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Unit 4 - Practice Quiz

ECO113

1 Which of the following best defines Gross Domestic Product (GDP)?

A. The total value of all goods and services produced by the nationals of a country during a year.
B. The market value of all final goods and services produced within the domestic territory of a country during a financial year.
C. The total value of all intermediate and final goods produced within a country during a year.
D. The sum of all factor incomes earned by the residents of a country.

2 The difference between Gross National Product (GNP) and Gross Domestic Product (GDP) is:

A. Depreciation
B. Net Indirect Taxes
C. Net Factor Income from Abroad (NFIA)
D. Subsidies

3 Which aggregate is officially known as National Income in India?

A. GDP at Market Price ()
B. NNP at Market Price ()
C. NNP at Factor Cost ()
D. GNP at Factor Cost ()

4 How is Net Indirect Tax calculated?

A. Indirect Taxes + Subsidies
B. Indirect Taxes - Subsidies
C. Direct Taxes - Subsidies
D. Subsidies - Indirect Taxes

5 Which of the following is not included in the calculation of National Income?

A. Wages and Salaries
B. Transfer Payments (e.g., Old age pensions)
C. Operating Surplus
D. Mixed Income of Self-employed

6 Real GDP is calculated using:

A. Current Year Prices
B. Base Year Prices
C. Future Predicted Prices
D. International Market Prices

7 The formula for the GDP Deflator is:

A.
B.
C.
D.

8 In the context of National Income, what does Depreciation refer to?

A. Fall in the value of currency
B. Consumption of fixed capital due to wear and tear
C. Decrease in the stock of finished goods
D. Loss of money due to inflation

9 Which of the following represents Personal Disposable Income?

A. Personal Income - Direct Taxes - Miscellaneous Receipts of Govt.
B. Personal Income - Indirect Taxes
C. Private Income - Corporate Tax - Retained Earnings
D. National Income + Transfer Payments

10 The problem of Double Counting occurs when:

A. The value of final goods is counted twice.
B. The value of intermediate goods is included in the final estimate.
C. Depreciation is ignored.
D. Exports are counted as Imports.

11 Under the Value Added Method, National Income is calculated as:

A. Sum of all expenditures
B. Sum of Gross Value Added (GVA) by all producing enterprises
C. Sum of all factor incomes
D. Total output produced

12 In the Expenditure Method, the equation for GDP is:

A.
B.
C.
D.

13 Which component is included in the Income Method?

A. Government Final Consumption Expenditure
B. Operating Surplus (Rent, Interest, Profit)
C. Net Exports
D. Change in Stock

14 Which of the following is considered an Intermediate Good?

A. Bread purchased by a household
B. Machine purchased by a factory
C. Wheat purchased by a flour mill
D. Car purchased by a consumer

15 How is Per Capita Income calculated?

A.
B.
C.
D.

16 Mixed Income refers to:

A. Income from both legal and illegal sources.
B. Income of the self-employed who provide their own labor and capital.
C. Combination of wages and interest only.
D. Income earned from abroad.

17 In the Circular Flow of Income, 'Real Flow' refers to:

A. Flow of money between sectors.
B. Flow of goods and factor services between sectors.
C. Flow of foreign currency.
D. Flow of savings to banks.

18 In a Two-Sector Economy, the participants are:

A. Households and Government
B. Firms and Foreign Sector
C. Households and Firms
D. Government and Firms

19 Which of the following is a Leakage from the circular flow of income?

A. Investment
B. Exports
C. Government Spending
D. Savings

20 Which of the following is an Injection into the circular flow of income?

A. Taxes
B. Imports
C. Investment
D. Savings

21 The equilibrium condition in a Three-Sector Model (Closed Economy with Government) is:

A.
B.
C.
D.

22 The Four-Sector Model of the circular flow includes:

A. Households, Firms, Government, and Financial Sector
B. Households, Firms, Government, and External (Rest of World) Sector
C. Households, Firms, Banks, and Stock Market
D. Producers, Consumers, Investors, and Savers

23 In the context of the external sector, (X - M) stands for:

A. Exports plus Imports
B. Net Factor Income
C. Net Exports
D. Exchange Rate

24 If Net Factor Income from Abroad (NFIA) is negative, then:

A.
B.
C.
D.

25 Which of the following is a major difficulty in measuring National Income in developing countries?

A. Existence of a large non-monetized sector (barter system).
B. Excessive use of digital payments.
C. High literacy rates.
D. Transparent corporate reporting.

26 Why are Capital Gains (e.g., rise in price of shares) excluded from National Income?

A. They are illegal.
B. They do not represent current production of goods or services.
C. They are too difficult to calculate.
D. They are always taxed at 100%.

27 The imputed value of owner-occupied houses is:

A. Excluded from National Income.
B. Included in National Income.
C. Included only if the house is sold.
D. Considered a transfer payment.

28 How are second-hand goods treated in National Income accounting?

A. Their full value is added.
B. They are excluded to avoid double counting.
C. Only the brokerage/commission on their sale is included.
D. Both B and C.

29 Which of the following describes the Income Method equation?

A.
B.
C.
D.

30 National Income data is primarily used for:

A. Assessing the performance of the stock market.
B. Measuring economic growth and standard of living.
C. Determining individual bank interest rates.
D. Calculating the profits of a single firm.

31 What is Green GDP?

A. GDP calculated using agricultural products only.
B. GDP adjusted for environmental degradation and resource depletion.
C. GDP generated by renewable energy sectors.
D. Nominal GDP without inflation adjustment.

32 Which sector usually contributes the most to the National Income of a developed economy?

A. Primary Sector (Agriculture)
B. Secondary Sector (Manufacturing)
C. Tertiary Sector (Services)
D. Subsistence Sector

33 Operating Surplus does NOT include:

A. Rent
B. Interest
C. Wages
D. Profit

34 Which price is used to calculate National Income at Factor Cost?

A. Price paid by the consumer.
B. Price received by the producer (excluding taxes).
C. International price.
D. Retail price.

35 Unpaid services of a housewife are not included in National Income because:

A. They do not add value.
B. It is difficult to ascertain their market value.
C. They are considered illegal.
D. They are transfer payments.

36 If Nominal GDP is $600$ and the Price Index is $120$, what is the Real GDP?

A. $500$
B. $720$
C. $480$
D. $600$

37 In the Circular Flow model, financial institutions (banks):

A. Produce goods and services.
B. Mobilize savings and provide loans for investment.
C. Collect taxes.
D. Import goods.

38 Which of the following is a use of National Income statistics?

A. To formulate government budgets and fiscal policy.
B. To compare income distribution.
C. To determine the sectoral contribution to the economy.
D. All of the above.

39 The value of Inventory (Closing Stock - Opening Stock) is treated as:

A. Consumption
B. Investment (Capital Formation)
C. Export
D. Import

40 Illegal activities like smuggling and gambling are excluded from National Income because:

A. They are immoral.
B. Estimates of such incomes are not available.
C. They do not involve money.
D. They are part of the external sector.

41 What is the relationship between National Income () and ?

A.
B.
C.
D.

42 In the circular flow, if Injections > Leakages, the national income will:

A. Decrease
B. Increase
C. Remain constant
D. Become zero

43 Which method is best suited for the Construction sector to estimate national income?

A. Expenditure Method
B. Product (Value Added) Method
C. Income Method
D. None of the above

44 Which of the following constitutes External Sector flows?

A. Taxes and Subsidies
B. Savings and Investment
C. Exports and Imports
D. Wages and Profits

45 Personal Income differs from National Income because Personal Income:

A. Includes transfer payments and excludes undistributed corporate profits.
B. Excludes transfer payments.
C. Is always lower than National Income.
D. Includes depreciation.

46 The goods produced for Self-Consumption by farmers are:

A. Excluded from National Income.
B. Included by estimating their market value.
C. Considered as intermediate goods.
D. Treated as imports.

47 Which of the following is a statistical difficulty in measuring National Income?

A. Choosing the method of measurement.
B. Defining the 'nation'.
C. Lack of reliable data and illiteracy.
D. Distinction between final and intermediate goods.

48 To calculate from , one must:

A. Add Depreciation.
B. Subtract Net Indirect Taxes.
C. Add Net Factor Income from Abroad.
D. Subtract Depreciation.

49 In the equation , if , the economy has:

A. Trade Surplus
B. Trade Deficit
C. Balanced Trade
D. No foreign sector

50 The sum of Net Value Added at Factor Cost () across all sectors is equal to:

A. Gross Domestic Product at Market Price
B. Net Domestic Product at Factor Cost
C. Gross National Product at Factor Cost
D. Net National Product at Market Price