MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO CONCEPTS OF GROSS DOMESTIC PRODUCT AND GROSS NATIONAL PRODUCT; CAPITAL FORMATION
What does GDP stand for?
a) Gross Domestic Product
b) Gross National Product
c) Gross Net Profit
d) Gross National Profit
Answer: a) Gross Domestic Product
Which of the following is NOT included in the calculation of GDP?
a) Government spending
b) Personal savings
c) Investment spending
d) Consumer spending
Answer: b) Personal savings
GNP differs from GDP in that it includes:
a) Only domestic production
b) Domestic production and income earned abroad
c) Domestic production and imports
d) Imports and exports
Answer: b) Domestic production and income earned abroad
Capital formation refers to:
a) The process of constructing buildings and infrastructure
b) The process of increasing the capital stock of a country
c) The process of accumulating financial wealth
d) The process of increasing consumption expenditure
Answer: b) The process of increasing the capital stock of a country
Which of the following is an example of physical capital?
a) Savings accounts
b) Stocks and bonds
c) Machinery and equipment
d) Government bonds
Answer: c) Machinery and equipment
In India, which sector contributes the most to GDP?
a) Agriculture
b) Industry
c) Services
d) Mining
Answer: c) Services
Which of the following is an example of human capital?
a) A factory building
b) Trained workforce
c) Land and natural resources
d) Financial assets
Answer: b) Trained workforce
Which of the following is NOT a component of GDP by expenditure approach?
a) Consumption expenditure
b) Investment expenditure
c) Government expenditure
d) Imports
Answer: d) Imports
The Gross National Income (GNI) of a country is GDP plus:
a) Net taxes
b) Net foreign investment
c) Net income earned from abroad
d) Net exports
Answer: c) Net income earned from abroad
Which of the following is an example of fixed capital formation?
a) Investment in stocks and shares
b) Purchase of machinery for a factory
c) Spending on entertainment
d) Payment of salaries to employees
Answer: b) Purchase of machinery for a factory
Which of the following accurately describes the formula for calculating GDP?
a) GDP = Consumption + Investment + Government Spending + Exports – Imports
b) GDP = Consumption + Investment + Government Spending – Exports + Imports
c) GDP = Consumption + Investment – Government Spending + Exports – Imports
d) GDP = Consumption – Investment + Government Spending + Exports + Imports
Answer: a) GDP = Consumption + Investment + Government Spending + Exports – Imports
In the expenditure approach to calculating GDP, which of the following represents the largest component in India?
a) Consumption expenditure
b) Investment expenditure
c) Government expenditure
d) Net exports
Answer: a) Consumption expenditure
Gross National Product (GNP) can be defined as:
a) The total value of goods and services produced within the borders of a country in a specific time period.
b) The total value of goods and services produced by the citizens of a country, regardless of where they are located, in a specific time period.
c) The total value of goods and services produced and consumed within a country’s borders in a specific time period.
d) The total value of goods and services produced by foreign nationals within a country’s borders in a specific time period.
Answer: b) The total value of goods and services produced by the citizens of a country, regardless of where they are located, in a specific time period.
Which of the following is an example of an intangible asset?
a) Land
b) Buildings
c) Intellectual property
d) Machinery
Answer: c) Intellectual property
Which sector in India is commonly associated with the highest share of employment but contributes the least to GDP?
a) Agriculture
b) Manufacturing
c) Services
d) Construction
Answer: a) Agriculture
In the context of national income accounting, depreciation refers to:
a) A decrease in the value of a country’s currency
b) The appreciation of assets over time
c) The wearing out or consumption of fixed capital
d) The increase in the value of a country’s exports
Answer: c) The wearing out or consumption of fixed capital
Which of the following is NOT a component of national income?
a) Rent
b) Profit
c) Sales tax
d) Wages
Answer: c) Sales tax
Which of the following represents the largest share of India’s GDP in recent years?
a) Agriculture
b) Manufacturing
c) Services
d) Mining
Answer: c) Services
Which of the following is NOT included in the calculation of net national product (NNP)?
a) Depreciation
b) Indirect taxes
c) Subsidies
d) Net foreign factor income
Answer: b) Indirect taxes
Which of the following is an example of financial capital?
a) Factories
b) Machinery
c) Stocks and bonds
d) Roads and bridges
Answer: c) Stocks and bonds
Which of the following statements is true regarding the relationship between GDP and GNP?
a) GDP is always higher than GNP
b) GNP is always higher than GDP
c) GDP and GNP are equal
d) There is no fixed relationship between GDP and GNP
Answer: d) There is no fixed relationship between GDP and GNP
Which of the following represents an example of government investment?
a) Purchases of goods and services by households
b) Building of new roads and bridges by the government
c) Purchases of stocks and bonds by individuals
d) Payment of salaries to government employees
Answer: b) Building of new roads and bridges by the government
Which of the following factors contributes to economic growth in India?
a) Decrease in population
b) Increase in unemployment rate
c) Technological advancements
d) Decrease in foreign investment
Answer: c) Technological advancements
In the calculation of GDP, which of the following is NOT included in government spending?
a) Spending on defense
b) Spending on education
c) Transfer payments like social security benefits
d) Spending on healthcare
Answer: c) Transfer payments like social security benefits
Which of the following is a measure of human capital?
a) Physical infrastructure
b) Education and skills of the workforce
c) Machinery and equipment
d) Natural resources
Answer: b) Education and skills of the workforce
What does the term “per capita GDP” measure?
a) The total GDP of a country
b) The GDP per person in a country
c) The GDP growth rate
d) The inflation rate
Answer: b) The GDP per person in a country
Which of the following is NOT considered a part of the informal sector of the economy?
a) Street vendors
b) Small-scale farmers
c) Large manufacturing companies
d) Domestic workers
Answer: c) Large manufacturing companies
Which of the following is NOT a component of investment expenditure in the national income accounts?
a) Business investment in machinery
b) Residential construction
c) Government spending on goods and services
d) Change in business inventories
Answer: c) Government spending on goods and services
What does the term “economic growth” refer to?
a) An increase in the size of the population
b) An increase in the production of goods and services in an economy over time
c) An increase in government spending
d) An increase in the inflation rate
Answer: b) An increase in the production of goods and services in an economy over time
Which of the following is NOT a method used to calculate GDP?
a) Expenditure approach
b) Income approach
c) Output approach
d) Distribution approach
Answer: d) Distribution approach
Which of the following is NOT a characteristic of a developed economy?
a) High GDP per capita
b) High literacy rates
c) High levels of unemployment
d) Advanced infrastructure
Answer: c) High levels of unemployment
Which sector of the economy typically contributes the least to GDP but employs the largest portion of the workforce in India?
a) Agriculture
b) Manufacturing
c) Services
d) Mining
Answer: a) Agriculture
Which of the following represents an example of government transfer payments?
a) Funding for public education
b) Social security benefits
c) Investment in infrastructure
d) Defense spending
Answer: b) Social security benefits
In the context of national income accounting, what does the term “value-added” refer to?
a) The final selling price of a product
b) The difference between the selling price and the production cost of a product
c) The total revenue generated by a product
d) The total cost of inputs used in production
Answer: b) The difference between the selling price and the production cost of a product
Which of the following is NOT a component of the circular flow of income in an economy?
a) Savings
b) Investment
c) Imports
d) Exports
Answer: a) Savings
What is the relationship between saving and investment in an economy?
a) Savings are always equal to investment
b) Savings are always greater than investment
c) Savings are always less than investment
d) There is no fixed relationship between savings and investment
Answer: a) Savings are always equal to investment
Which of the following is an example of government capital formation?
a) Construction of a new airport
b) Purchase of shares in a private company
c) Payment of salaries to civil servants
d) Investment in research and development by a private firm
Answer: a) Construction of a new airport
Which of the following is an example of an intermediate good?
a) Bread sold to consumers
b) Flour used by a bakery to make bread
c) A car purchased by a family for personal use
d) A computer purchased by a business for office use
Answer: b) Flour used by a bakery to make bread
Which of the following factors is NOT considered in calculating the GDP deflator?
a) Inflation rate
b) Price changes of all goods and services
c) Consumer spending patterns
d) Changes in the quality of goods and services
Answer: c) Consumer spending patterns
Which of the following is an example of an investment in human capital?
a) Purchase of machinery
b) Training programs for employees
c) Purchase of government bonds
d) Construction of a new factory
Answer: b) Training programs for employees
Which of the following statements about GDP and GNP is true?
a) GDP measures the value of all final goods and services produced within a country’s borders, while GNP measures the value of all final goods and services produced by the citizens of a country, regardless of where they are located.
b) GDP measures the value of all final goods and services produced by the citizens of a country, regardless of where they are located, while GNP measures the value of all final goods and services produced within a country’s borders.
c) GDP and GNP are interchangeable terms used to measure the economic output of a country.
d) GDP measures the value of all goods produced within a country’s borders, while GNP measures the value of all goods produced and consumed within a country’s borders.
Answer: a) GDP measures the value of all final goods and services produced within a country’s borders, while GNP measures the value of all final goods and services produced by the citizens of a country, regardless of where they are located.
Which of the following represents an example of capital deepening?
a) A decrease in the number of factories in an economy
b) An increase in the number of workers employed in an economy
c) An increase in the amount of physical capital per worker
d) A decrease in the amount of human capital per worker
Answer: c) An increase in the amount of physical capital per worker
Which of the following is NOT a factor that contributes to economic growth?
a) Technological advancement
b) Increase in population
c) Investment in education and infrastructure
d) Decrease in government spending
Answer: d) Decrease in government spending
Which of the following best describes the term “inflation”?
a) A decrease in the general price level of goods and services
b) An increase in the general price level of goods and services
c) A decrease in the value of a country’s currency relative to other currencies
d) An increase in the value of a country’s currency relative to other currencies
Answer: b) An increase in the general price level of goods and services
Which of the following is NOT included in the calculation of GDP using the income approach?
a) Wages and salaries
b) Profits of businesses
c) Rental income
d) Government transfer payments
Answer: d) Government transfer payments
Which of the following is an example of a final good?
a) Steel purchased by an automobile manufacturer to make cars
b) Wheat purchased by a bakery to make bread
c) A car purchased by a consumer for personal use
d) Flour purchased by a restaurant to make pasta
Answer: c) A car purchased by a consumer for personal use
Which of the following is an example of a non-market transaction?
a) Buying groceries from a supermarket
b) Selling stocks on the stock market
c) Gardening at home for personal consumption
d) Paying rent for an apartment
Answer: c) Gardening at home for personal consumption
Which of the following represents the largest sector of employment in India?
a) Agriculture
b) Manufacturing
c) Services
d) Construction
Answer: a) Agriculture
Which of the following best describes the term “trade deficit”?
a) A situation where a country’s exports exceed its imports
b) A situation where a country’s imports exceed its exports
c) A situation where a country’s imports and exports are equal
d) A situation where a country has no international trade
Answer: b) A situation where a country’s imports exceed its exports
Which of the following represents an example of economic depreciation?
a) Wear and tear on machinery used in production
b) Increase in the value of land over time
c) Increase in the value of stocks and bonds
d) Wear and tear on personal automobiles
Answer: a) Wear and tear on machinery used in production
