Self Assessment Paper-1

Time : 1 hrs Max. Marks : 25

SOLUTIONS
1. (i) Economic Welfare  [1]
2. Product Method  [1]
3. True [1]
4. (iii) 3 – (c) [1]
5. (iv) Assertion (A) is false, but Reason (R) is true. [1]
6. (i)  Intermediate Goods as machine purchased by a dealer of machines is meant for resale to someone.  [1½]
(ii) Final goods as a car purchased by a household is used for consumption.  [1½]
7. GVAFC = (iii × iv) + (v) – (vi) + (vii) – (i) – (ii)
= [Output × Price] + [Change in Stock] – [Intermediate Cost] + [Subsidy] – [Import Duty – Excise]  [1½]
= [6,000 × 6] + [600] – [16,000] + [500] – [1,000] – [2,000]  [1]
= [36,000 + 600 + 500] – [16,000 – 1,000 – 2,000]
= [37,100] – [19,000]
GVAFC = ` 18,100 crore  [½]
8. (i) Final Expenditure as it is for consumption purpose. [2]
(ii) Final expenditure as it is a kind of capital investment. 
[2]
9. When Real GDP rises, flow of goods and services tends to rise. Other things remaining constant, this means
greater availability of goods per person, implying higher level of welfare. But there are strong exceptions to this
generalisation.  [1]
Following observations may be noted in this context :
(i) Distribution of GDP : If with every increase in the level of GDP, distribution of GDP is getting more unequal,
welfare level of the society may not rise. In this situation, the bulk of the population may have even lesser
goods than before (even when the overall level of GDP has tended to rise)  [1½]
(ii) Composition of GDP : Composition of GDP may not be welfare oriented even when the level of GDP tends
to rise. There is no direct increase in the welfare of the masses if GDP has risen owing largely to the increase
in the production of defence goods. [1½]
10. Income Method
GNPFC = Compensation of Employees + Profit + Rent + Interest + Consumption of Fixed Capital – Net Factor
Income to Abroad  [1½]
= 300 + 160 + 70 + 50 + 10 + (– 50)  [1]
= 590 – 50
GNPFC = ₹ 540 crore [½]
Expenditure Method
GNPFC = Govt. Final Consumption Expenditure + Private Final Consumption + Gross Domestic Capital
Formation – Net Factor Income to Abroad – Net Indirect Taxes + Exports – Imports  [1½]
= 200 + 400 + 80 – (50) – 60 + 65 – 95  [1]
= [680 + 65] – [50 + 60 + 95]
= [745] – [205]
NNPFC = ` 540 crore  [½]
 qq