Odisha State Board CHSE Odisha Class 12 Economics Solutions Chapter 10 Aggregates Related to National Incorne Questions and Answers.
CHSE Odisha 12th Class Economics Chapter 10 Question Answer Aggregates Related to National Incorne
Group – A
Short type Questions with Answers
I. Answer with in Two/Three sentence.
Question 1.
Gross National Product is always greater than Gross Domestic Product.
Answer:
Gross domestic product includes only the value of goods and services produced within the domestic territory of a country, but GNP, net factor income from abroad is another component which is added to GDP to determine GNP.
Question 2.
Net National Income is a part of gross national income.
Answer:
Net national income can be obtained by deducting value of depreciation from gross national income. So, it is a part of gross national income.
Question 3.
Personal income always exceeds disposable income.
Answer:
Disposable income is obtained by deducting direct tax from personal income. So it is a part of personal income. .
Question 4.
Output method Income method and Expenditure method are somehow similar.
Answer:
In an economy, there are three simultaneous flows i.e., output flow, income flow and expenditure flow. Thus the value of output is identical with income earned by the factors as well as the expenditure incurred.
Question 5.
Transfer payment is excluded from the computation at National Income.
Answer:
Transfer payment is made without having any productive contribution. It is exclusively meant for social security. Hence, it is not included in the national income.
Question 6.
Sale of second hand car does not constitute a part of national income?
Answer:
The amount received from the sale is not the result of any production. Rather, the production of the car has already created income which has been computed earlier. So it does not constitute a part of national income.
Question 7.
GNP at market price exceeds GNP at factor cost?
Answer:
GNP at market price is valued at prevailing price level which includes indirect tax. But GNP at factor cost is exclusive of indirect tax hence the GNP at market price is greater than GNP at factor cost.
Question 8.
Net national product is a part of the Gross National Product.
Answer:
Gross National Product is the total amount of goods & services produced in the country during a year along with the net income from abroad. Net National product is the residual of GNP left after meeting the value of depreciation & hence it is a prt of GNP.
Question 9.
Old age pension is a transfer payment.
Answer:
Transfer payment is made without having any productive contribution. As the old age pension is paid without any productive contribution, it comes under the category of transfer payment.
Question 10.
Personal income is more than the disposable income.
Answer:
Personal income is the income earned by the individual from all of his sources. But disposable income is the income left after the payment of direct tax. So it is a part of the personal income.
II. Answer with in Five/Six sentence :
(A) write short notes on :
Question 1.
National Income.
Answer:
Income is generated in the production process. Production units employ factors of production and make payment for their services. The sum total of income earned by various factors of production constitute the national income. It can, therefore, be said that national income of a country can be calculated either by taking the sum of income paid by the producing units or by the income received by the factors. In simpler words, the income method consists of the sum total of net income and payments received by the citizens of a country during a year.
In calculation of national income, according to income method, wages and salaries, compensation of employees, employers contribution towards social security, mixed income of self-employed, rent, interest, divided, surplus earning of public enterprises and net factor income from abroad are added up. The sum total of all these represent the gross national income of which net national income is apart. National income in the latter sense is arrived at by deducting the cost of depreciation from the gross national’income.
Question 2.
Gross National Product.
Answer:
Gross National product is the money value of total goods & services produced in a country during year along with the net factor income from abroad. It comprises of two aspects ; Gross domestic product at market price & net factor income from about. Thus GNP = GDP + Net factor income from abroad. In computing GNP, only the money value of final goods & services is taken into account. GNP is accepted as an indicator of economic development.
Question 3.
Domestic Income.
Answer:
Domestic income refers income earned by the factors in the domestic territory of the contry. It indicates that the income from three sectors like primary, secondary & tertiary sectors constitutes national income. All those three sector employ different factors of production which in turn, earn income. There are in form of rent, wage, interest & profit. Along with this surplus of public sector is added. With this addition, domestic income can be determined.
Question 4.
Per-capita Income.
Answer:
Per-capita income is calculated by dividing the national income by the number of people in a particular year. The per capita income may be estimated at current prices as well as constant prices. Sometimes the per capita income may not increase or may even fall if national income increase is less than the rate of increase in population. Per-capita increase in income at current prices may not present a correct picture of economic growth and standard of living in the county. Increase in per-capita income at constant prices indicates the economic growth.
Question 5.
Personal Income.
Answer:
Personal income refers to the current income of the persons or households from all sources. It includes the actual income earned by the members of the households of the economy. In order to determine the personal income the undistributed profit and tax payable should be deducted. Personal income is viewed as the aggregate of all types of factor incomes earned by the house holds.
Question 6.
Disposable income:
Answer:
The income which is left after the payment of payable tax is called disposable income. Personal disposable income is the personal income minus income tax & property taxes. Thus disposable income is that income which is left for spending. All the taxes payable & the different government obligations are deducted from the personal income so as to determine disposable income.
Question 7.
Intermediate Product.
Answer:
Intermediate products are bought and sold between producers as they are used for further production. Such goods like cotton and wheat are used for manufacture of cloth and flour respectively and as such these are called secondary inputs. The value of intermediate product is not taken into account in estimation of national income. These products remain within production boundary.
Question 8.
Transfer Payment.
Answer:
The payments which are made without having any productive contribution is called transfer payment. It is the transfer receipts like unemployment allowances, old-age pensions sickness benefits etc. These payments are made to the persons who are not rendering. Hence transfer payments are unilateral payments.
(B) Distinguish Between
Question 1.
National Income & National Product:
Answer:
National income is the factor income accruing to the normal residents of a country. It includes both domestic factor income an net factor income from abroad. National income is equal to net national product at factor cost. National product is the sum of total money value of final goods and services produced by a nation during a year. It is calculated by multiplying the quantities or different goods and services with their respective prices. The cost of depreciation, transfer payments, capital gains andi the value of intermediate goods are not taken in to account in computation of gross national income.
Question 2.
GDP&GNP:
Answer:
(i) Gross domestic product is the market value of final goods & services produced within the domestic territory during a year. But Gross national product refers to the total money value of gods & services produced in the country during a year along with the net factor income from abroad.
(ii) GDP is relatively a narrower concept & GNP is a broader concept.
(iii) Both the GD & GNP take the final goods & services into account & ignores the intermediate goods.
Question 3.
National income & Personal Income :
Answer:
National Income refers to the income of the country as a whole whereas personal income is the income received by the individuals or house holds. National income is a broader cohcept but personal income is a narrower concept. The sum of personal incomes becomes a form of national income. Personal income is never equal to national income. Thus national has several components which are most in the personal income.
Question 4.
Intermediate goods & final goods:
Answer: Intermediate goods are those goods Which are used for further production. But final goods are meant for direct consumption. Intermediate goods are generally preducers goods that
provide indirect satisfaction to the consumer whereas the final goods provide the direct satisfaction to the consumer. In case of national income accounting, the money value of final goods is taken into consideration & the value of intermediate gods is deducted in national income accounting. It is very difficult to treat one good as intermediate or final goods.
Question 5.
National income in constant price and current price.
Answer:
National income may be calculated at current and constant prices. The value of goods and services measured at base year prices is called national income at constant prices. When goods and services are valued at prevailing prices of a particular year the national income at current price. Since prices have a tendency to rise in modem times national income is valued at current price does not indicate the actual growth of an economy. National income at constant price reveals the real national income and the standard of living of the people.
Question 6.
Personal income and disposable income.
Answer:
Personal income is the current income received by persons from all sources including transfer income from government and business. It includes direct taxes. Disposable income refers to that part of personal income which an individual can spend or save. Disposable income is arrived at by deducting all taxes from personal income.
Group – B
Long Type Questions With Answers
Question 1.
What is National Income ? What are its related concepts?
Answer:
The concept ‘National income’ has been defined in a number of ways. However the definitions of national income can be grouped under two heads, namely the traditional definition and modem definition.
The traditional definition was advanced by Alfred Marshall, A.C. Pigou and Fisher. According to Marshall, “The labour and capital of a country acting on its natural resources, produce annually a certain net aggregate of commodities material and non-material including services of all kinds…. this is the true net annual income or revenue of the country or national devidend.”
According to Pigou, “National income is that part of objective income of the community, including of course income derived from abroad which can be measured in money.” According to Central Statistical Organisation, “national income is the sum of factor income earned by the normal residents of a country in the form of wages, rent, interest and profit in an accounting year.”
However, national income may be defined as the sum of factor incomes, viz., wages, rent, interest and profit accming to the normal residents of a country for their productive activities during a definite period of time, say a year. National income refers to the sum of the factor rewards, namely wages, rent, interest and profit accruing to the citizens of a country for their productive activities during a year.
National product refers to the sum of the market value of final goods and services produced by the citizens of a country during a year. National expenditure refers to the sum of expenditures on consumption investment, government purchase of goods and services, and net foreign investment.
There are various related concepts of national income. These are explained below :
1. Gross Domestic Product at Market Price : Gross domestic product at market price is defined as the market value of the final goods and services produced by all the producers in the domestic territory of a country during an accounting year. Thus, Gross Domestic Product at Market Price = Value of output in domestic territory – value of intermediate consumption. GDP at market price can also be calculated by adding net indirect taxes to GDP at factor cost i.e.; GDP at market prices = GDP at factor cost + Net indirect taxes.
2. Net domstic Product at Market Price : Net domestic product at market price is the market value of final goods and services produced by all the producers in the domestic territory of a country during an accounting year exclusive of consumption of fixed capital. It is equal to the net value added at market price. Thus the net domestic product at market price includes all those items which are included in gross domestic product at market price except the consumption of fixed capital. So, Net Domestic Product at Market Price = Gross Domestic Product at Market Price – consumption of Fixed Capital.
3. Gross National Product at Market Price : Gross national product at market price is defined as the market value of the final goods and services produced in the domestic territory of a country by normal residents during an accounting year including net factor, income from abroad. Thus gross national product at market price includes all the constituents of gross domestic product at market price and net factor income from abroad. In other words, Gross National Product at Market Price = Domestic Product at Market Price + Net Factor-Income abroad.
4. Net National Product at market Price : Net national product at market price is the market value of the final goods and services produced by normal residents of an economy in its domestic territory during an accounting year exclusive of depreciation and inclusive of net factor income abroad. Net national product at market price is nothing but gross national product at market price less consumption of fixed capital or depreciation. Thus, Net National Product at Market Price = Gross National Product at Market Price – Consumption of fixed Capital (depreciation).
5. Gross Domestic Product at Factor Cost: Gross domestic product at factor cost or gross domestic income is the sum of net values added by all the producers in the domestic territory of the country and the value of consumption of fixed capital during an accounting year. Thus, gross domestic product at factor cost is the sum of net value added by all the producers in the domestic territory of the country and the consumtion of fixed capital. As such,
Gross Domestic Product at Factor Cost = Sum of net values added + consumption of fixed capital.
Similarly,
Gross Domestic Product at factor cost = Gross Domestic factor income + consumption of fixed capital.
Gross Domestic Product at factor cost can also be estimated by deducting net indirect taxes from gross domestic product at market price. As such,
Gross Domestic Product at factor cost = Gross Domestic Product at Market Price – Net Indirect taxes.
6. Net Domestic Product at Factor Cost: Net domestic product at factor cost is nothing but gross domestic product at factor cost less depreciation. As such,
Net Domestic Product at Factor Cost = Gross Domestic product at factor cost – Depreciation.
Net domestic product at factor cost can also be estimated by deducting net indirect taxes from net domestic product at market price.
As such,
Net Domestic Product at factor Cost = Net Domestic Product at Market Price – Net Indirect taxes.
7. Gross National Product at Factor Cost: Gross National Product at factor cost is the difference between gross national product at market price and net indirect taxes. It is also called gross national income. It is nothing but the sum of domestic factor income and net factor income from abroad. According to Peterson, “Gross National Product at factor cost is the sum of gross value added at factor cost by the normal residents of the country during a year and net factor income from abroad.
Gross National Product at Factor cost = Gross Domestic Product at factor cost + Net factor income from abroad.
Similarly,
Gross National Product at factor cost can also be calculated by deducting net indirect taxes from gross national product at market price.
GNP at factor cost = Net national product at factor cost + Depreciation.
Gross National Product at factor cost can also be calculated by deducting net indirect taxes from gross national product at market price.
Gross National Product at Factor cost = Gross National Product at Market Price – Net Indirect Taxes.
8. Net National Product at Factor Cost: Net National Product at factor cost is the sum of net value added at factor cost by normal residents in the domestic territory of a country and net factor income from abroad in an accounting year. Net national product at factor cost is nothing but gross national product at factor cost less depreciation or consumption of fixed capital. As such.
Net National Product at Factor Cost = Gross National Product at factor cost – Depreciation.
Net national product at factor cost can also be calculated by the sum of net domestic product, at factor cost and net factor income from abroad. As such,
Net National Product at Factor Cost = Net Domestic Product at Factor Cost + Net Factor Income from Abroad.
Net national product at factor cost can also be calculated by deducting net indirect taxes from net national product at market price. As such,
Net National Product at factor cost = Net National Product at Market Price – Net Indirect taxes.
Net national product at factor cost is equal to national income. Two points have to be carefully noted :
(i) the difference between gross and net agregates is the value of consumption of fixed capital, and
(ii) the difference between market prices and factor cost is the value of net indirect taxes.
Question 2.
Describe the income method for calculation of National Income.
Answer:
National income refers to the money value of all goods & services produced in the country during a particular year along with the net income from abroad. In other words, it is conceived as sum of all factor incomes earned by the different factors during a particular year to measure the national income, generally three methods like Income method, expenditre method & output method are adopted.
Income Method : In income method, the factor incomes like rent, wage, interest & profit are added together to defermine the national income in a particular year. In other words, the rewards to land-lords, labourers, capitalists & entrupreneurs are added together. It is a fact that the production of goods & services generates income simultaneously which is equal to the value of the product. So by adding up rent, wage, interest & profit, national income can be found out.
To find out national income, just two sectors like private sectors & Govt, sectors are considered & in open economy, the net income from abroad is added to the income of these two sectors. Thus, according to income method, the income accruing to private sector, government sector & foreign sector are added. So, calculation of national income under income method covers up domestic sector (Private sector & Public Sector) & foreign sector.
Income from domestic sector : Domestic income refers income earned by the factors in the domestic territory of the contry. It indicates that the income from three sectors like primary, secondary & tertiary sectors constitutes national income. All those three sector employ different factors of production which in turn, earn income. There are in form of rent, wage, interest & profit. Along with this surplus of public sector is added. With this addition, domestic income can be determined.
Income from Foreign Sector : Anoter constituent of national income is the income from foreign sectors. It is expressed as Net Factor Income from Fbroad. In an open economy, certain factors of the country may be employed in foreign countries which earn income. Besides, in the process of international trade, there may emerge certain net exports. All these become a part of national income & hence added to the domestic income of calculate the national income. Thus,
National Income = Domestic Income + Net Factor income from Abroad.
Precautions : In income method, some precautionary measures are taken while calculating national Income. There are mentioned below:
(a) Value of the goods used by the producer or income from the self owned land, (rent), from the self-management wage), from the self invested capital (interust) should be carefully taken into consideration.
(b) Transfer income which is paid without having any productive contribution must be deducted.
(c) Black Moey & Income from illegal sources should not be considered.
(d) Public debts incurred in unproductive purpose is not included in national income. With all these precautions, national income can be calculated. But, this method can not alone determine the national income correctly.
Question 3.
Explain the expenditure method for the estimation of National Income.
Answer:
Expenditure method is also used to measure national income. In this method final expenditure on gross domestic product is taken into account. Expenditure on final consumption of goods is called final consumption expenditure, government final consumption expenditure, gross captial formation (investment), change in stock and net exports. Households and general government make purchases of goods and services in the market for final consumption.
Household enterprises and general government purchase capital goods for replacement of worn out parts. Government and consumer households make purchase from outside the country which is termed as imports. Similarly domestic goods and services are sold outside the country which is termed as imports. Similarly domestic goods and services are sold outside the country which is called exports. The difference between value of exports and the value of imports constitutes the net exports which form part of expenditure on gross domestic product.
To measure the final expenditure on gross domestic product, it is necessary to ascertain the retail price and quantity of goods and services, by to the household and private non-profit organisations the final consumption expenditure is known. Resident households also make direct purchases abroad. Expenditure on this account has to be added to final consumption expenditure. Non-resideni households make direct purchases in the domestic market which has to be deducted from therate final consumption expenditue.
The final consumption expenditure of the government is known by adding the net purchases of goods and services by the government and payment made as compensation of employees. By multiplying the quantity of sales with the retail price the expenditure of the government in the domestic market is known. Government also makes purchases from abroad. Thus by adding the government’s expenditure on purchases in the domestic market, purchases from abroad and compensation of employees the final consumption expenditure of the government is arrived at.
The next item is gross fixed capital formation. Capital formation refers to excess of production over consumption during a year. Capital formation takes places in shape of gross fixed capital formation and change in stocks. Expenditure on these two accounts show the total expenditure on gross capital formation. Gross fixed capital formation consists of construction and acquisition of machinery and equipment. Expenditure on construction can be found out by multiplying the price of exports with the volume of inputs used plus compensation of employees’ rent, interest and profits. Care should be taken to include own account productional of fixed assets, purchase of new houses by households, work in progress and renovation of old buildings in the final expenditure.
Similarly, final expenditure on machinery and equipment is found out by multiplying the quantity of machinery and equipment produced during the year with the market price. The value of own account production is added to the expenditure. As regards expenditure on change in stocks, the physical change in stocks in multiplied with the market prices. The total expenditure on gross capital formation is thus, arrived at by adding expenditure on gross fixed capital and change in stocks of the domestically produced goods and services.
The next item to be considered is net exports. Net exports is the difference between the exports and imports during a year. Expenditure on net exports forms a part of expenditure on gross domestic product.
While estimating national income on the basis expenditure method care should be taken not to include expenditure on the second-hand goods, expenditure on purchase of shares, debentures and bonds, transfer payments like pensions, unemployment allowances and contribution to social security schemes. Cost of intermediate goods etc. However, the value of products for self consumption expenditure. Similarly expenditure on imputed rent of the owner occupied houses is also included in the final consumption expenditure.
The expenditure method sugggests the gross domestic product at market prices. The .gross national product at market prices is arrived at by adding net factor income from abroad to the gross domestic product. The net national product at factor cost which is same as national income is arrived at by deducting net indirect taxes and the cost of depreciation from the gross national product.
Difficulties in expenditure method : Measurement of national income through expenditure method, though appears, simple, is beset with certain practical difficulties. First of all, expenditure method will deliver correct information, provided correct data ar available. Generally, data on expenditure, at different stages are not fully available. As a result, there is liselhood of underestimation of national income. Similarly national figures may be exaggerated of double counting is not avoided.
Secondly, in case of consumer durables it is difficult to distinguish between consumption expenditure and investment expenditure. Such goods render services over a long period of time. In such cases it is difficult to measure the value of services rendered every year and include the same in the expenditure of a particular year.
Thirdly, some times, it is difficult to differentiate between consumption expenditure and investment expenditure of the Government. For example, defence expenditure is treated as consumption whereas expenditure on infrastructure development is considered as investment expenditure. Lastly, a correct picture of change in stock may not be available for the purpose of national income calculation.
Question 4.
Describe the product method (output method) for the calculation of National Income.
Answer:
Product method is a method which measures the national income by estimating the contribution of each producing enterprise to production in the domestic territory of the country in an accounting year. Product method is also known as value added method of net output method or industrial origin method. The measurement of national income using product method involves the following steps.
The first step of this method involves in identifying all those producing enterprises which employ factor inputs. All the producing enterprises are broadly classified into the following three industrial sectors.
(a) Primary Sector: Primary sector is that sector which produces goods by exploiting natural resources. The sector including agriculture and allied activities like fishing, mining and quarrying. All these sub sectors produce goods by exploiting natural resources like land, water, forests mines, etc.
(b) Secondary Sector : Secondary sector is one in which the enterprises trasform one type of commodity into another type of commodity, e.g., manufacturing cloth from cotton, sugar from sugarcane, etc. This is also called manufacturing sector.
(c) Tertiary Sector : Tertiary sector is one in which the enterprises produce services only, such as banking, insurance, transport, communications, trade, commerce, etc. this sector is also known as service sector.
The second step of this method involves in the estimation of net value added. In this connection, values of certain parameters like value of output, value of intermediate consumption and consumption of fixed capital, need to be estimated.
Estimating value of output across primary, secondary and tertiary sectors of the economy involves its own problems. In fact, one may estimate value of output using two different techniques or methods. These are final output method and value added method.
According to final output method, the value of output is estimated as the sum of sales and change in stock of the producing units. Value of output thus estimated should not be taken to mean as the value of final output. Value of output includes the value of final goods as well as the value of intermediate goods, while the value of final output refers to the value of final goods and services in isolation from the value of intermediate consumption. Thus final output is estimated as the difference between the value of total output and intermediate consumption. Thus, value of final output = Value of total output – Intermediate consumption. Using this method one might encounter the problem of double counting.
According to the value added method, each producing unit of the economy is required to furnish data not on the value of output but on value added which is estimated as the difference between value of output and intermediate consumption, thus, value added = Value of output – Intermediate consumption. Value added obviously refers to the value of final goods and services produced by each producing unit of the country. We get domestic product at market price by adding ‘value added’ of all the producing units within the domestic territory. Thus the method of value added is preferable to the method of final output in estimating national income.
The final step is the estimation of national income. Gross value added by all the producing units across three sectors of the economy is added up to obtain gross domestic product at market price. Consumption of fixed capital or the value of depreciation is deducted from gross value added at market price to obtain net value added at market price or net domestic product at market price.
Net indirect taxes may be deducted from net domestic product at market-price in order to obtain net domestic product at factor cost or net value added at factor cost. It is also called net domestic income. By adding net factor income from abroad to net domestic product at factor cost we get net national product at factor cost or national income.
Precautions regarding value Added Method:
While estimating national income through value added method, following important precautions must be taken.
- Value of the sale and purchase of second hand goods is not included in value added.
- Commission earned on accounting of the sale and purchase of second hand goods is included in the estimation of value added.
- Own-account production of goods of the producing units is taken into account while estimating value added.
- Value of intermediate goods is not included in the estimation of value added.
- Imputed value of production for self-consumption is taken into account.
- Imputed rent on the owner occupied house is also taken into account.
- Production of services for self-consumption is not considered while estimating value added.
- The value added method gives us the domestic product only. The national product is calculated by adding net factor income from abroad.
- The value added in the government sector is equal to compensation of employees. It is because the data regarding rent and interest are not available in this sector, and profit does not exist because all that is produced is meant for collective consumption, and is not sold in the market.
Group – C
Objective type Questions with Answers
I. Multiple Choice Questions with Answers :
Question 1.
The value of goods & services produced within the territory of a country is known as
(i) GNP
(ii) GDP
(iii) NNP
(iv) None of the above
Answer:
(ii) GDP
Question 2.
GDP becomes equals to GNP if
(i) Depreciation is added
(ii) import is added
(iii) export is added
(iv) net export is added
Answer:
(iv) net export is added
Question 3.
The money value of national product produced during a year is known as
(i) GNP
(ii) National income
(iii) GDP
(iv) NNP
Answer:
(iii) GDP
Question 4.
The physical quantities of goods multiplied with prevailing price level gives rise to
(i) national income at current price
(ii) national income at constant price
(iii) per capital income
(iv) Both (i) and (ii)
Answer:
(i) national income at current price
Question 5.
If national income of a country increases in proportion to increase in population, the per capital income.
(i) increases
(ii) decreases
(iii) remains same
(iv) none of the above
Answer:
(iii) remains same
Question 6.
Average income of the people in the country is termed as
(i) per capital income
(ii) national income
(iii) net national income
(iv) average real income
Answer:
(i) per capital income
Question 7.
Which is the element that influences the per capital income?
(i) population of the country
(ii) national income
(iii) GNP
(iv) Both (i) and (ii)
Answer:
(iv) Both (i) and (ii)
Question 8.
The goods which are not meant for production nor for resale is called
(i) intermediate goods
(ii) final goods
(iii) goods for self consumption
(iv) All of the above
Answer:
(ii) final goods
Question 9.
The goods which are exchanged between the producers are
(i) final goods
(ii) consumer goods
(iii) intermediate goods
(iv) all of the above
Answer:
(iii) intermediate goods
Question 10.
Which is not the element of domestic factor income?
(i) compensation of employees
(ii) operating surplus
(iii) mixed income
(iv) net income from abroad
Answer:
(iv) net income from abroad
Question 11.
Which is not included in compensation of employees.
(i) salaries
(ii) wages
(iii) travelling allwance
(iv) insurance premium of workers
Answer:
(iii) travelling allwance
Question 12.
Which is not included in operating surplus?
(i) Rent
(ii) wage
(iii) interest
(iv) profit
Answer:
(ii) wage
Question 13.
The income of self-employed individuals is called
(i) mixed income
(ii) operating surplus
(iii) compensation of employees
(iv) income of individuals
Answer:
(i) mixed income
Question 14.
Old age pension is included in
(i) compensation of employees
(ii) mixed incon
(iii) transfer payments
(iv) operating surplus
Answer:
(iii) transfer payments
Question 15.
Which is included as transfer payments?
(i) old age pensions
(ii) gifts
(iv) all of the above
(iii) donations
Answer:
(iv) all of the above
Question 16.
Which is not included in private income?
(i) profit of public undertakings
(ii) transfer payments
(iii) “net factor income from abroad
(iv) interest on national debt.
Answer:
(i) profit of public undertakings
Question 17.
Which is not included inn personal income?
(i) salary
(ii) wage
(iii) transfer payment
(iv) saving
Answer:
(iv) saving
Question 18.
Disposable income is the personal income left after debucting
(i) direct tax
(ii) indirect tax
(iii) subsidy
(iv) interest on debt
Answer:
(i) direct tax
Question 19.
Which is included in compensation of employees
(i) bonus
(ii) dearness allowance
(iii) sick leave allowance
(iv) all of the above
Answer:
(iv) all of the above
Question 20.
In which category insurance premium & provident fund contribution are included
(i) mixed income
(ii) operating surplus
(iii) compensation of employees
(iv) personal income
Answer:
(iii) compensation of employees
Question 21.
Royalties are included in
(i) mixed income
(ii) operating surplus
(iii) disposable income
(iv) private income
Answer:
(ii) operating surplus
Question 22.
The income received by the lawyers, doctors etc are
(i) personal income
(ii) disposable income
(iii) private income
(iv) mixed income
Answer:
(iv) mixed income
Question 23.
The output method used for measuring national income is otherwise known as
(i) income method
(ii) value added method
(iii) expenditure method
(iv) both (i) and (ii)
Answer:
(iii) expenditure method
Question 24.
The common difficulty taken place in measuring national income is
(i) double counting
(ii) selection of price
(iii) distinction between quantum of final goods & intermediate goods
(iv) all of the above
Answer:
(iv) all of the above
Question 25.
Which income is not counted in measuring national income?
(i) transfer payments
(ii) income from second hand sale
(iii) income from robbery
(iv) all of the above
Answer:
(iv) all of the above
Question 26.
Which tax should not be included in national income?
(i) wealth tax
(ii) estate duty
(iii) gift tax
(iv) all of the above
Answer:
(iv) all of the above
Question 27.
Undistributed profit is an element of:
(i) Personal income
(ii) Private income
(iii) National income
(iv) None of the above
Answer:
(ii) Private income
Question 28.
Personal income is more than :
(i) Personal disposable income
(ii) Private income
(iii) All of the above
(iv) None of the above
Answer:
(i) Personal disposable income
Question 29.
An example of operating surplus is:
(i) wage of salary
(ii) Rent or interest
(iii) Firms and household
(iv) None of the above
Answer:
(ii) Rent or interest
Question 30.
Mixed income earned by :
(i) An industrialist
(ii) A self employed
(iii) All of the above
(iv) None of the above
Answer:
(ii) A self employed
Question 31.
Under expenditure method, National Income is measured at:
(i) Cost price
(ii) Market price
(iii) Both A and B
(iv) None of the above
Answer:
(ii) Market price
Question 32.
G D. P. is the collective effort of:
(i) Domestic factors
(ii) Both domestic and foreign factors
(iii) Foreign factos
(iv) All of the above
Answer:
(ii) Both domestic and foreign factors
Question 33.
G. N. P. at factor cost is equal to :
(i) G N. P. at market price – Net indirect taxes
(ii) G N. P. at factor cost + Net indirect taxes
(iii) G N. P. at cost factor cost – Depreciation
(iv) None of the above
Answer:
(i) G N. P. at market price – Net indirect taxes
Question 34.
G N. Pat factor cost is :
(i) Net national product at factor cost – depreciation
(ii) Net national product at factor cost + depreciation.
(iii) G. N. P. at factor cost + depreciation
(iv) None of the above
Answer:
(ii) Net national product at factor cost + depreciation.
Question 35.
Net national product at factor cost is
(i) G N. P. at factor cost + Depreciation
(ii) G N. P. at factor cost – Depreciation
(iii) G N. P. at factor cost – Net indirect taxes
(iv) None of the above
Answer:
(ii) G N. P. at factor cost – Depreciation
Question 36.
Interest paid on public debt is a :
(i) Factor payment
(ii) Transfer payment
(iii) Capital payment
(iv) None of the above
Answer:
(ii) Transfer payment
II. Fill in the blanks :
Question 1.
_____ refers to the income accruing from property and from work of self-employed persons.
Answer:
Mixed income
Question 2.
_____ is that part of profit of a firm which is distributed among the share-holders.
Answer:
Dividend
Question 3.
Indirect taxes are not included in national income as it is not a _____ income.
Answer:
Factor
Question 4.
_____ income being an unilateral payment falls outside generated income.
Answer:
Transfer
Question 5.
National product of country becomes lesser than the domestic product when net factor income from abroad is _____ .
Answer:
negative
Question 6.
Capital transfers are met from _____ savings.
Answer:
Past
Question 7.
Personal disposable income excludes _____ taxes.
Answer:
Direct
Question 8.
Interest on public debt is a _____ payment.
Answer:
Transfer
Question 9.
Pension is _____ a income.
Answer:
Transfer
Question 10.
Old age pension is an example of _____ payment.
Answer:
Transfer
Question 11.
Real percapita income is measured in _____ price.
Answer:
Constant .
Question 12.
Income earn by the factor of production is _____ at factor cost.
Answer:
Net National Product
Question 13.
Disposal income is a part of _____ income.
Answer:
Personal
Question 14.
The income earned by the self employed person is _____ income.
Answer:
Mixed .
Question 15.
_____ is deducted from the personal income so as to get disposable income.
Answer:
Direct tax .
Question 16.
The average annual income of the residents of a country is called _____.
Answer:
Percapita income
Question 17.
increase in _____ income indicates economic growth of a country.
Answer:
Real percapita income
Question 18.
Expenditure for the advertisement is a part of _____ consumption.
Answer:
Interview
Question 19.
_____ goods is accepted for the estimation of National income.
Answer:
Final good.
Question 20.
The income cam by a lawer is _____ income.
Answer:
Mixed
III. Correct the Sentences:
Question 1.
National income is the value of goods & services produced in the country during a year.
Answer:
Incorrect.
Correct – National income is the value of goods & services produced in the country during a year including the net income from abroad.
Question 2.
Gross Domestic product is greater than Gross national product.
Answer:
Incorrect.
Correct – Gross Domestic product is less than Gross national product.
Question 3.
National income is calculated for a particular year.
Answer:
Correct.
Question 4.
GNP at market price is less than GNP at factor cost.
Answer:
Incorrect.
Correct – GNP at factor cost is less than GNP at market price.
Question 5.
GDP at market price = GDP at factor cost – Net Indirect Tax.
Answer:
Incorrect.
Correct – GDP at market Price = GDP at factor cost + Net Indirect Tax.
Question 6.
The difference between market prices & factor cost is the net income from abroad.
Answer:
Incorrect.
Correct – The difference between market prices & factor cost is the net indirect tax.
Question 7.
Net aggregates are always greater than gross aggregates.
Answer:
Incorrect.
Correct – Net aggregates are always less than gross aggregates.
Question 8.
Private income is less than personal income.
Answer:
Incorrect.
Correct – Private income is greater than personal income.
Question 9.
Personal income is less than disposable income.
Answer:
Incorrect.
Correct – Personal income is greater -than disposable income.
Question 10.
Personal income is the sum of all types of factor income.
Answer:
Correct.
Question 11.
Disposable income = Personal income – indirect tax.
Answer:
Incorrect.
Correct – Disposable income = Personal income – direct tax.
Question 12.
Undistributed profits are the savings of house hold.
Answer:
Incorrect.
Correct – Undistributed profits are the savings of the enterprises.
Question 13.
Product method is called output method.
Answer:
Correct.
Question 14.
The value of final goods are added in product method to calculate national income.
Answer:
Incorrect.
Correct – The value of final goods are added in product method to calculate national incoem.
Question 15.
The value of intermediate consumption is added to the value of final goods to calculate national income.
Answer:
Incorrect.
Correct – The value of intermediate consumption is deducted from the value of final goods to calculate national income.
Question 16.
Income method is value added method.
Answer: Incorrect.
Correct – Product method is value added method.
Question 17.
Factor incomes are added in the income method for estimating national income.
Answer: Incorrect.
Correct – Factor incomes are added in the income method for estimating national income.
Question 18.
Operating surplus includes the income of self employed persons.
Answer: Incorrect.
Correct – Operating surplus includes income from property & entrepreneurship.
Question 19.
Rent is an operating surplus.
Answer: Correct.
Question 20.
Salaries & wages are the mixed income.
Answer:
Incorrect.
Correct – Salaries & wages are compensation of employees.
Question 21.
Old age pension is a transfer income.
Answer: Correct.
Question 22.
Incomes of the self employed person is an operating surplus.
Answer:
Incorrect.
Correct – Incomes of the self employed person is mixed income.
Question 23.
National product is greater than national income.
Answer:
Incorrect.
Correct – National product is equal to national income.
Question 24.
GNP is greater than NNP.
Answer:
Correct.
Question 25.
Operating surplus does not occur in government sector.
Answer:
Correct.
II. Answer the following questions in one word :
Question 1.
What is National Income?
Answer:
National income refers to the money value of total goods & services produced during a year alongwith net income from abroad.
Question 2.
What is GNP?
Answer:
GNP refers to the total volume of goods & services produced during a year along with the net exports.
Question 3.
How can be Net National Product be found, out?
Answer:
GNP – value of depreciation = NNP.
Question 4.
What is Gross Domestic Product?
Answer:
Gross Domestic Product is the market value of all final goods & services produced within the domestic territory of a counry during a year.
Question 5.
What is Private Income?
Answer:
Private income refers to the income of Private individuals from all the sources.
Question 6.
What is Personal Income?
Answer:
Personal Income refers to the income received by the individual from all sources.
Question 7.
What is disposable income?
Answer:
The income which can be spent on consumption by the individuals is called disposable income.
Question 8.
What is per capita income?
Answer:
Percapita income is an average income of an indiviudual in a particular year.
Question 9.
What is Product method?
Answer:
Product method is a method adopted for measuring the national income by estimating the contribution of each producing enterprise to production during a year.
Question 10.
Which method is called value-added method?
Answer:
Product method is called value-added method.
Question 11.
What is income method?
Answer:
Income method is adopted for measurin national income by adding the factor incomes like rent, wage, interest & profit during a particular year.
Question 12.
What is operating surplus?
Answer:
The operating surplus includes income from property & entrepreneurship.
Question 13.
What are the examples of operating surplus?
Answer:
Rent, interest, profit etc. are the examples of operating surplus.
Question 14.
What is transfer income?
Answer:
The income which is earned without any productive contribution is called transfer income.
Question 15.
What is compensation of employees?
Answer:
The compensation of employees includes wages & salaries in cash & inland, payment for social csecurity etc.
Question 16.
What is mixed income?
Answer:
Mixed income refers to the incomes of the self employed persons.
Question 17.
What is expenditure method?
Answer:
Expenditure method measures the national income by adding final expenditure on GDP at market price dring a year.
Question 18.
What is transfer income?
Answer:
The income which is earned without any productive contribution is called transfer income.
Question 19.
What is value added method ?
Answer:
Value added method is a method for the estimation of national income in which the national income is calculated by adding the value of final goods & services produced in an economy during a year.
Question 20.
What is intermediate goods?
Answer:
The goods which are used for further production is called intermediate goods.
Question 21.
Give an example of transfer payment.
Answer:
Old age pension.
Question 22.
What is net exports?
Answer:
The difference between the value of exports & imports is called net exports.