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NATIONAL INCOME TEST

Class 12 - Economics
Time Allowed: 1 hour and 30 minutes Maximum Marks: 60

Section A
1. In the production of sugar, sugarcane is: [1]

a) a final good b) Both a final good and a capital good

c) a capital good d) an intermediate good

2. Capital goods are those goods: [1]
A. which are used in the production process for several years
B. which are used in the production process for a few years
C. which involve depreciation losses

a) Both B and C b) Both A and B

c) Both A and C d) All of these

3. The difference between Private Income and Personal Income is ________. [1]

a) Corporate tax b) Dividend

c) Corporate savings d) Corporate tax and corporate savings

4. NDPFc is equal to [1]

a) NDPMP - subsidies b) NDPMP - indirect taxes - subsidies

c) NDP mp - Net indirect taxes d) NDPMP + Net indirect taxes

5. Which of the following will you exclude while estimating national income by expenditure method? [1]

a) Mixed income of self employed b) Operating surplus

c) Rent paid d) Scholarships paid by the government

6. Difference between value of output and value added is: [1]

a) Net Indirect Taxes b) Change in Stock

c) Consumption of Fixed Capital d) Intermediate Cost

7. Net factor income from abroad is the income earned by: [1]

a) Non-residents abroad b) Residents abroad

c) Residents in the domestic territory only d) Non residents in the domestic territory
Section B
8. Assertion (A): Payment of corporate tax by a firm is also not included in national income. [1]
Reason (R): It is a transfer payment and is already included in profits. Corporate tax accrues to the government.
It is not received by the owners of factors of production. Hence, it is not a factor income.

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 a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

9. Assertion (A): Income from illegal activities like smuggling, theft, gambling, etc., should not be included. [1]
Reason (R): Including illegal activities will cause the problem of double counting.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

10. Assertion (A): The value of intermediate goods is included in the national income estimates. [1]
Reason (R): Including intermediate goods separately will inflate or overestimate the national income.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

11. Assertion (A): Production of services for self-consumption are not included in national income. [1]
Reason (R): Domestic Services are already included in the value of final goods. If they are included again, it
will lead to double counting.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

12. Assertion (A): Indirect taxes are deducted from NNP at market prices to calculate national income. [1]
Reason (R): Indirect taxes accrue to the government. It is a transfer payment, not a factor payment.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

13. Assertion (A): Operating Surplus does not arise in the general government sector. [1]
Reason (R): General Government produces goods and services with the aim of earning profit without an
intention of social welfare.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

Section C
14. State True or False: [5]
(a) Change in inventories is a stock variable. [1]
(b) Capital goods involve loss of value on account of their depreciation. [1]
(c) Gross domestic capital formation is always greater than gross fixed capital formation. [1]
(d) Value addition can also take place even when the commodity does not go through any transformation. [1]
(e) Sales by a firm includes sales to domestic buyers only. [1]
Section D
15. Fill in the blanks: [6]

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 (a) Consumption goods have ________ demand, while capital goods have ________ demand. [1]
(b) Only ________ obsolescence is considered for the estimation of depreciation. (expected/unexpected) [1]
(c) Profit = ________ + Dividend + Retained Earnings. [1]
(d) ________ refers to market value of all goods and services produced during a period of one year. [1]
(e) GDP(FC) = GDP(MP) - ________ (factor cost/net indirect taxes) [1]
(f) Value added is a ________ (Flow/Stock) variable. [1]
Section E
16. Are the following normal residents of Indian Economy : [3]
i. Indians employed in World Health Organisation located in India.
ii. An American tourist staying in India.
iii. Indian working in the USA embassy in India.
17. Increase in per capita real income means increase in per capita availability of goods and services. Does it [3]
necessarily mean rise in the welfare of the people of the country? Give any one argument in support of your
answer and explain the same.
18. Estimate the value of Nominal Gross Domestic Product (GDP) for a hypothetical economy. The values of Real [3]
Gross Domestic Product (GDP) and Price Index are given as ₹ 500 crores and 125 respectively.
19. Calculate NDP at FC by expenditure method and GDP at MP by income method. [3]

Particulars ₹ in crores

(i) Gross fixed capital formation 130

(ii) Private final consumption expenditure 510

(iii) Mixed income of the self-employed 280

(iv) Net factor income from rest of the world (-) 5

(v) Exports 50

(vi) Imports 60

(vii) Compensation of employees 240

(viii) Government final consumption expenditure 70

(ix) Consumption of fixed capital 40

(x) Indirect tax 90

(xi) Subsidies 10

(xii) Rent, interest and profit 90

(xiii) Change in stock 30

(xiv) Interest on national debt 10

20. Explain how distribution of G.D.P. is its limitation as a measure of economic welfare. [4]
21. Giving reason, explain how should the following be treated while estimating National Income. [4]
i. Expenditure on free services provided by government.
ii. Payment of interest by a government firm
22. Calculate gross value added of factor cost : [4]

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 (i) Units of output sold (units) 1000

(ii) Price per unit of output (Rs.) 30

(iii) Depreciation (Rs.) 1000

(iv) Intermediate cost (Rs.) 12000

(v) Closing Stock (Rs.) 3000

(vi) Opening Stock (Rs.) 2000

(vii) Excise duty (Rs.) 2500

(viii) Sales Tax (Rs.) 3500

23. Will the following be included in the domestic product of India? Give reasons for your answer. [6]
i. Profits earned by foreign companies in India.
ii. Salaries of Indians working in the Russian Embassy in India.
iii. Profits earned by a branch of State Bank of India in Japan.
24. (i) How will you treat the following while estimating the national income of India? Give reasons [6]
a. Payment of interest on borrowings by the general government.
b. Increase in prices of the shares of a company.
c. Government expenditure on sanitation.
d. Growing vegetable in a kitchen garden of the house
(ii) From the following about firm Y, calculate Net Value Added at Market Price by it:

Items In Thousands

(i) Sales 300

(ii) Depreciation 20

(iii) Net indirect taxes 30

(iv) Purchase of intermediate products 150

(v) Closing Stock 200

(vi) Purchase of machinery 100

(vii) Opening Stock 210

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