Revised 99 A 2 Feb16 Himalai Oral Test National Income

Part A

Qts 1 What is  Gross Domestic Product

Ana 

1. It is total finished goods and services produced by Indians with in India.

2. It is in One financial Year. April 1 to March 31

Qts II What is Gross National Product 

1. It is total finished goods and Services produced by Indians with in India and in abroad.

2. It is in one financial Year. April 1 to March 31

Qts III What is  Net National Product

It is GNP - Depreciation

Qts IV What is  National Income

It is NNP + (Indirect Taxes - Subsidies)

V  Per Capita Income

It is National Income divided from Number of population in India

Method of Calculating National Income.

Qts I What is  Product Method

It is total finished Goods and Services produced by Indians

It is GDP

Qts II. Expenditure Method

It is total money spent by Indians in one financial year.

It is GST

Qts III. What is Income Method

It is total income earned by Indians

It is Income tax

It is also National Income.

Part B

Qts I. Increase in absolute and per capita real GNP do not connote a higher level of economic development, if 

(a) Industrial output fails to keep peace with agricultural output.

( b) Agricultural output fails to keep pace with industrial output.

(c) Poverty and unemployment increase.

(d) imports grow faster than exports.

Ans. C

Explanation: 

Economic development is a multi- dimensional concept. 

Growth in absolute and per capita GDP/GNP numbers signify growth only in a particular aspect, where in the benefits might accrue only to a small small section of the society.

 If a country is ailing with poverty and unemployment, then increase in GNP numbers will not contribute to economic development significantly.

Qts II. The national income of a country for a given period is equal to the

(a) Total value of goods and services produced by the nationals

(b) sum of total consumption and investment expenditure

(c) sum of personal income of all individuals

(d) money value of final goods and services produced

Ans. D

Explanation: 

The growth of National income helps to know the progress of the country in economic terms. 

In other words, the total amount of income arising from the economic activity in the year for that country is counted as the national income.

It is not same as the GDP which counts only the values within the territory of the country.

Qts III.  The growth rate of per capita income at current prices is higher than that of, per capita income constant prices, because the latter takes into account the rate of

(a) growth of population

(b) increase in price level

(c) growth of money supply

(d) increase in the wage rate

Ans. B

Explanation:

It indicates the actual performance of the economy. 

The growth rate of per capita income at current prices is higher than that of per capita income at constant prices because the later takes into account the rate of increase in price level.

Per capita income at current prices takes into account the flow of money supply in the market and its related aspect.

 Higher the money supply more income of people and hence, rises per capita income at the nominal prices.

 Also, the GDP at current price is called the Nominal GDP, while those at the constant prices are called Real GDP.

Qts IV. National Income is the

(a) Net National Product at market price 

(b) Net National Product at factor cost

(c) Net Domestic Product at market price

(d) Net Domestic Product at factor cost

Ans. B

Explanation:

National Income is Net National Product at factor cost. 

From the modern point of view, Simon Kuznets has defined national income as "the net output of commodities and services flowing during the year from the country's productive system in the hands of the ultimate consumers."

GDP= is the total value of all final goods and services produced by the country in certain year within the country.

GNP =GDP+ Net Income from Foreign Assets, Net National Product (NNP): 

NNP =GNP-Depreciation, Revenue Price (or Factor Cost) = Market Price - Net Indirect Taxes.

Qts V .The most appropriate measure of a country's economic growth is its 

(a) Gross Domestic Product 

(b) Net Domestic Product

(c) Net National Product

(d) Per Capita Real Income

Ans. D

Explanation: 

The most appropriate measure economic growth is its Per Capita Real Income.

 Real income refers to the income of an individual or group after taking into consideration the effects of inflation on purchasing power. 

The real income of an economy divided by the total population is per capita real income. 

Thus, it gives an insight of the real economic situation of a country.

Qts VI. The term National Income represents 

(a) Gross national product at market prices minus depreciation

(b)Gross national product at market prices minus depreciation plus net factor income from abroad

(c) Gross national product at market prices minus depreciation and indirect taxes plus subsidies

(d) Gross national product at market prices minus net factor income from abroad

Ans. C

Explanation:

The term National Income represents gross national product at market prices minus depreciation and indirect taxes plus subsidies.

Since National income is Net National product at factor cost ,we can derive it to through following ways: 

GNP =GDP+ Net Income from Foreign Assets,

 Net National Product (NNP): = GNP - Depreciation,

 Revenue Price (or Factor Cost) = Market Price - Net Indirect Taxes +Subsidies.

Part C

Qts I Explain the per capita income as a measurement of economic growth.

Ans

1. Per capita income is the outcome to total national income divided by total population.

2. It does not give correct figure of nations income status also of income distribution.

Qts 2  What is the difference between Gross National Product (GNP) and Net National Product (NNP)?

Ans 

1.Gross National Product refers to the money value of total output or production of final goods and services produced by the nationals of a country during a given period of time.

2.Whereas Net National Product is obtained by subtracting depreciation values (i.e., capital stock consumption) from GNP. 

NNP =GNP-Depreciation

Qts 3. Explain per capita income as a measure of economic growth.

Ans 

It is the outcome of total national income divided by total population of that country.