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Economics Quiz: National Income Concepts
50 Questions
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Economics Quiz: National Income Concepts

Created by
@StrongestUnderstanding8909

Questions and Answers

What is the total value of a country's final output of all new goods and services produced during the year?

  • Gross Domestic Product
  • National Income (correct)
  • Gross National Income
  • Gross National Product

    • Which of the following statements is true?

  • Personal income refers to the income of individuals of a country.
  • The income at their disposal after paying direct taxes is called disposable income.
  • Both (a) and (b) (correct)
  • None of the above

    • Which sector has the maximum share in National Income in India?

  • Local Sector (correct)
  • Public Sector
  • Private Sector
  • None of the above

    • Which of the following is not required while calculating Gross National Product (GNP)?

    <p>Per Capita Income of Citizens</p> Signup and view all the answers

    Which of the following is associated with the term deflation in economy?

    <p>Decrease in the money relating to the supply of goods and services</p> Signup and view all the answers

    The national output is measured at:

    <p>Market Prices</p> Signup and view all the answers

    Most important source of capital formation in India has been:

    <p>Household Savings</p> Signup and view all the answers

    Which of the following actions taken by the RBI is expansionary?

    <p>The purchase of government bonds</p> Signup and view all the answers

    The difference between total expenditure and total receipts except loans and other liabilities is called what?

    <p>Fiscal Deficit</p> Signup and view all the answers

    Who is responsible for presenting the Union Budget before the Parliament?

    <p>Finance Minister</p> Signup and view all the answers

    During depression and unemployment, which type of budget is recommended?

    <p>Deficit Budget</p> Signup and view all the answers

    Inflation relates to which of the following?

    <p>Price level rises - money value falls</p> Signup and view all the answers

    When deficit financing increases, what actions will the RBI take on CRR and SLR?

    <p>Increase It</p> Signup and view all the answers

    The market in which loans of money can be obtained is called what?

    <p>Money Market</p> Signup and view all the answers

    Which of the following statements correctly define the meaning of reverse repo rate?

    <p>The rate at which the apex bank RBI borrows money from commercial banks</p> Signup and view all the answers

    Which of the following best describes the goal of Monetary Policy?

    <p>Controlling the Money Supply</p> Signup and view all the answers

    Open market operations refer to what?

    <p>An activity by a Central Bank to give (or take) liquidity in its currency to (or from) a bank or group of banks</p> Signup and view all the answers

    The trough of a business cycle occurs when what hits its lowest point?

    <p>Aggregate Economic Activity</p> Signup and view all the answers

    The period of the business cycle in which real GDP is increasing is called what?

    <p>Expansion</p> Signup and view all the answers

    During business cycles, the opposite of a trough is what?

    <p>A Peak</p> Signup and view all the answers

    What is the business cycle?

    <p>Is the natural rise and fall of the economic growth that occurs over time</p> Signup and view all the answers

    Which of the following describes the phase of a business cycle that occurs after a trough and before a peak?

    <p>Expansion</p> Signup and view all the answers

    A short-term variation in relation to calendar or time of a day is called what?

    <p>Seasonal</p> Signup and view all the answers

    Which among the following is a qualitative tool of monetary policy?

    <p>Credit Rationing</p> Signup and view all the answers

    In a free economy, inequalities of income are due to what?

    <p>Private Property and Inheritance</p> Signup and view all the answers

    What action should the government take on its overall expenditure to check inflationary forces?

    <p>Reduce Expenditure</p> Signup and view all the answers

    A country's gross domestic product can be calculated using which formula?

    <p>GDP = C + G + I + NX</p> Signup and view all the answers

    Indian Economy is an example of what?

    <p>Mixed Economy</p> Signup and view all the answers

    Most pertinent problem while computing National Income is what?

    <p>Non-Monetized Consumption</p> Signup and view all the answers

    If an economy is in equilibrium at the point where plans to save and to invest are equal, then Government expenditure must be what?

    <p>Equal to Government Income</p> Signup and view all the answers

    If we compare GDP and GNP, then:

    <p>GNP = GDP + Net Income from Abroad</p> Signup and view all the answers

    The basis of fiscal policy is to maintain a balance between what?

    <p>Public Spending and Tax Rates</p> Signup and view all the answers

    The difference between fiscal deficit and interest payment during the year is called what?

    <p>Primary Deficit</p> Signup and view all the answers

    Difference between revenue deficit and grants for creation of capital assets is called what?

    <p>Effective Revenue Deficit</p> Signup and view all the answers

    As the level of interest rates in the economy falls, the demand for money, ceteris paribus:

    <p>Will increase</p> Signup and view all the answers

    The low point in the business cycle is referred to as the:

    <p>Trough</p> Signup and view all the answers

    Which of the following is a reason for inflation?

    <p>All of the Above</p> Signup and view all the answers

    Along with the Ministry of Finance, which other institution plays an important role in the monetary policy of India?

    <p>RBI</p> Signup and view all the answers

    Revenue equals expenditure in what kind of budget?

    <p>Balanced Budget</p> Signup and view all the answers

    The immediate effect of credit creation by banks is what?

    <p>Increase in Money Supply</p> Signup and view all the answers

    What is the impact on a bank’s profitability when the RBI increases CRR and SLR rates?

    <p>Reduces Profitability of Banks</p> Signup and view all the answers

    If the RBI adopts an expansionist open market policy, this means it will:

    <p>Offer banks more credit in the open market</p> Signup and view all the answers

    Which of the following is the objective of Fiscal Policy?

    <p>All of the Above</p> Signup and view all the answers

    If the economy is in an inflationary period, what action would Fiscal Policy most likely take?

    <p>Increase Taxes</p> Signup and view all the answers

    Measurement of domestic savings occurs in which sector?

    <p>Household Sector</p> Signup and view all the answers

    To avoid double counting when GDP is estimated, economists do what?

    <p>Calculate Value Added at Each Stage of Production</p> Signup and view all the answers

    Coincident indicators tend to reach their peaks and troughs at about the same time as what?

    <p>Real GDP</p> Signup and view all the answers

    Which of the following is the basis of determining National Income?

    <p>Production of Goods and Services</p> Signup and view all the answers

    State which is not included while computing National Income of India:

    <p>Unemployment Allowance</p> Signup and view all the answers

    State the largest contribution in Gross Domestic Savings:

    <p>Household Sector</p> Signup and view all the answers

    Study Notes

    • National Income is the total value of a country’s final output of all new goods and services produced in a year.
    • Personal income represents the income of individuals, while disposable income is what remains after direct taxes are paid.
    • In India, the local sector holds the maximum share in National Income.

    Calculating Gross National Product (GNP)

    • GNP does not require per capita income of citizens for its calculation.
    • Four elements are crucial for calculating GNP: private investments, net foreign investments, and purchase of goods and services.

    Monetary Policy and Deflation

    • Deflation is associated with a decrease in money supply in relation to available goods and services.
    • Market prices are used to measure national output.

    Budgeting and Fiscal Policies

    • Government expenditure during periods of depression and unemployment should be in deficit to stimulate the economy.
    • Revenue deficit is defined as the difference between total expenditure and total receipts, excluding loans. Fiscal deficit is more comprehensive, including the need for loans.

    Business Cycles

    • The trough of a business cycle occurs when aggregate economic activity hits its lowest point.
    • Expansion occurs when real GDP is increasing, while the peak is the highest point of economic activity.
    • Business cycles reflect the natural rise and fall of economic growth over time.

    Tools of Monetary Policy

    • Qualitative tools include credit rationing, while quantitative tools involve setting reserve requirements and interest rates.
    • The money market is where loans can be obtained, while reverse repo rate is the rate at which the RBI borrows from commercial banks.

    Inflation and Interest Rates

    • Inflation refers to rising price levels and decreasing money value, typically caused by factors like deficit financing and structural deficiencies.
    • Lower interest rates generally lead to increased demand for money within the economy.

    Budget Definitions and Government Roles

    • A balanced budget occurs when revenue equals expenditure; surplus and deficit budgets show gains and losses, respectively.
    • The Finance Minister is responsible for presenting the Union Budget before the Parliament.

    National Income Measurement

    • India's gross domestic product (GDP) can be calculated using the formula GDP = C + G + I + NX, where C is consumption, G is government spending, I is investment, and NX is net exports.
    • The household sector is the most significant contributor to domestic savings, while issues like non-monetized consumption can complicate national income calculations.

    Indicators and Economic Stability

    • Coincident indicators reflect economic performance and align with real GDP fluctuations.
    • Fiscal policy aims to balance public spending with tax rates to achieve economic stability.

    Key Contributions to Savings and Income Calculation

    • The largest contributions to Gross Domestic Savings come from the household sector, while certain types of incomes, such as unemployment allowance, are excluded in national income calculations.
    • Measurement of national income relies on production figures of goods and services, underlining its importance in economic health assessments.

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    Description

    Test your knowledge on key concepts of national income with this quiz. Answer questions about gross domestic product, national income, and disposable income. Perfect for economics students looking to reinforce their understanding.

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