Long Answer Questions ( 6M)
Q1. What precautions should be taken while using product method of national income?
Q2. What precautions should be taken while using expenditure method?
Q3. What precautions should be taken while using income method?
Q4. Explain limitations of GDP as indicator of economic welfare.
Q5. Define externalities. Give an example of negative externality. What is its impact on welfare?
Q6. “All capital goods are producer goods but all producer goods are not capital goods.” Explain with
the help of example.
Q7. Explain ‘non-monetary exchanges’ as a limitation of using gross domestic product as an index of
welfare of a country.
Q8. “India's GDP is expected to expand 7.5% in 2019-20 World Bank”-The Economic Times. Does the
given statement mean that welfare of people of India increase at the same rate? Comment with
reason.
Q9. ‘Circular flow of income in a two sector economy is based on the axiom that one’s expenditure is
other’s income’. Do you agree with the given statement? Support your answer with valid reasons.
Q10. “Machine purchased is always a final good”. Do you agree? Give reasons for your answer.
Q11. Why should the aggregate final expenditure of an economy be equal to the aggregate factor
payments? Explain.
Q12. Explain the main steps involved in measuring national income through product method.
Q13. Explain the steps involved in calculation of national income through income method.
Q14. Write down the limitations of using GDP as an index of welfare of a country.
Q15. Calculate National Income from the following data
Sl No Items (Rs. In Crores)
(i)Net factor income from abroad (-)20
(ii) Government final consumption expenditure 200
(iii) Subsidies 10
(iv) Private final consumption expenditure 800
(v) Net current transfers from the rest of the world 30
(vi) Net domestic fixed capital formation 100
(vii) Indirect taxes 80
(viii) Consumption of fixed capital 40
(ix) Change in stock (-)10
(x) Net export (-)50
Q16. Calculate
Gross Domestic Product at Market Price by Expenditure method and
(ii) value of subsidies from the followings data
Sl No items (Rs. In crores)
(i) Govt. final consumption expenditure 3000
(ii) Pvt. Final consumption expenditure 2000
(iii) Net domestic fixed capital formation 1800
(iv) Imports 50
(v) Exports 150
(vi) Indirect taxes 250
(vii) Change in stock 200
(viii) Consumption of fixed capital 100
(ix) Factor income from abroad 700
(x) Factor in come to abroad 800
(xi) National income 7250
Q17. How are the following treated in estimating national income from expenditure method?
Give reason.
(i) Purchase of new car by a household
(ii) Purchase of raw material by purchase unit
(iii) Expenditure by the government on scholarship to student
[Link] will you treat the following while estimating domestic product of India?
(a) Rent received by resident Indian from his property in Singapore.
(b) Salaries if Indians working in Japanese Embassy in India
c) Profits earned by branch of American bank in India.
[Link] will you treat the following while estimating National product of India?
(a) Rent received by resident Indian from his property in Singapore.
(b) Salaries if Indians working in Japanese Embassy in India.
(c) Profits earned by branch of American bank in India.
[Link] the following be included in National Income of India? Give reasons for your answer.
(a) Financial help given to flood victims
(b) Profits earned by an Indian bank from its branches abroad.
(c) Salaries paid to non-resident Indians working in Indian Embassy in America.
(d) Interest received by an individual from banks.
Q21. What is the difference between planned and unplanned inventory accumulation?
Q22. Write down the relation between change in inventories and value added of a firm?
Q23. Calculate
a) GDPFC and b) Factor Income to Abroad. From the following data.
Items Rs. (in crores)
(i) Interest 600
(ii) Profits 700
iii) Rent 400
(iv) Opening Stock 150
(v) Compensation of Employees 2000
(vi) Net Domestic Capital Formation 1000
(vii) Gross Fixed Capital Formation 1050
(viii) Factor Income from Abroad 20
(ix) GNPFC 3750
(x)Net Exports (-) 50
(xii)Closing Stocks 200
