Chapter MCQ Test 2 — National Income
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
Indian software engineers working in the USA send back earnings. These earnings are included in India's GNP but not its GDP because GNP counts output by:
Residents wherever they are
Foreigners only
The government only
Machines
Explanation: GNP is residence-based, so Indians' foreign earnings count; GDP, being territory-based, excludes them.
Question 2 of 10
If GDP = ₹200, NFIA = −₹5 and depreciation = ₹20, then NNP (GNP − depreciation) equals:
₹175
₹225
₹185
₹215
Explanation: GNP = 200 + (−5) = 195; NNP = 195 − 20 = ₹175.
Question 3 of 10
A steel maker sells steel to a car maker who sells cars. To avoid double counting, national income includes:
Only the final cars (or the value added at each stage)
Both the steel and the cars fully
Only the steel
Neither
Explanation: Counting both the steel and the car fully would double-count the steel; we count final output or value added.
Question 4 of 10
A country's GDP is high but its per-capita income is low. The most likely reason is a:
Very large population
Very small population
High NFIA
Low depreciation
Explanation: Per-capita income = national income ÷ population, so a big population lowers it despite a large GDP.
Question 5 of 10
When the government cuts direct taxes, households' ____ income rises, leaving more to spend or save.
Disposable
National
Gross domestic
Factor
Explanation: Disposable income = personal income − direct taxes, so lower direct taxes raise it.
Question 6 of 10
All three methods of measuring national income agree because the value of output equals the:
Income generated and the expenditure on it
Tax collected
Population
Depreciation
Explanation: Production creates income and is bought with expenditure, so the three measures are equal.
Question 7 of 10
Measuring national income in a developing country is hard partly because of the large:
Unorganised sector and non-monetary transactions
Number of central banks
Amount of GNP
Number of methods
Explanation: Informal activity and barter/self-consumption are hard to value, complicating measurement.
Question 8 of 10
National income at factor cost differs from NNP at market price by the amount of:
Net indirect taxes
Depreciation
Direct taxes
Exports
Explanation: Factor cost = market price − net indirect taxes (indirect taxes minus subsidies).
Question 9 of 10
A rising national income year after year is generally a sign that the economy is:
Growing
Shrinking
Unchanged
Bartering
Explanation: Sustained increases in national income indicate economic growth.
Question 10 of 10
In the expenditure method, 'net exports' is calculated as:
Exports minus imports
Exports plus imports
Imports minus exports
Exports times imports
Explanation: Net exports (X − M) add exports and subtract imports to capture spending on domestic output.