National Income and Economic Activities Quiz
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Questions and Answers

National income is the money value of all economic activities conducted in a nation each year.

True

An economic activity refers to the production of goods and services that can be valued at market prices.

True

Non-economic activities, such as the services of a housewife or hobbies, contribute to national income.

False

The national income of a country is the total market value of all final goods and services produced in the economy annually.

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

To measure the real national income, the figure for national income is adjusted for price changes.

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

The purchasing power parity theory was put forward by Professor Gustav Cassel of Sweden in the year 1920.

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

The PPP theory has two versions: the absolute and the relative versions.

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

According to the absolute version of the PPP theory, the exchange rate between two currencies should be equal to the ratio of the price indexes in the two countries.

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

The absolute version of the PPP theory is widely used by economists.

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

The relative version of the PPP theory takes into account factors such as transportation costs and non-traded goods.

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

Study Notes

National Income

  • The money value of all economic activities conducted in a nation each year.
  • Economic activities refer to the production of goods and services with market values.
  • Non-economic activities, such as housework or hobbies, do not contribute to national income.
  • The total market value of all final goods and services produced in the economy annually is known as a country's national income.

Measuring Real National Income

  • The national income figure is adjusted for price changes to measure the real national income.

Purchasing Power Parity Theory

  • The PPP theory, proposed by Professor Gustav Cassel in 1920, aims to determine the relationship between currencies based on purchasing power.
  • The theory has two versions: absolute and relative.

Absolute Version

  • States that the exchange rate between two currencies should equal the ratio of their price indexes.
  • Widely used by economists.

Relative Version

  • Considers factors like transportation costs and non-traded goods when comparing currencies.

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Description

Test your knowledge on national income and economic activities with this quiz! Learn about the components of national income, including agricultural and industrial production, and non-economic goods and services.

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