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National Income — GK Questions with Answers

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24 questions
  1. National income is equal to — (IAS, 2001)
    1. Gross National Product at market prices minus depreciation
    2. Gross National Product at market prices minus depreciation plus net factor income from abroad
    3. Gross National Product at market prices minus depreciation and indirect taxes plus subsidies
    4. Gross National Product at market prices minus net factor income from abroad
    Show answer

    Answer: (C) Gross National Product at market prices minus depreciation and indirect taxes plus subsidies

    Taking depreciation out of GNP gives NNP at market price; taking out indirect taxes and adding subsidies gives NNP at factor cost, which is national income.

  2. The national income of a country for a given period is equal to the — (UPSC, 2013)
    1. total value of goods and services produced by the nationals
    2. sum of total consumption and investment expenditure
    3. sum of the personal incomes of all individuals
    4. money value of final goods and services produced
    Show answer

    Answer: (D) money value of final goods and services produced

    What national income counts is the money worth of final goods and services; the intermediate ones stay out.

  3. Consider these statements — 1. For measuring national income, GDP is the better of the two. 2. GNP always stands higher than GDP.
    1. Only 1
    2. Only 2
    3. Both 1 and 2
    4. Neither 1 nor 2
    Show answer

    Answer: (D) Neither 1 nor 2

    Both are wrong. Which measure is better depends on the purpose, and GNP falls below GDP when foreigners earn more inside the country than our citizens earn outside it.

  4. Which one of these stays out of the national income estimates
    1. The sale of a collector's item
    2. An addition to the stock of a company's products
    3. The market rent of a self-owned house
    4. The cost of government services
    Show answer

    Answer: (A) The sale of a collector's item

    Selling something second-hand creates no new production, so it does not enter national income.

  5. Which one is the most suitable yardstick for the economic growth of a country
    1. National income
    2. Net National Product
    3. Gross capital formation
    4. Gross Domestic Product
    Show answer

    Answer: (D) Gross Domestic Product

    GDP is the commonest and most suitable measure for comparing economic growth.

  6. Which sector contributes the most to gross domestic saving in India
    1. The public sector
    2. The private sector
    3. The corporate sector
    4. The household sector
    Show answer

    Answer: (D) The household sector

    Savings of the household sector make up the largest part of gross domestic saving in India.

  7. Why are only final goods counted in GDP
    1. They are easier to count
    2. To avoid double counting
    3. They are more expensive
    4. Only their data is available to the government
    Show answer

    Answer: (B) To avoid double counting

    If intermediate goods were added too, the same production would be counted several times and GDP would look inflated.

  8. Which of these is not part of the domestic territory of a country
    1. The Exclusive Economic Zone
    2. An Indian embassy abroad
    3. A ship registered in India
    4. A foreign embassy located in India
    Show answer

    Answer: (D) A foreign embassy located in India

    A foreign embassy stands on Indian soil but counts as that country's territory, not India's.

  9. Which months make up the first quarter of the Indian financial year
    1. January to March
    2. April to June
    3. July to September
    4. October to December
    Show answer

    Answer: (B) April to June

    The financial year begins on 1 April, so Q1 is April, May and June.

  10. If nominal GDP is 150 and real GDP is 120, what is the GDP deflator
    1. 80
    2. 100
    3. 125
    4. 270
    Show answer

    Answer: (C) 125

    (150 ÷ 120) × 100 = 125, which means prices have risen 25% since the base year.

  1. What is the chief feature of real GDP
    1. It keeps the effect of inflation out
    2. It is always higher than nominal GDP
    3. It is worked out at current prices
    4. It includes income from abroad
    Show answer

    Answer: (A) It keeps the effect of inflation out

    Real GDP is worked out at constant prices, so only a rise in quantity shows up in it.

  2. What is the present base year for GDP calculation
    1. 2004-05
    2. 2011-12
    3. 2017-18
    4. 2022-23
    Show answer

    Answer: (D) 2022-23

    The base year has moved from 2011-12 to 2022-23.

  3. Which technique came into the production method with the new base year
    1. Single deflation
    2. Double deflation
    3. Chain weighting
    4. Moving average
    Show answer

    Answer: (B) Double deflation

    Double deflation adjusts input prices along with output prices, so the figure comes out more accurate.

  4. What is the basic difference between GNP and GDP
    1. GNP has depreciation taken out
    2. GNP goes by people and GDP by territory
    3. GNP counts only government production
    4. GNP does not include subsidies
    Show answer

    Answer: (B) GNP goes by people and GDP by territory

    GDP looks at where production happened, while GNP looks at who did the producing.

  5. Where does the income of an Indian working in Dubai get counted
    1. In India's GDP
    2. In India's GNP
    3. In both
    4. In neither
    Show answer

    Answer: (B) In India's GNP

    That income was earned outside Indian territory but by an Indian resident, so it goes into GNP and not into GDP.

  6. How is Net Domestic Product (NDP) arrived at
    1. GDP + depreciation
    2. GDP − depreciation
    3. GNP − depreciation
    4. GDP − indirect tax
    Show answer

    Answer: (B) GDP − depreciation

    Taking depreciation out of a gross figure gives the net one; out of GDP it gives NDP and out of GNP it gives NNP.

  7. To get factor cost from market price, what has to be done
    1. Add indirect tax and subtract subsidy
    2. Subtract indirect tax and add subsidy
    3. Add both
    4. Subtract both
    Show answer

    Answer: (B) Subtract indirect tax and add subsidy

    The tax was added on the way out, so on the way back the tax is subtracted and the subsidy added.

  8. If GNP at market price is 200, depreciation 20, indirect tax 30 and subsidy 10, what is the national income
    1. 140
    2. 160
    3. 180
    4. 200
    Show answer

    Answer: (B) 160

    200 − 20 = 180 (NNP at market price), then 180 − 30 + 10 = 160 (NNP at factor cost), which is national income.

  9. What is subtracted while working out personal income
    1. Transfer payments
    2. Undistributed profits
    3. Subsidy
    4. Depreciation
    Show answer

    Answer: (B) Undistributed profits

    Undistributed profits stay with the company and never reach households, so they are subtracted; transfer payments are added instead.

  10. By which methods is GDP calculated in India
    1. Only the income method
    2. The income and expenditure methods
    3. The production and expenditure methods
    4. All three methods
    Show answer

    Answer: (C) The production and expenditure methods

    India uses the production method (supply side) and the expenditure method (demand side); the income method is not used.

  1. In the expenditure method, what does "I" stand for
    1. Imports
    2. Investment, that is gross fixed capital formation
    3. Indirect tax
    4. Income
    Show answer

    Answer: (B) Investment, that is gross fixed capital formation

    C is consumption, I is investment, G is government spending and X − M is net exports.

  2. How is value added (GVA) worked out
    1. Sale price + intermediate cost
    2. Sale price − the cost of intermediate goods and services
    3. Sale price − depreciation
    4. Sale price − wages
    Show answer

    Answer: (B) Sale price − the cost of intermediate goods and services

    At every link only the value that link added is counted, so double counting does not arise.

  3. Who estimates national income in India today
    1. NITI Aayog
    2. The Reserve Bank of India
    3. The National Statistical Office (NSO)
    4. The Indian Statistical Institute
    Show answer

    Answer: (C) The National Statistical Office (NSO)

    The NSO, formed in 2019 by merging the CSO and the NSSO, does this work under MoSPI.

  4. In which year was the National Income Committee formed and who chaired it
    1. 1949, Professor P C Mahalanobis
    2. 1954, Professor V K R V Rao
    3. 1950, Dadabhai Naoroji
    4. 1951, C Rangarajan
    Show answer

    Answer: (A) 1949, Professor P C Mahalanobis

    The committee was formed in 1949 and its report came in 1954, putting India's national income for 1948-49 at 8,710 crore rupees.

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