Economics

National Income and Poverty Measurement

1,142 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

It is meant to capture a notion of extreme poverty. As such, it is calculated as the average poverty line of the poorest countries. What is it?

  1. The international poverty line

  2. The Indian poverty line

  3. The global poverty line

  4. The universal poverty line
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The international poverty line is a global standard set by the World Bank to measure extreme poverty, typically defined as living on less than a specific amount per day.

Multiple choice

GDP plus net property income from abroad equals what?

  1. GNP

  2. NNP

  3. Depreciation

  4. Real GDP
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Right answer because GNP is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country.

Multiple choice

Which is the best measure of economic growth of a country?

  1. GDP

  2. GNP

  3. Net revenue

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

GNP (Gross National Product) is often considered a better measure of the economic growth of a country than GDP, as it accounts for the income earned by residents abroad and excludes income earned by foreigners within the country.

Multiple choice

One of the problems in calculating the national income in India correctly is

  1. Under employment;

  2. Deflation;

  3. Inflation;

  4. Non-monetised consumption;

  5. Low savings
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A major challenge in calculating national income in developing countries like India is the presence of a large non-monetized sector, where goods and services are bartered or consumed directly by producers without market transactions.

Multiple choice

Which of the following is not included in the National Income?

  1. Imputed rent of owner-occupied houses

  2. Government expenditure on making new bridges

  3. Winning a lottery

  4. Commission paid to an agent for sale of a house
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

National Income accounts for the value of goods and services produced. Lottery winnings are considered transfer payments or windfalls, not income generated from productive economic activity.

Multiple choice

Directions: A brief passage or a statement is given and a question is asked, based on the information provided in the passage/statement. Critically examine the five alternative answer options marked (1) to (5) and choose the best answer. So as to calculate the GDP growth across the globe, individual countries' growth rates are weighted in terms of their share of global output. Using Purchasing Power Parity, as the IMF does, the global economy has grown by an average of 5% over the past five years, its strongest pace since the early 1970s. This is primarily due to the emerging economies growing by 7.5% a year (vis a vis only 2.3% in the developed economies), and they account for around 45% of global GDP. Given the above information, which of the following would be definitely FALSE?

  1. The percentage share of emerging economies in global GDP was less than that of developed ones till 1970s.

  2. If the developed economies and the emerging economies grow at the same pace each year, the global GDP growth rate would be much more than it is at present.

  3. The growth rate of emerging economies is bound to further increase in future too.

  4. <font size="2" face="Arial">There has been no significant change in terms of living standards of people in developing economies.</font>

  5. There has been no significant change in terms of disposable income of people in developing economies.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

There is nothing given about the share of developing economies in global GDP till 1970s. It could correct or incorrect; we have simply no way of judging its accuracy. So option (1) is wrong. Options (2) and (3) are suppositions, about which it is not possible to say anything, given the information in hand. Option (5) is not necessarily false, as it talks of disposable income, which means the part of income left after meeting one’s expenses. It is not a definitive indicator of the truth or otherwise of the statements given. Option (4), which represents the best possible answer, highlights that there has been no change in the living standards of people in developing economies, which seems to be improbable given that they are growing by a much faster pace as compared to developed economies.

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

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