National Income Accounting quiz

Which of the following is a flow variable?

National income is:

GDP at market price - net indirect taxes = :

Which is included in national income?

If NFIA is negative, then:

Net investment is:

Mixed income of self-employed refers to income of:

Real GDP is calculated at:

Which is an example of a positive externality?

In the expenditure method, which is not a component?

What is meant by value added? (2 marks)

Why are transfer payments not included in national income? (2 marks)

Distinguish between domestic income and national income. (2 marks)

What is meant by domestic territory of a country? (2 marks)

Why is imputed rent of owner-occupied houses included in GDP? (2 marks)

Distinguish between nominal GDP and real GDP. (2 marks)

Explain why services of housewives are not included in national income. (2 marks)

Is a machine purchased by a firm a final good or an intermediate good? Give reason. (2 marks)

What is meant by net indirect taxes? (2 marks)

State the three equivalent ways of measuring GDP. (2 marks)

GDP at market price is Rs 5,000 crore, NFIA is Rs -100 crore and depreciation is Rs 400 crore. Calculate GNP at market price and NNP at market price. (3 marks)

Nominal GDP is Rs 1,500 crore and real GDP is Rs 1,200 crore. Calculate the GDP deflator. What does it indicate about prices? (3 marks)

NNP at market price is Rs 3,000 crore, indirect taxes Rs 400 crore and subsidies Rs 100 crore. Calculate national income. (3 marks)

Gross investment of an economy is Rs 500 crore and depreciation Rs 120 crore. The capital stock at the start of the year was Rs 2,000 crore. Calculate net investment and capital stock at the end of the year. (3 marks)

Firm A produces goods worth Rs 500 with no inputs, selling Rs 300 to firm B and Rs 200 to households. Firm B uses the Rs 300 inputs and sells final goods worth Rs 800 to households. Calculate value added by each firm and GDP, and verify by the final goods method. (3 marks)

Read the passage and answer the questions. In a year, India's nominal GDP grew by 10%, but the government reported real GDP growth of only 6%. A student said the economy produced 10% more goods. (i) Is the student correct? (ii) Why is real growth lower? (iii) What does the gap indicate? (5 marks)

Read the passage and answer the questions. A steel plant increased output, adding Rs 500 crore to GDP, but its smoke caused respiratory illness among nearby villagers and polluted the river. (i) Identify the concept. (ii) Why does GDP overstate welfare here? (iii) Give one example of a positive externality. (5 marks)

Read the passage and answer the questions. Ramesh bought a second-hand car for Rs 3 lakh through a dealer who charged a commission of Rs 15,000. He also bought shares worth Rs 1 lakh, paying brokerage of Rs 1,000. (i) What amount is included in GDP? (ii) Why is the price of the car not included? (iii) Why is the purchase of shares not included? (5 marks)

Read the passage and answer the questions. An economy has PFCE of Rs 1,200 crore, GFCE of Rs 300 crore, gross investment of Rs 400 crore, exports Rs 150 crore and imports Rs 250 crore. (i) Calculate GDP at market price. (ii) Calculate net exports. (iii) Which method is used? (5 marks)

Read the passage and answer the questions. Two countries have the same GDP per capita. In country X, 10% of people own 70% of income, while in country Y income is evenly spread. (i) Which country has higher welfare? Why? (ii) What does this show about GDP as a welfare index? (iii) State one other limitation of GDP. (5 marks)

Explain the circular flow of income in a two-sector economy with a diagram. Why are all three methods of measuring national income equal? (6 marks)

Explain the value added method of measuring national income with steps and precautions. (6 marks)

Explain the income method of measuring national income with steps, components and precautions. (6 marks)

Explain the expenditure method with its components and precautions, and show with a chart the conversion from GDP MP to NNP FC. (6 marks)

Explain why GDP is not a perfect index of welfare, and distinguish between nominal and real GDP with a numerical example of the GDP deflator. (6 marks)