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 some macroeconomic identities national income accounting national income aggregates

In Dx$=$f(Px, T, Y)Y is?

  1. Income level of consumer

  2. Tastes of consumer

  3. Quantity of demand of goods

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In the demand function Dx = f(Px, T, Y), Px is the price of the good, T represents consumer tastes, and Y represents the income level of the consumer.

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

Personal income distribution is relatively ___________________.

  1. More unequal in urban areas than in rural areas

  2. More equal in urban areas than in rural areas

  3. More or less the same in rural and urban areas

  4. More unequal in rural areas than in urban areas
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Personal income distribution is generally more unequal in urban areas due to the higher concentration of wealth, diverse employment opportunities, and significant income gaps compared to rural areas.

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

Which of these is/are not included in net domestic product at factor cost?

  1. Wages or compensation of employees

  2. Rent, interest, profit or operating surplus

  3. Mixed income

  4. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net Domestic Product at factor cost (NDPfc) includes wages, rent, interest, profit, and mixed income. Therefore, none of these items are excluded.

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

For most economies which of these statement is true?

  1. National income accounts and national output accounts are equal to each other.

  2. Estimation of national income is just impossible

  3. National output is less than national Income

  4. National income is less than national output
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In macroeconomic accounting, the total value of national income (sum of factor incomes) is equal to the total value of national output (sum of final goods and services produced) due to the circular flow of income.

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

GNP at MP=Rs. 99,000 Net factor income abroad=(-) 560
Capital consumption allowance= Rs. 6100, Net indirect tax=Rs. 8470
From the above, estimate of GNP at factor cost.

  1. Rs. 90,530

  2. Rs. 91,000

  3. Rs. 89,990

  4. Rs. 93,100
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

GNPfc = GNPmp - Net Indirect Taxes. GNPfc = 99000 - 8470 = 90530. The other values (NFIA, CCA) are already accounted for in the GNPmp figure.

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

Given personal income of Rs.7510, personal income tax of Rs.410, Consumption being Rs. 5000, Personal saving will be _______.

  1. Rs.7000

  2. Rs.6890

  3. Rs.2100

  4. Rs.6700
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Personal saving is calculated as Personal Income minus Personal Income Tax minus Consumption. Here, 7510 - 410 - 5000 = 2100.

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

Given personal income of Rs.7510, personal income tax of Rs. 410, Consumption being Rs. 5000, Personal saving being Rs. 2100. Find the disposal income.

  1. Rs. 7000

  2. 6890

  3. Rs. 7100

  4. Rs. 6700
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Disposable income is defined as Personal Income minus Personal Income Tax. Here, 7510 - 410 = 7100.

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

______ is the personal income minus personal income tax and miscellaneous payments to government.

  1. Surplus income

  2. Disposable income

  3. Expendable income

  4. Residual income
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Disposable income refers to the income which is freely available to the disposal of the individual. The gap between the personal income of an individual and disposal income is due the taxes and other payments made to the government on the personal income earned. 
Symbolically: ${\text{Disposable Income = Personal Income - Taxes and other payments made to the government on the personal income}}$ 

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

Given personal income of Rs.8000, personal income tax of Rs.1200, Consumption Rs. 5000, Personal saving is equal to ______.

  1. Rs.2000

  2. Rs.2400

  3. Rs.2900

  4. Rs.1800
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Personal saving equals (Personal Income - Personal Income Tax) - Consumption. Calculation: (8000 - 1200) - 5000 = 6800 - 5000 = 1800.

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

The major difference between personal income and disposal income is _______.

  1. indirect tax

  2. direct taxes

  3. savings

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

Personal income is the total income received by individuals, while disposable income is the amount left for spending after direct taxes are deducted.