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

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

Illegal income includes ______ while transfer income includes ________.

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

  1. cost, price

  2. taxes, payments

  3. none of the above

  4. betting, scholarships

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Correct Option: D

National Income is the ________ of all goods and services produced by a country during a period of year.

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

  1. physical quantity

  2. money value

  3. value

  4. all the three

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Correct Option: B

For developed economics which of the following methods is most suitable?

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

  1. Value Added Method

  2. Income Method

  3. Expenditure Method

  4. Product Method

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Correct Option: B

"The national income consists of a collection of goods and services reduced to common basis by being measured in terms of money."- who says this?

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

  1. Samuelson

  2. Kuznets

  3. Hicks

  4. Pigou

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Correct Option: C

To avoid double counting in national income GDP is calculated by summing up ________.

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

  1. the value of all goods and services

  2. the value of final goods only

  3. the value of producers goods only

  4. the value of non-durable goods

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Correct Option: B

In a closed economy, gross domestic product is always equal to gross national product. 

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. True

  2. False

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Correct Option: A
Explanation:
This happens because net factor income from abroad is zero due to no interaction with the rest of the world.

The concept of normal resident applies to individuals only. 

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. True

  2. False

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Correct Option: B
Explanation:

A person is treated as resident of a country in the country in which his interest actually lies. It can be an individual living in the same country or in another country. If a person lives in foreign country he should live in other country for less than a year. It not only involves individuals but also involves institutions. Hence, the concept of normal residents applies not only to individuals but also to institutions.

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

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. Indirect Taxes$ >$ Subsides

  2. Indirect Taxes $=$ Subsidies

  3. Indirect Taxes $<$ Subsides

  4. Indirect Taxes $\ge$ subsidies

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Correct Option: C
Explanation:

If factor cost is greater than market price, then it means Indirect taxes < Subsidies. Market price can be less than factor cost when subsidies will be more than the indirect tax.

Formula: Market price - indirect tax + subsidies = Factor cost

Which of the following constitute the reason for difference between Market Prices and Factor Cost?

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. Indirect Taxes

  2. Subsidies

  3. Both (a) and (b)

  4. Neither (a) nor (b)

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Correct Option: C
Explanation:

Market price is basically the current price at which an asset is bought or sold in the market. It includes the cost of production in the  form of wages,rent,interest,profit.etc. whereas factor cost may not reflect the effect of taxes and subsidies unlike market price. It takes into account only of the actual cost of production including the profit. Hence, the reason for difference between market price and factor cost is indirect taxes and subsidies.

Mixed income refers to the income of: ______.

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. small enterprises

  2. traders

  3. self employed persons

  4. all the three

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Correct Option: D