Tag: national income accounting

Quizzes (4) Questions (38)

Questions Related to national income accounting

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 includes ______ while transfer income includes ________.

  1. cost, price

  2. taxes, payments

  3. none of the above

  4. betting, scholarships
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Illegal income (like betting) is generally excluded from national income calculations, while transfer payments (like scholarships) are also excluded as they do not represent production of goods or services.

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

  1. physical quantity

  2. money value

  3. value

  4. all the three
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

National Income is defined as the total money value of all final goods and services produced within a country during a given period.

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

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

  1. Value Added Method

  2. Income Method

  3. Expenditure Method

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

The Income Method is often considered most suitable for developed economies where income tax records and organized financial data are comprehensive and reliable.

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

  1. Samuelson

  2. Kuznets

  3. Hicks

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

This specific definition of national income, emphasizing the reduction of goods and services to a common monetary basis, is attributed to the economist J.R. Hicks.

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

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

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

To avoid double counting, only the value of final goods and services is included in the GDP calculation, as the value of intermediate goods is already embedded in the final price.

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

The concept of normal resident applies to individuals only. 

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

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

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

  1. Indirect Taxes$ >$ Subsides
  2. Indirect Taxes $=$ Subsidies
  3. Indirect Taxes $<$ Subsides
  4. Indirect Taxes $\ge$ subsidies
Reveal answer Fill a bubble to check yourself
C Correct answer
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

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

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

  1. Indirect Taxes

  2. Subsidies

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

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

Mixed income refers to the income of: ______.

  1. small enterprises

  2. traders

  3. self employed persons

  4. all the three
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Mixed income refers to the combined income of self-employed individuals, which includes elements of wages, rent, interest, and profit that are difficult to separate in small-scale operations.