Tag: circular flow of income and methods of calculating national income

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Questions Related to circular flow of income and methods of calculating national income

Multiple choice economics circular flow of income and methods of calculating national income expenditure method and income method methods of measuring national income national income accounting

Difficulty of estimating mixed incomes is under:

  1. Income method

  2. Expenditure method

  3. Value added method

  4. Both A & B
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Mixed income refers to the income of self-employed persons, which is difficult to separate into wages, rent, and profit. This is a specific challenge associated with the Income method of calculating national income.

Multiple choice economics circular flow of income and methods of calculating national income expenditure method and income method methods of measuring national income national income accounting

The sum of total of incomes received for the services of labour, land or capital in a country is called _______.

  1. Gross domestic product

  2. National income

  3. Gross domestic income

  4. Gross national income
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The gross domestic income is the total income earned by the county in one year, it is calculated as the sum of consumption, investment, government spending and net exports. 

Multiple choice economics circular flow of income and methods of calculating national income expenditure method and income method methods of measuring national income national income accounting

State the full form of GNP.

  1. Gross National Product

  2. Group Net Product

  3. Grand Nuclear Process

  4. Group Networking Process
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Gross National Product (GNP) is defined as the sum of the gross domestic product (GDP) and net factor incomes from abroad. Thus, in order to estimate the gross national product of India, we have to add net factor income from abroad, i.e., income earned by Indian residents abroad minus income earned by non-residents in India to the gross domestic product of India. Symbolically, GNP = GDP + NFIA; where NFIA is the net factor income from abroad.

Multiple choice economics circular flow of income and methods of calculating national income expenditure method and income method methods of measuring national income national income accounting

Study of how the national income arising from what has been produced in the country is distributed through wages, profits and interest is called the study of ________.

  1. Consumption

  2. Production

  3. Distribution

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The distribution of national income among the factors of production (land, labor, capital, and entrepreneurship) is known as the study of distribution in economics.

Multiple choice economics circular flow of income and methods of calculating national income expenditure method and income method methods of measuring national income national income accounting

Income from second hand sale of goods is _______ from National Income.

  1. measured

  2. excluded

  3. included

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Income from the sale of second-hand goods is excluded from National Income because the value of the good was already counted in the year it was produced as a new good.

Multiple choice economics circular flow of income and methods of calculating national income expenditure method and income method methods of measuring national income national income accounting

Old age pension is _________ income.

  1. earned

  2. transfer

  3. increased

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Old age pension is paid to people after retirement who no longer provide any productive services in exchange. The government in this case collects taxes from working population and provide pension to older population in the form of government expenditure.

The pension is income for those who receive it, however, no new income is generated in the economy, hence it is a transfer payment.

Multiple choice economics circular flow of income and methods of calculating national income expenditure method and income method methods of measuring national income national income accounting

Illegal income is _________ in  National Income.

  1. calculated

  2. included

  3. not included

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Illegal income is not recorded or reported to the government or authorities since it has not been generated through legal economic activities. Thus, it is not accounted for when national income is calculated.

Multiple choice economics circular flow of income and methods of calculating national income expenditure method and income method methods of measuring national income national income accounting

National Income estimates are _______ in India.

  1. accurate

  2. not accurate

  3. rising

  4. none
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Due to the large size of the informal sector and difficulties in data collection, national income estimates in India are often considered to have significant margins of error, hence not fully accurate.