MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO CONCEPTS OF GROSS DOMESTIC PRODUCT AND GROSS NATIONAL PRODUCT; CAPITAL FORMATION
Which of the following best defines Gross Domestic Product (GDP)?
a) The total value of all final goods and services produced within a country’s borders in a specific time period
b) The total value of all final goods and services produced by the citizens of a country, regardless of location, in a specific time period
c) The total value of all goods and services produced within a country’s borders, excluding exports, in a specific time period
d) The total value of all goods and services produced within a country’s borders, including imports, in a specific time period
Answer: a) The total value of all final goods and services produced within a country’s borders in a specific time period
Gross National Product (GNP) is defined as:
a) The total market value of all final goods and services produced by a country’s residents, regardless of where they are located, in a specific time period
b) The total value of all goods and services produced within a country’s borders, excluding imports, in a specific time period
c) The total value of all final goods and services produced within a country’s borders, including income from abroad, in a specific time period
d) The total value of all final goods and services produced by a country’s citizens, regardless of location, in a specific time period
Answer: a) The total market value of all final goods and services produced by a country’s residents, regardless of where they are located, in a specific time period
In India, which sector contributes the most to GDP?
a) Agriculture
b) Manufacturing
c) Services
d) Mining and Quarrying
Answer: c) Services
Capital formation refers to:
a) The process of creating capital goods
b) The process of increasing the size of the capital market
c) The process of increasing the wealth of capitalists
d) The process of increasing the value of existing capital assets
Answer: a) The process of creating capital goods
Which of the following is NOT included in the calculation of GDP?
a) Government spending
b) Investment in stocks and bonds
c) Consumption expenditure
d) Exports
Answer: b) Investment in stocks and bonds
Which of the following is a component of GDP?
a) Transfer payments
b) Social security benefits
c) Government subsidies
d) Investment in machinery and equipment
Answer: d) Investment in machinery and equipment
What is the primary measure used to determine the economic performance of a country?
a) Inflation rate
b) Unemployment rate
c) GDP growth rate
d) Exchange rate
Answer: c) GDP growth rate
Which of the following accurately represents the formula for calculating GDP?
a) GDP = C + I + G + (X – M)
b) GDP = C + I + G + X
c) GDP = C + I + G + M
d) GDP = C + I + (X – M)
Answer: a) GDP = C + I + G + (X – M)
Gross National Product (GNP) differs from GDP in that GNP:
a) Includes net income earned from abroad
b) Excludes depreciation
c) Measures only the domestic production of goods and services
d) Is calculated annually rather than quarterly
Answer: a) Includes net income earned from abroad
Which of the following statements is true regarding per capita GDP?
a) It measures the total GDP of a country divided by its total population
b) It reflects the average income of individuals in a country
c) It indicates the overall standard of living in a country
d) All of the above
Answer: d) All of the above
In the expenditure approach to calculating GDP, which of the following is NOT included?
a) Consumption expenditure
b) Government spending
c) Investment in stocks and bonds
d) Net exports
Answer: c) Investment in stocks and bonds
Which sector of the economy includes activities such as farming, forestry, and fishing?
a) Primary sector
b) Secondary sector
c) Tertiary sector
d) Quaternary sector
Answer: a) Primary sector
Which of the following represents an example of capital formation?
a) A company purchasing new machinery for production
b) A household saving money in a bank account
c) A government providing subsidies to farmers
d) An individual buying shares in a company
Answer: a) A company purchasing new machinery for production
Which factor is NOT considered in the calculation of net national product (NNP)?
a) Depreciation
b) Indirect taxes
c) Subsidies
d) Net foreign factor income
Answer: d) Net foreign factor income
Which of the following is a limitation of using GDP as a measure of economic welfare?
a) It does not account for income distribution
b) It ignores non-market activities
c) It fails to consider environmental degradation
d) All of the above
Answer: d) All of the above
What does the term “Factor Cost” refer to in national income accounting?
a) The cost of factors of production used in the production process
b) The total value of final goods and services produced within a country’s borders
c) The total value of goods and services produced after adjusting for indirect taxes and subsidies
d) The total income earned by factors of production in the economy
Answer: d) The total income earned by factors of production in the economy
Which of the following is an example of an intermediate good?
a) A car purchased by a consumer
b) Steel used in the construction of a building
c) Flour sold to a bakery for making bread
d) A laptop bought by a student for personal use
Answer: c) Flour sold to a bakery for making bread
Which of the following represents a measure of real GDP?
a) GDP measured at current market prices
b) GDP adjusted for inflation
c) GDP measured using nominal values
d) GDP calculated using the base year’s prices
Answer: b) GDP adjusted for inflation
Which component of GDP represents the total value of goods and services produced by households for their own use?
a) Consumption expenditure
b) Investment expenditure
c) Government expenditure
d) Net exports
Answer: a) Consumption expenditure
The underground economy refers to:
a) Economic activities that are illegal or unrecorded
b) Economic activities that take place in underground mines
c) Economic activities that are subsidized by the government
d) Economic activities that are highly profitable
Answer: a) Economic activities that are illegal or unrecorded
Which of the following is NOT a method for calculating GDP?
a) Income approach
b) Output approach
c) Expenditure approach
d) Savings approach
Answer: d) Savings approach
Which of the following is a measure of economic growth?
a) Increase in inflation rate
b) Increase in nominal GDP
c) Decrease in unemployment rate
d) Decrease in real GDP
Answer: c) Decrease in unemployment rate
Which of the following represents the largest component of GDP in India?
a) Consumption expenditure
b) Investment expenditure
c) Government expenditure
d) Net exports
Answer: a) Consumption expenditure
Which of the following is an example of a transfer payment?
a) Salary paid to government employees
b) Pension paid to retired individuals
c) Subsidy given to farmers
d) Interest paid on government debt
Answer: b) Pension paid to retired individuals
Which of the following statements about Gross Value Added (GVA) is true?
a) GVA includes taxes but excludes subsidies
b) GVA represents the total value of goods and services produced within a country’s borders
c) GVA is calculated as GDP minus net exports
d) GVA is used to measure the contribution of each individual sector to the economy
Answer: d) GVA is used to measure the contribution of each individual sector to the economy
Which of the following is considered a limitation of using GNP as a measure of economic performance?
a) It does not account for income earned by foreign nationals within the country
b) It includes depreciation, which may distort the actual economic output
c) It does not consider the size of the population
d) It only measures the income generated domestically
Answer: a) It does not account for income earned by foreign nationals within the country
Which of the following represents an example of an intermediate good?
a) Flour sold to a bakery for making bread
b) A car purchased by a consumer
c) A laptop bought by a student for personal use
d) Steel used in the construction of a building
Answer: a) Flour sold to a bakery for making bread
The term “Factor Cost” in national income accounting refers to:
a) The total income earned by factors of production in the economy
b) The cost of factors of production used in the production process
c) The total value of goods and services produced after adjusting for indirect taxes and subsidies
d) The total value of final goods and services produced within a country’s borders
Answer: a) The total income earned by factors of production in the economy
Which of the following is a component of aggregate demand?
a) Net exports
b) Government savings
c) Private investment
d) Foreign aid
Answer: a) Net exports
Which of the following is considered a social indicator used to measure the quality of life in a country?
a) GDP per capita
b) GNP growth rate
c) Unemployment rate
d) Consumer price index
Answer: c) Unemployment rate
Which sector of the economy includes activities such as education, healthcare, and hospitality?
a) Primary sector
b) Secondary sector
c) Tertiary sector
d) Quaternary sector
Answer: c) Tertiary sector
Which of the following represents the broadest measure of economic activity in a country?
a) Net national product (NNP)
b) Gross domestic product (GDP)
c) Gross national product (GNP)
d) Net domestic product (NDP)
Answer: b) Gross domestic product (GDP)
Which of the following is NOT a component of investment in national income accounting?
a) Business spending on machinery
b) Residential construction
c) Government purchases of goods and services
d) Purchases of new stocks and bonds
Answer: c) Government purchases of goods and services
Which of the following represents an example of capital deepening?
a) A company replacing old machinery with newer, more efficient equipment
b) A government increasing spending on healthcare and education
c) A household investing in stocks and bonds
d) A worker acquiring new skills through training programs
Answer: a) A company replacing old machinery with newer, more efficient equipment
Which of the following is considered a non-market activity?
a) Purchasing groceries from a supermarket
b) Hiring a plumber to fix a leaking pipe
c) Cleaning your own house
d) Dining at a restaurant
Answer: c) Cleaning your own house
Which of the following is NOT a method used to calculate GDP?
a) Value-added approach
b) Expenditure approach
c) Income approach
d) Input-output approach
Answer: d) Input-output approach
Which of the following represents the total income earned by individuals and businesses in an economy during a specific period?
a) Gross National Product (GNP)
b) Gross Domestic Product (GDP)
c) Net National Product (NNP)
d) Net Domestic Product (NDP)
Answer: b) Gross Domestic Product (GDP)
Which of the following is an example of a final good?
a) Flour purchased by a bakery for making bread
b) Steel purchased by a construction company for building bridges
c) Wood purchased by a furniture manufacturer for making chairs
d) A television purchased by a consumer for personal use
Answer: d) A television purchased by a consumer for personal use
Which of the following is NOT included in the calculation of GDP?
a) Government spending
b) Investment in stocks and bonds
c) Consumption expenditure
d) Exports
Answer: b) Investment in stocks and bonds
Which of the following accurately defines Gross National Product (GNP)?
a) The total value of all final goods and services produced within a country’s borders in a specific time period
b) The total value of all final goods and services produced by the citizens of a country, regardless of location, in a specific time period
c) The total value of all goods and services produced within a country’s borders, excluding exports, in a specific time period
d) The total value of all goods and services produced within a country’s borders, including imports, in a specific time period
Answer: b) The total value of all final goods and services produced by the citizens of a country, regardless of location, in a specific time period
In India, which sector contributes the most to GDP?
a) Agriculture
b) Manufacturing
c) Services
d) Mining and Quarrying
Answer: c) Services
Capital formation refers to:
a) The process of creating capital goods
b) The process of increasing the size of the capital market
c) The process of increasing the wealth of capitalists
d) The process of increasing the value of existing capital assets
Answer: a) The process of creating capital goods
Which of the following is NOT included in the calculation of GDP?
a) Government spending
b) Investment in stocks and bonds
c) Consumption expenditure
d) Exports
Answer: b) Investment in stocks and bonds
Gross National Product (GNP) is defined as:
a) The total market value of all final goods and services produced by a country’s residents, regardless of where they are located, in a specific time period
b) The total value of all goods and services produced within a country’s borders, excluding imports, in a specific time period
c) The total value of all final goods and services produced within a country’s borders, including income from abroad, in a specific time period
d) The total value of all final goods and services produced by a country’s citizens, regardless of location, in a specific time period
Answer: a) The total market value of all final goods and services produced by a country’s residents, regardless of where they are located, in a specific time period
Which of the following accurately represents the formula for calculating GDP?
a) GDP = C + I + G + (X – M)
b) GDP = C + I + G + X
c) GDP = C + I + G + M
d) GDP = C + I + (X – M)
Answer: a) GDP = C + I + G + (X – M)
Which of the following is NOT a component of GDP?
a) Net exports
b) Government spending
c) Consumption expenditure
d) Investment in financial assets
Answer: d) Investment in financial assets
Which of the following accurately represents the formula for calculating Net National Product (NNP)?
a) NNP = GDP + depreciation
b) NNP = GDP – depreciation
c) NNP = GNP – depreciation
d) NNP = GNP + depreciation
Answer: b) NNP = GDP – depreciation
Which of the following is NOT a method for calculating GDP?
a) Income approach
b) Output approach
c) Expenditure approach
d) Savings approach
Answer: d) Savings approach
Which of the following is considered a limitation of using GDP as a measure of economic welfare?
a) It does not account for income distribution
b) It ignores non-market activities
c) It fails to consider environmental degradation
d) All of the above
Answer: d) All of the above
What does the term “Factor Cost” refer to in national income accounting?
a) The total income earned by factors of production in the economy
b) The cost of factors of production used in the production process
c) The total value of goods and services produced after adjusting for indirect taxes and subsidies
d) The total value of final goods and services produced within a country’s borders
Answer: a) The total income earned by factors of production in the economy
