National Income — Set 5
Economics · राष्ट्रीय आय · Questions 41–50 of 70
What happens to the National Income when the value of the 'GDP Deflator' increases?
Correct Answer: B. Nominal National Income increases relative to Real Income
An increase in the GDP deflator signifies that the general price level has risen. This causes Nominal GDP to grow faster than Real GDP because Nominal GDP includes price inflation. The deflator measures the level of inflation within the domestically produced goods.
In the 'Value Added Method', how is 'Value Added' defined?
Correct Answer: B. Value of Output - Intermediate Consumption
Value Added is the difference between the value of goods produced (output) and the cost of materials used to produce them (intermediate consumption). It represents the specific contribution of a firm or industry to the total product. Summing these values across all sectors gives the GDP.
Which of the following is included in the 'Compensation of Employees'?
Correct Answer: D. Wages and salaries in cash and kind
Compensation of employees includes all payments, in cash or kind, made by employers to their staff for work done. This includes basic pay, dearness allowance, and social security contributions. It is the largest component of the Income Method in many economies.
The term 'Net Domestic Product at Factor Cost' is also known as?
Correct Answer: B. Domestic Income
Net Domestic Product at factor cost (NDP FC) is the total income generated by factor services within the domestic territory. It is commonly referred to as Domestic Income. It does not include net factor income from abroad.
What is the 'Base Year' effect in GDP calculation?
Correct Answer: B. The distortion in growth rates due to the choice of the base year
The base year effect occurs when a change in the reference year leads to a significant shift in calculated growth rates or total values. This happens because prices and production structures change over time. Updating the base year ensures that the data reflects the current economic reality.
Corporate Tax and Undistributed Profits are components of?
Correct Answer: D. Private Income
Private income includes factor income from all sources and transfer payments but excludes income from the government sector. Corporate tax and undistributed profits are part of the income generated by the private sector. These are deducted from private income to arrive at personal income.
Which of the following is a 'Stock' variable?
Correct Answer: D. Wealth
Wealth is a stock variable because it represents an accumulated amount at a specific point in time. In contrast, income or production are flows measured over a period. Distinguishing between them is vital for understanding economic health and sustainability.
The 'Operating Surplus' in national income accounting consists of?
Correct Answer: D. Rent + Interest + Profit
Operating Surplus is the part of factor income that goes to the owners of property and entrepreneurship. It is the sum of rent, interest, and profit. It excludes the compensation paid to employees.
Consumption of final goods by the government is termed as?
Correct Answer: B. Government Final Consumption Expenditure
Government Final Consumption Expenditure (GFCE) represents the government's spending on goods and services for collective use, like defense or health. It is a major component of the Expenditure Method. GFCE does not include transfer payments or capital formation.
What is 'Double Counting' in national income estimation?
Correct Answer: D. Adding the value of a good at multiple stages of production
Double counting occurs if the value of intermediate goods is added to the value of final goods. For example, counting both the value of flour and the value of bread made from it would result in an error. Economists use the value-added method to solve this problem.