Chapter Exam

Chapter-1 National Income and Related Aggregates — Online MCQ Test

Q: Which of the following is included in NDP (Net Domestic Product)?

Answer: A. GDP minus depreciation of capital assets — NDP = GDP - Depreciation. It accounts for the wear and tear of capital assets during production.

Q: What is the relationship between GNP and NNP?

Answer: A. NNP = GNP - Depreciation — NNP (Net National Product) equals GNP (Gross National Product) minus depreciation of capital stock.

Q: In the circular flow of income, money flows from households to firms through which market?

Answer: A. Product market — In the product market, households purchase goods and services from firms, creating a flow of money from households to firms.

Q: Which sector's income is NOT directly included in the income method of calculating national income?

Answer: D. Value of goods stolen — Only legitimate incomes earned through production are included. Stolen goods represent illegal transfers, not income from productive activities.

Q: If a farmer sells wheat to a miller for ₹100, and the miller sells flour to a baker for ₹150, and the baker sells bread for ₹200, what is the total value added?

Answer: C. ₹200 — Value added = ₹100 (farmer) + ₹50 (miller: 150-100) + ₹50 (baker: 200-150) = ₹200. To avoid double counting, we sum only the incremental value at each stage.

Q: How does net income from abroad affect the relationship between GDP and GNP?

Answer: A. GNP = GDP + Net income from abroad — GNP = GDP + Net income from abroad, where net income from abroad = income earned by nationals abroad minus income earned by foreigners domestically.

Q: A country shows the following data: GDP at market prices = ₹1000 cr, Depreciation = ₹80 cr, Net indirect taxes = ₹50 cr, Net income from abroad = ₹10 cr. Calculate NNP at factor cost.

Answer: A. ₹880 crore — NNP at factor cost = GDP at market prices - Depreciation - Net indirect taxes + Net income from abroad = 1000 - 80 - 50 + 10 = ₹880 crore.

Q: A developing country reports NNP at factor cost of ₹5000 cr and shows depreciation of ₹300 cr. If net indirect taxes are ₹200 cr and net income from abroad is -₹50 cr (outflow), what is the GDP at market prices?

Answer: A. ₹5550 crore — Working backwards: NNP at factor cost = 5000 cr. GNP at factor cost = 5000 + 50 = 5050 cr. GNP at market prices = 5050 + 200 = 5250 cr. GDP at market prices = 5250 + 50 = ₹5300 cr. (Note: Recalculating: GDP = GNP - Net income from abroad + Depreciation + Indirect taxes = 5000 + 50 + 300 + 200 = 5550 cr).

ECONOMICS · Grade 12 · CBSE(NCERT)

Practice Chapter-1 National Income and Related Aggregates with a free chapter-wise online MCQ test for CBSE(NCERT) Grade 12 ECONOMICS. This chapter covers: circular flow of income - GDP - NDP - GNP - NNP - value added method - income method - expenditure method. AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter-1 National Income and Related Aggregates — Important Questions & Answers (FAQ)

Frequently asked questions from CBSE(NCERT) Grade 12 ECONOMICS — Chapter-1 National Income and Related Aggregates, with answers and explanations. These are sample questions; the exam has its own separate question set.

What is GDP (Gross Domestic Product)?

A. Total value of goods and services produced within a country's borders in a year ✓
B. Total value of goods and services produced by citizens abroad
C. Total value of final goods only, excluding services
D. Total income earned by all residents regardless of location

Answer: A. Total value of goods and services produced within a country's borders in a year
GDP measures the monetary value of all finished goods and services produced within a country's borders during a specific period.

Which of the following is included in NDP (Net Domestic Product)?

A. GDP minus depreciation of capital assets ✓
B. GDP plus net income from abroad
C. GDP minus indirect taxes
D. GDP plus government subsidies

Answer: A. GDP minus depreciation of capital assets
NDP = GDP - Depreciation. It accounts for the wear and tear of capital assets during production.

What is the relationship between GNP and NNP?

A. NNP = GNP - Depreciation ✓
B. NNP = GNP + Depreciation
C. NNP = GNP - Indirect taxes
D. NNP = GNP + Subsidies

Answer: A. NNP = GNP - Depreciation
NNP (Net National Product) equals GNP (Gross National Product) minus depreciation of capital stock.

In the circular flow of income, money flows from households to firms through which market?

A. Product market ✓
B. Factor market
C. Capital market
D. Stock market

Answer: A. Product market
In the product market, households purchase goods and services from firms, creating a flow of money from households to firms.

Which sector's income is NOT directly included in the income method of calculating national income?

A. Wages and salaries
B. Profits of firms
C. Rent from property
D. Value of goods stolen ✓

Answer: D. Value of goods stolen
Only legitimate incomes earned through production are included. Stolen goods represent illegal transfers, not income from productive activities.

If a farmer sells wheat to a miller for ₹100, and the miller sells flour to a baker for ₹150, and the baker sells bread for ₹200, what is the total value added?

A. ₹100
B. ₹150
C. ₹200 ✓
D. ₹450

Answer: C. ₹200
Value added = ₹100 (farmer) + ₹50 (miller: 150-100) + ₹50 (baker: 200-150) = ₹200. To avoid double counting, we sum only the incremental value at each stage.

How does net income from abroad affect the relationship between GDP and GNP?

A. GNP = GDP + Net income from abroad ✓
B. GNP = GDP - Net income from abroad
C. GNP = GDP × Net income from abroad
D. GNP = GDP ÷ Net income from abroad

Answer: A. GNP = GDP + Net income from abroad
GNP = GDP + Net income from abroad, where net income from abroad = income earned by nationals abroad minus income earned by foreigners domestically.

A country shows the following data: GDP at market prices = ₹1000 cr, Depreciation = ₹80 cr, Net indirect taxes = ₹50 cr, Net income from abroad = ₹10 cr. Calculate NNP at factor cost.

A. ₹880 crore ✓
B. ₹870 crore
C. ₹920 crore
D. ₹890 crore

Answer: A. ₹880 crore
NNP at factor cost = GDP at market prices - Depreciation - Net indirect taxes + Net income from abroad = 1000 - 80 - 50 + 10 = ₹880 crore.

Which scenario represents a situation where national income could increase while material welfare might decrease?

A. Increased production of goods with higher prices due to inflation ✓
B. Higher real wages across all sectors of the economy
C. Increased production of eco-friendly and sustainable goods
D. Growth in healthcare and education services

Answer: A. Increased production of goods with higher prices due to inflation
If nominal national income increases primarily due to inflation while real output remains stagnant, people's actual purchasing power and material welfare may decrease despite higher nominal income figures.

A developing country reports NNP at factor cost of ₹5000 cr and shows depreciation of ₹300 cr. If net indirect taxes are ₹200 cr and net income from abroad is -₹50 cr (outflow), what is the GDP at market prices?

A. ₹5550 crore ✓
B. ₹5450 crore
C. ₹5250 crore
D. ₹5350 crore

Answer: A. ₹5550 crore
Working backwards: NNP at factor cost = 5000 cr. GNP at factor cost = 5000 + 50 = 5050 cr. GNP at market prices = 5050 + 200 = 5250 cr. GDP at market prices = 5250 + 50 = ₹5300 cr. (Note: Recalculating: GDP = GNP - Net income from abroad + Depreciation + Indirect taxes = 5000 + 50 + 300 + 200 = 5550 cr).

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Chapter-2 Money and Banking