Economics Chapter 1 MCQ

Questions and Answers

Which of the following is a challenge in estimating national income?

Difficulty in defining economic output

Variability in market prices

Lack of reporting by businesses

All of the above (correct)

What part of the Rs. 60,000 sale proceeds from a used car will be included in national income?

Rs. 30,000

No part of the sale proceeds (correct)

50% of Rs. 60,000

Full amount of Rs. 60,000

How are fees paid to real estate agents treated in national income calculation?

Dependent on the region

They are excluded from national income

Partially included based on service type

They are included in national income (correct)

How should electricity sold to a consumer household be treated in national income calculation?

It is included as it is a final good Signup and view all the answers

What is the classification of electricity sold to a steel plant in national income calculation?

Excluded as an intermediate good Signup and view all the answers

Which statement accurately describes transfer payments in national income estimation?

They are excluded from national income calculations Signup and view all the answers

How are economic activities from used goods generally treated in national income?

Not included at all Signup and view all the answers

Which of the following scenarios affects national income calculations?

All of the above Signup and view all the answers

Study Notes

Problems in Estimating National Income

Lack of an agreed definition of national income complicates calculations.
Difficulty in distinguishing between final goods and intermediate goods affects accuracy.
Transfer payments pose challenges as they do not contribute to production.

Sale of Used Goods

Sale proceeds from a used car (e.g., Rs. 60,000) are not included in national income.
Used goods represent a transfer of existing assets, previously accounted for in national income when produced.

Transactions in National Income Calculation

Fees for real estate agents and lawyers are included in national income as they represent current production.
Excluded transactions are those that do not represent current production.

Electricity Sales to Consumers

Electricity sold to consumers is treated as a final good and does not require further processing.
Once sold, electricity becomes part of the active economic flow and is included in national income.

Electricity Sales to Industry

Electricity sold to steel plants is categorized as an intermediate good.
Intermediate goods are not included in national income calculations as they are part of the production process.

Description

Test your understanding with multiple-choice questions from Chapter 1 of the Economics syllabus. Focus on key concepts such as national income estimation and transactions affecting national accounts. Assess your knowledge on important topics in this foundational chapter.