NCERT Class 12 Economics — Chapter 4: National Income Accounting

In the context of National Income aggregates, what does 'Private Income' include that 'Personal Income' does not?

Consider the following statements regarding 'Nominal GDP' and 'Real GDP': 1. Nominal GDP is evaluated at current prevailing prices. 2. Real GDP is evaluated at current market prices. 3. If Real GDP changes, it implies a change in prices only. Which of the statements given above is/are correct?

Which of the following is NOT a reason for the difference between CPI and GDP Deflator?

What is the primary reason for deducting 'Imports' in the expenditure method of calculating GDP?

Match List I with List II and select the correct answer using the code given below: List I | List II A. Inventory at year-end | 1. Flow concept B. Change in Inventory | 2. Stock concept C. Depreciation | 3. Stock concept D. Wealth | 4. Flow concept

Consider the following statements regarding 'Final Goods' in an economy: 1. A good is designated as a final good based on its physical characteristics rather than the economic nature of its use. 2. Goods purchased by an enterprise for use in further production or transformation are never classified as final goods. 3. Final goods remain in the active economic flow for further transformation. Which of the statements given above is/are correct?

With reference to 'Capital Goods', consider the following statements: 1. They are durable goods used in the production process that do not get transformed into other goods. 2. They are considered intermediate goods because they aid in the production of other commodities. 3. They gradually undergo wear and tear and require replacement over time. Which of the statements given above is/are correct?

Consider the following statements regarding 'Consumer Durables': 1. They are goods like food and clothing that are extinguished by immediate consumption. 2. Like capital goods, they undergo wear and tear and need repairs or replacement. 3. They are considered final goods in national income accounting. Which of the statements given above is/are correct?

Consider the following statements regarding 'Factor Cost', 'Basic Prices', and 'Market Prices': 1. Factor cost includes net production taxes. 2. Basic prices include net production taxes but exclude net product taxes. 3. Market prices are obtained by subtracting net product taxes from basic prices. Which of the statements given above is/are correct?

With reference to the distinction between 'Stocks' and 'Flows', consider the following statements: 1. Income and profits are flow concepts as they are measured over a period of time. 2. Capital goods are flow variables defined over a period of time. 3. The change in the stock of capital is a stock variable measured at a specific point in time. Which of the statements given above is/are correct?

Consider the following statements regarding 'Investment' in an economy: 1. Gross investment includes the value of capital goods produced for the replacement of existing capital stock. 2. Net investment is calculated by adding depreciation to gross investment. 3. In economics, investment refers to the creation of new physical capital assets. Which of the statements given above is/are correct?

With reference to the circular flow of income in a simple economy, consider the following statements: 1. It assumes the existence of a government and external trade sector. 2. The aggregate consumption by households is equal to the aggregate expenditure on goods produced by firms. 3. There is no leakage from the system in the form of savings. Which of the statements given above is/are correct?

Consider the following statements regarding the 'Product Method' of calculating National Income: 1. Value added is defined as the value of production of the firm plus the value of intermediate goods used. 2. It aggregates the gross value added of all firms in the economy. 3. The net contribution made by a firm is retained entirely by the entrepreneur. Which of the statements given above is/are correct?

With reference to 'Production Taxes' and 'Product Taxes', consider the following statements: 1. Production taxes are paid in relation to production and are independent of the volume of production. 2. Land revenues and stamp fees are examples of product taxes. 3. Excise tax and service tax are examples of product taxes. Which of the statements given above is/are correct?

With reference to 'Inventory' in economics, consider the following statements: 1. It is a stock variable representing unsold finished goods, semi-finished goods, or raw materials. 2. The change in inventory during a year is treated as a stock variable. 3. An unexpected fall in sales leads to unplanned accumulation of inventories. Which of the statements given above is/are correct?

Consider the following statements regarding 'Gross Value Added (GVA)': 1. Gross Value Added excludes the value of depreciation. 2. Net Value Added is obtained by subtracting depreciation from Gross Value Added. 3. If a firm produces goods but does not sell them, the value is included in GVA as inventory investment. Which of the statements given above is/are correct?

With reference to the 'Expenditure Method' of calculating GDP, consider the following statements: 1. Expenditure on intermediate goods is included in the final investment expenditure. 2. It sums up the final expenditure on consumption, investment, government spending, and net exports. 3. Investment expenditure includes only the expenditure on fixed capital goods, excluding inventory. Which of the statements given above is/are correct?

In the context of the circular flow of income, which of the following represents the 'Income Method' of calculating GDP? 1. Sum of all factor payments: wages, profits, interest, and rent. 2. Sum of all final expenditures received by firms. 3. It is theoretically equivalent to the sum of Gross Value Added of all firms.

Consider the following statements regarding 'Planned and Unplanned Inventory': 1. If a firm sells less than it expected, it results in unplanned decumulation of inventory. 2. If a firm sells more than it expected, it results in unplanned decumulation of inventory. 3. Planned accumulation occurs when a firm intentionally produces more than its expected sales to increase stock. Which of the statements given above is/are correct?

Consider the following statements regarding 'Gross National Product (GNP)': 1. It measures the aggregate production of final goods and services taking place within the domestic economy only. 2. It is calculated by adding Net Factor Income from Abroad to GDP. 3. It deducts the earnings of foreigners working within the domestic economy. Which of the statements given above is/are correct?

With reference to 'Net National Product (NNP) at Factor Cost', consider the following statements: 1. It is derived by adding net indirect taxes to NNP at market prices. 2. It is also known as National Income (NI). 3. It includes the value of depreciation. Which of the statements given above is/are correct?

Consider the following statements regarding 'Personal Income (PI)': 1. It is the part of National Income that is actually received by households. 2. Undistributed profits and corporate taxes are added to National Income to calculate PI. 3. Transfer payments from the government are included in Personal Income. Which of the statements given above is/are correct?

With reference to 'Personal Disposable Income (PDI)', consider the following statements: 1. It includes the income that households must pay as taxes to the government. 2. It is calculated by deducting personal tax payments and non-tax payments from Personal Income. 3. It is always less than Personal Income if personal taxes are positive. Which of the statements given above is/are correct?

What is the distinction between 'National Disposable Income' and 'Net National Product at Market Prices'?

With reference to the 'GDP Deflator', consider the following statements: 1. It is the ratio of Nominal GDP to Real GDP. 2. It measures the change in the quantity of goods produced, not prices. 3. Unlike the Consumer Price Index (CPI), it does not include the prices of imported goods. Which of the statements given above is/are correct?

Why might GDP not be a perfect index of the welfare of a country's people? Statements: 1. A rise in GDP guarantees an equitable distribution of income. 2. Non-monetary exchanges like household services are not counted in GDP. 3. Negative externalities like pollution are fully accounted for in GDP calculations. Which of the statements given above is/are correct?

Consider the following statements regarding the 'Circular Flow of Income': 1. In a simple economy, the aggregate payments by firms exceed the aggregate consumption expenditure. 2. The flow of goods and services from firms to households is matched by a flow of factor services from households to firms. 3. The model assumes that households spend their entire income on consumption. Which of the statements given above is/are correct?

Consider the following statements regarding 'Inventory Investment': 1. It is treated as a part of capital formation. 2. Only planned accumulation of inventory is counted as investment; unplanned accumulation is treated as a loss. 3. It is always a positive value regardless of whether stocks increase or decrease. Which of the statements given above is/are correct?

Consider the following statements regarding 'Net Product Taxes' and 'Net Production Taxes': 1. Net Product Taxes are added to GVA at basic prices to arrive at GDP at market prices. 2. Net Production Taxes are excluded from GVA at basic prices. 3. Factor cost is derived by subtracting both Net Product Taxes and Net Production Taxes from GDP at market prices. Which of the statements given above is/are correct?

With reference to the 'Circular Flow' in a two-sector economy, consider the following statements: 1. The upper loop represents the Factors of Production Market. 2. The lower loop represents the Factors of Production Market. 3. The flow of factor payments is from firms to households. Which of the statements given above is/are correct?

Which of the following is NOT considered a 'Final Good'?

Consider the following statements regarding 'Gross Domestic Product (GDP)': 1. It measures the aggregate value of final goods and services produced within the domestic territory. 2. It includes income earned by citizens working abroad. 3. It excludes the contribution of foreign companies operating within the country. Which of the statements given above is/are correct?

Consider the following statements regarding 'Corporate Tax': 1. It is a tax imposed on the earnings made by firms. 2. It accrues to the households as part of their personal income. 3. It is deducted from National Income to arrive at Personal Income. Which of the statements given above is/are correct?

Consider the following statements regarding the 'Macroeconomic Model': 1. A model describes an actual economy in every minute detail. 2. The purpose of a model is to highlight essential features of the economic system. 3. The simple model assumes no government and no external trade. Which of the statements given above is/are correct?

Consider the following statements regarding 'GDP and Welfare': 1. If GDP rises, welfare always rises proportionally. 2. GDP does not account for the distribution of income. 3. GDP accounts for all externalities, whether positive or negative. Which of the statements given above is/are correct?

Consider the following statements regarding 'Stocks' and 'Flows' in the context of capital: 1. A particular machine is part of the capital stock for many years. 2. The machine remains part of the flow of investment goods every year it is used. 3. Depreciation of the machine is a flow concept measured over a period. Which of the statements given above is/are correct?