Very Short Answer Type Questions (1 Mark)

1. Define stock variable.

2. Define capital goods.

3. What is nominal gross domestic product ?

4. Define flow variables.

5. Define ‘real’ gross domestic product.

6. Define capital formation.

7. When is the national income less than domestic income?

8. When is the national income larger than domestic factor income?

9. What is the effect of an indirect tax and a subsidy, on the price of the commodity?

10. Are the wages and salaries received by Indians working in American Embassy in India a
part of Domestic Product of India?

11. Why is the study of the problem of unemployment in India considered a

macro economic study?

12. When is gross domestic product of an economy equal to gross national product?

Short Answer Type Questions(3 Marks)

1. Will the following be included in gross domestic product / Domestic Income of India?
Give reasons for each answer.
i. Consultation fee received by a doctor.
ii. Purchase of new shares of a domestic firm.
iii. Profits earned by a foreign bank from its branches in India.
iv. Services charges paid to a dealer (broker) in exchange of second hand goods.
2. How will you treat the following while estimating domestic product of India? Give
reasons.
i. Rent received by a resident Indian from his property in Singapore.
ii. Profits earned by a branch of an American Bank in India.
iii. Salaries paid to Koreans working in Indian embassy in Korea.

3. State whether the following is a stock or flow:

(a) Wealth, (b) Cement production, (c) Saving of a household, and (d) Income
of household.

4. Are the following included in the estimation of National Income a country?

Give reasons.
i. Bonus received by employees.
ii. Government expenditure on defence.
iii. Money sent by a worker working abroad to his family.
iv. Profit earned by a branch of Indian Bank in London.

5. Is net export a part of NFIA? Explain.

6. Calculate gross value added of factor cost :

(i) Units of output gold (units) 1000

(ii) Price per unit of output (Rs.)30
(iii) Depreciation (Rs.) 1000
(iv) Intermediate cost (Rs.) 12000
(v) Closing stock (Rs.) 3000
(vi) Opening stock (Rs.) 2000
(vii) Excise (Rs.) 2500
(viii)Sales Tax 3500

7. Giving reasons classify the following into intermediate products and final products
i. Furniture purchased by a school.
ii. Chalk, duster, etc, purchased by a school.

8. Explain the basis of classifying goods into intermediate and final goods. Give suitable
examples.
 9. Giving reason classify the following into intermediate and final goods.
i. Machine purchased by a dealer of machine.
ii. A car purchased by a house hold.

[Link] the following part of a country’s net domestic product at market price? Explain
i. Net indirect tax
ii. Net export
iii. NFIA
iv. Consumption of fixed capital

[Link] the circular flow of income. And its types

[Link] the following items into stock and flow variables. Give reasons also.

i. Capital
ii. Saving
iii. Gross Domestic Product
iv. Wealth

[Link] reasons, classify following into intermediate products and final products.

[Link] the difference between Stock and Flow.

MCQ
1. If NNP at MP=Rs 5,330, indirect tax = 1,770 and consumption of fixed capital = Rs 1,550 then
GNPFC will be x. The value of x is.
a) Rs.4,110
b) Rs.5,000
c) Rs.5,110
d) Rs.6,000

2. GDPMP will be equal to GDPFC if

a) Gross domestic capital formation = Net domestic capital formation
b) Indirect taxes = subsidy
c) Factor income from abroad = Factor income to abroad
d) Opening stock = closing stock

3. Identify the correct statements from the following:

A) Fees to a mechanic paid by a firm is not included in the estimation of national income.
B) Income tax paid by an individual is not included in national income.
C) Interest paid by a garment manufacture on a loan taken from bank is included in national
income.
D) Payment of old age pension will not be included in national income as it is a transfer
payment.
E) Insurance premium paid by household to an insurance company is not included in the
estimation of national income.
(A) A, D, E Only
(B) A, B, C, D Only
(C) A, B, E Only
(D) B, D, E Only

4. Identify the correct statement from the following:

a) The household ‘s investing is not considered to be the cost of building a residence.
b) Net factor revenue from overseas includes money from exports.
c) The sum of factor incomes equals the net value added.
d) The assessment of national income take into account the market value of both final and
intermediate items.
e) Profit earned by non-resident company in India is a part of domestic income of India.
(A) A, D Only
(B) B, E Only
(C) D, E Only
(D) C, E Only

5. Which of the following correctly represent value at market price?

a) Factor cost+ net indirect taxes
b) Factor cost – net indirect taxes
c) Factor cost + indirect taxes
d) Factor cost – indirect taxes

6. When all of an economy’s output is sold during a simple accounting year, the value of output
is represented by:
a) Sales+ change in stock
b) Sales only
c) Sales-change in stock
d) Change in stock
7. If a farmer sells wheat to Miller for Rs.500 and Miller sells flour to baker for Rs.700 and baker
sells bread to the consumer for Rs.1000, then total value added by Miller and baker is:
a) Rs 500
b) Rs 550
c) Rs 800
d) Rs 1200

8. Given below are the steps for calculation of National Income by value added method. Place
them in the correct sequence and choose the correct option given below
a) Estimate Gross domestic product at market price.
b) Calculate Net Domestic product at a factor cost.
c) Estimation of value of output produced by each firm in all sectors of the economy.
d) Calculate Net National products at Factor cost.
(1) (C), (A), (B), (D)
(2) (A), (B), (C), (D)
(3) (B), (C), (D), (A)
(4) (D), (A), (C), (B)

9. Identify which of the following are included in National income?

a) Gifts from abroad.
b) Compensation of employees paid by a company located in India.
c) Prize won in a lottery.
d) Purchase of NCERT textbook by a student
1) (A) and (B) only
2) (C) and(D) only
3) (B) and (C) only
4) (B) and (D) only
A) 1
B) 2
C) 3
D) 4

10. Which of the following formula is correct?

1) Real GDP = Price Index/Nominal GDP X 100
2) Real GDP = Nominal GDP/Price Index X 100
3) Nominal GDP = Real GDP/Price Index X 100
4) Nominal GDP= Price Index/Real GDP X 100
A) 1
B) 2
C) 3
D) 4

11. Choose the correct sequence to arrive at NNP at FC using value added method.
a) GDP at MP – Depreciation.
b) NDP at MP – Net indirect taxes.
c) Value of output – intermediate cost.
d) Domestic income + Net factor income from abroad
Choose the correct answer from the following options:
1) A, B, D, C
2) C, B, A, D
3) A, B, C, D
4) C, A, B, D

12. Which of the following is NOT included in estimation of national income?

1) Commission of an agent from sale of a second-hand car
2) Wheat kept for self -consumption by a firm
3) Share sold in stock market
4) Services of a lawyer hired by a firm
A) 1
B) 2
C) 3
D) 4

13. Which of the following compensation is NOT a part of compensation of employees while
estimating of national income?
1) Wages and salaries plan by employee
2) Rent free house
3) Term insurance plan by employee
4) Contribution to provident fund by company
A) 1
B) 2
C) 3
D) 4

14. Operating Surplus equal to:

(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

15. Which of the following statements is/are correct?

(i) Value added and value of output are identical concepts.
(ii) Sum total of value added by all the producing units within the domestic territory of the
country is equal to national product.
Alternatives
(a) Both are true
(b) Both are false
(c) (i) is true, but (ii) is false
(d) (i) is false, but (ii) is true

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

17. Inventory investment is used as a component to calculate national income in which of the
following methods?
(a) Product method and income method
(b) Income method and expenditure method
(c) Product method and expenditure method
(d) Product method, income method and expenditure method

18. National income is the sum of factor incomes accruing to ________

(a) Nationals
(b) Economic territory
(c) Residents
(d) Both residents and non-residents

19. Combined factor income, which can’t be separated into various income components is
known as
(a) Mixed income of self-employed
(b) Compensation of employees
(c) Deferred income
(d) Any of the above

20. Which of the following is not a ‘factor payment’?

(a) Free uniform to defence personnel
(b) Salaries to members of Parliament
(c) Rent paid to the owner of the building
(d) Scholarship given to the students

21. Which of the given statement is incorrect? Nikhil pls check this question
(a) GDP at MP= GDP at FC + NIT
(b) NNP at MP = NNP at FC
(c) GNP at MP = GDP at MP + NFIA
(d) NNP at FC = National Income

22. In which of the following cases would the purchase of rice be included while calculating the
GDP of India from the expenditure side?
(a) A resident Indian purchases rice to make a dosa which he sells to his neighbour. He then
pockets the money received.
(b) A resident Indian purchases rice to make dosa which he sells to his neighbour. He donates
the money received to a charity.
(c) A foreign citizen visiting Indian purchases rice to make a dosa which he sells to another
foreign citizen visiting India.
(d) A non-resident Indian visiting India purchases rice, goes back to his country of residence,
makes a dosa and then sells it to his neighbour.

23. With a positive externality

(a) there is under consumption in the free market.
(b) there is over consumption in the free market.
(c) the government may tax to decrease production.
(d) society could be made better-off if less was produced.

24. If a country’s nominal GDP is constant, then which of the following statements about it
would be correct?
a) It is impossible for the real per capita GDP to rise in such circumstances
b) The real per capita GDP can rise if and only if the country’s population is shrinking and prices
are falling
c) It is possible for the real per capita GDP to rise even if the country’s population is increasing
d) none of the above

25. GDP does not include

a) government spending to clean up pollution caused by factories
b) payments to technical consultants abroad
c) additions to inventory stocks of intermediate goods
d) None of the above

26. GDP equals GNP when

a) the value of exports of goods equals the value of imports of goods
b) the value of exports of goods and services equals the value of imports of goods and services
c) there are no net factor income from abroad
d) None of the above

27. Income from buying and selling of financial assets is not included in the estimation of
domestic income by income method. Choose the correct reason for the same.
a) These are paper claims and no actual production has happened
b) It’s a transfer of ownership from one person to other
c) These are not related to the current year’s production.
d) Both (a) and (b)

28. From the following information, compute GNP at MP. GDP at FC = 3,000. Net factor income
to abroad = 200 ,Rs Indirect taxes= Rs 420, subsidies= Rs 240.
a) 3,380
b) 2,980
c) 3,020
d) 2,620

29. Domestic factor income is another name for:

a) NDP at FC
b) NNP at MP
c) GDP at FC
d) NNP at FC

30. Which the following is not a component of operating surplus?

a) Money income.
b) Rent.
c) Royalty.
d) Compensation of employees.