Practice test

National income - Test Set 4

Review 20 exam-focused questions with detailed explanations, then start the interactive test when you are ready.

20 questions

Questions and explanations

  1. Question 1

    What is personal income?
    1. The income earned by individuals and households after taxes and other deductions.
    2. The total income earned by businesses and corporations in an economy.
    3. The income earned by individuals through their own business or self-employment.
    4. The total income earned by individuals and households before taxes and other deductions.
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  2. Question 2

    Which of the following methods is used to calculate national income by summing up the total spending on final goods and services in an economy?
    1. Value-added method
    2. Output method
    3. Expenditure method
    4. Income method
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  3. Question 3

    Which of the following represents disposable income?
    1. The income earned by individuals and households after taxes and other deductions.
    2. The total income earned by businesses and corporations in an economy.
    3. The income earned by individuals through their own business or self-employment.
    4. The total income earned by individuals and households before taxes and other deductions.
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  4. Question 4

    Why are intermediate goods NOT included in the calculation of national income?
    1. Including intermediate goods would result in double counting.
    2. Intermediate goods are not produced within the country’s borders.
    3. Including intermediate goods would decrease the value of national income.
    4. Intermediate goods are not important for measuring economic activity.
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  5. Question 5

    Which of the following is true about disposable income in relation to personal income?
    1. Disposable income is equal to personal income.
    2. Disposable income is always less than personal income.
    3. Disposable income is always greater than personal income.
    4. Disposable income can be greater or less than personal income, depending on taxes and deductions.
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  6. Question 6

    Which of the following statements(s) is true?
    A) Higher inflation means lower real GDP, ceteris paribus
    B) Price Index is 200 if nominal GDP and real GDP are the same.
    1. Only B
    2. Both A and B
    3. Only A
    4. Neither A nor B
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  7. Question 7

    Which of the following is a correct expression?
    1. Depreciation = Net investment - Gross Investment
    2. Gross investment = Net investment – Depreciation
    3. Net investment = Gross Investment - Depreciation
    4. Net investment = Gross Investment + Depreciation
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  8. Question 8

    NDP at FC plus net factor income from abroad is equal to ______.
    1. NNP at MP
    2. NNP at FC
    3. GDP at FC
    4. GNP at MP
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  9. Question 9

    Identify the true statement.
    1. If real GDP is 240 and price index is 120, nominal GDP is 200.
    2. If real GDP is 500 and price index is 200, nominal GDP is 250.
    3. If real GDP is 500 and price index is 200, nominal GDP is 700.
    4. If real GDP is 240 and price index is 120, nominal GDP is 288.
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  10. Question 10

    Which of the following is the correct sequence of national income from broader to narrower concepts?
    1. GNP at market prices - NNP at market prices - GNP at factor cost - NNP at factor cost
    2. Personal disposable income - Personal income - GNP at market prices - GNP at factor cost
    3. GNP at factor cost - GNP at market prices - NNP at market prices - Personal income
    4. GNP at factor cost - NNP at factor cost - Personal income - Personal disposable income
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  11. Question 11

    Which of these is NOT the correctly stated component of the expenditure method of measuring national income?
    1. Final investment expenditure by firms
    2. Final government expenditure
    3. Export plus import expenditure
    4. Final consumption expenditure by households
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  12. Question 12

    ______ is the income of the Government, which arises out of the property left by the people without a legal heir.
    1. Escheat
    2. Moot
    3. Felony
    4. Lien
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  13. Question 13

    In the estimation of national income, which of the following items will be subtracted from NNP at market price?
    1. Depreciation
    2. Net product taxes and net production taxes
    3. Net indirect taxes
    4. Depreciation and net product taxes
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  14. Question 14

    Which of these expressions is correct?
    1. If the factor income from abroad is greater than the factor income paid abroad, then GNP would be greater than GDP.
    2. If the factor income from abroad is greater than the factor income paid abroad, then GNP would be lower than GDP.
    3. If the factor income earned from abroad is less than the factor income paid abroad, then GNP would be greater than GDP.
    4. If the net factor income from abroad is negative, then GNP would be greater than GDP.
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  15. Question 15

    hat is the basic difference in the aggregates at market price and factor cost?
    1. Depreciation
    2. Indirect taxes
    3. Net indirect taxes
    4. Direct taxes
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  16. Question 16

    According to the Output Method, GDP is calculated as: ______.
    1. GDP at Constant Prices – Taxes + Subsidies
    2. GDP at Constant Prices + Subsidies
    3. GDP at Constant Prices – Taxes
    4. GDP at Constant Prices + Taxes – Subsidies
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  17. Question 17

    The GDP deflator is also called ______.
    1. implicit inflation index
    2. explicit inflation index
    3. implicit price deflator
    4. explicit price deflator
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  18. Question 18

    As per the recommendations of the National Statistical Commission, the Base Year of the GDP Series in India was revised from 2004-05 to ______ with effect from January 2015.
    1. 2011-12
    2. 2013-14
    3. 2005-06
    4. 2009-10
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  19. Question 19

    Which of the following sectors of the economy has the highest share in India’s GDP?
    1. Agriculture
    2. Industrial
    3. Manufacturing
    4. Service
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  20. Question 20

    What is subtracted from GDP to arrive at NDP?
    1. Net factor income from abroad
    2. Subsidies
    3. Depreciation
    4. Net indirect taxes
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