Based on the chapter National Income and Its Measurement, some of the important questions are prepared in this question paper. It covers one mark, two and five marks questions from the book back and PTA question.

Download CBSE Class 12th Standard CBSE undefined question papers, sample papers, important questions, and previous year solved papers in PDF format. Get free study materials, NCERT solutions, and exam preparation resources for Class 12th Standard CBSE undefined

Questions:

Multiple Choice Question

10 x 1 = 10

Which of the following item will not be included while calculating national income by the value added method?

(a)

Owner-occupied Houses

(b)

Own-account Production of fixed capital

(c)

Production for self-consumption

(d)

Voluntary work

In which case, net indirect taxes be equal to zero?

(a)

Indirect taxes>Subsides

(b)

Indirect taxes

(c)

Indirect taxes = Subsides

(d)

None of the above

Post-tax Income of the Household is known as:

(a)

Personal Income

(b)

Personal Disposable Income

(c)

Private Income

(d)

Domestic Income

NI = Domestic Income, when

(a)

Net Factor Income from abroad (NFIA) is positive

(b)

NFIA is negative

(c)

NFIA is zero

(d)

None of the above

NDP_FC will be equal to

(a)

NDP_MP - Indirect Taxes

(b)

NDP_MP + Subsidies

(c)

NDPMP - NIT

(d)

NDP_MP + Depreciation

Goods purchased for satisfaction of wants are

(a)

Capital goods

(b)

Final goods

(c)

Consumption goods

(d)

Intermediate goods

Which of the following represents National Income?

(a)

\({ GNP }_{ FC }\)

(b)

\({ NDP }_{ FC }\)

(c)

\({ NNP }_{ MP }\)

(d)

\({ NNP }_{ FC }\)

In GNP calculation, which of the following should be excluded?

(a)

Rental incomes

(b)

Interest payments

(c)

Dividents

(d)

Government transfer payment

.......... is the income which accrues to the private sector from all sources.

(a)

Personal Income

(b)

Real income

(c)

Private income

(d)

Personal Disposable Income

10.

Transfer payments are ..........

(a)

payments transferred from Central Government account to State Government account

(b)

payments made to factors of production by an organiser

(c)

payments made for no return service

(d)

None of the above

Generic 4

2 x 4 = 8

11.

Show how the sum of value added is equal to sum of factor incomes?

12.

Explain how 'distribution of Gross Domestic Product' is a limitation in taking Gross Domestic Product as an index of welfare.

Generic 6

2 x 6 = 12

13.

State three types of expenditure that are not included while estimating national income by expenditure method. Why are these not included?

14.

How will you treat the following while the following estimating National Income? Give reasons for your answer.

(i) Capital gain on sale of a house.

(ii) Prize won in a lottery.

(iii) Interest on public debt.

Generic 3

5 x 3 = 15

15.

Calculate:
(a) Gross National Product at Market Price
(b) Net National Disposable Income

S.No.	Contents	Rs (in crore)
(i)	Private Final Consumption Expenditure	3000
(ii)	Net Factor Income to Abroad	100
(iii)	Government Final Consumption Expenditure	800
(iv)	Net Export	(-) 200
(v)	Net Current Transfers from Rest of the World	300
(vi)	Gross Domestic Fixed Capital Formation	600
(vii)	Change in Stock	(-) 20
(viii)	Net Indirect Taxes	400
(ix)	Factor Income from Abroad	50
(x)	Net Domestic Capital Formation	500

16.

Calculate (a) Gross National Product at Market Price and (b) Personal income from the following data:

S.No.	Contents	Rs (in crore)
(i)	Corporation Tax	35
(ii)	Wages and Salaries	200
(iii)	National Debt Interest	25
(iv)	Operating Surplus	400
(v)	Net Current Transfers from Abroad	15
(vi)	Net Factor Income from Abroad	(-) 10
(vii)	Consumption of Fixed Capital	20
(viii)	Social Security Contribution by Employers	30
(ix)	Net Indirect Tax	40
(x)	Net Domestic Product at Factor Cost Accruing to Private Sector	500

17.

Net National Product at Factor Cost of a particular country in a year is Rs 1900 crore. There are no interest payments made by the households to the firms/government to the households. The Personal Disposable Income of the households is Rs 1200 crore. The personal income taxes paid by them is Rs 600 crore and the value of retained earnings of the firms and government is valued at Rs 200 crore. What is the value of transfer payments made by the government and firms to the households?

18.

Calculate (a) Net National Disposable Income and (b) Personal income from the following data:

S.No.	Contents	Rs (in crore)
(i)	Personal Tax	212
(ii)	Net National Product at Factor Cost	2500
(iii)	Net Indirect Taxes	180
(iv)	Domestic Product Accruing to Government	500
(v)	Retained Earnings of Private Corporations	80
(vi)	Net Factor Income from Abroad	23
(vii)	National Debt Interest	100
(viii)	Net Current Transfers from Abroad	20
(ix)	Corporation Tax	70
(x)	Current Transfers from Government	30

19.

Calculate 'Gross National Disposable Income' from the following data:

S.No.	Contents	Rs (in lakh)
(i)	Net Domestic Product at Factor Cost	3000
(ii)	Indirect Taxes	300
(iii)	Net Current Transfers from Rest of the World	250
(iv)	Current Transfers from the Government	100
(v)	Net Factor Income to Abroad	150
(vi)	Consumption of Fixed Capital	200
(vii)	Subsidies	100

Fill up / 1 Marks

5 x 1 = 5

20.

When will GDP of an economy be equal to GNP?

21.

What is personal disposable income?

22.

What should be deducted from GNP_MP to obtain GDP_MP?

23.

Define National Income.

24.

Define capital goods.

Visit QB365-SLMS - https://www.qb365.in/slms/

Answers Key:

Multiple Choice Question

10 x 1 = 10

(d)
Voluntary work

(b)
Personal Disposable Income

(d)
\({ NNP }_{ FC }\)

(d)
Government transfer payment

10.

Generic 4

2 x 4 = 8

11.

Sum of value added refers to the value of final goods and services produced in the economy during the period of one year. Net Value Added at Factor Cost implies cost of the factors of production in terms of rent, interest, profit and wages. This is equal to income generated. Hence, the fact that value added is identical with income generated.

12.

If the Gross Domestic Product of a country is rising sharply, it may not necessarily indicate welfare. This is because the rise in GDP may be concentrated in the hands of very few individuals or firms. It means the gap between the rich and poor is widening due to these inequalities in the distribution of income. It means welfare of the common people does not rise with the rise in GDP.

Generic 6

2 x 6 = 12

13.

Precautions to be taken up while estimating national income through the expenditure method are:
(a) Do not include intermediate expenditure, as it is already included in the final expenditure. In case intermediate expenditure is included, it will lead to double counting of expenditure, which may result in overestimation of national income.
(b) Do not include expenditure on second-hand goods, as it has already been included in the national income of the year, they were bought/sold for the first time. In case of any commission/brokerage paid to the intermediary, it should be treated as final expenditure and included in National Income.
(c) Imputed expenditure on own-account production should be included, e.g., production for Self-consumption, self-consumed services of owner occupied houses, free services from general government and private non-profit making organisations serving households.
(d) Exclude the Expenditure on transfer payments as they are unilateral transfers against which no good/service is provided in return. E.g. old age pension, donations, scholarships, taxes etc.
(e) Exclude the expenditure on shares/bonds etc, as buying and selling of these only leads to transfer of money from one person/institution to another. In case of any brokerage or commission paid to the agent, it should be included in final expenditure.

14.

(i) Capital gain on sale of a house is not included in the National Income estimation because it does not add to the flow of goods and services in the economy.

(ii) Prize won in a lottery is not included in National Income estimation because it is a part of transfer payments.

(iii) Interest on public debt is deemed as transfer payment. Hence, not included in the estimation of National Income.

Generic 3

5 x 3 = 15

15.

(a) Gross National Product at Market Price (\({ GNP }_{ MP }\))
= Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Fixed Capital Formation + Change in Stock + Net Export - Net Factor Income to Abroad
= 3000 + 800 + 600 + (-20) + (- 200) -100
= 4400 - 320
= Rs 4080 crore
(b) Net National Disposable Income = \({ GNP }_{ MP }\) - Depreciation, + Net Current Transfers from Rest of the World
= 4080 - (600 - 20 - 500) + 300
= (4380 - 80) crore
= Rs 4300 crore

16.

Net Domestic Product at Factor Cost \(\left( { NDP }_{ FC } \right) \)

= Wages and Salaries + Social Security Contribution by Employers + Operating Surplus = 200 + 30 + 400 = Rs 630 crore

(a) Gross National Product at Market Price \(\left( { GNP }_{ MP } \right) \)

= \({ NDP }_{ FC }\) + Consumption of Fixed Capital + Net Indirect Tax + Net Factor Income from Abroad

= 630 + 20 + 40 + (-10) = Rs 680 crore

(b) Personal Income = Net Domestic Product at Factor Cost Accruing to Private Sector + Net Factor Income from Abroad + National Debt Interest - Corporation Tax

= 500 + (-10) + (5+15) + 25 - 35 = Rs 480 crore

17.

Given, Personal Disposable Income = Rs 1200 crore

Personal Taxes (Direct tax) = Rs 600

Personal Income = PDI + Direct Taxes

= 1200 + 600 = Rs 1800

Private Income = Personal Income + Retained

Saving = 1800 + 200 = Rs 2000 crore

\({ \therefore NNP }_{ FC }\) = Private Income - Transfer Payments

1900 = 2000 - Transfer Payments

\(\therefore \) Value of Transfer Payment = Rs 100 crore

18.

(a) Net National Disposable Income = \({ NNP }_{ FC }\) + Net Indirect Taxes + Net Current Transfers from Abroad = 2500 + 180 + 20 = Rs 2700 crore

(b) Personal Income = \({ NNP }_{ FC }\) - Domestic Product accruing to Government + Net Current Transfers from Abroad + Current Transfers from Government + Current Transfers from Government + National Debt Interest - Retained Earnings of Private Corporations

= 2500 - 500 + 20 + 30 + 100 - 70 - 80

= Rs 2000 crore

19.

Gross National Disposable Income = Net Domestic Product at Factor Cost + Indirect Tax - Subsidy + Net Current Transfers from Rest of the World - Net Factor Income to Abroad + Consumption of Fixed Capital

= 3000 + 300 - 100 + 250 - 150 + 200 = Rs 3500 lakh

Fill up / 1 Marks

5 x 1 = 5

20.

()
GDP and GNP will be equal when the net factor income from abroad is zero

21.

()
Personal disposable income is the personal income remaining with the individuals after paying direct personal taxes and other fees and fines to the government. It is post-tax income.

22.