Q1.Which of the following is/are included in Gross Domestic Product at Market Price (GDP_MP)?
- Indirect taxes
- Subsidies
- Depreciation
Options:
(a) 1 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) All three
Correct Answer: (b) 1 and 3 only
Explanation :
- GDP_MP = GDP_FC + Net Indirect Taxes (Indirect Taxes – Subsidies).
- Indirect taxes raise market prices → included.
- Subsidies reduce market prices → subtracted, not included.
- Depreciation is part of gross measures → included.
Q2.Which of the following is/are included in Gross National Product (GNP) but not in Gross Domestic Product (GDP)?
- Income of Indian companies from abroad
- Profits earned by foreign banks in India
- Export of goods
Options:
(a) 1 only
(b) 1 and 2
(c) 2 and 3
(d) 1 only
Correct Answer: (d) 1 only
Explanation :
- GNP = GDP + NFIA (Net Factor Income from Abroad).
- Only incomes earned by residents from abroad count under NFIA → (1).
- Foreign banks earning in India = domestic production → part of GDP, not NFIA.
- Exports are part of GDP (domestic production sold abroad).
Q3.Which of the following is correct about Net National Product at Factor Cost (NNP_FC)?
- It is called National Income in Indian accounting.
- It equals GDP_MP – Depreciation – Net Indirect Taxes + NFIA.
- It is the total measure of factor incomes earned by residents of a country.
Options:
(a) 1 and 2
(b) 1 and 3
(c) 2 and 3
(d) All three
Correct Answer: (d) All three
Explanation :
- NNP_FC is officially termed National Income by CSO.
- Formula:
- GDP_MP → subtract Depreciation → NDP_MP
- Subtract Net Indirect Taxes → NDP_FC
- Add NFIA → NNP_FC
- Represents all factor incomes earned by residents, irrespective of geography.
Q4.Personal Income differs from Private Income because of:
- Undistributed corporate profits
- Corporate taxes
- Interest on public debt
Options:
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) All three
Correct Answer: (b) 1 and 2 only
Explanation :
- Personal Income = Private Income – Undistributed Profits – Corporate Taxes + Transfer Payments.
- Undistributed corporate profits: Not received by households → deducted.
- Corporate taxes: Paid by firms → reduce what households receive → deducted.
- Interest on public debt: Already part of factor incomes → common to both → not a differentiator.
Q5.Which of the following statements is/are correct?
- Transfer payments are not included in national income because they do not represent payment for current productive activity.
- Imputed rent of owner-occupied houses is included in national income.
- Windfall gains (lottery prizes) are included in national income.
Options:
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) All three
Correct Answer: (b) 1 and 2 only
Explanation :
- Transfer payments: No productive activity → excluded.
- Imputed rent: Counts as a productive service even without transactions → included.
- Windfall gains: Pure transfers, not factor income → excluded.
