MCQ of National Income and Related Aggregates

Topic - 1 Circular Flow of Income

1. Which of the following sector is not includes in a two-sector economy?

(a) Government             

(b) Households       

(c) Firms           

 (d) All of these 

2. Which of the following is a phase of circular flow of income?

(a) Generation Phase

(b) Distribution Phase

(c) Disposition Phase

(d) All of these

3. Which of the following is not an example of flow variable?

(a) Number of births during a year

(b) National wealth

(c) National Income

(d) Wheat produced during a year

4.Which of the following is not considered a factor income?

(a) Rent

(b) Wages

(c) Gifts from abroad

(d) Profit

5. Stock variable is defined as a variable which is:

(a) Measured over a period of time

(b) Measured at a particular point of time

(c) Cannot be measured

(d) None of these

6. Real flow is also known as:

(a) Nominal flow

(b) Physical flow

(c) Money flow

(d) Both (a) and (b)

Assertion Reason Questions (ARQs)

INSTRUCTIONS

In the following Questions, read the following statements: Assertion (A) and Reason (R). Choose the correct alternative among those given below:

Alternatives:

(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).

(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A).

(c) Assertion (A) is True but Reason (R) is False.

(d) Assertion (A) is False but Reason (R) is True.

7. Assertion (A): Savings are zero in case of two-sector economy.

Reason (R): Households Spend C the entire factor income received from firms on consumption of goods and services.

8. Assertion (A): Stock variable does not have a time dimension.

Reason (R): Stock variable is a dynamic concept.

9. Assertion (A): Macroeconomics is also known as Income and Employment Theory.

Reason (R): Macroeconomics aims to determine income and employment level of the economy.

Statement Based Questions

In the following Questions, read the following statements and choose the correct alternative among those given below:

Alternatives:

(a) Both the Statements are true.

(b) Both the Statements are false.

(c) Statement 1 is true and Statement 2 is false.

(d) Statement 2 is true and Statement 1 is false.

10. Statement 1: Money Flow involves flow of money between firms and households.

Statement 2: Money Flow is also known as Physical Flow.

11. Statement 1: In a two-sector economy with households and firms, there are no savings in the economy.

Statement 2: Real Flow in the form of factor services and final goods and services is equal to money flow between firms and households in a two-sector economy.

 Topic - 2 Basic Concepts of Macroeconomics

1. Which of the following are covered under the domestic territory of India?

(a) State Bank of India in London

(b) Google office in India

(c) Office of Tata Motors in Australia

(d) Russian Embassy in India

2. Which one of the following is an intermediate product?

(a) Purchase of pulses by consumers

(b) Machine purchased by a firm

(c) Wheat used by a flour mill

(d) Wheat used by Households

3. Which one of the following is not an example of final goods?

(a) Chalk, dusters, etc. purchased by a school

(b) Fertilizers used by the farmers

(c) Wheat used by a flour mill

(d) All of the above

 4. If factor cost is greater than market price, then it means that:

(a) Indirect Taxes > Subsides

(b) Indirect Taxes = Subsides

(c) Indirect Taxes < Subsides

(d) Indirect Taxes  >_ Subsides

 5. Which of the following leads to unexpected obsolescence?

(a) Natural Calamities

(b) Change in Demand

(c) Change in Technology

(d) Both (b) and (c)

6. Depreciation of fixed capital assets refers to:

(a) Normal wear and tear

(b) Foreseen obsolescence

(c) Normal wear & tear & foreseen obsolescence

(d) Unforeseen obsolescence

7.  Unforeseen obsolescence of fixed capital assets during production is:

(a) Consumption of Fixed Capital

(b) Capital Loss

(c) Income Loss

(d) None of the above

8. Refrigerator purchased by a confectionery shop is an example of:

(a) Final Good

(b) Intermediate Good

(c) Capital Good

(d) Both (a) and (c)

 9. Which of the following is an example of Non-durable good?

(a) Milk

(b) Bread

(c) Both (a) and (b)

(d) Clothes

10. Addition to the capital stock of an economy is termed as:

(a) Investment

(b) Capital Loss

(c) Consumption of Fixed Capital

(d) All of these

Assertion Reason Questions (ARQs)

INSTRUCTIONS

In the following Questions, read the following statements: Assertion (A) and Reason (R). Choose the correct alternative among those given below:

Alternatives:

(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).

(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A).

(c) Assertion (A) is True but Reason (R) is False.

(d) Assertion (A) is False but Reason (R) is True.

11. Assertion (A): Factor income is a Bilateral Income.

Reason (R): Factor income is earned for contributing to production process.

12. Assertion (A): Intermediate goods have direct demand.

Reason (R): The demand for intermediate goods depends on demand for final goods.

13. Assertion (A): Transfer Income is not included in the National Income.

Reason (R): Transfer Income can be received either within the domestic territory or from abroad.

14. Assertion (A): Subsidy is a Transfer Payment.

Reason (R): Subsidy contributes to current flow of goods and services.

15. Assertion (A): Depreciation is also termed as Consumption of Fixed Capital.

Reason (R): Depreciation refers to that value of fixed capital which is used up in the process of production. 

Statement Based Questions

In the following Questions, read the following statements and choose the correct alternative among those given below:

Alternatives:

(a) Both the Statements are true.

(b) Both the Statements are false.

(c) Statement 1 is true and Statement 2 is false.

(d) Statement 2 is true and Statement 1 is false.

16. Statement 1: Economic territory and political frontier of a nation are one and the same thing. Statement 2: American Embassy in India is a part of the economic territory of India.

17. Statement 1: Normal residents include both, individuals and institutions.

Statement 2: International organisations are treated as normal residents of the international area.

18. Statement 1: Factor income is included in both National Income and Domestic Income.

Statement 2: Factor income refers to income received without rendering any productive service in return. 

19. Statement 1: Intermediate goods are included in National Income but not in Domestic Income.

Statement 2: Intermediate goods are used up in the same year.

20. Statement 1: Net factor income from abroad is positive when income earned from abroad is less than income paid to abroad.

Statement 2: Net factor income from abroad is negative in a closed economy as such economy does not deal with the rest of the world sector.

National Income and Related Aggregates

1. Out of the following, which aggregate represents 'National Income'?

(a) NNP MP

(b) GNPFC

(c) NNPFC

(d) GNP MP

2. If factor income received from abroad is equal to factor income paid abroad, then which of the following is not a valid statement?

(a) National Income = Domestic Income

(b) NDPFC + Depreciation = GNP FC

(c) NDPFC + Depreciation = GNP MP

(d) All are valid

3. Fill in the blank: NNPFC--------= GDP MP

(a) + Depreciation - Net factor income from abroad - Net Indirect taxes

(b) + Depreciation + Net factor income from abroad + Net Indirect taxes

(c) + Depreciation - Net factor income from abroad + Net Indirect taxes

(d) + Depreciation + Net factor income from abroad - Net Indirect taxes

4. If economic subsidies are added to and indirect taxes are subtracted from the national income at market prices, then it will be equal to:

(a) Domestic Income

(b) National Income

(c) Gross national product at market prices

(d) Gross domestic product at factor cost

5. Identify the correct equation from the following:

(a) GDP MP = NNPFC + Depreciation

(b) NDPFC = NNP FC + Net Indirect Taxes

(c) GNP MP = GDP MP + Net Factor Income from Abroad

(d) NNPFC = NDP MP + Depreciation

6. For a closed economy (with no foreign trade), which of the following is correct? 

(a) GDP = GNP

(b) GDP > GNP

(c) GDP < GNP

(d) GDP + GNP = 0

7. Domestic factor income is another name for:

(a) NDPFC

(b) NNP MP

(c) GDPFC

(d) NNP FC

8. Net domestic product at factor cost is less than national income when:

(a) Net factor income from abroad is positive

(b) Net factor income from abroad is negative

(c) Net factor income from abroad is Zero

(d) Net Export are positive

Assertion Reason Questions (ARQs)

INSTRUCTIONS

In the following Questions, read the following statements: Assertion (A) and Reason (R). Choose the correct alternative among those given below:

Alternatives:

(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).

(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A).

(c) Assertion (A) is True but Reason (R) is False.

(d) Assertion (A) is False but Reason (R) is True.

9. Assertion (A): Domestic Income is equal to National Income in case of Closed Economy. Reason (R): Closed Economy has no economic relations with rest of the world.

10.Assertion (A): National Income is a national concept.

Reason (R): National Income includes value of final goods and services produced in the entire world by producers who are normal residents of the country.

Statement Based Questions

In the following Questions, read the following statements and choose the correct alternative among those given below:

Alternatives:

(a) Both the Statements are true.

(b) Both the Statements are false.

(c) Statement 1 is true and Statement 2 is false.

(d) Statement 2 is true and Statement 1 is false.

11. Statement 1: NDPFC is also known as Domestic Income.

Statement 2: NDPFC is less than NNPFC when net factor income from abroad is positive.

12. Statement 1: Gross Domestic Product at Market Price is a territorial concept.

Statement 2: Gross Domestic Product at Market Price excludes net indirect taxes.

13. Statement 1: Domestic Income considers all producers who are normal residents of the country.

Statement 2: Domestic Income does not include NFIA.

14. Statement 1: GNP MP includes goods and services produced by all units located within the domestic territory irrespective of fact whether produced by residents or non-residents.

Statement 2: GNP MP is always more than GDP MP.

15. Statement 1: Gross National Product (GNP) can be greater than Gross Domestic Product (GDP) in a two-sector economy.

Statement 2: Net factor income from abroad is zero in a two-sector economy.

Measurement National Income

 1. hich of the following is not a part of profits?

a) Corporate Tax

(b) Dividends

(c) Retained Earnings

(d) Royalty

2 . Income Method" is also known as:

(a) Distributive Share Method

(b) Income Disposal Method

(c) Industrial Origin Method

(d) None of these

3. Which of the following is a synonym of "Undistributed Profits"?

(a) Savings of private corporate sector

(b) Reserves and Surplus

(c) Retained Earnings

(d) All of these

4. The value of intermediate consumption will be ------- if purchase of raw material is 1,200, exports are of 600 and imports are of 200.

(a) 1,200

(b) ₹800

(c) ₹1,800

(d) ₹1,400

5. Which one is included in National Income?

(a) Winning from Lottery

(b) Milk purchase by a dairy shop

(c) National Debt Interest

(d) None of these

6. 'Gross Investment' is also known as: (i) Gross Domestic Capital Formation, (ii) Gross Capital Formation (iii) Gross Fixed Capital Formation, (iv) Gross Domestic Fixed Capital Formation.

(a) Both (i) and (ii)

(b) (i)

(c) (ii)

(d) (i), (ii) and (iv)

7. Which of the following method can be used to calculate National Income?

(a) Income Method

(b) Expenditure Method

(c) Value Added Method

(d) All of the above

8. 'Commodity Service Method' is another name for:

(a) Expenditure Method

(b) Income Method

(c) Value Added Method

(d) None of these

9. 'Distributed Profits' is also known as:

(a) Corporate Tax

(b) Dividend

(c) Retained Earnings

(d) None of these

10. If a farmer sells wheat to miller for 500 and miller sells flour to baker for 700 and baker sells breac consumers for 1,000, then total value added by 'miller' and baker' is:

(a) ₹500

(b) ₹300

(c) ₹1,700

(d) 1,200

11. Increase in Real Gross Domestic Product (GDP) implies------- inthe economy.

(a) Increase in the level of Income

Assertion Reason Questions (ARQs)

INSTRUCTIONS

In the following Questions, read the following statements: Assertion (A) and Reason (R). Choose the correct alternative among those given below:

Alternatives:

(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).

(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A).

(c) Assertion (A) is True but Reason (R) is False.

(d) Assertion (A) is False but Reason (R) is True.

12. Assertion (A): Value Added Method, Income Method and Expenditure Method are three different metnos to measure the National Income.

Reason (R): Production, Income and Expenditure are three different phases of circular flow of income.

13. Assertion (A): Real Gross Domestic Product is a better indicator of economic growth of a nation as compare to Nominal Gross Domestic Product.

Reason (R): Real Gross Domestic Product measures the value of goods and services at current year prices

14.Assertion (A): Production of services for self-consumption are not included in national income.

Reason (R): Domestic Services are already included in the value of final goods. If they are included agan it will lead to double counting.

15. Assertion (A): Interest paid by government on public debt is not included in the Interest Income.

Reason (R): Interest paid on loans taken for consumption purposes is not included as factor income.

16. Assertion (A): Exports are included in the output of an economy.

Reason (R): Exported goods are produced within the domestic territory of the country.

Statement Based Questions

In the following Questions, read the following statements and choose the correct alternative among those given below:

Alternatives:

(a) Both the Statements are true.

(b) Both the Statements are false.

(c) Statement 1 is true and Statement 2 is false.

(d) Statement 2 is true and Statement 1 is false.

17. Statement 1: Net Exports is a Domestic Concept.

Statement 2: Net Exports includes non-factor services like banking and shipping.

18..Statement 1: National Income at Current Price is also known as Real National Income.

Statement 2: National Income at Current Price is affected by change in both price and quantity.

19.. Statement 1: Environmental pollution caused by industrial plants is an example of negative externality. Statement 2: GDP does not consider negative externality but takes into account positive externality.

20. Statement 1: Nominal GDP is a better measure to make periodic comparison in the physical output of goods and services over different years.

Statement 2: Nominal GDP is affected by change in physical output only and not by change in price.

Answer Keys

Topic 1- Circular Flow of Income

1. A  2.  D 3.  B  4. C  5.  B  6. B  7.  A  8.  C  9.  A  10.  C  11.  A  

Topic - 2 Basic Concepts of Macroeconomics

1.   B    2.   C   3. D      4.  C    5. A    6.   C  7.  B  8.   D 9.  C 10. A  11. A   12.  D  13. B  14.   C  15.  A  16. B   17.  A 18. C   19. D  20.  B

Topic 3 - National Income and Related Aggteagate

1.  C   2.  3.    4.   5.    6.   7.   8.  9.  10.   11.   12.  13.   14.  15.  

Topic - 4  Measurement of National Income

1.       2.      3.       4.      5.     6.     7.    8.    9.   10.   11.    12.    13.   14.     15.    16.   17.   18.   19.   20.