National Income
Questions for Review
Multiple Choice Questions with Answer:
1. The market value of all final goods and services produced within domestic territory of the country during a year is known as-------------
a. GDPMP b. GDPFC c. GNPMP d. GNPFC
2. The money value of all final goods and services produced in the domestic territory of a country during a year plus Net factor income from abroad is called------------
a. GDPMP b. GDPFC c. GNPMP d. GNPFC
3. The difference between the income received from abroad for rendering factor services by the normal residents of the country to the rest of the world and income paid for the factor services rendered by nonresidents in the domestic territory of a country is known as-------
a. Net Factor Income from Abroad b. Capital Consumption Allowances c. Depreciation d. None of these.
4. The difference between indirect tax and subsidy is known as-------------
a. Net Factor Income from Abroad b. Capital Consumption Allowances c. Depreciation d. Net Indirect Tax.
5. Net National Product at Factor Cost (NNPFC) is also known as------------
a. Net Factor Income from Abroad b. National Income c. National cost d. Net Indirect Tax.
6. That part of personal income which is actually available to households for consumption and saving is called-----------
a. National Disposable Income b. Personal Disposable Income c. Personal Income d. None.
7. Real and nominal income is calculated respectively at-------------
a. Current price and Constant Price b. Constant price and Current price c. Current price and Current price d. Constant price and Constant price.
8. GDP Deflator is 1Q2QQQ3equal to-----------
π. πππππππ πΊπ·π π πππ πΊπ·π × 100
b. π πππ πΊπ·π πππππππ πΊπ·π × 100
c. πππππππ πΊππ π πππ πΊππ× 100
d. πππππππ ππ·π π πππ ππ·π × 100
9. Sum of all kinds of income received by the individuals from all sources is called---------
a. Personal Income b. Private Income c. Personal Disposable Income d. None
10. GNPMP is equal to a. GDPMP + NFIA b. GDPMP - NFIA c. GDPMP – D d. None
Ques 1 2 3 4 5 6 7 8 9 10 Ans a c a d b b b a a a
Question: What do you understand by the term national income?
Answer: It is the money value of all final goods and services produced by residents of a country in a year. It is also defined as the sum of factor incomes in a country in a year. It is also expressed in terms of aggregate expenditure of a country in a year.
Question: What is the importance of national income accounting in an economy?
Answer: Followings are the points which shows the importance of national income accounting:
Indicator of Economic Progress; Measure of Economic Growth; Comparison with other Countries; Significance in Business Policy Making; Significance for Trade Unions; Knowledge of Structural Changes; Signification for Economic Analysis, etc.
Question: What do you understand by the term domestic territory of a country?
Answer: It includes land mass of a country, territorial waters, ships and aircrafts owned and operated by residents across countries, fishing vessels, oil rigs and floating platforms and embassies abroad.
Question: What do you mean by normal resident?
Answer: A person or institution who ordinarily resides in a country and whose centre of economic interest lies in that country is called normal resident. The normal residents of a country include the All producing enterprises operating in a country; Nationals of a country and the foreign nationals who stay for one year or more in the country; Saudi nationals who have gone abroad but come back within a year’s time; Saudi employees working in the foreign embassies and international institutions located in Saudi Arabia; and Saudi students and patients who have gone abroad and stay there even for more than one year. Normal Residents = Nationals living in Saudi Arabia + Non- nationals living in Saudi Arabia
Question: What do you understand by non- resident of a country?
Answer: if a Saudi national goes abroad and stays there for a period less than one year, he will remain normal resident of Saudi Arabia. But, if he stays there for more than one year he will be treated as non- resident of Saudi Arabia.
Question: What is capital formation?
Answer: The surplus of the production over consumption in an accounting year which is further used for production is called capital formation.
Question: What are final goods?
Answer: Goods which directly satisfies human wants are called final goods.
Question: What are intermediate goods?
Answer: Goods which are used in the production process to produce other goods are called intermediate goods.
Question: What is Gross Domestic Product at Market Price (GDPMP)?
Answer: Gross Domestic Product (GDPMP) is the market value of all final goods and services produced within domestic territory of the country during a year.
Question: What is the features of GDPMP?
Answer: the main features of GDPMP are: It includes only final goods and services produced in the domestic territory of a country; It includes consumption of fixed capital (depreciation); It is estimated at the prevailing prices.
Question: What is Gross Nation Product at Market Price (GNPMP)?
Answer: Gross National Product at market price is Gross Domestic Product at market price plus net factor income from abroad. GNPMP is the money value of all final goods and services produced in the domestic territory of a country during a year plus Net factor income from abroad. i.e.,
GNPMP = GDPMP + NFIA
Where,
GNPMP = Gross National Product at market price GDPMP= Gross Domestic Product at market price NFIA= Net factor income from abroad
Question: What do you understand by Net Factor Income from Abroad (NFIA)?
Answer: Net factor income from abroad is the difference between the income received from abroad for rendering factor services by the normal residents of the country to the rest of the world and income paid for the factor services rendered by nonresidents in the domestic territory of a country.
Question: What is Net Domestic Product at Market Prices (NDPMP)?
Answer: Net Domestic Product at market prices is the net market value of all the final goods and services produced in domestic territory of a country during a year. Net market value of the goods is equal to the market value of goods minus depreciation.
NDPMP = GDPMP – D (or CCA)
Where,
NDPMP= Net Domestic Product at market prices GDPMP= Gross Domestic Product at market pric
D = Depreciation CCA= Capital Consumption Allowances
Question: What is Net National Product at Market Price (NNPMP)?
Answer: Net National Product at Answer: Market Prices is the net market value of all the final goods and services produced by the normal residents of a country during a year.
NNPMP = GNPMP – D
Where,
NNPMP = Net National Product at Market Prices GNPMP = Gross National Product at market price D = Depreciation
Question: What is Gross Domestic Product at Factor Cost (GDPFC)?
Answer: It is the sum of net value added at factor cost by all the producers in the domestic territory of a country and the consumption of fixed capital during an accounting year. i.e.,
GDPFC = Domestic Factor Income + Consumption of Fixed Capital
GDPFC = GNPMP – IT + S
Question: What is Gross National Product at Factor Cost (GNPFC)?
Answer: It is the difference between the GNPMP and net indirect taxes. It is the sum of net domestic factor income, consumption of fixed capital and net factor income from abroad. Symbolically,
GNPFC = GNPMP – IT + S
GNPFC = Domestic Factor Income + NFIA + Consumption of fixed capital.
Question: What is Net Domestic Product at Factor Cost (NDPFC)?
Answer: Net domestic income is the income generated in the form of wages, rent, interest and profit in the domestic territory of a country by all the producers (normal and non- normal residents) in an accounting year. In other words,
NDPFC = NDPMP – IT + S
Where;
IT = Indirect Taxes; and S = Subsidies.
Question: What is Net Indirect Tax?
Answer: The difference between IT and S is known as net indirect tax.
Question: What is Net National Product at Factor Cost (NNPFC)?
Answer: Net National Product at the factor cost is the sum total of net value added at factor cost by all the normal residents producer enterprises of a country during a year. Symbolically,
NNPFC = NDPFC + NFIA
It is also expressed as the sum of domestic factor income and net factor income from abroad. i.e.,
NNPFC = Net Domestic Income + NFIA
Net National Product at Factor Cost (NNPFC) is also known as National Income.
Question: What is Personal Income?
Answer: Personal income is sum of all kinds of income received by the individuals from all sources.
Question: What is Private Income?
Answer: It refers to the income which accrues to individuals from whatsoever source, within the domestic territory of a country and abroad.
Question: What is difference between Private Income and Personal Income?
Answer: Private income includes all the payments which accrue to individuals from whatever sources while personal income includes only those payments which are actually received by the individuals.
Question: What is Personal Disposable Income?
Answer: It refers to that part of personal income which is actually available to households for consumption and saving. In other words, Personal Disposable Income = Personal Income – (Direct Taxes + Fines, Fees, etc. + Social Security Contributions by Employees)
Question: What is Net National Disposable Income?
Answer: It is the sum of national income, net indirect taxes and other current transfers from the rest of the world. In other words, Net National Disposable Income = National Income + Net Indirect Taxes + Net Capital Transfers from the rest of the World
Question: What is Per Capita Income (PCI)?
Answer: It is the average income of the normal residents of a country. Symbolically,
PCI = πππ‘πππππ πΌπππππ (πππππ‘ πΉπππ‘ππ πΆππ π‘) ππππ’πππ‘πππ
Question: What is Real Income?
Answer: The income measured in physical term or in terms of the quantity of goods and services. It is calculated at some base year.
Question: What is Nominal income?
Answer: The income measured in term of current price is called nominal income.
Question: What is GDP Deflator?
Answer: It is nominal GDP (current price) divided by real GDP (base year price). GDP Deflator = πππππππ πΊπ·π π πππ πΊπ·π × 100
Question: What are the methods of measurement of national income?
Answer: There are three methods of the measurement of the national income:
4. Value Added Method or Product Method 5. Income Method or Factor income in production process 6. Expenditure Method
Question: Suppose a country produces four goods: rice, cloth, cement and cars. The production of the four commodities in the year 2013- 14 was 1000 units, 5000 units, 2000 units and 500 units respectively. The per unit price of the four commodities is SR 10, SR 20, SR 50 , and SR 2,00,000 respectively. Find out the GDP at market prices.
Solution:
S. No. Commodity Quantity (Units) Price per unit (SR) Gross Money Value (SR)
1. Rice 1000 10 10,000
2. Cloth 5000 20 1,00,000
3. Cement 2000 50 1,00,000
4. Car 500 20,00,000 10,00,00,000
Total Money Value in SR (GDPMP) = 10,02,10,000
Question: Suppose the gross domestic product at market prices of Saudi Arabia in 2012- 13 was SR 85,000 crores and net factor income from abroad was (-) SR 430 crores. Calculate GNPMP.
Solution: GNPMP = GDPMP + NFIA
= 85,000 + (- 430) = SR 84,570 crores.
Question: Suppose we are provided with the following information:
(i) GNPMP = SR 35,800 Crores (ii) Consumption of fixed capital = SR 1,670
Find out Net National Product at market price.
Solution: NNPMP = GNPMP – Consumption of fixed capital
= 35,800 – 1,670
= SR 34,130 Crores.
Question: Given the following data, calculate net domestic product at market prices:
(i) Gross National Product at market prices = SR 85,000 Crores; (ii) Consumption of fixed capital = SR 3,000 Crores (iii) Net factor income from abroad = SR 2,000 Crores.
Solution: NDPMP = GDPMP- Consumption of fixed capital
= (GNPMP – Net factor income from abroad) - Consumption of fixed capital
= (85,000 – 2,000) – 3,000 = SR 80,000 Crores.
Question: Given the following information, calculate net domestic product at factor cost:
(i) Net domestic product at market prices = SR 25,000 Crores (ii) Indirect taxes = SR 1500 Crores (iii) Subsidies = SR 500 Crores.
Solution: NDPFC = NDPMP – IT +S
= 25000 – 1500 + 500 = SR 24000 Crores.
Question: Given the following information about an economy, calculate net domestic product at factor cost:
(i) Gross domestic product at market prices = SR 12000 Crores (ii) Consumption of fixed capital = SR 1500 Crores (iii) Subsidies = SR 300 Crores (iv) Indirect taxes = SR 1000.
Solution: NDPFC = NDPMP – IT + S
= (GDPMP – Consumption of fixed capital) – IT + S
= (12000 – 1500) + 1000 + 300
= 9500 + 1300 = SR 10800 Crores
Question: Given the following data, calculate GDPFC:
(i) Net domestic product at factor cost = SR 25000 Cr (ii) Consumption of fixed capital = SR 3000 Cr
Solution: GDPFC = NDPFC + Consumption of fixed capital
= 25000 + 3000 = SR 28000 Cr.
Question: Given the following information, calculate GDPFC:
(i) NNPMP = SR 3200 Cr (ii) NFIA = SR 200 Cr (iii) Consumption of fixed capital = SR 1000 Cr (iv) Indirect taxes = SR 500 Cr (v) Subsidies = SR 300 Cr
Solution: GDPFC = GDPMP – IT + S
= (NNPMP + Consumption of fixed capital - NFIA) – IT + S
= (3200 + 1000 - 200) – 500 + 300
= 4000 – 500 + 300
= SR 3700 Cr
Multiple Choice Questions with Answer:
1. The market value of all final goods and services produced within domestic territory of the country during a year is known as-------------
a. GDPMP b. GDPFC c. GNPMP d. GNPFC
2. The money value of all final goods and services produced in the domestic territory of a country during a year plus Net factor income from abroad is called------------
a. GDPMP b. GDPFC c. GNPMP d. GNPFC
3. The difference between the income received from abroad for rendering factor services by the normal residents of the country to the rest of the world and income paid for the factor services rendered by nonresidents in the domestic territory of a country is known as-------
a. Net Factor Income from Abroad b. Capital Consumption Allowances c. Depreciation d. None of these.
4. The difference between indirect tax and subsidy is known as-------------
a. Net Factor Income from Abroad b. Capital Consumption Allowances c. Depreciation d. Net Indirect Tax.
5. Net National Product at Factor Cost (NNPFC) is also known as------------
a. Net Factor Income from Abroad b. National Income c. National cost d. Net Indirect Tax.
6. That part of personal income which is actually available to households for consumption and saving is called-----------
a. National Disposable Income b. Personal Disposable Income c. Personal Income d. None.
7. Real and nominal income is calculated respectively at-------------
a. Current price and Constant Price b. Constant price and Current price c. Current price and Current price d. Constant price and Constant price.
8. GDP Deflator is 1Q2QQQ3equal to-----------
π. πππππππ πΊπ·π π πππ πΊπ·π × 100
b. π πππ πΊπ·π πππππππ πΊπ·π × 100
c. πππππππ πΊππ π πππ πΊππ× 100
d. πππππππ ππ·π π πππ ππ·π × 100
9. Sum of all kinds of income received by the individuals from all sources is called---------
a. Personal Income b. Private Income c. Personal Disposable Income d. None
10. GNPMP is equal to a. GDPMP + NFIA b. GDPMP - NFIA c. GDPMP – D d. None
Ques 1 2 3 4 5 6 7 8 9 10 Ans a c a d b b b a a a
Questions with Answer:
Answer: It is the money value of all final goods and services produced by residents of a country in a year. It is also defined as the sum of factor incomes in a country in a year. It is also expressed in terms of aggregate expenditure of a country in a year.
Question: What is the importance of national income accounting in an economy?
Answer: Followings are the points which shows the importance of national income accounting:
Indicator of Economic Progress; Measure of Economic Growth; Comparison with other Countries; Significance in Business Policy Making; Significance for Trade Unions; Knowledge of Structural Changes; Signification for Economic Analysis, etc.
Question: What do you understand by the term domestic territory of a country?
Answer: It includes land mass of a country, territorial waters, ships and aircrafts owned and operated by residents across countries, fishing vessels, oil rigs and floating platforms and embassies abroad.
Question: What do you mean by normal resident?
Answer: A person or institution who ordinarily resides in a country and whose centre of economic interest lies in that country is called normal resident. The normal residents of a country include the All producing enterprises operating in a country; Nationals of a country and the foreign nationals who stay for one year or more in the country; Saudi nationals who have gone abroad but come back within a year’s time; Saudi employees working in the foreign embassies and international institutions located in Saudi Arabia; and Saudi students and patients who have gone abroad and stay there even for more than one year. Normal Residents = Nationals living in Saudi Arabia + Non- nationals living in Saudi Arabia
Question: What do you understand by non- resident of a country?
Answer: if a Saudi national goes abroad and stays there for a period less than one year, he will remain normal resident of Saudi Arabia. But, if he stays there for more than one year he will be treated as non- resident of Saudi Arabia.
Question: What is capital formation?
Answer: The surplus of the production over consumption in an accounting year which is further used for production is called capital formation.
Question: What are final goods?
Answer: Goods which directly satisfies human wants are called final goods.
Question: What are intermediate goods?
Answer: Goods which are used in the production process to produce other goods are called intermediate goods.
Question: What is Gross Domestic Product at Market Price (GDPMP)?
Answer: Gross Domestic Product (GDPMP) is the market value of all final goods and services produced within domestic territory of the country during a year.
Question: What is the features of GDPMP?
Answer: the main features of GDPMP are: It includes only final goods and services produced in the domestic territory of a country; It includes consumption of fixed capital (depreciation); It is estimated at the prevailing prices.
Question: What is Gross Nation Product at Market Price (GNPMP)?
Answer: Gross National Product at market price is Gross Domestic Product at market price plus net factor income from abroad. GNPMP is the money value of all final goods and services produced in the domestic territory of a country during a year plus Net factor income from abroad. i.e.,
GNPMP = GDPMP + NFIA
Where,
GNPMP = Gross National Product at market price GDPMP= Gross Domestic Product at market price NFIA= Net factor income from abroad
Question: What do you understand by Net Factor Income from Abroad (NFIA)?
Answer: Net factor income from abroad is the difference between the income received from abroad for rendering factor services by the normal residents of the country to the rest of the world and income paid for the factor services rendered by nonresidents in the domestic territory of a country.
Question: What is Net Domestic Product at Market Prices (NDPMP)?
Answer: Net Domestic Product at market prices is the net market value of all the final goods and services produced in domestic territory of a country during a year. Net market value of the goods is equal to the market value of goods minus depreciation.
NDPMP = GDPMP – D (or CCA)
Where,
NDPMP= Net Domestic Product at market prices GDPMP= Gross Domestic Product at market pric
D = Depreciation CCA= Capital Consumption Allowances
Question: What is Net National Product at Market Price (NNPMP)?
Answer: Net National Product at Answer: Market Prices is the net market value of all the final goods and services produced by the normal residents of a country during a year.
NNPMP = GNPMP – D
Where,
NNPMP = Net National Product at Market Prices GNPMP = Gross National Product at market price D = Depreciation
Question: What is Gross Domestic Product at Factor Cost (GDPFC)?
Answer: It is the sum of net value added at factor cost by all the producers in the domestic territory of a country and the consumption of fixed capital during an accounting year. i.e.,
GDPFC = Domestic Factor Income + Consumption of Fixed Capital
GDPFC = GNPMP – IT + S
Question: What is Gross National Product at Factor Cost (GNPFC)?
Answer: It is the difference between the GNPMP and net indirect taxes. It is the sum of net domestic factor income, consumption of fixed capital and net factor income from abroad. Symbolically,
GNPFC = GNPMP – IT + S
GNPFC = Domestic Factor Income + NFIA + Consumption of fixed capital.
Question: What is Net Domestic Product at Factor Cost (NDPFC)?
Answer: Net domestic income is the income generated in the form of wages, rent, interest and profit in the domestic territory of a country by all the producers (normal and non- normal residents) in an accounting year. In other words,
NDPFC = NDPMP – IT + S
Where;
IT = Indirect Taxes; and S = Subsidies.
Question: What is Net Indirect Tax?
Answer: The difference between IT and S is known as net indirect tax.
Question: What is Net National Product at Factor Cost (NNPFC)?
Answer: Net National Product at the factor cost is the sum total of net value added at factor cost by all the normal residents producer enterprises of a country during a year. Symbolically,
NNPFC = NDPFC + NFIA
It is also expressed as the sum of domestic factor income and net factor income from abroad. i.e.,
NNPFC = Net Domestic Income + NFIA
Net National Product at Factor Cost (NNPFC) is also known as National Income.
Question: What is Personal Income?
Answer: Personal income is sum of all kinds of income received by the individuals from all sources.
Question: What is Private Income?
Answer: It refers to the income which accrues to individuals from whatsoever source, within the domestic territory of a country and abroad.
Question: What is difference between Private Income and Personal Income?
Answer: Private income includes all the payments which accrue to individuals from whatever sources while personal income includes only those payments which are actually received by the individuals.
Question: What is Personal Disposable Income?
Answer: It refers to that part of personal income which is actually available to households for consumption and saving. In other words, Personal Disposable Income = Personal Income – (Direct Taxes + Fines, Fees, etc. + Social Security Contributions by Employees)
Question: What is Net National Disposable Income?
Answer: It is the sum of national income, net indirect taxes and other current transfers from the rest of the world. In other words, Net National Disposable Income = National Income + Net Indirect Taxes + Net Capital Transfers from the rest of the World
Question: What is Per Capita Income (PCI)?
Answer: It is the average income of the normal residents of a country. Symbolically,
PCI = πππ‘πππππ πΌπππππ (πππππ‘ πΉπππ‘ππ πΆππ π‘) ππππ’πππ‘πππ
Question: What is Real Income?
Answer: The income measured in physical term or in terms of the quantity of goods and services. It is calculated at some base year.
Question: What is Nominal income?
Answer: The income measured in term of current price is called nominal income.
Question: What is GDP Deflator?
Answer: It is nominal GDP (current price) divided by real GDP (base year price). GDP Deflator = πππππππ πΊπ·π π πππ πΊπ·π × 100
Question: What are the methods of measurement of national income?
Answer: There are three methods of the measurement of the national income:
4. Value Added Method or Product Method 5. Income Method or Factor income in production process 6. Expenditure Method
Question: Suppose a country produces four goods: rice, cloth, cement and cars. The production of the four commodities in the year 2013- 14 was 1000 units, 5000 units, 2000 units and 500 units respectively. The per unit price of the four commodities is SR 10, SR 20, SR 50 , and SR 2,00,000 respectively. Find out the GDP at market prices.
Solution:
S. No. Commodity Quantity (Units) Price per unit (SR) Gross Money Value (SR)
1. Rice 1000 10 10,000
2. Cloth 5000 20 1,00,000
3. Cement 2000 50 1,00,000
4. Car 500 20,00,000 10,00,00,000
Total Money Value in SR (GDPMP) = 10,02,10,000
Question: Suppose the gross domestic product at market prices of Saudi Arabia in 2012- 13 was SR 85,000 crores and net factor income from abroad was (-) SR 430 crores. Calculate GNPMP.
Solution: GNPMP = GDPMP + NFIA
= 85,000 + (- 430) = SR 84,570 crores.
Question: Suppose we are provided with the following information:
(i) GNPMP = SR 35,800 Crores (ii) Consumption of fixed capital = SR 1,670
Find out Net National Product at market price.
Solution: NNPMP = GNPMP – Consumption of fixed capital
= 35,800 – 1,670
= SR 34,130 Crores.
Question: Given the following data, calculate net domestic product at market prices:
(i) Gross National Product at market prices = SR 85,000 Crores; (ii) Consumption of fixed capital = SR 3,000 Crores (iii) Net factor income from abroad = SR 2,000 Crores.
Solution: NDPMP = GDPMP- Consumption of fixed capital
= (GNPMP – Net factor income from abroad) - Consumption of fixed capital
= (85,000 – 2,000) – 3,000 = SR 80,000 Crores.
Question: Given the following information, calculate net domestic product at factor cost:
(i) Net domestic product at market prices = SR 25,000 Crores (ii) Indirect taxes = SR 1500 Crores (iii) Subsidies = SR 500 Crores.
Solution: NDPFC = NDPMP – IT +S
= 25000 – 1500 + 500 = SR 24000 Crores.
Question: Given the following information about an economy, calculate net domestic product at factor cost:
(i) Gross domestic product at market prices = SR 12000 Crores (ii) Consumption of fixed capital = SR 1500 Crores (iii) Subsidies = SR 300 Crores (iv) Indirect taxes = SR 1000.
Solution: NDPFC = NDPMP – IT + S
= (GDPMP – Consumption of fixed capital) – IT + S
= (12000 – 1500) + 1000 + 300
= 9500 + 1300 = SR 10800 Crores
Question: Given the following data, calculate GDPFC:
(i) Net domestic product at factor cost = SR 25000 Cr (ii) Consumption of fixed capital = SR 3000 Cr
Solution: GDPFC = NDPFC + Consumption of fixed capital
= 25000 + 3000 = SR 28000 Cr.
Question: Given the following information, calculate GDPFC:
(i) NNPMP = SR 3200 Cr (ii) NFIA = SR 200 Cr (iii) Consumption of fixed capital = SR 1000 Cr (iv) Indirect taxes = SR 500 Cr (v) Subsidies = SR 300 Cr
Solution: GDPFC = GDPMP – IT + S
= (NNPMP + Consumption of fixed capital - NFIA) – IT + S
= (3200 + 1000 - 200) – 500 + 300
= 4000 – 500 + 300
= SR 3700 Cr
Comments
Post a Comment