_{MP} \) + Net factor income from abroad
(d) \( NDP_{FC} = GDP_{FC} \) - Depreciation
Answer: (b) \( GNP_{FC} = GNP_{MP} \) + Net indirect taxes

Question. Net Factor Income from Abroad =
(a) National income - Net indirect taxes
(b) National income - Indirect taxes
(c) National income - Domestic income
(d) Domestic income - National income
Answer: (c) National income - Domestic income

Question. Which of the following is a factor income?
(a) Interest
(b) Scholarship
(c) National debt interest
(d) Grants
Answer: (a) Interest

Question. Factor incomes are:
(a) earned incomes
(b) unearned incomes
(c) both earned as well as unearned incomes
(d) neither earned nor unearned incomes
Answer: (a) earned incomes

Question. Which of the following is not a transfer payment?
(a) Gifts from abroad
(b) Retirement pensions
(c) Donations
(d) Grants
Answer: (b) Retirement pensions

Question. When \( NNP_{MP} \) = Rs. 5,330, indirect taxes = Rs. 1,770 and consumption of fixed capital = Rs. 1,550, then: \( GNP_{FC} = \)
(a) Rs. 2,010
(b) Rs. 3,560
(c) Rs. 5,110
(d) Rs. 8,650
Answer: (c) Rs. 5,110

Question. If \( NDP_{FC} \) = Rs. 4,300, depreciation = Rs. 1,350, subsidies = Rs. 250, net factor income from abroad = Rs. 330, \( GDP_{MP} \) will be:
(a) Rs. 2,370
(b) Rs. 2,700
(c) Rs. 5,400
(d) Rs. 6,230
Answer: (c) Rs. 5,400

Fill in the Blanks

Question. By adding _______ to domestic income, we estimate national income. (net exports/net factor income from abroad)
Answer: net factor income from abroad

Question. Those residents who ordinarily reside in a country and whose centre of interest lies in that country are called _______. (normal residents of the country/citizens of the country)
Answer: normal residents of the country

Question. _______ income is an unearned income. (Factor/Transfer)
Answer: Transfer

Question. GDP at Market Price = NDP at Market Price + _______ (Indirect Taxes/Depreciation)
Answer: Depreciation

Question. _______ lower the market price of the goods. (Subsidies/Indirect taxes)
Answer: Subsidies

Question. _______ includes income generated both by the residents as well as non-residents of a country. (Domestic income/National income)
Answer: Domestic income

Question. _______ includes factor incomes only. (Domestic income/Personal income)
Answer: Domestic income

True or False

Question. GDP at Factor Cost = NDP at Factor Cost - Depreciation.
Answer: False

Question. National income is the sum total of factor incomes.
Answer: True

Question. Difference between indirect taxes and subsidies is called net indirect taxes.
Answer: True

Question. Ambassador from India in Japan is a non-resident of India.
Answer: False

Question. GNP at Market Price = GDP at Market Price + Net Factor Income from Abroad.
Answer: True

Question. Depreciation is not included in the Gross Domestic Product at Factor Cost.
Answer: False

Question. Domestic income includes net factor income from abroad.
Answer: False

Very Short Answer Questions

Question. What is meant by normal residents of a country?
Answer: Normal residents are those residents who ordinarily reside in the country concerned and whose centre of economic interest lies in that country.

Question. What is meant by domestic territory of a country?
Answer: Domestic territory of a country refers to economic territory of a country in which economic activities of the country generates its domestic income.

Question. What is factor income?
Answer: Factor income is the income received by owners of the factors of production in the form of rent, wages, interest and profit for the services rendered in the production process.

Question. Define domestic factor income.
Answer: Domestic factor income is income generated in the domestic territory of the country by all enterprises during one year.

Question. What are transfer payments or transfer expenditure?
Answer: Transfer payments (or transfer expenditure) are all those unilateral payments corresponding to which there is no value-addition in the economy. Examples: Gifts and donations.

Question. Define voluntary transfers.
Answer: Voluntary transfers are those transfers which flow on account of the free will of the payer and the recipient.

Question. Define forced transfers.
Answer: Forced transfers are compulsory payments, like income tax.

Question. Define current transfers.
Answer: Current transfers are those transfers which are paid from the current income of the payer and added to the current income of the recipient for consumption expenditure.

Question. What are capital transfers?
Answer: Capital transfers are the transfers made out of wealth or saving of the payer and included in the wealth or saving of the recipient.

Question. What are capital transfers from abroad?
Answer: Capital transfers from abroad are those transfers which are paid by rest of the world for purpose of gross capital formation or long-term expenditure.