CBSE Class 12 Economics National Income Accounting Worksheet Set B

Question. Output means……………unless stated otherwise
a) Gross output at MP
b) Net output at MP
c) Gross output at FC
d) None of these

Answer: A

Question. Which of the following is not a component of domestic income?
a) Operating surplus
b) Compensation of employees
c) Net factor income from abroad
d) Mixed income

Answer: C

Question. If factor cost is greater than marker price, it means that
a) Indirect taxes < subsidies
b) Indirect taxes > subsidies
c) Indirect taxes = subsidies
d) None of these

Answer: A

Question. An Indian farmer produces wheat without incurring cost of inputs and sells for Rs. 1,000 to a miller who grinds wheat into flour and sells for Rs1,200 to baker. The baker sells bread to consumers for Rs. 1,600. Total value added is Rs.
a) 1600
b) 2200
c) 1000
d) 1400

Answer: A

Question. Which of the following is not true about final goods?
a) Final gods satisfy wants of ultimate consumers and producers.
b) Final goods have direct demand as they satisfy the wants directly.
c) Final goods are subject to further transformation in the process of production.
d) Final goods are neither used up as raw-material nor for resale in the same year.

Answer: C

Question. Following is an example of final good:
a) Flour used by a banker in making biscuits
b) Unsold stock of goods lying with the sellers
c) Tires purchased by a transport company
d) Mobile sets purchased by a mobile dealer

Answer: B

Question. Which out of the following is not included in estimation of NI?
a) Subsidized Lunch
b) Old-age Pension
c) Free Medical facilities
d) Construction of a house

Answer: B

Question. Which of the following is included in compensation of employees?
a) Dearness Allowance
b) Tools given to employees to be used during work
c) Payment by insurance company to an injured employee
d) Contribution by employee to provident fund

Answer: A

Question. Commodity service method’ is another name for:
a) Expenditure method
b) Income method
c) Value – added Method
d) None of these

Answer: C

Question. Which of the following statements is true?
a) Bread is always a consumer good
b) All producer goods are not capital goods
c) Transfer income is received for providing a good or service in return
d) Interest paid by a household on car loan from a bank is a factor payment

Answer: B

Very Short Answer type Questions

Question. When will GDP of an economy be equal to GNP?
Answer: GDP and GNP will be equal when the ‘net factor income from abroad’ is zero.

Question. When is the net domestic product at market price less than the net domestic product at factor cost?
Answer: When net indirect taxes are negative i.e., subsidies are more than indirect taxes.

Question. If NDPFC is Rs 1,0000 crores and NFIA is (-) Rs 500 crores, how much will be the national income?
Answer: National Income = 10000 + (-500)
= Rs 9500 Crore

Question. If the domestic factor income is Rs 50,000 crores and the national income is Rs 45,000 crores, how much will be the net factor income from abroad?
Answer: Net factor income from abroad = 45,000 – 50,000 = (-) Rs 5000 Crore

Question. If compensation of employees in a firm constitutes 65% of net value added at factor cost of a firm, find the proportion of operating surplus.
Answer: 100% – 65% = 35% (assuming mixed income is zero) .

Question. What is the rationale for not taking into account the value of intermediate goods in the measure of GDP?
Answer: To avoid the problem of double counting.

Question. When is the net domestic product at market price less than the net domestic product at factor cost?
Answer: When net indirect taxes are negative i.e., subsidies are more than indirect taxes.

Question. What is Nominal GDP?
Answer: It is money value of final goods and services produced in a year at prices of the current year.

Question. What is GDP deflator?
Answer: It is measured as the ratio of nominal GDP to real GDP, multiplied by 100.
GDP Deflator=Nominal GDP/Real GDP*100.

Question. What is Green GNP?
Answer: It refers to estimation of GNP that accounts for or taken into consideration certain parameters like environmental pollution and exploitation of natural resources.

Short Answer type Questions

Question. Explain how ‘externalities’ are a limitation of taking gross domestic product as an index of welfare.
Answer: When the activities of somebody result in benefits or harms to others with no payment received for the benefit and no payment made for the harm done, such benefits and harms are called externalities.
Activities resulting in benefits to others are positive externalities and increase welfare; and those resulting in harm to others are called negative externalities, and thus decrease welfare.
GDP does not take into account these externalities.
For example, construction of a flyover or a highway reduces transport cost and journey time of its users who have not contributed anything towards its cost. Expenditure on construction is included in GDP but not the positive externalities flowing from it. GDP and positive externalities both increase welfare. Therefore, taking only GDP as an index of welfare understates welfare. It means that welfare is much more than it is indicated by GDP.
Similarly, GDP also does not take into account negative externalities. For examples, factories produce goods but at the same time create pollution of water and air. River Yamuna, now a drain, is a living example. The pollution harms people. The factories are not required to pay anything for
harming people. Producing goods increases welfare but creating pollution reduces welfare. Therefore, taking only GDP as an index of welfare overstates welfare. In this case, welfare is much less than indicated by GDP.

Question. With reasons state whether the followings will be included in the estimation of National Income of a country?
a) Commission on sale of second-hand goods.
b) Scholarship given by the government to the students.
c) Income earned by an Indian resident working in Russian Embassy situated in India.
d) Subsidized lunch served to workers in a factory.
Answer: a) Yes, this will be included in the national income as it is a factor income
b) No, it will not be included as it is transfer payments
c) Yes, it will be included as the income is earned by Indian resident
d) Yes, it will be included as it is a part of the compensation of employees

Question. \( \text{GNP at MP} = \text{______} \)
(a) \( \text{GDP}_{MP} - \text{Depreciation} \)
(b) \( \text{GDP}_{MP} + \text{Depreciation} \)
(c) \( \text{GDP}_{MP} \div \text{Depreciation} \)
(d) \( \text{GDP}_{MP} + \text{Net factor income from abroad} \)
Answer: (a)

Question. \( \text{NDP}_{MP} = \text{________} \)
(a) \( \text{GDP}_{MP} - \text{Depreciation} \)
(b) \( \text{GDP}_{FC} + \text{Net factor income from abroad} \)
(c) \( \text{NNP}_{FC} + \text{Net indirect taxes} \)
(d) All of these
Answer: (a)

Question. \( \text{NNP}_{MP} = \text{________} \)
(a) \( \text{GNP}_{MP} - \text{Depreciation} \)
(b) \( \text{NDP}_{MP} + \text{Net factor income from abroad} \)
(c) \( \text{NNP}_{FC} + \text{Net indirect taxes} \)
(d) All of these
Answer: (d)

Question. \( \text{GDP}_{FC} = \)
(a) \( \text{GDP}_{MP} - \text{Net indirect taxes} \)
(b) \( \text{GDP}_{MP} + \text{Net indirect taxes} \)
(c) \( \text{GDP}_{MP} + \text{Subsidies} \)
(d) \( \text{GDP}_{MP} - \text{Indirect taxes} \)
Answer: (a)

Question. \( \text{NDP}_{FC} = \)
(a) \( \text{GDP}_{FC} - \text{Indirect taxes} \)
(b) \( \text{GDP}_{FC} - \text{Depreciation} \)
(c) \( \text{GDP}_{FC} + \text{Economic subsidy} \)
(d) All of these
Answer: (b)

Question. \( \text{NNP}_{FC} = \)
(a) \( \text{GNP}_{FC} - \text{Depreciation} \)
(b) \( \text{NNP}_{MP} + \text{Economic subsidy} - \text{Indirect taxes} \)
(c) \( \text{NDP}_{MP} + \text{Net factor income from abroad} \)
(d) All of these
Answer: (d)

Question. Which of the following is the method of measuring National Income?
(a) Income method
(b) Product method
(c) Expenditure method
(d) All of these
Answer: (d)

Question. Why are the intermediate goods not included in the National Income while measuring National Income?
(a) To avoid double accounting
(b) It decreases income
(c) Intermediate goods are not good
(d) All of these
Answer: (a)

Question. Who had made the first attempt at National Income Accounting?
(a) Prof. D.R. Gadgill
(b) Simon Kuznets
(c) J.M. Keynes
(d) Gregory King
Answer: (d)

Question. Calculation of National Income at Market Prices is known as _________
(a) Money income
(b) Real income
(c) Non-monetary income
(d) None of these
Answer: (a)

Question. Accounting of National Income at constant prices is known as ________
(a) Money income
(b) Real income
(c) Current income
(d) Domestic income
Answer: (b)

Question. Which of the following items are excluded from GNP measurement?
(a) Purely financial transactions
(b) Transfer of used goods and non-market goods and services
(c) Illegal activities and the value of leisure
(d) All of these
Answer: (d)

Question. The subject of the Study of Macro Economics is:
(a) The Principle of National Income
(b) The Principle of Consumer
(c) The Principle of Producer
(d) None of these
Answer: (a)

Question. Macro Economics Studies:
(a) Employment opportunities in the economy
(b) Theory of supply of Commodities
(c) Elasticity of demand in Scooter
(d) Price of wheat in the market
Answer: (a)

Question. General Price Level is studied in:
(a) Micro Economics
(b) Macro Economics
(c) Both (a) and (b)
(d) None of these
Answer: (b)

Question. Employment Theory is related to :
(a) Static Economics
(b) Micro Economics
(c) Macro Economics
(d) None of these
Answer: (c)

Question. Increase in Stock of Capital is known as:
(a) Capital Loss
(b) Capital Profit
(c) Capital Formation
(d) None of these
Answer: (c)

Question. Which of the following is sPktock ?
(a) Wealth
(b) Saving
(c) Export
(d) Profit
Answer: (a)

Question. Which one of the following is included in circular flow?
(a) Real Flow
(b) Money Flow
(c) Both (a) and (b)
(d) None of these
Answer: (c)

Question. Which one of the following is included in ‘Stock’?
(a) Quantity of Money
(b) Wealth
(c) Quantity of wheat stored in a warehouse
(d) All the above
Answer: (d)

Question. Which one is included inflow ?
(a) Consumption
(b) Investment
(c) Income
(d) All of these
Answer: (b)

Question. Which of the following is included in real flow?
(a) Flow of Goods
(b) Flow of Services
(c) Both (a) and (b)
(d) None of these
Answer: (c)

Question. Which services are provided by families to a firm?
(a) Land
(b) Labour
(c) Capital and Enterprises
(d) All the above
Answer: (d)

Question. Which one is included in the three-sector model?
(a) Family
(b) Firm
(c) Government
(d) All of these
Answer: (d)

Question. Which one is included in the four-sector model?
(a) Family, Firm, Industry
(b) Family, Firm, Government
(c) Family, Firm, Government, Foreign Sector
(d) None of the above
Answer: (c)

Question. Which is the equilibrium condition of circular flow in the four sector model?
(a) \( C + I \)
(b) \( C + I + G \)
(c) \( C + I + G + (X - M) \)
(d) None of these
Answer: (c)

Question. The primary sector includes:
(a) Agriculture
(b) Retail trading
(c) Small Industries
(d) All the these
Answer: (d)

Question. For a four sector or open economy the condition for equilibrium is:
(a) Savings + taxes + Imports = Investment + govt. expenditure + exports
(b) Total Leakages = Total Injections
(c) Aggregate output = Aggregate Expenditure
(d) All of these
Answer: (d)

Question. Which service is included in Tertiary Sector?
(a) Mining
(b) Construction
(c) Communication
(d) Animal Husbandry
Answer: (c)

Question. Which of the following is not flow?
(a) Capital
(b) Income
(c) Investment
(d) Depreciation
Answer: (a)

Question. The market price of all final goods of a country in a year is known as:
(a) \( \text{GDP}_{MP} \)
(b) \( \text{GDP}_{FC} \)
(c) \( \text{NNP}_{FC} \)
(d) None of these
Answer: (a)

Question. Which one is true?
(a) \( \text{GNP} = \text{GDP} + \text{Depreciation} \)
(b) \( \text{NNP} = \text{GNP} + \text{Depreciation} \)
(c) \( \text{NNP} = \text{GNP} - \text{Depreciation} \)
(d) \( \text{GNP} = \text{NNP} - \text{Depreciation} \)
Answer: (c)

Question. \( \text{GNP}_{Mp} = ? \)
(a) \( \text{GDP}_{Mp} - \text{Depreciation} \)
(b) \( \text{GDP}_{Mp} + \text{Net Factor Income from Abroad} \)
(c) \( \text{GNP}_{Mp} + \text{Subsidy} \)
(d) None of the above
Answer: (b)

Question. \( \text{NNP}_{MP} = ? \)
(a) \( \text{GNP}_{Mp} - \text{Depreciation} \)
(b) \( \text{GNP}_{Mp} + \text{Depreciation} \)
(c) \( \text{GNP}_{Mp} + \text{Indirect Tax} \)
(d) None of the above
Answer: (a)

Question. Depreciation expenses are included in:
(a) \( \text{GNP}_{Mp} \)
(b) \( \text{NNP}_{Mp} \)
(c) \( \text{NNP}_{FC} \)
(d) None of these
Answer: (a)

Question. \( \text{NDP}_{FC} = ? \)
(a) \( \text{NDP}_{MP} - \text{Indirect Tax} \)
(b) \( \text{GNP}_{MP} - \text{Indirect Tax} + \text{Subsidy} \)
(c) \( \text{NDP}_{MP} - \text{Subsidy} \)
(d) \( \text{NDPMF} - \text{Depreciation} \)
Answer: (b)

Question. Net National Income at Factor Cost is called?
(a) National Income
(b) Gross Investment
(c) Domestic Income
(d) None of these
Answer: (a)

Question. Which one is included in National Income?
(a) Rent, Wage, Interest
(b) Rent, Wage, Salary
(c) Rent, Profit, Interest
(d) Rent, Wage, Salary, Interest, Profit
Answer: (d)

Question. What is the consumption of fixed capital called?
(a) Capital formation
(b) Depreciation
(c) Investment
(d) All of these
Answer: (b)

Question. Which of the following is correct?
(a) Disposable Income = Personal Income – Direct Taxes
(b) Disposable Income = Private Income – Direct Taxes
(c) Disposable Income = Personal Income – Indirect Taxes
(d) Disposable Income = Private Income – Indirect Taxes
Answer: (a)

Question. If for a country net factor income from abroad is negative then:
(a) GDP < GNP
(b) GDP > GNP
(c) GDP ≥ GNP
(d) GDP = GNP
Answer: (b)

Question. The market value of all final goods and services produced in an economy over a year is called :
(a) Gross National Product
(b) National Income
(c) Gross Domestic Product
(d) Net National Product
Answer: (c)

Question. Which method is adopted in measuring National Income?
(a) Production Method
(b) Income Method
(c) Expenditure Method
(d) All of these
Answer: (d)

Question. Which sector is included in an economy?
(a) Primary
(b) Secondary
(c) Tertiary
(d) All of these
Answer: (d)

Question. Which of the following is not included in the calculation of Gross National Product?
(a) Purchase and Sale of Old commodities
(b) Intermediate Commodities
(c) (a) and (b) both
(d) None of the above
Answer: (c)

Question. Which one of the following services are included in the Secondary Sector?
(a) Insurance
(b) Manufacturing
(c) Trade
(d) Banking
Answer: (b)

Question. Which one is included in Primary Sector?
(a) Land
(b) Forest
(c) Mining
(d) All these
Answer: (d)

Question. To include the value of goods or services more than one time while calculating National Income is called :
(a) Single Counting
(b) Double Counting
(c) Multiple Counting
(d) None of these
Answer: (b)

Question. Which one is a component of profit?
(a) Dividend
(b) Undistributed Profit
(c) Corporate Profit Tax
(d) All of these
Answer: (d)

Question. Which one is included in National Income?
(a) Transfer Earnings
(b) Sale proceeds of Shares and Bonds
(c) Black Money
(d) None of the Above
Answer: (d)

Question. Which one is included in the calculation of National Income?
(a) New Final Goods and Services
(b) Earned Income of Indian Companies in Abroad
(c) Expenses made by Foreign Tourists in the country
(d) All the above
Answer: (d)

Question. Which one is the limitation of Macro Economics?
(a) Collective Economic Paradox
(b) Ignores Individual Units
(c) Both (a) and (b)
(d) None of these
Answer: (c)

Question. Macro-economics is the study of:
(a) Principle or Theories of national income
(b) Consumer’s theory
(c) Production theory
(d) None of these.
Answer: (a)

Question. Out of the following which is not a flow:
(a) Capital
(b) Income
(c) Investment
(d) Depreciation.
Answer: (a)

Question. From the following which method is used for measuring national income:
(a) Production method
(b) Income method
(c) Expenditure method
(d) All of the above.
Answer: (d)

Question. Which of the following is included in the primary sector:
(a) Land
(b) Forest
(c) Mines
(d) All of the above.
Answer: (d)

Question. Total national income divided by total population is known as:
(a) Private income
(b) Personal income
(c) Personal spendable income
(d) Per capita income.
Answer: (d)

Question. Production enterprises are divided in:
(a) Two sectors
(b) Three sectors
(c) Four sectors
(d) Five sectors.
Answer: (b)