MCQ- Indian Economy - National Income

Indian Economy - National Income – Q & A

1. GNP=GDP + Net factor income from abroad

   2. Net National Product at factor cost is “National Income”

   3. National Disposable Income=Net National product at market prices + other current transfers from the rest of the world.

Which of the statements given above is/are correct?

  (a) 1 and 2 only

  (b) 2 and 3only

  (c) 1, 2 and 3

  (d) 1 and 3 only

Answer .c

2. Consider the following statements:

    1. Real GDP is calculated in a way such that the goods and services are evaluated at constant prices.

    2. Nominal GDP is the value of GDP at the current prevailing prices.

    3. The ratio of Real GDP to Nominal is known as Index of prices (GDP Deflator)  

Which of the statements given above is/are correct?

  (a) 1 and 2 only

  (b) 2 and 3only

  (c) 1, 2 and 3

  (d) 1 and 3 only

Answer .a

3. Choose the false statement among the following statements:

(a)   Consumer Price Index (CPI) is the index of prices of a given basket of commodities which are bought by the representative consumer.

(b)   The weights of representative goods are constant in GDP Deflator– but they differ according to production level of each good in CPI.

 (c)The index for wholesale prices is called Wholesale Price Index (WPI), in USA it is referred to as Producer Price Index (PPI).

(d) CPI includes prices of goods consumed by the representative consumer, hence it includes prices of imported goods. GDP deflator does not include prices of imported goods.

Answer .b

4. Choose the false statement among the following statements:

(a)Demand of money=Transaction demand + Speculative demand

(b)Transaction demand ∝ Real GDP + Price level

(c)Speculative demand ∝ 1/Market rate of Interest

(d)When the market rate of interest is minimum, speculative demand for money is zero

Answer .d

5. The total liability of the monetary authority of the country (RBI) is called as

   (a) monetary base

   (b) high powered money

   (c) both (a) and (b)

   (d) None of these

Answer .c

6. Consider the following pairs:

                          

    Demand deposit                    : Saving deposit & Current account deposits

    Time deposit                         :  Fixed deposit

    Legal tenders                        :  Cheques

    Fiat money                            :  Currency notes and coin

Which of the above pairs are correctly matched?

(a)   1,2 and 3only

(b)    2 and 3 only

  (c) 3 and 4 only

  (d) 1, 2 and 4 only

Answer .d

7. Currency notes and coins are called Fiat money because

 (a) they do not have intrinsic value like gold or silver

  (b) made on special imported paper

   (c) they are printed by government

   (d) exchanged for goods and services

Answer .a

8. ________ is the most commonly used to measure money supply, also known as Aggregate monetary resources.

  (a) M1

  (b) M2

  (c) M3

  (d) M4

Answer .c

9. The total stock of money in circulation among the public at a particular point of time is called money supply. RBI publishes figures for four alternative measures of money supply, viz. M1, M2, M3 and M4.

M1=CU+DD

M2=M1+saving deposits with Post Office saving banks

M3=M1+Net time deposits of commercial banks

M4=M3+Total deposits with Post office saving organisation (excluding National saving Certificates)

Where,     CU=currency with public

                 DD= Net Demand deposits held by commercial banks

Which among these options represents the narrow money?

  (a) M2 and M3

  (b)M1 and M2

  (c)M3 and M4

  (d)M1 and M4

Answer .b

10. The total stock of money in circulation among the public at a particular point of time is called money supply. RBI publishes figures for four alternative measures of money supply, viz. M1, M2, M3 and M4.

M1=CU+DD

M2=M1+saving deposits with Post Office saving banks

M3=M1+Net time deposits of commercial banks

M4=M3+Total deposits with Post office saving organisation (excluding National saving Certificates)

Where,     CU=currency with public

                 DD= Net Demand deposits held by commercial banks

Which among these options represents the broad money?

  (a)M1, M2 and M3

  (b)M1 and M2

1. The financial year in India is

a. April 1 to March 31
b. January 1 to December 31
c. March 1 to April 30
d. March 16 to March 15

ANSWER: a. April 1 to March 31

National income is calculated for a specific period of time. In India, it is calculated for April 1 to March 31.

2. Consider the following statements and identify the right ones.

i. National income is the monetary value of all final goods and services produced.
ii. Depreciation is deducted from gross value to get the net value

a. I only
b. ii only
c. both
d. none

ANSWER: c. both

National Income is the monetary value of all final goods and services that are produced by the residents of the country.

3. Consider the following statements and identify the right ones.

i. While calculating GDP, income generated by foreigners in a country is taken into consideration
ii. While calculating GDP, income generated by nationals of a country outside the country is taken into account

a. I only
b. ii only
c. both
d. none

ANSWER: a. I only

While calculating GDP, income generated by nationals of a country outside the country is not taken into account.

4. The net value of GDP after deducting depreciation from GDP is

a. Net national product
b. Net domestic product
c. Gross national product
d. Disposable income

ANSWER: b. Net domestic product

After deducting the depreciation charges of plant and machinery from GDP, we get net value of GDP which is called NDP. 

5. Consider the following statements and identify the right ones.

i. While calculating GNP, income generated by foreigners in a country is taken into consideration
ii. While calculating GNP, income generated by nationals of a country outside the country is taken into account

a. I only
b. ii only
c. both
d. none

ANSWER: b. ii only

While calculating GNP, income generated by foreigners in a country is not taken into consideration.

6. When depreciation is deducted from GNP, the net value is

a. Net national product
b. Net domestic product
c. Gross national product
d. Disposable income

ANSWER: a. Net national product

NNP is the net value of GNP after the depreciation of plant and machinery is deducted.

7. The value of NNP at consumer point is

a. NNP at factor cost
b. NNP at market price
c. GNP at market price
d. GNP at factor cost

ANSWER: b. NNP at market price

NNP at market price is calculated by deducting indirect taxes and subsidies from NNP at factor cost.

8. The value of NNP at production point is called

a. NNP at factor cost
b. NNP at market price
c. GNP at market price
d. GNP at factor cost

ANSWER: b. NNP at market price

NNP at factor cost is the value of the NNP when the value of goods and services are taken at the production point.

9. The value of national income adjusted for inflation is called

a. Per capita income
b. Disposable income
c. Inflation rate
d. Real national income

ANSWER: d. Real national income

It is adjusted for inflation that is calculated from a reference point which is a base year.

10. The average income of the country is

a. Per capita income
b. Disposable income
c. Inflation rate
d. Real national income

ANSWER: a. Per capita income

Per capita income is calculated by dividing the total national income by the total population of the year.

11. Consider the following statements and identify the right ones.

i. Personal income refers to the income of individuals of a country.
ii. The income at their disposal after paying direct taxes is called disposable income

a. I only
b. ii only
c. both
d. none

ANSWER: c. both

The income of the individuals at their disposal after paying direct taxes like income tax is called disposable income.

12. Which of the following is added to national income while calculating personal income?

a. Transfer payments to individuals
b. Social security contributions
c. Corporate taxes
d. Undistributed profits

ANSWER: a. Transfer payments to individuals

Personal income refers to the income of the individuals of a country. While transfer payments are added, the other three are subtracted.

13. Which of the following method/s is/are used to calculate national income in India?

a. Production method
b. Expenditure method
c. Income method
d. All the above

ANSWER: d. All the above

Due to non-availability of the data, no single method can solely be used in India. We use a mixture of all the three.

14. The national income estimation is the responsibility of

a. NSSO
b. CSO
c. Finance Ministry
d. National Income Committee

ANSWER: b. CSO

15. Consider the following statements and identify the right ones.

i. CSO is a premier statistical institution for collecting data in India
ii. It presents the national income estimates twice a year.

a. I only
b. ii only
c. both
d. none

ANSWER: a. I only

Central Statistical Organization was established in 1950 and is vested with the responsibility of national income estimation. It presents the estimates once in a year.

16. As per the CSO classification, which of the following does not fall under the industrial sector?

a. Construction
b. Manufacturing
c. Fisheries
d. Mining

ANSWER: c. Fisheries

As per the CSO classification, fisheries fall under the category of agriculture sector.

17. As per the CSO classification, which of the following does not fall under finance and real estate category?

a. Banking
b. Construction
c. Insurance
d. Real estate

ANSWER: b. Construction

As per the CSO classification, construction falls under the category of industrial sector.

18. As per the CSO classification, which of the following does not fall under industrial sector?

a. Electricity 
b. gas and water supply
c. transport and communication
d. manufacturing



19. Consider the following statements and identify the right ones.

i. The data for NI and PCI are collected at current prices.
ii. They are deflated using the deflator index to get value at constant prices.

a. I only
b. ii only
c. both
d. none

ANSWER: c. both

This is done so because the national income can increase either due to increase in production of goods and services or in prices.

20. The most appropriate measure of a country's economic growth is

a. GDP
b. NDP
c. Per capita real income
d. GNP

ANSWER: c. Per capita real income
Per capita income is the average income of the country. Per capita real income takes inflation into consideration.