INTRODUCTION TO

MICROECONOMIC UNIT:1
ECONOMY
sIstem of interconnected production, consumption, and
matels determines how resources are distributed among trade activities is called an economy, and it
nersons residing in and participating in the economy, all of the players. To meet the requirements of
commodities and services are produced, consumed,
and distributed.

ECONOMICS
The term "economics refers to the studs of economies and
the elements that influence them.

CENTRAL PROBLEMS OF AN ECONOMY

roducing goods and services, distributing them,and disposing them are the three fundamental economic
of
actvities carried out in an economy. Since there are only a finite number of resources and an
TUmber of human desires, each economy must contend with the problem of resource scarcity infinite
while carrying
out these tasks.
he three Central Problems of an Economs arise as a result of the necessituy to choose how to
distribute the
limited resources that are available:
What to Produce? How to Produce?ForWhom to Produce?
The study of economics has traditionally been divided into two main branches:

Microeconomics
Perceconomics is the studs of individual people's Macroeconomics is the study of elements that attect
aa firms' behaviour in order to understand why
moke the economic decisions they do and how
Dese actions affect the wider economic
system.
Macroeconomics
the entire economy, such as how inflation and price
increases affect the economy. It aims to monitor
and comprehend the monetary indicators, such as
changes in consumer spending, unemployment rates,
and Gross Domestic Product (GDP), that over time
reveal whether an economy is suUccessful or
unsuccessful
 Bank-Economics
8CUET(UG)Question
Multiple ChoiceQuestions

economics that deals with resource (a) independentof each other

1. The area of (b) ínterrelated to each other
distribution is called:
(a) Macroeconomics
(c) both (a) and (b)
(d) none of the above
(b) Microeconomics
Ans. (b) ínterrelated to each other
(c) Econometrícs A
8. Whích of the following is related to the
(d) None of the above problem 'how to produce?
Ans. (b) Microeconomics (a) Factorial distríbution of income
economics?
2. Who is the father of ONb) The choice of technique
(a) Adam Smith
(c) The choice of product
(b) Karl Marx
(d) None of theabove
(c) J. M. Keynes
(d) Alfred Marshall Ans. (b) The choice of technique
9. Central problems of an economy arise, because
Ans, (a) Adam Smith (a) Marny goods are sold in market
following is/are features of
3. Which of the Government makes decisions
b)
microeconomics? D
(c) Shortage of labour
(a) It deals with small parts of the economy. scarcity of
firms and (d) Multiplícity of wants and
(b) It looks at individual consumers, resources
industries. scarcity f
determination of price of any Ans. (d) Multiplicity of wants ard
(c) It studies the resources
product or factors of production. deals with indívidual incomne,
10.
(d) Allof the above consumption and savings.
Ans. (d) All of the above
(a) Mixed economics
one of the
4. Theory of consumer behaviour is (b) Prímary economics
vital theories of:
(c) Microeconomícs
(a) Macroeconomics
(d) Macroeconomics
(b) MicToeconomnics
Ans. (c) Microeconomics
(c) Both (a) and (b) relates to the
(d) None of the above 11. The problem of services
problemn of deciding how goods and
Ans. (b) Microeconomics among
produced in an economy be distributed
5. Which of the following is not a central problem its members.
of microeconomics?
la) What to produce? (a) for whom to produce
(b) how to produce
(b) How to produce?
fc) When we produce? (c) what to produce
(a) none of the above
(d) For whom to produce?
Ans. (c) When we produce? Ans. (a) for whom to produce
6. Which of the following is related to 12. Which of the following is a branch of Micro
microeconomics? Economics?
(a} Inflation in the ecoomy (a) Product Price Determination
(b) Problem of unemployment (b) Factor Price Determínation
(c) National Income (c) Economic Welfare
(d) All of the above
(d) Income fromn railways Ans. (d) All of the above
railways
Ans. (d) Income from 13. The word micro was firstly used by:
The study of microeconomics and
(a) Marshall
macroeconomics is
(b) Boulding
 fntrodueton of iero feonnmicsl9
{o Keynes () The resoüurces are fuly ermployed
( RagnatErisch (d) The technology remains unchanged
Ans. (d) RagnarFrisch Ans. (b) The resources of utilisation changes
a Qonsumer behaviour is studied in: 18. Which of the following subject matters studies
a Micro Fconomics in microeconomics?
b) Ineomne Theory (a) Money supply
d Macro Eoonomics (b) Aggregate demand
1a)None of the above () Market demand ofa good
Ans. a) MMicro Economics (d) National Income
5 Which of the following central problem of Ans. (c) Market demand of a good
an economy deals with the distribution of 19. Which of the following is true for
National Income? microeconomics paradox?
a) How to produce? (a) Something which is true in microeconomics
(b) What to produce? does not hold true in macroeconomics.
i For whom to produce? (b) Something which does not hold true in
a) None of the above either microeconomics or macroeconomics.
Ans. ic) For whom to produce? c) Something which olds true both in
6 His curve which shows the various alternative microeconomics or macroeconomics.
production possibilities of two goods that (d) None of the above
can be produced with given resources and Ans. (a) Something which is true in microeconomics
techniques of production. does not hold true in macroeconomics
a) Production Possibility Curve 20. is that branch of economics which
deals with economic issues at the level of an
b) Marginal Utility Curve
fc Diminishüng Curve individual like individual household, pricing
(d) Production Curve of a firm, wages of a worker etc.
Aas. (a) Production Possibility Curve (a) Macroeconomics
17, Which of the following is not the assumptions (b) Microeconomics
of production possibility schedule? (c) Econometrics
la) The resources available are fixed (d) None of the above
(b) The resources of utilisation changes Ans. (b) Microeconomies
 CONSUMER BEHAVIOUE
AND DEMAND
UNIT: 2

(ONSUMER EQUILIBRIUM
satisfaction out of his given income
maximum equilibrium represents
sitvation wherein aconsumer gets that consumer
Consumer equilibrium is a commodity. In other words, we can say resources.
price of a his available
at the given market the best possible use of

THROUGH UTILITY APPROACH

EQUILIBRIUM
THE (ONSUMER'S consuming two or more than two commodities, equilibrium willbe
his
Equi-marginal utility, the
consumer According to the Law of
In the case of the Equi-marginal vtility. marginal utility derived from
determined by the Law of goods in such a way that
on different
consumer spends his limited income all commodities are equal.
MU, M,MU,
Py P,

Situations of Consumer's Equilibrium's

In Case of Single Commodity
When a consumer consumes a single commodity
(say, x) then he will be at equilibrium if:
Marginal Utility (MUx) is equal to Price (Px) paid for
the commodity; i.e. MU = Price
InCase of Two Commodities
According to the law of Equi-marginal utility, a
of
consumer gets maximum satisfaction, when ratios
MUof two commodities and their respective prices
are equal and MUfalls as consumption increases.
There are two necessary conditions to attain
Consumer's Equilibrium in case of Two
Commodities:

Marginal Utility (MU) of last rupee MU falls as consumption

spent on each commodity is same. increases.

-DEMAND
Denand is the quantity of a commodity that a consumer wishes to purchase at a given level of price and
during a specified period of time.

MARKET DEMAND
Market demand refers to the quantity of a commodity that all the consumers are willing and able to
at a particular price during a given period of time. bUy,
 Determingnts of Demand
Number of buyers in the market 4
>Price of the commodity
Income of the consumer Consumer expectations .
. > Tastes and preferences of a consumer

DEMAND SCHEDULE demand schedule.

Atable that displays the quantity demanded at each price is known as a

DEMAND CURVE
between the cost of a commodity or
The demand curve is a graphical presentation of the connection
service and the quantity demanded over a specific time period.

MOVEMENT IN DEMAND CURVE

When the quantity demanded and price of a good change, there is movement in the demand curve, which
referred as a Movement in Demand Curve.
causes the curve to move in aparticular direction, hence

SHIFT IN DEMAND CURVE

constant, but there is a change in the
The demand curve shift occurs when the price of the good remains
quantity demanded as a result of other causes, shifting the curve to one side.

PRICE ELASTICITY OF DEMAND

percentage change in own price of
It is the ratio between percentage change in quantity demanded and
the commodity.
Mathematically, it is expressed as:
Percentage Change in Price
Price Elasticityof Demand = Percentage Change in Quantity Demanded +

Measurement of Price Elasticity of Demand

Percentage Method or Total Expenditure Method or SGeometric Methods<

Proportiorate Method
Percentage method is also called
as 'Flux Method' or 'Proportionate
Method' or 'Mathematical
Method'. According to this
method, elasticity is measured as
the ratio of percentage change in
the quantity demanded to
Percentage change in the price.
Total Outlay Method
The elasticityof demand can be
calculated using this method by
taking into account price changes,
which are followed by changes in
the overall quantity of items
purchased and the overall sum of
money spent on them.
When the demand and price for a
commodity change by infinitely
small amounts; the geometric
method is used to calculate the
price elasticity of demand. It
indicates that different points
along the same straight demand
Curve have varied levels of
demand elasticity for similar
commodities.
 Bank Economics
19CEt (UG)Question MultipleChoice Questions
Explanation :
against the
quantity is to be purchased decreases with
The demand for normal goodscurve for normal
1. Specific known as: demand
specificprice is demand curve the fall in income. The
fall in the income
(a) Movement
along the goods shifts to the left with the
(b) Demand of the consumers.
(c) Quantity demanded is the type of movement
5. Which of the following
curve?
demand curve along a demand
(d) Shift in the
demanded (a) Increase in demand
Ans. (c) Quantity dermand
Explanation: (b) Decrease in
demand
quantity of good (c) Contraction of
Quantity demanded is thewilling and able to
consumer is (d) Both (a) and (b)
or service that during a period of of demand
purchase at a certain price, Ans. (c) Contraction
time. depicts:
Explanation :
slope of a demand curve curve can either be
2. Downward Movement on the demand
among price and quantity
(a) Positive relation wherein the upward
upward or downward,contraction in demand.
demanded movement shows a
price and quantity shows expansion
(b) No related between while downward movement
demanded in demand.
between price and the determinates of
(c) Negative relation Which of the following are
6. market
quantity demanded demand function?
(d) None of the above AM0 70 (a) Population size
relation between price and
Ans. (c) Negative o eo abiomap nDb) Distribution of income
quantity demanded
(c) Both (a) and (b)
Explanation: (d) None of the above
Becauseas the price rises the quantity demanded Ans. (c) Both (a) and (b)
falls and vice-versa.
the demand curve in Explanation:
3. What will be the shape of determine the
the case of normal goods? There are several factors that
(a) Negative slope demand for a product which include population
tastes
consumer's
size, distribution of income,
(b) Zero slope
(c Positive slope and preferences, consumer's income etc.
7. The teacher gave Akshit an assignment. He
(d) None of these between price and
Ans. (a) Negative slope eh is asked to tell the relation
demand from the given table?
Explanation: Demand
Price
The demand curve for normal goods is 20 35
downward sloping indicating the negative 15 50
relationship between the price of a product and
the quantity demanded. (a) Increase in demand
4. What is the effect of fall in income of the (b) Decrease in demand
consumer? (c) Contraction of demand
(a) Upward movernent orn demand curve (d) Extension of demand
(b) Downward movement on demandcurve Ans. (d) Extension of demand
(C) Rightward shift of demand curve
(d) Leftward shift of demand curve Explanation:
When the quantity
Ans. (d) Leftward shift of demand curve demanded
due to the fall in price, it is
of a good rises
called extension of
 consume behinviour nd bonand 13
exceptions to the láw of demand or can say
demand. Here in the above case, price falls from
violated the law of demand.
20 to 15 and quantity demanded is increasing
ronm 35 to 50 depicts the situation of extensiom 11. What are the causes of the decrease in demand?
ofdemand. (a) Price of complementary goods increase
Calculate the market demand from the (b) Price of subsitute goods increases
schedule for Rahul, Rashi, Rohan,
(c) Income of consumers rises
Price Rahal's Rashi's Rohan's Market (d) All of the above
Demand Demand Demand Demand
10
Ans. (a) Price of complementary goods increase
12 29
Explanation :
3 18 The demand for good decreases, if the price of
refill
4 4 5 its complement rises. For example price of
5 3 increases, the demand for the pen decreases.
(a) 23, 13, 8 () 29, 23, 18 12. What will be the market demand if the price is
(b) 24 10, 5
5 and P'sdemand is 12 units, Q's demand is 13
(d) None of these
units, and R'sdemand is 20 units?
Ans. (a) 23,13, 8 (a) 33 units (c) 50 units
Explanation: (b) 45 units (d) 40 units
Market demand refers to the demand of all Ans. (c) 45 units
consumers of agooda or servie at a given price. Explanation :
Here in the above case market demand at price
Market demand Demand of all individuals in
2is 23, price 4 is 13 and price 5 is 8.
the market
9. Match the Columns:
So, P's demand = 12 units
COLUMN A COLUMN B
Q'sdemand =13 units
(A)Extension of (1) Upward movement R's demand = 20 units
demand along the demand
Curve Therefore, market demand =12 + 13+ 20
= 45 units
(B) Increase in (ii) Downward
demand movement along the 13. While reading the newspaper, Madhav finds a
demand curve headline "Prices of petrol and diesel have been
(C) Decrease in (ii) A forward shift in the cut by 33 per litre as due to international oil
demand demand curve prices slumped to a four-year low". Analyse
(D)Contraction (iv) A backward shift in the impact on demand of cars by identifying
of demand the demand curve the movement/shift in thedemand curve.
le) (A-(i), (B)-(i), (C)-i), (D)-(iv) (a) Contraction in demand
(b) (A-Gi), (B)-(ii), (C)-iv), (D)-() (b) Extension in demand
(c) Increase in demand
) (Aim), (B}-0), (C)-i), (D)-(iv)
(d) Decrease in demand
(d) (Aj-iü), (B)-(i), (C)-{iv), (D)-{i)
Ans. (c) Increase in demand
Ans. (b) (A-Hi), (B)-(Gi), (C)-(iv), (D)-(i)
In which of the following case, law of demand Explanation:
in violated? When the prices of petrol and diesel are cut, the
(a) Giften goods demand for cars is expected to rise, because car
(b) Artice of distinction and petrol are complementary goods. This will
(c) Irratiornal judgment lead the demand curve of cars to shíft right wards.
(d) All of the above 14. Rama reads in the newspaper that the prices
Ans, (dy All of the of Coke are getting reduced. Analyse the
above impact on demand of Pepsi by identifying the
ExplGifenanatigoods,
on: Veblen good or articBes of
movement shift in the demand curve.
(a) Contraction in demand
distinction and irrational judgement are the (b) Externsion in demand
 Ans. Ans.
17. l6. Ans.
Revenue
method
(c) (d) (c) Percentage responds
(b) (a) reveue Inelastic
as
Explanation:
etc.betweenquantity (d) (d) inelastic
(c) (b) demand? of price of
(a) Which 15. Ans. 14/CUEL
much elasticityelasticity of
quantity Price All
ortionate All Quantities
price Raise Value demand demand Explanation
the
: (d) (d) () (b) (a) Pepsi. wil If
What (d) () (C)
Proportionate
nethod Arc Total All of All Pric e Explanation: the (UG)
of of All Income Cross
elasticity
expenditure demanded
0 demand
as of
some elasticityabove of of ar e increase, Decreases
Decreases Increase
weakly and the the the price
between the demanded of prices Question
methods of of to the theelasticity th e
price. aboveabove followingrelated demanda demand the are elasticityelasticity
1 demanded to commodity aboveabove in
method to ie, in raise change
types thus of in in Bank
method 0 types
Its for
is price,e<1, economics and
commodities. shows
to of of of
coke demand demand
demand -
method also features revenue shows shows of of decreasing Economtes
product a 1 is/are inchange demand
demanddemand
elasticity gets
raise
called quantity responds to
income. elasticities
occurs the the th
responsivernesse reduced,
includes: the in
as: price
doesn' t characteristicsresponsiveness of the
demanded
change
responsivenessprice.
when weekly While of demand? demand its
to change
raise Value in cross
Incomedemand. demand
the
to the
of for
inelastic
Ans.(c) 20. Ans.(b) Unitary
Ans.(c)
19.
is
atbuyinelastic
Elasticity
Explanation: zeroelastic will
(b) (a) have
Goods
quantity
that The 18.
habituated.
a Explanation : (d)Cross(c) (b) change
(a) change shows If Inelastic
(b)
higher it Explanation
the
: Elasticdegree (a) remains
However, price 100 price. Ameasured
the the Percentage
even captures price Price
Elasticity Income Price newspaper Method'Explanation:
. or
to that TR houses
per quantity
Proportionate
for of demanded elasticity elasticity in of
price. with which elasticity
elasticity of its in
the
Thisdemand
isremains
price the unit
price revenue According
the of elasticity quantity
own a as method
agoods measurement regularly. demanded the
change is demand.
customers demand elasticity elasticity samne. was vendor
because responsiveness to of of of price. ratio
will demand same, from 5, isalso
to demand
a demand demand of Method'
change demanded but to
price
inwhich be demand Therefore, Earlier,
unitary
(d) (c) of
even of sales now,delivers to ofthis called
he less
become Unitary
Zero(d) (c) perCentage
percentage
would inelastic (Ea) demand
of demand. method, or
of the than in after
of it
the its of is the he
tnewspapers
increases the as'Flux
consume identify 'M athematicat
go0d want unity habitualprice. measure a a
concerningdegree is
price newspaper newspaper elasticity
goods unítary,. changecharnge
o to to Methd
O of rise the 7,. in in in is
 NATIONAL 0NCOME AND
RELATED AGGREGATES UNIT:3

MACROECONOMICS
Macroeconomics is that branch of economics which deals with economic aggregates such as
income, unemployment, business cycles and national
inflation etc.
BASIC CONCEPTS IN MACROECONOMICS
"Consumption goods are the goods and
services which are consumed by the individuals and the
for the satisfaction of individual needs and
wants. Examples are households
car, food, education and clothes etc.
"Capitalgoods are the goods or fixed assets which are used by the firms for the further
and services. Such goods are durable in nature such as production of goods
machines, equipment and tools etc.
"Final goods are the goods which have crossed the production line,
by the end users whether households or firms and do that means they are ready to be used
not require any further processes on them.
"Intermediate goods include raw materials and semi finished goods on which further production
are still left to be done. This means these goods have not
crossed the production line.
processes
" Stock refers to a quantity of a variable which is
measured at a particular point of time. For example, the
stock of money in the economy at a particular date.
"Flow refers to a quantituy of a variable which is measured over a particular period of
time, such as the
disposable income in the economy.
"Gross investment refers to the expenditure on the new capital goods and inventory stocks of raw
semi finished goods and finished goods in a specific period. material,
" Depreciation, also known as consumption of fixed capital, refers to the loss in the value of the assets due
tonormal wear and tear, expected obsolescence and normal rate of accidental losses in a particular period

CIRCULAR FLOW OF INCOME IN TW0 SECTOR MODEL

Circular flow of income in two sector model refers to the continuoUs flow of goods and services, the factors
of production like land, labour, capital and entrepreneurship and money between the firms and the
household in a specific period.

NATIONAL INCOME
National income refers to the money valve of all the goods and services produced in an economy in a year.
It also represents the aggregate of factor incomes which accrue to the normal residents of a country in a
year.
 Econoles
20|GUET (UG) Question Bank- (a) consumer households
the rest of society.
of the individual benefits metaphor for the (b) government enterprises only
The invisible hand itself is a between supply (c) corporate enterprises only
constant fluctuations that occur equilibrium. It
and demand in order to reach (d) allproducing sectors of an economy
efers to the forces that constantly pushoptimal
suppiy Ans. (d) all producing sectors of an economy
and demand back so that a socially Explanation :
supply is reached.
9. Founder of modern economics is: Demand for intermediate consumption arises
(a) F.Hayek () J. M. Keynes from all the producing sectors of an economy.
(b) Adam Smith (d) Samuelson Intermediate consumption is a national accounts
Ans. (b) Adam Smith concept which measures the value of the goods
Explanation:
and services consumed as inputs in the process
of production. It excludes fixed assets whose
Adam Snmith is known as the father of Modern consumption is recorded as consumption of
Economics. His work explains the concepts fixed capital. The goods and services may be
of the mechanics of morality, markets and either transformed or used up by the production
capitalism within an industrialised society. procesS.
10. Macroeconomics is a contribution of which 13. Demand for final consumption arises in
economist?
(a) J. M. Keynes (c) F. M. Hayek bians (a) household sector only
(b) Adam Smith (d) Samuelson nk6ie (b) government sector only
Ans. (a) .. M. Keynes (c) both household and government sectors
Explanation : (d) neither in households nor in government

John Maynard Keynes spearheaded arevolution Ans. sectorootsmotnt fseein

(c) both household and government sectors
in economic thinking that overturned the
prevailing idea that free markets would Explanation:
automatically provide full employment. Final consumption consists of goods and
11. Which one of the following options is an
economic activity? services used up by individual households or
(a) Listening to music on the radio the community to satisfy their individual or
(b) Teaching one's own son at home collective needs or wants.
(c) Medical facilities rendered by a charitable 14. Identify the item which is not a factor
payment.
(a) Free uniforms to defence
dispensary
(d) A
personnel
housewife doing household duties (b) Salaries to the members of
Parliament
Ans. (c) Medical facilities rendered by a (c) Imputed rent of an
charitable owner occupied a
dispensary building
Explanation: (d) Scholarships given to the
students of
Any activity where goods and services are scheduled caste
excharged for money is an economic activity. Ans. (d) Scholarships given to
the students of
The economic activity of production involves scheduled caste
producing goods and services so that they can Explanation:
be sold in themarket at fair price. The
medical
facilities rendered by a charitable dispensary Factors
is thus considered asan
economic are madepayments are those
to factors of payments, which
because they purchase medicines and activity interest, production e.g., rent,
equipments fromn the market in exchange of
medical to the profit, wages ete. Scholarships given
scheduled caste students is not a
money they get in the form of donations. Since payment,
be
it is a
transter payment and it willfactor
noney is not being exchanged for goods and
services in any of the other situations, they may 15. In
incuded in
National Income. not
not be considered as economic activity. aclosed
(a) foreign economy,
sector is not included.
12. Demand for intermediate (c) households
in
consumption arises (b) government
Ans. (a) (d) firnms
foreign sector
 Explanation : National Income and Related Aggregates 2l
In aclosed economy, alleconomic Explanation:
activities take Stock variable is defined as a variable
place within geographical boundaries. Aclosed which is
economy has no economic relations with any measured at a particular point of time. Stock
other country, therefore foreign sector is not is not time dimensional. It influences the flow.
included in it. It has only two sectorS: Example: wealth, capital,etc.
19. Which of the following is
(a) Household sector: It best suited as an
includes consumers of example of a normal resident of India?
goods and services. Households are also the
owners of the factors of production. (a) US national working in WHOoffice in New
Delhi
(b) Producer sector: It
includes all
units in the economy. For the producing (b) An Italian national working in IMF office in
of goods and services, the production Mumbai
firms purchase (c) Ambassador of Zaire to India
factors of production.
16. National Income includes: (d) Indian Representative to UN
Ans. (d) Indian Representative to UN
(a) Old-age pension
(b) Money sent by an NRI to his family Explanation :
(c) Transfer payment from rest of the India's representative to UN is the best example
world for normal resident of our country because his
(d) None of the above
Ans. (d) None of the above
economic interest lies in the country.
20. is the factor remuneration received by
Explanation : the households for providing their
services to firms as workforce. productive
National Income is the value of all final goods (a) Rent
and services produced within the (c) Interest
domestic (b) Wages (d) Profit
territory of the country by the normal residents Ans. (b) Wages
of the country in the current year. It
does not
include transfer payments such as pension or Explanation:
income from non-domestic territories. The income that resource
17. Which of the following is not a owners earn in return
for land resources is called
payment?
transfer rent. The second
factor of production is labour. The
(a) Interest on national debt earned by labour resources is called wages income
is the largest source of income for and
(b) Retirement pension most people.
The third factor of production is
(c) Old-age pensionalt bsoll8 capital. The
income earned by capital is called interest.
(d) Donations 21. A unit of TV is:
Ans. (a) Interest on national debt n (a) Asingle-use capital good.
Explanation : A (b) A single-use consumer
(c) Adurable consumer good.e
lransfer payments are unilateral (one sided good.s
(d) All of the above.
payments), no corresponding flow of goods and Ans. (c) A durable consumer good.
services are held in the Current year in such a
Case. For example: donation, old age pension, Explanation :
unemployment allowance etc. Interest on A durable good or a hard good or
consumer
national debt is not a transfer payment. durable is agood that does not quickly wear out
18. The or, more specifically, one that yields utility over
economic variable which is measured at a
given point of time is known as time rather than being completely consumed in
(a) fixed inventory one use.

(b) flow variable 22. Which of the following is included in the

National Income of any country?
(c) stock variable (a) Sales tax
) none of the (b) Road construction
Ans. (c) stock above (c) Finarncial help to earthquake victimns
variable (d) Services of a housewife
 Bank-Economics
92CUET (UG)Question 26. In case of a planned economy, the decisiona
Ans. (b) Road construction are taken by the:
Explanation: (a) Producers (c) Government
It will be included in
the National Income (b) Consumers (d) Voters
and leads
formation
as it is a part of capital Ans. (c) Government
to production of goods and services in the
economy.
Explanation :
not constitute
23. Which of the following does Acentrally planned economy is an economy
intermediate consumption?
where decisions on what to produce, how to
(a) Non-durable goods received in kind by the produce and for whom toproduce are taken by
govemment as transter payments
the government.
(b) Painting of buildings
27. Choose the correct pair of statements from the
(c) Expenditure on minor repairs of a building
by households following given sets of statements in columns
Iand II.
(d) Direct purchases made from abroad by the
govermment Column I Column II
Ans. (d) Direct purchases made from abroad by the
1. Economic A. Primary Sector
govemment
territory
Explanation: 2.. Private income B Income accruing to
Intermediate consumption consists of the the private sector
value of the goods and services consumed as from all sources
inputs by aprocess of production, excuding 3. Personal income C. Own income
fxed assets whose consumption is recorded as 4. Real national D Part of personal
consumption of fixed capital. The goods and income income
services may be either transformed or used up
by the production process. (a) 1-A (c) 3-C
24 Domestic factor income does not consist of (b) 2-B (d) 4-D
which one of the following? Ans. (a) 2-B
(a) Compensation of employees Explanation:
(b) Operating surplus
(c) Mixed income of self-emnployed Income accruing to the private sector from
(d) Value of intermediate goods all sources, i.e., by way of factor income and
Ans. (d) Value of intermediate goods transfer income, is called private income.
28. Read the following statements carefully
Explanation: and choose the correct alternative from the
Domestic factor income is the compensation of following:
empioyees and operating surplus originating Statement 1: The part of personal income that is
in domestic production. Domestic factor spent on consumption by the producer is called
incorne consists of compensation of employees, disposable income.
operating surplus and mixed income. Statement 2: The part of personal income which
25. The sum of factor payments is equal to: is either spent on consumption by the
a) Domestic Income or saved is called household
(b) National Income (a) Both the
disposable income.
statements are true.
(c) Per Capita Real Income (b) Both the statements are
false.
(d) Per Capita Nominal Income (c) Statement 1 is true,
and Statement 2 is false.
Ans. (b) National Income (d) Statement 2 is true,
and Statement 1is false.
Explanation Ans. (d) Statement 2 is
true, and Statement 1 is
false.
The value added basically encompasses the
productive capacity or contributions of the
Explanation
The partof personal income whichis either spent
factors/inputs of production in the entire on consumption by the
called disposable income.household or saved is
production process in the econony.
Disposable incomne is
 net inome. It's the amount left over atter taxes.
Disposable Income Personal Income-Taxes.
Read the following statements carefully
nd choose the corTect alternative from the
following:
Statement 1: Stock variables are the variables
whose magnitude is measured at a particular
point in time.
Statement 2: Production, consumption, and
capital formation are the vital (Basic) economic
activities.
(a Both the statements are true.
b Both the statements are false.
c) Statement 1 is true, and Statement 2 is
false.
d) Statement 2 is true, and Statement 1 is false.
Ans a Both the statements are true.
Explanation:
Stock variables are defined as any quantity,
which is measured at a particular point of
time eg, number of machines in a plant at a
particular date.
The three vital economic processes of an
economy are production, consumption and Ans. (b) Production method
investment. Although these are interrelated,
production is a process of the creation of goods
and services Consumption is the use of goods
and services for the satisfaction of human wants.
30. Land, Labour, Capital and are the four
factors of production and rent, wages, interest
and profits are the incomes of the individual
faciors.
(a) Entrepreneurship
b) Enterprise
fc) Rent
(d) None of the above
Ans. (a Entrepreneurship
Explanation:
Land, Labour, Capital, and Entrepreneurship
rent,
are the four factors of production and of
the incomes
wages, interest, and profits are
theindividual factors.
31. Mixed incomne ofthe self-employed means:
proprietors
taj Gross profits received by enterprise
(b) Rent, interest arid profit of anwhich are not
payments
(c) Combined factor
distinguishable
workers
(d) Wages duetofarnily
Ans, (c) Combined factor payments which are not
distinguishable
National income and Related
Explanations Acareoates23
Mixed income of the
combined factor payments self-enployed means
of rent, wages,
interest and profit received by the
self-employed
professionals,which are not distinguishable.
32. Net value added is equal to.
(a) Payments aceruing to factors of
(b) Compensation to employees
production
(c) Wages plus rents
(d) Value of output minus depreciation
Ans. (a) Payments accruing to factors of production
Explanation:
Net value added is equal to payments accruing
to factors of production ie., rent, wages, interest
and profits.
33. The net value added method of measuring
National Income is also known as:
(a) Gross output method
(b) Production method
(c) Industry of origin method
(d) All of the above
Explanation :
The net value added method of measuring
national income is also known as production
method. In this method, value of all final goods
and services is added to get national income
34. National Income differs from net
national
product at market price by the amount
(a) current transfers from the rest of the world
(b) net indirect taxes
(c) national debt interest
(d) it does not differ
Ans. (b) net indirect taxes
Explanation:
National income is the net national product at
factor cost (NNPrC), it is the cost at factory level
National product at market price incudes the
taxes prevailing in the country on that product.
Thus, NNPMP Net Indirect taxes = NNPC r
NI.
35, Net national product at factor cost is:
(a) Equal to National Income
(b) Less than National Income
(c) More than National Inieome
(d) Sometimes less than National ncome and
SOEmetimes more than it
 |CUET(UG) QuestionBank-
Economics which can be satisfied by public goods. The
public goods are supplied by the government
26 national income
Ans. (a) Equal to
for the benefit of the people. These goods ar
Explanation:
equal to helpful in benefiting the economy as a whole.
product at factor cost is
Net national
NNPEC refers to Net 40. Value of output can be explained as:
National income, because
National Product (NNP)which is a
measure to (a) Sales + change in stock
estimate National Income. (b) Sales - change in stock
measured over a period of
36. A variable which is variable.
(c) Sales
time is called
(c) expenditure (d) None of the above
(a) income
(d) flow Ans. (a) Sales + change in stock
(b) stock
Ans. (d) ow Explanation :
Explanation : Value of output can be expressed as sum of sales
either
and change in stock because output is
Flow variable is defined as any quantity sold or accumulated as unsold
stock.
measured over a period time.
41. The difference between gross capital formation
37. Which of the following is not a component of
domestic income? and net capital formation is:
(a) Operating surplus (a) Net factor income from abroad
b) Compensation of employees (b) Depreciation
(c) Net factor income from abroad (NFIA) (c) Business fixed investment
(d) Mixed income (d) Change in stock
Ans. (c) Net factor income from abroad (NFIA) Ans. (b) Depreciation
Explanation : Explanation :
NFIA is not a domestic income because it is the Depreciation is the consumption of fixed capital.
income earned from foreign lands. Domestic It is defined as fall in the value of fixed capital
income is the income earned within the country. goods due to normal wear and tear and foreseen
38. Which of the following is not incuded in obsolescernce. It is calculated by subtracting
National Income? grOss value of capital formation from the net
(a) Profit value.
b) Wages 42. Which of the following willbe treated as final
(c) Rent goods?
(d) Gifts from abroad (a) Seeds used by a farmer in his field A
Ans. (d) Gifts frormn abroad (b) Tyres purchased by a transport company
Explanation: (c) Unsold stock of a good lying with the seller
Cifts from abroad are a type of transfer (d) Computers purchased by a dealer
payments whhch do not create any additional Ans. (c) Unsold stock of a good lying with the seller
output or income in the economy, hence, they
are not induded in National Incone. Explanation:
39, produces goods and services for Unsold stock of a good lying
the satisfaction of collective wants. the final good because it with the seller 1
(aj Households sector further levels of procuction won't undergo any
and will be directly
(b) Producing sector
purchased bythe
{c) External sector 43. 1f factor cost is consumer.
(d) Government sector
means that: greater than market price, 1
Ans. (d) Goveriment sector
(a) Indirect taxes< subsidies
Expianation (b) Indirect taxes >
Collective wants are wants of the people living subsidies
(C) Indirect taxes subsidies
in communities Or groups
who have wants (d) None of the above
 Hotionni fneone ond Related Agregtes 25
Ans.(a) Indirect taxes ubsidies
(a) Savingsby households
Explanation
(b) Government expenditure
wfactor cost is greater than market price, thern it () Investrment
means Indiect taxes <
Subsidies. Market price
as beless than factor cost when subsidies will
(d) Export payments
Ans. (a) Savings by households
he rmofe than the iidirect tax. lence, market
kce indirect tax*subsidies Factor cost Explanation:
Broker's commission on Leakages refer to the outflow of money frotn
sale/purchase
second hand goods is included in National
of
the economy Savings from households, is the
Income as: flow of money from the economy to the banks
(a) Itis a part of gross capital formation as deposits, this money is not used back into the
b) tis a part of compensation of employees economy unless it is used as investrnent by the
ich R is an income earned from rendering firrms.
productive services in the currentyear 47. NationalIncome incudes:
d) None of the above (a) Factor incorme
AS. (c) It is an income earned from rendering (b) Transfer incone
productive services in the current year (c) Both (a) and (b)
Explanation: (d) Neither (a) nor (b)
Broker's commission on sale ad purchase Ans. (a) Factor incorne
of second hand goods is included in national Explanation:
inoome because it is an incone earned for
The factor incone of all normal residents of a
rendering productive services of the current country is referred to as the Nationa! InCome,
year.
while factor income and current transfers
45. Which of the following concepts is used to
together are referred to as private income.
differentiate between market price and factor 48. The difference between Private
cOst? Income and
Personal Income is:
(a) Depreciation
b) Net indirect taxes
(a) Corporate tax
(b) Corporate savings
c) Net factor income from abroad
(c) Dividend
Kd, Net exports
As. (b) Net indirect taxes (d) Corporate tax and corporate savings
Ans. (d) Corporate tax and corporate savings
Explanation : Explanation:
The market price aggregates are the values
Personal income is the sum of earned incomes
prevailing at the market, ie,, inclusive of the
Jaxes whereas, the values at factor cost are and current transfer incomes. Again, personal
the values at the factory level. Market price income is different from private income
basically the current price at which goods because of components of private income
rd services are bought or sold in the market namely corporate tax and undistributed profit
t inciudes the cost of production in the of corporate enterprise are not incucded in
form personal income.
Wages, rent, interest, profit, etc, whereas,
factr cost nay fiot reflect the effect of taxes 49, In which type of economy, domestie ineone is
Ard subsidies uniike market price. lt takes equal to national income?
into
dccount only of the actual cost of production (a) Open economy
including the profit. Hence, the. reason for (b) Closed economy
difference between
sindirecttaxes and
market price and factor cost (c) Both (a) and (b)
46, One of the subsidies. (d) Neither (a) nor (b)
following
from circular flow of
is an example of leakage Ans. (b) Closed economy
incOme:
CUET (UG)Question Bank- Economics
Explanation: 53. Continuous sectoral flow of goods
income is in an economy is known as and moNey
In a closed economy, domestic (a) real flow (c) circular flow
no
equal to National Income because there is (b) nomninal flow
intervention of the foreign incomes in such an (d) none of these
Ans. (c) circular flow
economy.
50. Value added refers to: Explanation:
(a) Production of durable goods The circular flow of income or circular fov.
(b) Output- intermediate consumption is a model of the economy in which the
() Production of non-durable goods exchanges are represented as flows of major
(d) Expenditure on intermediate goods goods and services, etc. between money,
economic
agents.
Ans. (b) Output - intermediate consumption
54. Continuous sectoral flow of goods and services
Explanation: in an economy is known as
Value-added can be described as a difference (a) Real flow (c) Circular flow
between the total inputs and outputs. It explains (b) Nominal flow (d) None of these
the economic enhancement of a business and its Ans. (a) Real flow
offerings before it is presented for trade to its
customers. In other words, it is the additional Explanation:
value that is created above the original cost of a Real flows depict the way that commodities
good or service. and products and services are produced and
51. Depreciation of fixed capital assets refer to consumed in the economy.
55. In a closed economy, firms depend on the
(a) Normal wear and tear households for the supply of
(b) Foreseen obsolescence (a) goods and services
(c) Normal wear and tear and foreseeno n (b) factor inputs
obsolescence
(c) both (a) and (b)
(d) Unforeseen obsolescence
Ans. (c) Normal wear and tear and foreseern (d) none of the above
obsolescence Ans. (b) factor inputs
Explanation : Explanation :
Depreciation of fixed capital assets refers to Households and firms depend on each other
normal wear and tear and foreseen obsolescence. in the circular flow of income. Households
Depreciation is also called consumption of provide factors of production to firms i.e. Land,
fixed capital. Loss of fixed assets happen on labour, Capital, Entrepreneur. In return firms
account of normal wear and tear, normal rate of provide payments to these factors in the form of
accidental damages and expected obsolescence. rent, wages, interest, and profit. Firms provide
52. National Income is the sum of factor goods and services to households and in return
incomes
accruing to : households spend money to purchase them.
(a) Nationals 56. In a two-sector economy, the
(b) Economy territory equilibrium is: condition o
(c) Residents (a) I=s
(d) Both residents and non-residents (b) 1+ G=S+T
Ans. (c) Residents (c) I+G +X=S +T+ M
Explanation: (d) C+I=1+S
National Income is the sum total of factor
Ans, (a) I=S
incomes earned by normal residents of a Explanation:
country in the form of rent, wages, interest and In a
profit in an accounting year. sourcetwo-sector
of economy, saving is the ory
withdrawal and investment is the
source of injection. Thus, an ony
economv is said
 be in
equilibrium when saving (i.e., withdrawal)
equals investment (i.e., injection). Ans. (a) 1-A
National Income and Related Aggregates | 27
57. Subsidy implies:
(a) Selling the Explanation:
product to the government at Durable goods used in the production process
higher prices. are called capital goods.
(b) Selling the product below the cost of 60. Choose the correct pair of
production. statements from the
(c) Selling the product at loss.
following given sets of statements in columns
Iand II.
(d) Selling the product at cost
taxes.
plus indirect Column I Column II
Ans. (b) Selling the product below o 1. Normal resident A. Geographical
the cost of area
production
2. Consumption B Administered by
Explanation: goods a government
A subsidy is a benefit given to the 3. Normal resident
business firm or individual, C. Aperson who
institution, usually by the lives in a country
government. It is given to remove samne type of 4. Net factor income D. Income paid to a
burden and it is often considered to be in the
resident
overall interest of public. It leads to fall in price
of subsidised product. (a) 1-A (c) 3-C
58. Which of the following affects National (b) 2-B (d) 4-D
Income? Ans. (a) 3-C
(a) Goods and Services tax Explanation :
(b) Corporation tax
(c) Subsidies A person who lives in a country and whose
centre of economic interest also lies in the
(d) None of the above
Ans. (c) Subsidies economic territory of that country is called a
normal resident of that country.
Explanation : 61. Value Added is the excess of Over that
of intermediate goods.
Subsidies are given by the government to reduce
the cost of production of goods and services. (a) value of input (c) both (a) and (b)
Thus, while calculating National Income, the (b) value of output (d) none of these
net indirect taxes are subtracted, while the Ans. (b) value of output
subsidies are added.
Explanation :
59. Choose the correct pair of statements from the
following given sets of statements in columns Value added is the excess of the value of output
Iand II. over that of intermediate goods.
Column II 62. National Income and domestic income will be
Column I in aclosed economy where net factor
Durable goods
1.Capital goods A.
used in the
income from abroad is zero.
(a) constant (c) zero
production (d) none of these
process (b) equal
B.
Fall in the value Ans. (b) equal
2.Consumption of fixed capital Explanation :
goods
goods National Income and domestic income will be
Production net factor
3. Depreciation equal in a closed economy where
process income from abroad is zero.
D. Consumption which are
4.Capital goods 63, Transfer payments are

goods received without rendering any productive

2-B services.
(a) 1-A (b)
() 3-C (d) 4-D
 g iVOihe
muKine tsuthe theNNin
hae standarg
b
calult deprekatie
eN
he weseta
seling
ot ttvty in
avege
NE the iNtN
NNH
eweatke
atiy incadedmeans oevaaae calulate UNNNtopetathy
a otlienatiwt
r Income population is pe Partioulars
any
the punchasing ttone the qualityo
be data ()
Caleutate
depreckaton
activityis
HenEwil NNPppulatiot
(a) NN aloveNNPpulatin
Population
() (a)Ans att a
erte deternie
following (i) Abrad(NEA)
|rewiatn
Natienal
monetarvinome atioml
money are the îtone
Explanation:services.country capital the
afthe :Explanatian att and subsity: ()
population,
and NNh
()
GNI IO0
of to
providing capita Total None
Economic ot
capita uset
e
amount inome
or
living caita the AHhaldk
From SNo (0)
and Per (b) (d) Per ot er
67. 68 At
andin haveia aTherofore,
a ot
efforts
exchanged.
money to Socialare are Transter productive
represents prevailing
while
of
time
taxes. pertod
period,
(d) pointmay varable(ay (NE
governments ()
point ime, tne
insurancethat indirect that
the
to need. payments. specttiewhichHow of
of refer payments correctly product of
time. ine,nit tocontributes
payment
are any taxestaxes taxes at
net exiating
2022),
A per
commonly
services in
those unemploymentrendering taxestaxesindirect a of one of
-Eeonomics central transfer indirect
indirect of inlusive 31, past period
measited ativity
Production
(b) activity
(c) activity
Bconomic
a unilateral following Indirect at quantiy
payments
Unilateral
(a) payments
payments
Trilateral
() payments
Unilateral
(a) Indirect value a
measuredDecember
the whith activity
called activity
Viable
(d)
Bilateral
(b) above is or to Price? at
over an
payment
goods and
paymentsmoney of without Net Net Net the is defined period in over Econom
point,
(a) (b) period
point
period, be actiyity is (a)
Primary
Bank - +
+ cost cost Explanation: define Explanation:
a accumulated
the Explanation: state, and typesare
no the Market + cost-cost
cost iprice
s itmarket, represents
would country
(say, measured
ouestion of transfer redistribute are point, is
None whichTransfer
local, SecurityCommon
payments
received of
services. Factor FactorFactor
Factor
Factor are stock fime flowyear)Any (c)
Whichatvalue Marketthe Stocks
flows a
(UG (a) A 66, Ans.
28CUET (d) A for by (a) (b) (c) (d) (a) in Ans.
Ans. 64. Ans. 65.
28| CUE (uoouestion tonk Economics
Explanation :
(a) Unilateral payments
(b) Bilateral payments Economic activity is the activity of making
(c) Trilateral paynents providing, purchasing or selling goods
(d) None of the above and services. Hence, any activity involvine
monetary income will be included in the C
Ans. (a) Unilateral payments of the country.
Explanation : 67. Per capita National Income means:
A transfer payment is a payment of money (a) NNP/population
for which no goods or services are exchanged. (b) Total capital population
Transfer payments commonly refer to efforts (c) Population NNP
by local, state, and central governments to (d) None of the above
redistribute money to those in need. Social
Ans. (a) NNP/population
Security and unemployment insurance are
common types of transfer payments. Transfer Explanation:
payments are unilateral payments that are Per capita national income is a measure of the
received without rendering any productive amount of money earned per person in a nation
services. Or geographic region. Per capita income can
64. Which of the following correctly represents be used to determine the average per person
value at Market Price? income for an area and to evaluate the standard
(a) Factor cost + Net indirect taxes of living and the quality of life of the population.
Per capita income for a nation is caleulated by
(b) Factor cost -Net indirect taxes
dividing the country's national income by its
(c) Factor cost + Indirect taxes
population.
(d) Factor cost - Indirect taxes 68. From the following data, calculate depreciation
Ans. (a) Factor cost + Net indirect taxes and subsidy:
Explanation : S.No. Particulars Rin
Crores)
Market price is the value of a product prevailing 26,000
in the market, it is inclusive of net indirect taxes. () NNPrC
of time while (iü) GNPMP 45,000
65. Stocks are defined at a
flows are define over of time. (iii) Depreciation 3,000
(c) point, point (iv) Net Factor Income From 6,500
(a) point, period
(d) period, period Abroad(NFIA)
(b) period, point dan (v) Indirect Business Taxes(IBT) 1,500
Ans. (a) point, period
) Calculate depreciation.
Explanation: (a) 15,500 (c) Z17500
specific time, and
A stock is measured at one (b) 16,500 (d) None of these
point in
represernts a quantity existing at thatmay have Ans. (c) 17500
which
time (say, December 31, 2022),
accumulated in the past. A flow variable is Explanation :
Therefore, a
measured over an period of time. GNPMP=NNPrC+ depreciation +IBT
time (say a
flow would be measured per unit of GNPMP-NNPFC= depreciation +IBT
year). GNPMP- NNPFC- IBT = depreciation
contributes to the GNP of
66. Any activity which Or, Depreciation=GNPMP-NNPFC-IBT
a country is called:
(a) Primary activity
=45,000-26,000- 1,50O
=17,500 Crore
(b) Production activity (ü) Based on the given data, determine
amount o
(c) Economic activity subsidy.
(d) Viable activity (a) -14,500
(c) 14,500
activity (b) 13,500
Ans. (c) Economic (d) 10,000
Ans. (a) -14500 National Income and Related
Explanation: (a) GDP Aggregates 29
(c) NNP
(b) NDP
GNPMP =NNPrC+ depreciation
+IBT - Subsidy Ans. (a) GDP
(d) GNP
Subsidy = NNPrC-GNPMp +
-26,000 -45,000 +3,000 + 1,500depreciation +IBT Explanation :
69, From the
following =(-14,500)
data, calculate Personal The GDP is the total of all
Income and Personal in an economy, within the
value added created
Disposable Income(PDI): the country. The value domestic territory of
of goods and services added means the value
S.No.
Particulars R in that have
crores) minus the value of the goodsbeen produced
and services
()NDPrC needed to produce them.
(ii) Undistributed profit 22,500 71. Output means
unless stated
(iii) Corporate tax 2,100 otherwise.
(iv) NFIA 2,200 (a) gross output at MP
5,400 (b) net output at MP
(v) Transfer income
2,400 (C) gross output at FC
(vi) Interests received (d) none of the above
households by 3,000
Ans. (a) gross output at MP
(vii) Interest paid by
households 4,500 Explanation:
(Vii)Personal tax 800 Output is the value of gross output at
i) Calculate the price. market
amount of Personal Income from 72. A growing
the data given above. country is the one whose:
(a) 726,700 crore (a) GNP is rising at
(c) 721,000 crore
n (b) GNP is current prices
(b) 22,500 crore (d) 18,000 crore constant at constant prices
Ans. (a) 26,700 crore i (c) GNP is
rising at constant prices
(d) None of the above
Explanation : Ans. (c) GNPis rising at
Personal Income(PI)= NDPFc+ NFIA +Transfer constant prices
Income -Undistributed Explanation:
Profit-Corporate
(Interest Paid by households -Interests tax
received
- A growing country is one
whose
by Households) constant prices is rising. GNP stands forGNP at
- Gross
=22,500 +5,400 + 2,400 2,100 2,200 National Product. It is the
the services and goods market value of all
- (4,500 -3,000) by the residents of a produced per year
-726,700 Crore. country- both within the
) What should be the amount of
geographical boundaries and outside.
73. Based on the given data,
Personal answer the questions
Disposable Income?
(a) 23,700
below:
(c) 79,500 S.No.
(b) 19,700 Particulars in
(d) 13,400
Ans, (a) 23,700 crores)
(i) Private Final
consumption 11,000
Expl anat
Personal
ion: (ii)
Expenses
Compensation of employees
Di sposable Income(PDI)
Income(PI)-Personal Taxes
Personal (ii) |Net factor income from(-)1150
800

abroad
-24,500 -800
(iv) Gross domestic capital
70, Sum total=23,700 Crore.
of final goods and services produced formation
300

in
domestic
year is called territory of an economy during a (v) Consumption of fixed capital
(vi) Net indirect taxes
450
225
 30 CUET(UG) Question Bank Economles
(c) GNP at FC + Net CUrrent
(vi) Opening stock
(viii) Mixed income of self
450
350
ROW transfers ron
(d) Personal disposal income + Net foe
employed income from abroad
{ix) Government final 450
Ans. (a) National Income + NIT + Net
consumption expenditure transfers from abroad Curren
(x)Profits 550
225
Explanation:
(xi)Exports
(xii)Clesing stock 850 National disposable income =National Incomte
+Net indirect taxes + Net current transfers from
(xiii) Imports 150
rest of the world. Net Disposable Income is the
(xiv)Rent 490 Income which is at the disposal of the nation a
(xv)Interest 625 a whole for spending
75. Domestic product is equal to:
G) Calculate Net National Product at factor cost
(a) National product + Net factor income from
(NNPr) by expenditure method. abroad
(a) 15,500 (c) 11,925 (b) National product - Net factor income from
(b) 12,600 (d) 8,885 abroad
Ans. (c) 1l925 (c) National product /net factor income from
abroad
Explanation:
(d) National product x Net factor income from
National Income (NNPEC) = Private final abroad
consumption expenses + Government final Ans. (b) National product - Net factor income from
consumption expernditure + Gross domestic abroad
capital formation (Closing stock - Opening
stock) +(Exports-Imports) +Consumption of Explanation:
fixed capital +Net factor incomes from abroad Domestic product is produced within the
-Net indirect taxes country thus it is exclusive of the NFIA, whereas
-11,009 +450 +300+ (850- 450 ) +(850- 150) + National Income, the net national product at
450 +(-1150) -225 factor cost is inclusive of the net factor incoms
11,750+ 400+700+450-1,150- 225 from abroad.
13,300- 1,375 76. Real national income means:
i1925 crores (a) National income at current prices
Calculate Net national Product at factor cost (b) National income at factor prices
(NNP)by Income Method: (c) National income at constant prices
ay t8,25 ctores (c) 1665 crores (d) National income at average price of pa
(d) 2,550crores five years
Ans. (c) National income ateonstant prices
bplaation: Explanation:
Natiarial incse tNNP It is the money value of final goods and service
ermpleyes+ Operating surplusCompensation
of
(kernt +Interest produced by normal residents of a county
*Profits) Mixed incone of in a yea, measured at base year price. It
Net facto incote from abroadself employed+ measure India's National Income of 2013-20
A+(40+ 629 + 590)+ 358+(-1150) at thhe prices of 2004-2005, then it is ternmed
'Nationalncome at constant price.
77. Net national product at factor cost wi
74. Net natiornal Benerally bes
disposable ineoms is equal to:
(a) Natioal Irsone (a) Equal to National Income
NIT Net current (b) Less than National Income
transfers from abroad ) More than National Income
(b) NNP at MP +Deprecation
(d) None of the above
 Ans.(a) Equalto National Income National Incomeand Related Aggregates 31
Explanation: from economic territory and aboard.
m NNP at market price includes indirect While
INP at factor cost is gross national product at so both the concepts are taxes
also
different.
81, Cho0se the correct pair of
or market price minus depreciation. Net National statements fron the
Product at factor cost is also called as National following given sets of statements in columns
nt ncome. Net National Product at factor cost is Iand I.
al to sum total of value added at factor cost
A net domestic product at factor cost and net ColumnI Column Il
factor incOme from abroad. 1. Net Indirect TaxesA. Indirect Taxes
ne
%Given the following data, Subsidies
(). GDPMP=406 2. Net Exports B. Exports +
(i) NFIA =()3 Imports
n) Consumption of fixed capital - R39
(iv) NIT =43
3.Imports C. Exports +Net
Exports
The value of National Income would be: 4. Factor Cost D. Market Price
(a) R321 (c) 260 + Net Indirect
(b) 406 (d) 127 Taxes
Ans. (a) 321 (a) 1-A (c) 3-C
T9. When will NNPrc be equal to NDPrC? (b) 2-B (d) 4-D
(a) When depreciation is zero Ans. (a) 1-A
b) When indirect taxes are equai to subsidies
fc) When direct taxes are zero
Explanation:
(d) When NFIA is zero The difference between indirect taxes and net
Ans. (d When NFIA is zero indirect taxes is of subsidies because.
Net Indirect Taxes = Indirect Taxes - Subsidies
Explanation: 82. Cho0se the correct pair of statements from the
NNPEC is defined as the measure of the factor following given sets of statements in columns
t tarnings of the residents of a country, both Iand II.
from economic territory and abroad. Therefore, ColumnI Column II
NNPrC Will be equal to NDP at factor cost when 1 Transfer
NFIA is zero. A.Two types
payments
tis calculated by formula:
2. Product flow B. Circular flow of
NNPEC=NDPgC +NFIA income
S0. Whichof the fol!lowing statements is incorrect? 3. Net factor income C. Exports +net
la) Gross Domestic Product (GDP) at Market from abroad exports
price =GDP at factor cost plus Net Indirect 4. Transfer D. Old age pension,
taxes.
b) Net National product (NNP) at Market
payments scholarships ete.
(a) 1-A (c) 3-C
price =NNP at factor cost.
(b) 2-B (d) 4-D
1C} Gross National Product (GNP) at Market
price =GDP at Market príce Plus Net factor Ans. (d) 4-D
ncome from abroad. Explanation:
9) Net National Product (NNP) at factor cost = Transfer payments are unilateral payments that
Ans. (b) National Income.
Net National product (NNP) at Market
are received without rendering any productive
services. For example, old age pension,
Price aNNP at factor cost. scholarships etc.
Explearning
NNPC anatiisoofn:thedefinedresidentsas theof themeasurecountryof factorboth 83. Read the following statements carefully
and cho0sé the correct alternative from the
following:
32CUET qUGi Question Bank- Soonomics
Statement 1: The formula for converting Explanation:
National Income at current prices into National The formula for
Income at canstant prices: converting
current prices into National National Income at
National Income at Constant Prices National Income at constant
prices:
Income at Current Prices/ Price Index of Current
Year x Prce Index of Base Year National Income at Constant Prices = National
Statement 2: The formula for converting Income at Current Prices / Price Index of Current
Year x Price Index of Base Year.
National Income at current prices into National
Income at constant prices: 84. The sum of net value at FC of all
the
National Income at Constant Prices = National units in domestic territory gives: producing
Income at Current Prices x Price Index of (a) GDP at MP (c) NDP at MP
Corrent Year x Price Index of Base Year (b) GDP at FC (d) NDP at FC
(al Both the statements are true. Ans. (d) NDP at FC
b) Both the statements are false.
Explanation :
Statement 1 is true, and Statement 2 is false.
d Statement 2 is true, and The sum of net value added at
Statement l is false. factor cost of all
Ans. c Statement 1 is true, and theproducing units of an
Statement 2 is false. domestic product at factor economy gives Net
cost because every
unit is calculated on factor cost.