Tag: methods of national income

Questions Related to methods of national income

The national income estimation is the responsibility of _______.

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. NSSO

  2. Central Statistical Office

  3. Finance Ministry

  4. National Income Committee

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Correct Option: B
Explanation:

Central statistical organisation is responsible for statistical activities in India. The CSO was set up in the cabinet secretariat on 2 May 1951.

The national income estimation is the responsibility of central statistical office.

Which of the following method uses adding up of factor payments received during a year to calculate national income?

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. Product Method

  2. Income Method

  3. Expenditure Method

  4. Value added Method

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Correct Option: B
Explanation:

Income method uses adding up of factor payments received during a year to calculate national income.

Income method: according to this method income is measured as flow of factors income. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Which of the following is not included in expenditure method of calculating national income?

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. Net exports

  2. Private final consumption expenditure

  3. Government final consumption expenditure

  4. Expenditure on second hand goods

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Correct Option: D
Explanation:

Expenditure method: national income is measured as a flow of expenditure. Includes sum total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

It does not include expenditure on second hand goods.

Which of the following is included in factor payments?

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. Rent and also royalty

  2. Interest

  3. Profits

  4. All the above

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Correct Option: D
Explanation:

Factor payments include Interest, Profits, Rent and also royalty

There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Income disposal method is also called as _________.

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. product method

  2. income method

  3. expenditure method

  4. value added method

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Correct Option: C
Explanation:

Expenditure method is also called as income disposal method

Expenditure method: National income is measured as a flow of expenditure. Includes sum total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

Suppose that a firm had an unsold stock worth of Rs 100 at the beginning of a year. During the year it had produced Rs 1,000 worth of goods and managed to sell Rs 800 worth of goods. Calculate inventory for the year ___________.

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. 100

  2. 200

  3. 300

  4. 400

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Correct Option: C

A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves) is called __________.

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. profits

  2. taxes

  3. dividends

  4. none of the above

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Correct Option: C
Explanation:

A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves) is called a dividend

A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.

The National Income is equal to __________.

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. NNP - Subsidies + Taxes

  2. NNP - Indirect Taxes + Subsidies

  3. NNP - Direct Taxes + Subsidies

  4. GNP - Subsidies + Taxes

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Correct Option: B
Explanation:


The phrase at factor cost is to be contrasted with the phrase at market prices.

Goods produced are sold at market prices which include the indirect taxes imposed by the Government. Indirect taxes are levied on commodities, such as excise duty on beer and cloth, etc.

Thus, the market value of the national product exceeds the income paid to the factors of production by the amount of indirect taxes. Hence, net national income at factor cost shows the income actually received by the factors of production.

On the other hand, a subsidy causes the market price to be less than the factor cost. The subsidy is an aid in money.

.’. NNI at Factor Cost = NNPat MP plus Subsidies minus Indirect Taxes.

National Income may be determined through ________.

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. Income Approach

  2. Expenditure Approach

  3. Output Approach

  4. All of the above

Show answer
Correct Option: D
Explanation:

The national income of a country can be measured by three alternative methods:
(i) Product Method
(ii) Income Method,
(iii) Expenditure Method. 

National Income of a country can be calculated by_______.

business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

  1. $2$ methods

  2. $3$ methods

  3. $4$ methods

  4. $5$ methods

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Correct Option: B
Explanation:
National Income is the total value of all services and goods that are produced within a country and the income that comes from abroad for a particular period, normally one year.
National income can be computed by three methods:
1) Value-Added Method by classifying Production Units in an economy as Primary, Secondary and Tertiary Sectors.
2)Income Method - on the basis of the combination of individuals and households indulged in different kinds of factors of production.
3)Final Expenditure Method - on the basis of a collection of units used for consumption, saving, and investment.