Economics

National Income and Poverty Measurement

1,163 Questions

National income and poverty measurement involves calculating economic indicators like GDP, the Gini coefficient, and the Human Development Index. These metrics help gauge economic health, inequality, and poverty levels within a country. Practice these economics questions to understand the statistical methods used in macroeconomic analysis.

GDP calculationEconomic inequality indicesPoverty line conceptsNational income methods

National Income and Poverty Measurement Questions

Multiple choice

Directions: Read the passage/argument and answer the question that follows it.

International organisations, such as the World Bank and the IMF, have been exaggerating the size of the Chinese economy in the past. If GDP of China is converted into dollars using market exchange rates, it amounted to $2.7 trillion last year, only one-fifth of America's $13.2 trillion, and the fourth-largest in the world. But a dollar buys a lot more in China than in America because prices of many non-traded goods and services tend to be much lower in poor economies.

Which of the following would best complete the above paragraph?

  1. Therefore, an average Chinese is richer than an average American.

  2. Thus, what finally matters is the number of dollars in your hands.

  3. Therefore, we can reasonably expect that converting a poor country's GDP into dollars at market exchange rates understates the size of its economy.

  4. Hence, all such comparisons need to account for those non-traded goods and services.

  5. Therefore, America is not as big as is thought to be.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

There is nothing given about the average income of a Chinese vs. an American. Thus, option (1) is not a suitable closing line. Option (2) goes against the logic presented because what matters is what you can buy with a dollar, not its number. Hence, option (2) is also wrong. It is difficult to comment on the truth of option (5) because the author has not written anything about how much a dollar is really worth in terms of comparison. Option (3), the correct option, is very much in line with the overall logic of the question and summarises the entire point nicely.

Multiple choice

HDI does not include

  1. life expectancy

  2. equality of income

  3. education level

  4. GDP level
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

HDI is composed of longevity of life expectancy, knowledge i.e. education and standard of living based on GDP level. It does not include equality of income which is measured by Gini Index.

Multiple choice

Which of the following is real GDP?

  1. GDP at base year prices

  2. GDP at current year prices

  3. GDP at any year prices

  4. GDP at future prices
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Real GDP is calculated at base year prices. Nominal GDP is calculated at current year prices

Multiple choice

HDI does not include

  1. life expectancy

  2. equality of income

  3. education level

  4. GDP level
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

HDI is composed of longevity of life expectancy, knowledge i.e. education and standard of living based on GDP level. It does not include equality of income which is measured by Gini Index.

Multiple choice

Which of the following is true?

  1. GDP at factor cost = GDP at market price + Net indirect taxes

  2. GDP at factor cost = GDP at market price - indirect taxes

  3. GDP at factor cost = GDP at market price - Subsidy

  4. GDP at factor cost = GDP at market price - Net factor income from abroad

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It is calculated as = GDP at market price - Net indirect taxes where net indirect taxes = indirect taxes - subsidy

Multiple choice

In India, inflation is measured by

  1. wholesale price index number

  2. consumer price index for urban non-manual workers

  3. consumer price index for agricultural workers

  4. national income deflation
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice

National income is the

  1. Net national product at market price

  2. Net national product at factor coast

  3. Net domestic product at market price

  4. Net domestic product at factor cost
Reveal answer Fill a bubble to check yourself
C Correct answer
Multiple choice

Which among the following is not taken into consideration when income method is used to measure national income?

  1. Rent

  2. Net factor income earned from abroad

  3. Gross domestic private investment

  4. Compensation of employees
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The income method calculates national income by summing factor incomes (wages, rent, interest, profit). Gross domestic private investment is a component of the expenditure method, not the income method.

Multiple choice

GDP stands for

  1. Gross Direct Product

  2. Gross Domestic Product

  3. Gross Direct Premium

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

GDP is a standard measure of the value added created through the production of goods and services in a country during a certain period.

Multiple choice

GNP is different from GDP as GNP includes

  1. depreciation

  2. indirect taxes

  3. exports income

  4. net income from abroad
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

GDP measures the value of goods and services produced within a country's borders. GNP (Gross National Product) adds the net income earned by residents from investments or labor abroad to the GDP.

Multiple choice

Which among the following factors creates obstacles in measuring correct estimate of national income?

  1. Inflation

  2. Existence of non-monetised sector

  3. Under employment

  4. Low rate of savings
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Existence of non-monetised sector creates obstacles in measuring correct estimate of national income. A well organised system of exchange in an economy based on the use of money is described as monetisation.  So a non monetized sector affects the stability of national income. 

Multiple choice

Which of the following factors is considered while calculating national income?

  1. Income from lottery

  2. Income of gamblers, smugglers, thieves etc

  3. Pension

  4. Income from the sale of second hand goods
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

National income calculations typically include transfer payments like pensions, as they are considered part of the income flow, whereas lottery winnings and illegal activities are excluded.