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Questions and Answers
Cooking at home is not an economic ______.
Cooking at home is not an economic ______.
activity
Home cooked food is not sold to the ______.
Home cooked food is not sold to the ______.
market
In a restaurant, cooked products are sold to ______.
In a restaurant, cooked products are sold to ______.
customers
Consumption goods are consumed when purchased by their ultimate ______.
Consumption goods are consumed when purchased by their ultimate ______.
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Durable goods used in the production process are tools, implements, and ______.
Durable goods used in the production process are tools, implements, and ______.
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Final goods can be divided into consumption goods and ______ goods.
Final goods can be divided into consumption goods and ______ goods.
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Goods like food and clothing are referred to as consumption or ______ goods.
Goods like food and clothing are referred to as consumption or ______ goods.
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Capital goods are crucial for aiding and enabling the production ______ to take place.
Capital goods are crucial for aiding and enabling the production ______ to take place.
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These goods form a part of ______, one of the crucial factors of production.
These goods form a part of ______, one of the crucial factors of production.
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Capital goods gradually undergo wear and tear and are often ______ or gradually replaced over time.
Capital goods gradually undergo wear and tear and are often ______ or gradually replaced over time.
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The annual production of goods and services is estimated through three ______.
The annual production of goods and services is estimated through three ______.
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The Product or Value Added Method calculates the aggregate annual value of goods and services produced in a given ______.
The Product or Value Added Method calculates the aggregate annual value of goods and services produced in a given ______.
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Some commodities like television sets and automobiles are considered ______ durables.
Some commodities like television sets and automobiles are considered ______ durables.
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Wheat producers are also referred to as ______.
Wheat producers are also referred to as ______.
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Final goods produced in an economy can be classified into consumption goods and ______ goods.
Final goods produced in an economy can be classified into consumption goods and ______ goods.
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Steel sheets used for making automobiles are examples of ______ goods.
Steel sheets used for making automobiles are examples of ______ goods.
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If a larger share goes for production of ______ goods, a smaller share is available for production of consumer goods.
If a larger share goes for production of ______ goods, a smaller share is available for production of consumer goods.
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The bakers used wheat to produce Rs ______ worth of bread.
The bakers used wheat to produce Rs ______ worth of bread.
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Intermediate goods are mostly used as raw material or ______ for production.
Intermediate goods are mostly used as raw material or ______ for production.
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Production of more capital goods means that in the future, the labourers would have more capital ______ to work with.
Production of more capital goods means that in the future, the labourers would have more capital ______ to work with.
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The total value of wheat produced by farmers was Rs ______.
The total value of wheat produced by farmers was Rs ______.
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To avoid ______ counting, the value of the wheat bought by bakers must be subtracted from their total production.
To avoid ______ counting, the value of the wheat bought by bakers must be subtracted from their total production.
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To assess the total flow of production, we need a common ______ rod.
To assess the total flow of production, we need a common ______ rod.
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If total output is higher, the amount of ______ goods that can be produced will surely be higher.
If total output is higher, the amount of ______ goods that can be produced will surely be higher.
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Final goods do not undergo any further ______ in the economic process.
Final goods do not undergo any further ______ in the economic process.
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Firm A sells its cotton to firm ______, who uses it to produce cloth.
Firm A sells its cotton to firm ______, who uses it to produce cloth.
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The bakers had to purchase Rs ______ worth of wheat from the farmers.
The bakers had to purchase Rs ______ worth of wheat from the farmers.
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Depreciation does not account for unexpected or sudden destruction of ______.
Depreciation does not account for unexpected or sudden destruction of ______.
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There can be other methods to calculate ______ in actual practice.
There can be other methods to calculate ______ in actual practice.
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The correct calculation of total production in the economy is not merely the sum of Rs 200 and Rs ______.
The correct calculation of total production in the economy is not merely the sum of Rs 200 and Rs ______.
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Firm B sells the cloth produced to consumers for Rs. ______.
Firm B sells the cloth produced to consumers for Rs. ______.
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A crucial factor enabling the sale of goods and services is ______ for such products.
A crucial factor enabling the sale of goods and services is ______ for such products.
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Value added by Firm A (VAA) is calculated as Sales minus ______.
Value added by Firm A (VAA) is calculated as Sales minus ______.
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One must have the necessary ability to purchase ______ in the market.
One must have the necessary ability to purchase ______ in the market.
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The value added by Firm B (VAB) is Rs. ______.
The value added by Firm B (VAB) is Rs. ______.
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Otherwise, one's need for ______ does not get recognized by the market.
Otherwise, one's need for ______ does not get recognized by the market.
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In the expenditure method, GDP is calculated as the sum of final ______.
In the expenditure method, GDP is calculated as the sum of final ______.
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Firm A gives Rs. ______ to the workers as wages.
Firm A gives Rs. ______ to the workers as wages.
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The total profits earned by Firm B is Rs. ______.
The total profits earned by Firm B is Rs. ______.
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The GDP by income method is equal to the total wages received and total ______ earned.
The GDP by income method is equal to the total wages received and total ______ earned.
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NDP at factor cost is the income earned by the factors in the form of wages, profits, rent, interest, etc., within the domestic territory of a ______.
NDP at factor cost is the income earned by the factors in the form of wages, profits, rent, interest, etc., within the domestic territory of a ______.
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NDPFC can be calculated using the formula NDPMP - Net Product Taxes - Net Production ______.
NDPFC can be calculated using the formula NDPMP - Net Product Taxes - Net Production ______.
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According to the System of National Accounts 2008, countries are now switching to new ______.
According to the System of National Accounts 2008, countries are now switching to new ______.
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GNPMP is the value of all the final goods and services produced by normal ______ of India.
GNPMP is the value of all the final goods and services produced by normal ______ of India.
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GNP at factor cost measures the value of output received by the factors of production belonging to a ______ in a year.
GNP at factor cost measures the value of output received by the factors of production belonging to a ______ in a year.
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GNPMP can be calculated using the formula GDPMP + ______.
GNPMP can be calculated using the formula GDPMP + ______.
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GNPFC is calculated using the formula GNPMP - Net Product Taxes - Net Production ______.
GNPFC is calculated using the formula GNPMP - Net Product Taxes - Net Production ______.
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Net National Product measures how much a country can ______ in a given period of time.
Net National Product measures how much a country can ______ in a given period of time.
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Study Notes
National Income Accounting
- National income accounting describes the fundamental functioning of a simple economy, including how the aggregate income of an economy can be viewed in a circular manner, and how national income can be calculated (product, expenditure, and income methods).
- Adam Smith's "An Enquiry into the Nature and Cause of the Wealth of Nations" is a foundational work in economics, exploring factors determining a nation's wealth, contrasting resource wealth with production processes.
- Economic wealth isn't tied solely to natural resources, but rather how resources are utilized in production flows.
- Production is a combined effort of human labor and environment, within societal and technological structures.
- Final goods are those not undergoing further transformation, unlike intermediate goods used in further production.
- Consumption goods are for direct consumption, while capital goods are durable items used in production (tools, equipment).
- Stocks represent quantities at a specific point in time (e.g., inventory), while flows represent quantities over a period of time (e.g., production).
- Depreciation is the estimated loss of capital value due to wear and tear.
- Nominal GDP uses current prices, posing challenges for comparing across time periods, differing countries, or different years.
- Real GDP is calculated using constant prices, allowing for accurate comparisons of economic output.
- GDP deflator measures the change in prices using a base year.
Circular Flow of Income and Methods of Calculating National Income
- A circular flow diagram visually represents the continuous flow of income between firms and households.
- Households spend income on goods and services from firms.
- Firms use income to pay for factors of production (rent, wages, interest, profit) impacting household income.
- Methods of calculating national income: product, expenditure, income.
- Calculating value added is crucial for avoiding double counting.
- Intermediate goods are not included, only the final goods to prevent double counting the value of goods more than once.
Some Macroeconomic Identities
- GDP is a measure of the total value of all the final goods and services produced in a country.
- GNP includes factor income earned from abroad.
- NNP removes depreciation from GNP.
- National income is the NNP at factor cost
- Personal income is the National income less corporate taxes and undistributed profits
- Personal disposable income includes a deduction for personal taxes.
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Description
This quiz explores the principles of national income accounting, focusing on how income is calculated through various methods. It also delves into Adam Smith's influential work on wealth and the importance of resource utilization in production processes. Test your understanding of these foundational economic concepts.
