CHAPTER -11-NATIONAL INCOME AND RELATED

AGGREGATES (BASIC CONCEPTS)

MULTIPLE CHOICE QUESTIONS

Sl. MCQ
No.
1. Which of the following represents national income?

(a) GDPmp (b) NDPfc (c) NNPfc (d) GNPfc

2. National income is equal to:

(a) GDPmp – Depreciation (b) NNPmp – Net indirect taxes
(c) GNPfc – Depreciation (d) Both (b) and (c)
3. Which one of the following statements is correct?
(a) Market price + Net indirect taxes = Factor cost
(b) Market price – Net indirect taxes = Factor cost
(c) Both (a) and (b)
(d) None of these
4. Which one of the following is correct formula of GNP deflator?
(a) × 100
(b) × 𝑅𝑒𝑎𝑙𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑖𝑛𝑐𝑜𝑚𝑒
(c) × 100
(d) Both (a) and (c)
5. In which type of economy domestic income is equal to national income?
(a) Open economy (b) Closed economy
(c) Capitalist economy (d) Socialist economy
6. GNP at market price is measured as:
(a) GDPmp + NFIA (b) GNPmp + subsidies
(c) GDPmp – Depreciation (d) NDPfc + NFIA
7. Which of the following is an example of normal resident of India?
(a) Ambassador in India of any other country.
(b) Foreign worker working in WHO office located in India.
(c) Ambassador of India in rest of the world.
(d) All of the above.
8. Which of the following makes GDP an inappropriate index of welfare?
(a) Non- monetary transactions (b) Externalities
(c) Composition and distribution of GDP (d) All of these
9. Real national income refers to :
(a) National income at current prices (b) National income at factor cost
(c) National income at constant prices (d) National income at market price
10. Difference between gross investment and net investment is:
(a) Net indirect taxes (b) Net factor income from abroad
(c) Depreciation (d) Both (a) and (c)
11. Cash transfer to cyclone victims is an example of:
(a) Factor income of the victims (b) Net income of the victims
(c) Transfer income of the victims (d) None of these

1|Page 8 October 2021,ZIET BHUBANESWAR

12. Which one of the following is intermediate good?
(a) Furniture purchased by a school
(b) Refrigerator purchased by sweet shop
(c) Machine installed by a factory
(d) Sugar purchased by sweet shop
13. Which of the following is included in domestic territory of India?
(a) SBI branch in London (b) Microsoft office in USA
(c) An American company in India (d) American embassy in India
14. Which one will give factor cost?
(a) Market price – Net indirect taxes (b) Market price + Net indirect taxes
(c) Market price + Subsidies (d) Market price – Subsidies
15. National income refers to :
(a) Only factor incomes of the citizens of a country
(b) Factor incomes of the normal residents of a country
(c) The sum total of domestic income and net transfer income
(d) Both (b) and (c)

16 What is the basis of the difference between the concepts of market price(MP) and factor cost(FC)
(A) Net Indirect Taxes
(B) Indirect Taxes
(C) Direct Taxes
(D) Subsidies
17 The difference between the National Income and Domestic Income is
(A) Consumption of Fixed Capital
(B) Net Indirect Taxes
(C) Net Factor Income From Abroad
(D) Both (A) and (B)
18 A sum of Rs.10000 has been given to a flood victim. This will be considered as-
(A) Compensation of employee
(B) Fixed Investment
(C) Factor Income
(D) Transfer Payment
19 Price Rise due to tax increase cause
(A) Rise in NNP at Market price
(B) Rise in NNP at Factor Cost
(C) Rise in GDP at Market price
(D) Rise in Net Factor Income From Abroad
20 Those goods which satisfy human wants directly are called

a) Intermediate goods
b) Consumer goods
c) Capital goods
d) None of these
21 In the production of sugar, sugarcane is

a) A final good
b) A capital good
c) An intermediate good
d) None of these
22 Which of the following is a semi durable goods?

2|Page 8 October 2021,ZIET BHUBANESWAR

 a) Radio
b) Clothes
c) Milk
d) Petrol
23 Capital goods are those goods

a) Which are used in production for several years

b) Which are used in production process for few years
c) Which involve depreciation losses
d) Both (a) and (c)
24 Increase in stock of capital is known as

a) Capital loss
b) Capital gain
c) Capital formation
d) None of these
25 Net investment is equal to

a) Gross investment + depreciation

b) Gross investment – depreciation
c) Gross investment * depreciation
d) Gross investment/ depreciation
26 Net capital formation causes

a) Increase in production capacity

b) Increase in depreciation
c) Increase in profit
d) Increase in cost
27 Which of the following leads to depreciation?

a) Normal wear and tear

b) Natural calamities
c) Changes in technology
d) None of these
28 Which of the following leads to unexpected obsolescence?

a) Change in demand
b) Natural calamities
c) Change in technology
d) None
29 Income of the family is example of which variable?

a) Stock
b) Flow
c) Both stock and flow
d) Neither stock nor flow
30 A quantity measured per unit of time is known as

a) Stock variable

3|Page 8 October 2021,ZIET BHUBANESWAR

 b) Flow variable
c) Inventory
d) None of these
31 Which of the following is a flow variable?

a) Consumption
b) Wealth
c) Quantity of money
d) None of these
32 Which one includes depreciation?

a) GNP at market price

b) NNP at market price
c) NNP at factor cost
d) None of these
33 Which of following is not a transfer payment?

a) Interest on national debt

b) Retirement pension
c) Old age pension
d) Donations
34 Partial equilibrium relates to:
(A) Microeconomics
(B) Macroeconomics
(C) Both A and B
(D) None of these
35 Which of the following is an example of macroeconomics?
(A) Saving of an individual
(B) Consumption of a household
(C) Price level of a firm
(D) Aggregate demand of an economy
36 Electric goods like tubelights and bulbs are examples of:
(A) Durable consumer goods
(B) Semi-durable consumer goods
(C) Non-durable consumer goods
(D) All of these
37 Gross investment is equal to:
(A) Net investment – Depreciation
(B) Expenditure on the purchase of intermediate as well as final goods
(C) Net investment + depreciation
(D) None of these
38 Stock of man-made goods which are used for further production is called:
(A) Investment
(B) Capital stock
(C) Capital formation
(D) Both A and C
39 Which of the following is not a flow variable?
(A) Income
(B) Capital formation
(C) Supply of money in a country

4|Page 8 October 2021,ZIET BHUBANESWAR

 (D) Leakage of water from the overhead tank
40 Money flows are the reciprocal of:
(A) Monetary flows
(B) Real flows
(C) Circular flows
(D) Inventory flows
41 Economic territory of a country in which economic activities of the country generates its domestic
income is called:
(A) National territory
(B) Domestic territory
(C) Political territory
(D) Geographical territory
42 Which of the following is an example of normal residents of India?
(A) Foreign worker working in WHO located in India
(B) The German working as director in IMF office located in India
(C) Ambassador in India from rest of the world
(D) Ambassador of India in rest of the world
43 If NDPfc = 4300,depreciation=1350,subsidies= 250,NFIA= 330, GDPmp will be:
(A) 2370
(B) 2700
(C) 5400
(D) 6230
44 Operating surplus =
(A) RENT+INTEREST+PROFIT
(B) COE+ MIXED INCOME OF SELF- EMPLOYED
(C) COE + RENT + INTEREST + PROFIT
(D) COE + RENT + INTEREST + PROFIT+ MIXED INCOME OF SELF- EMPLOYED
45 NNPMP = ________
(A) GNPMP – Depreciation
(B) NDPMP + Net factor income from abroad
(C) NNPFC + Net indirect taxes
(D) All of these
46 Why are the intermediate goods not included in the National Income while measuring National
Income?
(A) To avoid double accounting
(B) It decreases income
(C) Intermediate goods are not good
(D) All of these
47 Accounting of National Income at constant prices is known as ________
(A) Money income
(B) Real income
(C) Current income
(D) Domestic income
48 Goods which are purchased for resale are :
(A) final goods
(B) capital goods
(C) intermediate goods
(D) none of these

49 Depreciation is also known as :

5|Page 8 October 2021,ZIET BHUBANESWAR
 (A) Consumption of fixed capital
(B) Annual replacement cost
(C) Value of capital consumption
(D) All of the above

50 Addition to the capital stock of an economy is termed as :

(A) Investment
(B) Capital loss
(C) Consumption of fixed capital
(D) All of these

51 If factor cost is > market price, then it means that :

(A) Indirect Taxes > Subsidies
(B) Indirect Taxes =Subsidies
(C) Indirect Taxes <Subsidies
(D) Indirect Taxes ≥ Subsidies

52 Sugar purchased by a sweet shop is an ____________ good, while it is a _______good when it

is purchased by a consumer.
(A) capital, final
(B) final, intermediate
(C) intermediate, final
(D) final, producer

53 A car purchased by a dealer of cars is :

(A) consumer good
(B) capital good
(C) intermediate good
(D) all of these

54 Which of the following is not a flow?

(A) Capital
(B) Income
(C) Investment
(D) Depreciation

55 Flow of goods and services and factors of production across different sectors in a barter economy
is known as :
(A) Circular Flow
(B) Real Flow
(C) Monetary Flow
(D) Capital Flow

56 Net factor income from abroad is:

(A) Exports minus Imports
(B) Visible Exports minus Visible Imports
(C) Factor incomes received from abroad minus Factor incomes paid abroad

6|Page 8 October 2021,ZIET BHUBANESWAR

 (D) Factor incomes received from abroad

57 Depreciation of fixed capital assets refers to :

(A) Normal wear and tear
(B) Foreseen obsolescence
(C) Normal wear and tear and foreseen obsolescence
(D) Unforeseen obsolescence

58 American embassy in India is a part of domestic territory of:

(A) India
(B) America
(C) Both (A) and (B)
(D) Neither (A) nor (B)

59 Domestic Income is greater than National Income

(A)Never
(B) May or May not
(C) Always
(D) None of these

60 Which of the following is not a ‘factor payment’ ?

(A) Free uniform to defence personnel
(B) Salaries to the Members of Parliament
(C) Rent paid to the owner of a building
(D) Scholarship given to the students

61 If in an economy, the vaueof Net Factor Income from Abroad is Rs. 200 crores and the value of
Factor Income to Abroad is Rs. 40 crores, identify the value of Factor Income from Abroad.
(A) Rs. 200 crores
(B) Rs. 160 crores
(C) Rs. 240 crores
(D) Rs. 180 crores

62 National Income is the sum of factor incomes accruing to :

(A) Nationals
(B) Economic territory
(C) Residents
(D) Both residents and non-residents

7|Page 8 October 2021,ZIET BHUBANESWAR

 MCQ ANSWER KEY

1 (c) NNPfc
2 (d) Both (b) and (c)
3 (b) Market price – Net indirect taxes = Factor cost
4 (c) × 100
5 (b) Closed economy
6 (a) GDPmp + NFIA
7 (c) Ambassador of India in rest of the world.
8 (d) All of these
9 (c) National income at constant prices
10 (c) Depreciation
11 (c) Transfer income of the victims
12 (d) Sugar purchased by sweet shop
13 (c) An American company in India
14 (a) Market price – Net indirect taxes
15 (b) Factor incomes of the normal residents of a country
16 (A) Net Indirect Taxes
17 (C) Net Factor Income From Abroad
18 (D) Transfer Payment
19 (A) Rise in NNP at Market price
20 b
21 c
22 b
23 d
24 c
25 b
26 a
27 a
28 b
29 b
30 b
31 a
32 a
33 b
34 (A) Microeconomics
35 (D) Aggregate demand of an economy
36 (B)Semi-durable consumer goods
37 (C)Net investment + depreciation
38 (B) Capital stock
39 (C) Supply of money in a country
40 (B) Real flows
8|Page 8 October 2021,ZIET BHUBANESWAR
 41 (B) Domestic territory
42 (D) Ambassador of India in rest of the world
43 (C)5400
44 (A) RENT+INTEREST+PROFIT
45 (D) All of these
46 (A) To avoid double accounting
47 (B)Real income
48 C)intermediate goods
49 (D) All of the above
50 (A) Investment
51 (C) Indirect Taxes <Subsidies
52 (C) intermediate, final
53 (C) intermediate good
54 (A) Capital
55 (B) Real Flow
56 (C) Factor incomes received from abroad minus Factor incomes
paid abroad
57 (C) Normal wear and tear and foreseen obsolescence
58 (B) America
59 (B) May or May not
60 (D) Scholarship given to the students
61 (C) ₹ 240 crores
62 (C) Residents

PREPIRED BY : PGT ECONOMICS OF BHUBANESWAR, GUWAHATI,

KOLKATA, RANCHI, SILCHAR AND TINSIKIA REGION .
VETTED BY :RANCHI REGION

9|Page 8 October 2021,ZIET BHUBANESWAR

 CHAPTER -11-NATIONAL INCOME AND RELATED AGGREGATES (BASIC
CONCEPTS)
CASE STUDY BASED QUESTIONS

CASE BASED 1 AND 2

Read the passage given below and answer the following questions :
1. On 21st June, 2015, the first World Yoga Day was celebrated. In India, it was
significantly observed in Delhi, with more than 3500 people, including dignitaries from
84 nations and the Prime Minister NarendraModi. It was organized by the Ministry of
AYUSH. It widely publicised through campaigns on various media to spread
awareness about the benefits of Yoga among the masses. T-shirts with the yoga day
logo, yoga mats and other related items were distributed to the enthusiasts. Trained
yoga experts were appointed to help beginners who participated in the event.
(a) Government’s expenditure to popularise yoga among the masses________
welfare.
(b) Government’s expenditure to popularise yoga among the masseshas no effect on
GDP. (True/ False)
(c) The term ‘welfare ‘ refers to :
(i) Sense of pride in the nation
(ii) Increase in purchase of services
(iii) Sense of well-being among the people
(iv) Strict control by the government
(d) GDP at constant prices is also called ____________(per capita GDP/real GDP).
The Economic Survey, 2018-19 describes the vicious cycle of growth where increase in
the rate of fixed investment accelerates the growth of GDP that in turn induces a higher
growth in consumption. Higher growth of consumption improves the investment
outlook, which results in still higher growth of fixed investment that further accelerates
the growth of GDP, including a still higher growth of consumption. This cycle of
2.
higher fixed investment, higher GDP and higher consumption growth generates
economic development in the country.
(a) High___________is a sign of expansion of production capacity in the economy.

(i) Gross fixed investment

(ii) Inventory investment
(iii) Gross investment
(iv) Net fixed investment

1|Page 8 October 2021,ZIET BHUBANESWAR

 (b) ____________(Gross investment/ Net investment) includes investment for the
maintenance of fixed assets.

(c) Inventory investment includes :

(i) stock of finished goods
(ii) stock of semi-finished goods
(iii) stock of raw materials
(iv) all of these
(d) Depreciation is a component of Net investment. (True/ False)

CASE BASED 3
Read the passage given below and answer the following questions:
The Indian economy saw its worst contraction in decades, with GDP shrinking by a
record 23.9% in the Apr to June quarter in comparison to the same period last year.
The contraction reflects the severe impact of the covid-19 lockdown. The economy is
in a vicious cycle of low demand and low investment as demand is contracting so
heavily, while the government’s capacity to neutralize this contraction has been
reduced substantially by way of tax revenue contraction. Agriculture was the only
sector which recorded modest growth of 3.4% . in year on year term and all other
sectors saw contraction.
1 The reason why GDP of India has been decreased is-
(A) Hyper inflation
(B) Reduction in aggregate demand
(C) Low level of fixed investment
(D) None of these
2 Only Agriculture sector recorded the modest growth because-
(A) Government invested heavily in agriculture
(B) Government reduced taxes on agriculture products
(C) Demand did not get affected for agriculture produce
(D) All the above

2|Page 8 October 2021,ZIET BHUBANESWAR

3 Impact of covid-19 in India’s GDP
(A) GDP increased
(B) GDP decreased
(C) GDP remain unchanged
(D) none of the above
CASE BASED QUESTION 4
Read the following report and answer the questions based on it.
New Delhi: asserting that the “worst is behind us” veteran banker Deepak Parekh on
Thursday said that India’s GDP growth will be in positive territory in the fourth quarter
as demand has started picking up in all sectors. Citing an example, he said during the
virtual conference organised by Canada – India based Council. he said toll collection
are back to 88% of pre Covid level, e way bills are increasing and electricity
consumption has stabilized. India is domestic based economy and demand is set to rise
in coming future.
a) Do you think higher level of Real GDP always lead to higher availability of
goods per person in the domestic economy?
b) Can we say GDP is true indicator of welfare?
c) Real GDP is the index of _____.
CASE BASED QUESTION 5
The Indian economy saw its worst contraction in decade , with GDP shrinking by a
record 23% in April to June Quarter in comparison to the same period last year .The
contraction reflects the severe impact of the Covid 19 lockdown, which halted most
economic activities as well as the slowdown trend of the economy even pre Covid 19
.The Indian economy is in a deeply vicious cycle, where demand is contracting so
heavily ,while the capacity to neutralise this contraction has also contracted equally
because of the tax revenue contraction.
Agriculture was the only sector which recorded modest growth of 3.4% in year on year
term and all other sectors saw contraction.
Answer the following based on the text:
a) The impact of Covid 19 on India’s GDP_______. (increasing / decreasing)
b) _____ is crucial for revenue collection.(Nominal GDP/National income)
c) Who are considered as owner of factors of production? (Firms/ Households)

3|Page 8 October 2021,ZIET BHUBANESWAR

 CASE BASED QUESTION 6
6 Read the passage given below and answer the following questions 1and 2
GDP is a measure of economic prosperity of a country compiled as output or income.
However, GDP is regularly criticized for not presenting a fair view of welfare. If GDP
is a poor measure of welfare, focusing one sided on increasing GDP may lead to
misguided political decision. For example Nobel Laureate Joseph Stieglitz has argued
that the objective of the highest possible GDP growth will result reduced welfare.
1 GDP is not considered as a better measure of development. Which of the following
reasons could be accounted for the same?
(a)Externalities
(b) Non-marketable services
(c) Production of harmful goods
(d) All of these
2 A course of action by one economic agent which has an adverse impact on the other
economic agent without cost sharing, is known as…………… (Positive/Negative)
externality.
(A) Positive
(B) Negative

4|Page 8 October 2021,ZIET BHUBANESWAR

 CASE BASED QUESTIONS ANSWER KEY
CASE BASED 1 AND 2 ANSWER KEY

Q.1 (a) Increase

(b) False
(c) (iii) Sense of well-being among the people
(d) Real GDP
Q.2 (a) (iv) Net fixed investment
(b) Net investment
(c) (iv) all of these
(d) False

CASE BASED 3 ANSWER KEY

1 (B) Reduction in aggregate demand
2 (C) Demand did not get affected for agriculture produce much
3 (B) GDP decreased
CASE BASED 4 ANSWER KEY
1 a) NO
b) NO
c) Economic growth
CASE BASED 5 ANSWER KEY
a) Increasing
b) Nominal GDP
c) Household
CASE BASED 6 ANSWER KEY
1 (D) All of these
2 (B) Negative

PREPIRED BY : PGT ECONOMICS OF BHUBANESWAR, GUWAHATI, KOLKATA,

RANCHI, SILCHAR AND TINSIKIA REGION.
VETTED BY :RANCHI REGION

5|Page 8 October 2021,ZIET BHUBANESWAR

 CHAPTER -11-NATIONAL INCOME AND RELATED AGGREGATES (BASIC
CONCEPTS)
TRUE AND FALSE QUESTIONS

1. Domestic income of a country can be more than its national income.

(A) True
(B) False

2. Domestic income includes income of normal residents only.

(A) True
(B) False

3. In a closed economy domestic income may be more or less than national income.
(A) True
(B) False
4. Double counting leads to over estimation of national income.
(A) True
(B) False

5. In the estimation of GDP and national income we include the value of final goods
and services only.
(A) True
(B) False

6 Factor incomes are only earned incomes

(C) True
(D) False
7 Monetary GDP is estimated using the base year prices.
(A) True
(B) False
8 All capital goods are producer goods.
(A) True
(B) False
9 Domestic income is more than National income when NFIA is negative.
(A) True
(B) False
10 Capital stock increases as a result of investment.
(A) True
(B) False

1|Page 8 October 2021,ZIET BHUBANESWAR

 11
In an open economy domestic income is always equal to domestic income.
(A) True
(B) False
12 Depreciation can be negative also
(A) True
(B) False
13 Indirect tax can never be negative.
(A) True
(B) False
14 Domestic income can never be more than national income,
(A) True
(B) False
15 Higher GDP will always lead to higher welfare.
A)True
B)False
16 Transfer incomes are included in the estimation of national income as these are
rewards for rendering factor services.
A)True
B)False
17 GDP deflator shows change in GDP owing to the change in the price level.
A)True
B)False
18 Subsidy causes the difference between gross domestic product and net domestic
product.
A)True
B)False
19 The impact of externalities is always negative.
A)True
B)False
20 Domestic income of a country can be more than its national income.
A)True
B)False

21 Domestic income includes income of normal residents only.

A)True
B)False

22 In a closed economy domestic income may be more or less than national income.
A)True
B)False
23 Double counting leads to over estimation of national income.
A)True
B)False
2|Page 8 October 2021,ZIET BHUBANESWAR
24 In the estimation of GDP and national income we include the value of final goods
and services only.
A)True
B)False

TRUE / FALSE ANSWER KEY

Sl. No. Answers
1. True
2. False
3. False
4. True
5. True
6 True
7 False
8 True
9 True
10 True
11 false
12 false
13 true
14 false
15 false
16 True
17 True
18 False
19 False
20 True
21 False
22 False
23 True
24 True

PREPIRED BY : PGT ECONOMICS OF BHUBANESWAR, GUWAHATI, KOLKATA,

RANCHI, SILCHAR AND TINSIKIA REGION.
VETTED BY :RANCHI REGION

3|Page 8 October 2021,ZIET BHUBANESWAR

 CHAPTER -11-NATIONAL INCOME AND RELATED AGGREGATES (BASIC
CONCEPTS)
ASSERTION- REASON QUESTIONS

Sl. Questions
No.
1. Statement (A): Real GDP is better indicator of economic growth than nominal GDP.
Reason (R): Real GDP eliminates the change in prices.
(a) Both (A) and (R) true and (R) is correct explanation of (A).
(b) Both (A) and (R) true but (R) is not correct explanation of (A).
(c) (A) is true but (R) is false.
(d) (A) is false but (R) is true.

2. Statement (A): Higher level of GDP does not ensure higher level of social welfare.
Reason (R): Level of GDP does not focus on the composition and distribution of
income.
(a) Both (A) and (R) true and (R) is correct explanation of (A).
(b) Both (A) and (R) true but (R) is not correct explanation of (A).
(c) (A) is true but (R) is false.
(d) (A) is false but (R) is true.

3. Statement (A): GDPmp is the sum total of market value of all final goods and services
produced in the domestic territory during an accounting year.
Reason (R): GNPfc is the sum total of market value of final goods and services
produced by the normal residents of a country during an accounting year.
(a) Both (A) and (R) true and (R) is correct explanation of (A).
(b) Both (A) and (R) true but (R) is not correct explanation of (A).
(c) (A) is true but (R) is false.
(d) (A) is false but (R) is true.

4. Statement (A): We can convert domestic income into national income.

Reason (R): Net indirect taxes are the difference between domestic income and
national income.
(a) Both (A) and (R) true and (R) is correct explanation of (A).
(b) Both (A) and (R) true but (R) is not correct explanation of (A).
(c) (A) is true but (R) is false.
(d) (A) is false but (R) is true.

5. Statement (A): The concept of normal resident is important for national income
estimation.
Reason (R): The concept of normal resident is different from the concept of
citizen of a country.
(a) Both (A) and (R) true and (R) is correct explanation of (A).

1|Page 8 October 2021,ZIET BHUBANESWAR

 (b) Both (A) and (R) true but (R) is not correct explanation of (A).
(c) (A) is true but (R) is false.
(d) (A) is false but (R) is true.

6 Assertion: Gross Domestic Capital Formation can be less than Gross Fixed Capital
Formation.
Reason: Change in Stock is negative.
(A) Both Assertion and reason are true and reason is correct explanation of assertion.
(B) Assertion and reason both are true but reason is not the correct explanation of
assertion.
(C) Assertion is true, reason is false.
(D) Assertion is false, reason is true.
7 Assertion: Government should increase its investment expenditure to increase GDP
Reason: Government should spend more on health infrastructure.
(A) Both Assertion and reason are true and reason is correct explanation of assertion.
(B) Assertion and reason both are true but reason is not the correct explanation of
assertion.
(C) Assertion is true, reason is false.
(D) Assertion is false, reason is true.
8 Assertion: A change in taste and preference of Indian consumer towards MNCs and
imported goods leads to decrease in GDP
Reason: expenditure on imports of goods is subtracted from final expenditure in order
to estimate GDP.
(A) Both Assertion and reason are true and reason is correct explanation of assertion.
(B) Assertion and reason both are true but reason is not the correct explanation of
assertion.
(C) Assertion is true, reason is false.
(D) Assertion is false, reason is true.
9 Assertion: Expansion of Indian industries abroad leads to increase in national income
of the country.
Reason: Retained earnings of resident companies abroad is included in national
income.
(A) Both Assertion and reason are true and reason is correct explanation of assertion.
(B) Assertion and reason both are true but reason is not the correct explanation of
assertion.
(C) Assertion is true, reason is false.
(D) Assertion is false, reason is true.
10 Assertion (A) India’s GDP is forecast to contract 5.9% in 2020 and recover to3.9%
next year, the UNCTAD report said.
Reason(R) India I s experiencing impacts of worldwide deep recession amid a still
unchecked pandemic.
(a) Both Assertion(A) and Reason (R) is true and is Reason is correct explanation
for Assertion (A)
(b) Both Assertion and Reason is true but Reason(R) is not the correct explanation
for Assertion (A)
(c) Assertion is true but Reason is false
2|Page 8 October 2021,ZIET BHUBANESWAR
 (d) Assertion is false but Reason is true.
11 Assertion (A) GDP can never be greater than GNP
Reason (R) NFIA can never be negative
a) Both Assertion (A) and Reason (R) is true is true and Reason is correct
explanation for Assertion
b) Both Assertion (A) and Reason(R) is true, but Reason(R) is not correct
explanation for Assertion(A)
c) Assertion is true but Reason is false
d) Assertion is false but Reason is true
12 Assertion (A) Goods that are ultimately consumed rather than used in the production of
another good are known as final goods
Reason(R) Components sold to car manufacturer are type of final goods.
(a) Both assertion(A) and Reason (R) is true and Reason(R) is the correct
explanation for Assertion (A)
(b) Both Assertion and Reason is true but Reason is not correct explanation for
Assertion.
(c) Assertion(A) is true but Reason (R) is false.
(d) Assertion is true but Reason is false
(e) Assertion is false but reason is true

13 Assertion(A) Income from self-consumption is to be included in National Income.

Reason (R) A house owner living in his own house is assumed to be paying rent to
himself for using up the factor services.
a) Both Assertion (A) and Reason (R) is true and Reason (A) is the correct
explanation for assertion (A)
b) Both Assertion (A) and Reason (R) is correct but Reason is not correct
explanation for Assertion.
c) Assertion (A) is true but Reason (R) is false.
d) Assertion is false but Reason is true.

14 Assertion (A) The GNP is the value of goods and services produced annually in the
Nation.
Reason(R) The most comprehensive measure of national output is the GNP.
(a) Both Assertion(A) and Reason (R) is true and Reason (R) is the correct
explanation for Assertion (A)
(b) Both assertion (A) and Reason (R) is true but Reason is not correct explanation
for Assertion.
(c) Assertions true but Reason is false.
(d) Assertion is false but Reason is true.
15 Assertion: Factor income is bilateral income.
Reason: Factor income is earned for contributing to production process.
Alternatives:
A. Both A and R are true but R is the correct explanation of A.
B. Both A and R are true but R is not correct explanation of A.
C. A is true but R is false.
D. A is false but R is true.
3|Page 8 October 2021,ZIET BHUBANESWAR
 16 Assertion: Intermediate goods have direct demand.
Reason: The demand for intermediate goods depends on demand for final goods.
Alternatives:
A. Both A and R are true but R is the correct explanation of A.
B. Both A and R are true but R is not correct explanation of A.
C. A is true but R is false.
D. A is false but R is true.

17 Assertion: Transfer income is not included in the national income.

Reason: Transfer income is a unilateral concept.
Alternatives:
A. Both A and R are true but R is the correct explanation of A.
B. Both A and R are true but R is not correct explanation of A.
C. A is true but R is false.
D. A is false but R is true.

18 Assertion: Subsidy is transfer payment.

Reason: Subsidy contributes to current flow of goods and services.
Alternatives:
A. Both A and R are true but R is the correct explanation of A.
B. Both A and R are true but R is not correct explanation of A.
C. A is true but R is false.
D. A is false but R is true.

19 Assertion: Depreciation is also termed as Consumption of fixed capital .

Reason: Depreciation refers to that value of fixed capital which is used up in the
process of production.
Alternatives:
A. Both A and R are true but R is the correct explanation of A.
B. Both A and R are true but R is not correct explanation of A.
C. A is true but R is false.
D. A is false but R is true.

20 Assertion : Intermediate goods have direct demand.

Reason: The demand for intermediate goods depend on demand for final goods.
(A) Both Assertion and reason are true and reason is correct explanation of assertion.
(B) Assertion and reason both are true but reason is not the correct explanation of
assertion.
(C) Assertion is true, reason is false.
(D) Assertion is false, reason is true.

21 Assertion: Domestic income of a country can be more than its National income
Reason: Factor income paid abroad < Factor income received from abroad.
(A) Both Assertion and reason are true and reason is correct explanation of assertion.
(B) Assertion and reason both are true but reason is not the correct explanation of
4|Page 8 October 2021,ZIET BHUBANESWAR
 assertion.
(C) Assertion is true, reason is false.
(D) Assertion is false, reason is true.

22 Assertion: A good that will not pass through any more stages of production or
transformation is called a final good.
Reason: Value of final good is included in National Income.
(A) Both Assertion and reason are true and reason is correct explanation of assertion.
(B) Assertion and reason both are true but reason is not the correct explanation of
assertion.
(C) Assertion is true, reason is false.
(D) Assertion is false, reason is true.

23 Assertion: Nominal value is money value or value measured in terms of prices that
prevail at the time of measurement.
Reason: GDP is measured at both current prices as well as constant prices.
(A) Both Assertion and reason are true and reason is correct explanation of assertion.
(B) Assertion and reason both are true but reason is not the correct explanation of
assertion.
(C) Assertion is true, reason is false.
(D) Assertion is false, reason is true
24 Assertion: GDP at MP can be equal to NDP at MP
Reason: NIT = 0
(A) Both Assertion and reason are true and reason is correct explanation of assertion.
(B) Assertion and reason both are true but reason is not the correct explanation of
assertion.
(C) Assertion is true, reason is false.
(D) Assertion is false, reason is true.

5|Page 8 October 2021,ZIET BHUBANESWAR

 Assertion- Reason Answers

Sl. No. Answers

1. (a) Both (A) and (R) true and (R) is correct explanation of (A).
2. (a) Both (A) and (R) true and (R) is correct explanation of (A).
3. (c)(A) is true but (R) is false.
4. (c)(A) is true but (R) is false.
5. (b) Both (A) and (R) true but (R) is not correct explanation of (A).
6 (A) Both Assertion and reason are true and reason is correct
explanation of assertion.
7 (B) Assertion and reason both are true but reason is not the correct
explanation of assertion.
8 (A) Both Assertion and reason are true and reason is correct
explanation of assertion.
9 (A) Both Assertion and reason are true and reason is correct
explanation of assertion.
10 a
11 b
12 a
13 a
14 c
15 A. Both A and R are true but R is the correct explanation of A.
16 D. A is false but R is true.
17 B. Both A and R are true but R is not correct explanation of A.
18 C. A is true but R is false.
19 A. Both A and R are true but R is the correct explanation of A.
20 (D)
21 (C)
22 (B)
23 (B)
24 (C)

PREPIRED BY : PGT ECONOMICS OF BHUBANESWAR, GUWAHATI, KOLKATA,

RANCHI, SILCHAR AND TINSIKIA REGION.
VETTED BY :RANCHI REGION

6|Page 8 October 2021,ZIET BHUBANESWAR