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NATIONAL INCOME SSC CHSL QUESTIONS

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NATIONAL INCOME SSC CHSL QUESTIONS

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NATIONAL INCOME OF INDIA

National Income

National Income is the total value of a country’s final output of all new goods and services produced in one year. National Income is that total of all

➤ Wages and salaries, commissions and all labour incomes before payment of taxes and social security contributions.

➤ Interest income from bonds, mortgages loans etc after deducting interest paid on government debts.

➤ Rental income from real property and royalties.

➤ Profit of corporation, partnership before deduction of taxes based on income.

Gross Domestic Product (GDP)

Gross Domestic Product is the market value of the final goods and services produced within the domestic territory of a country during one year inclusive of depreciation.

GDPMP = Value of final goods and services produced within the territory of the country during a year.

Gross National Product (GNP)

Gross National Product is the market value of the final goods and services produced within the domestic territory of a country by the normal residents during an accounting year along with net factor income earned from abroad.

GNPMP = GDP MP + Net factor Income from Abroad

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➤ Net Factor Income from abroad is the difference between factor income (rent, interest, profit and wages) earned by our residents from rest of the world and factor income earned by non-residents within our country.

Net factor income from abroad =

Factor income earned by residents of the country from abroad-Factor income earned by Non –residents in the country

Net National Product of Market Price (NNP MP)

NNP MP = Market value of final goods and services produced during a year + Net factor income from abroad – Depreciation or capital consumption

NNP MP = GNP MP – Depreciation

Net Domestic Product at Market Price (NDP MP)

Net Domestic product at market price is the market value of final goods and services produced by all the producers in the domestic territory of a country exclusive of depreciation during a year.

   NDP MP = GDP MP – Depreciation

GDP MP = NDP + Depreciation

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Net Domestic Product at Factor Cost (NDPFC)

Net Domestic Product of factor cost (NDPFC) is the total sum of factor incomes (rent + profit + wages + interest) generated within the domestic territory of a country during a year.

NDPFC = NDP MP – Net indirect Taxes

        NDPFC = NDP MP + indirect Tax + Subsidy

Gross Domestic Product at Factor cost (GDPFC)

Gross Domestic Product at factor cost (GDPFC) is the total sum of factor incomes (rent + interest + profit + wages) generated within the domestic territory of a country, along with consumption of fixed capital during a year.

                GDPFC = NDPFC + Depreciation

               NDPFC = GDPFC – Depreciation

Net National Product at factor cost (NNPFC) Or National Income

Net National Product at factor cost (NNPFC) or National income is the total sum of factor incomes (rent + interest + profit + wages) generated within the domestic territory of a country, along with net factor income from abroad during a year.

NI = Rent + Wages + Salary + Interest + Profit

    NNPFC = NDPFC + Net Factor income from abroad

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Factor Price and Market Price

Suppose a company manufactured bicycle at ₹500 each. When the product (bicycle) delivered in market, Intermediaries Cost (Tax, Middleman,) has been added. The customer buy bicycle at ₹520 each. Hence the Factor Cost is ₹500 and Market Price is ₹520 each.

Private Income

Private income refers to that income which accrues to private sector from all sources, both within domestic territory as well as from rest of the world.

➤ It is the income of all private enterprises and households in the private sector from whatever source either earned or unearned.

Private Income =

Income earned by private sector in domestic product + Net factor income from Abroad + Current Transfer from government + Net current transfer from rest of the world + Interest on National Debts

Personal income

Personal income is the income actually received by the individuals and households from all sources in the form of factor income and current transfers.

➤ Personal income is always less than national income because factors of production do not get that income which is generated by them. Many deductions are made from national income and a few items are added for getting personal income.

Personal Income =

National Income – Corporate Tax – Undistributed Corporate Profits – Social securities contributions + Transfer payments

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Personal Disposable Income

➤ Personal Disposable income means the actual income which can be spent on consumption by individuals and families. The whole of the personal income cannot be spent on consumption, because it is the income that accrues before direct taxes have actually been paid.

Disposable Income =

Personal Income – Direct Taxes

➤ The disposable income is divided consumption expenditure and savings.

Disposable Income = Consumption expenditure + Savings

National Disposable Income (NDI)

➤ National disposable income refers to disposable income of the country as a whole.

➤ It is estimated as the total sum of net domestic income at factor cost, net indirect taxes, net factor income from abroad and net current transfers from rest of the world.

National Disposable Income = National Income + Net Indirect tax + Net current transfer from rest of the world

Green GNP

➤ Green GNP denotes sustainable economic growth. GNP at constant prices or current prices does not take note of environment pollution and decay of natural resources.

➤ The increase in GNP with excessive use of natural resources and environmental pollution fails to denote sustainable economic development.

➤ Estimating GNP with parameters like excessive use of natural resources and environmental pollution is called ‘Green GNP’.

GNP Deflator =  

 
 100

GDP Deflator = 

 
 100

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Per Capita Income

The average income of the people of a country in a particular year is called per capita income of that year. This concept also refers to the measurement of income at current prices at constant prices.

Methods of Measuring National Income 

There are three methods of measuring National Income– 

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1. Product Method: According to this method, the total value of final goods and services produced in a country during a year is calculated at market prices.

To find out the GNP, the data of all productive received from forests, mineral received from mines, commodities produced by industries, the contributions to production made by transport, communications, insurance companies, lawyers, doctors, teachers etc are collected and assessed at market prices. Only the final goods and services are included and the intermediary goods and services are left out.

2. Income Method: According to this method, the net income payments received by all citizens of a country in a particular year are added up, i.e net incomes that accrue to all factors of production by way of net rents, net wages, net interest and net profits are all added together but incomes received in the form of transfer payments are not included in it.

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3. Expenditure Method: According to this method, the total expenditure incurred by the society in a particular year is added together and includes personal consumption expenditure. Net domestic investment, government expenditure on goods and services and net foreign investment. This concept is based on the assumption that national income equals national expenditure.

National Income Estimation in Pre-independence Period

 YearPer Capita
Dada bhai Naoroji186820
William Digby1899
Findlay Shirras1911, 1922, 193149
Shah and Khambatta1921
V.K.R.V. Rao1925-29 1931-3276
R.C. Desai1931-40

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Hindu Rate of Growth

➤ The term ‘Hindu rate of growth was coined by professor Rajkrishna, an Indian economist, in 1978

to characterise the slow growth.

➤ It explained against the backdrop of socialistic economic policies.

➤ It was coined to refer to the phenomenon of sluggishness in growth rate of Indian economy (3.5% observed persistently during 1950s through 1980s).

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National Income estimation in India

➤ During pre independence era, no specific attempts were made for estimating national income in India.

➤ In 1868, the first attempt was made by Dada bhai Naoroji; He (in his book Poverty and Un-British rule in India) estimated Indian per capita annual income at a level of ₹20.

➤ After independence, the government of India appointed the national income committee in August 1949 under the chairmanship of Prof P.C Mahalanobis, to compile authoritative estimates of national income. The committee submitted its first report in 1951 and the final report in 1954.

➤ According to this report, the total national income of the country was estimated at a level of ₹8,650 crore and per capita income at a level of ₹246.90. The final report appeared in 1954 gave estimates of national income during the period of 1950 to 1954.

➤ For further estimation of national income, the government established Central Statistical Organization (CSO) which now regularly publishes National Income Data.

➤ Recently CSO has introduced a new Series on National income with 2011-12 as base year.

➤ National income includes the contribution of three sectors of the economy

(a) Primary sector (Agriculture, Forest, Fisheries, Mining)

(b) Secondary sector (Industries-Manufacturing & construction)

(c) Tertiary sector (Trade, Transport, Communications, Banking, insurance, Real estate, community and personal services)

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Important Fact

➤ In India, National income is estimated by central statistical organization.

➤ Recently, the base year for computation of National income is 2011-12.

➤ Hindu Rate of growth is associated with per capita income.

➤ Hindu rate of growth refers to the rate of growth of GDP.

➤ As the Indian economy develops, the share of the tertiary sector in the GDP increases.

➤ Bhutan has adopted Gross National Happiness as an index of the well being of its citizens.

➤ The most appropriate measure of a country’s economic growth is its per capita real income.

➤ Per capita income of a country is derived from National income and population both.’

➤ Tertiary sector contributes largest Gross National Product in Indian economy.

➤ Simon Kuznets was a generator of National Income Accounting. He received a Nobel Prize in 1971 for his empirical work on Economic growth.

➤ National income is mainly based on two concept National Product and Domestic product.

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Table of Contents

NATIONAL INCOME SSC CHSL QUESTIONS

  1. A firm sells new shares worth ₹1,000 direct to individuals. This transaction will cause:
  1. Gross national product to rise by ₹1,000.
  2. Gross Domestic Product to rise by ₹1,000.
  3. National Income to rise by ₹1,000.
  4. No impact on Gross National Product.

Answer: D

2. In India, agriculture income is calculated by:

  1. Output method
  2. Input method
  3. Expenditure method
  4. Commodity flow method

Answer: D

3. Who coined the term ‘Hindu rate of growth’ for Indian Economy?

  1. A.K. Sen
  2. Kirit S. Parikh
  3. Raj Krishna
  4. Montek Singh Ahluwalia

Answer: C

4. GDP at factor cost is:

  1. GDP minus indirect taxes plus subsidies.
  2. GNP minus depreciation allowances.
  3. NNP plus depreciation allowances.
  4. GDP minus subsidies plus indirect taxes.

Answer: D

4. Per Capita Income is obtained by dividing National Income by:

  1. Total population of the country.
  2. Total working population.
  3. Area of the country.
  4. Volume of the capital used.

Answer: A

5. Which one of the following is a development expenditure?

  1. Irrigation expenditure
  2. Civil administration
  3. Debt services
  4. Grant-in-aid

Answer: D

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6. Gross domestic product is defined as the value of all:

  1. Goods produced in an economy in a year.
  2. Goods and services in an economy in a year.
  3. Final goods produced in an economy in a year.
  4. Final goods and services produced in an economy in a year.

Answer: D

7. Depreciation is equal to:

  1. Gross National Product- Net National Product
  2. Net National Product- Gross National Product
  3. Gross National product- Personal Income
  4. Personal Income- personal taxes.

Answer: A

8. Which one of the following is NOT a method of measurement of national income?

  1. Value added method
  2. Income method
  3. Expenditure method
  4. Investment method

Answer: D

9. Net National Product of a country is:

  1. GDP minus depreciation allowances.
  2. GDP plus net income from abroad.
  3. GNP minus net income from abroad.
  4. GNP minus depreciation allowances.

Answer: D

10. National Income is based on the:

  1. Total revenue of the state.
  2. Production of goods and services.
  3. Net profit earned and expenditure made by the state.
  4. The sum of all the factors of income.

Answer: D

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11. Which of the following is definitely a major indication of the State of the economy or country?

  1. Rate of GDP growth.
  2. Rate of Inflation
  3. Number of banks in a country.
  4. Stock of food grains in a country.
  5.  None of these.

Answer: A

12. Which of the following can be called as a part of the Service Sector?

  1. Textile Mills
  2. Banking
  3. Coal Mines
  4. Agriculture.
  5. None of these

Answer: B

13. Many a times we read a term in financial newspapers- GDP. What is the full form of the same?

  1. Gross Domestic Product
  2. Global Domestic Ratio
  3. Gross Depository revenue
  4. Global depository receipts
  5. None of these

Answer: A

14. In terms of economics, the total value of all the output (goods and services) produced and income received in a year by a domestic resident of a country put together is called:

  1. Net National Product
  2. Gross National Product
  3. Gross National income
  4. National Income
  5. None of these

Answer: D

15. Which of the following is equivalent to National Income?

  1. Gross Domestic Product at market price.
  2. Net Domestic Product at factor cost.
  3. Net national product at Market price
  4. Net National Product at factor Cost.

Answer: D

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16. Assertion: Per Capita Income of India does not give a complete picture of the economic growth of the country.

Reason: Per Capita Income of the country is not independent of its size of population.

  1. Both A and R are true and R is the correct explanation of A.
  2. Both A and R are true but R is not the correct explanation of A.
  3. A is true but R is false.
  4. R is true but A is false.

Answer: D

17. Which sector of the Indian Economy contributes larges to the Gross National product?

  1. Primary Sector
  2. Secondary Sector
  3. Tertiary Sector
  4. Public Sector

Answer: C

18. National Income estimate in India are prepared by:

  1. Planning Commission
  2. Reserve Bank of India
  3. Central Statistical Organisation
  4. Indian Statistical Institute

Answer: C

20. Per Capita Income of a country derived from:

  1. National Income
  2. Population
  3. National Income and Population both
  4. None of these

Answer: C

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21. In India, Hindu rate of growth is associated with which of the following?

  1. Birth rate
  2. Population
  3. Per Capita Income
  4. National Income

Answer: A

22. Who had estimated National Income in India first?

  1. Dadabhai Naoroji
  2. R.C. Dutt
  3. V.K.R.V. Rao
  4. D. R. Gadgill

Answer: A

23. The National Income of a country is:

  1. The annual revenue of the Government
  2. Sum total of factor incomes
  3. Surplus of public sector undertakings
  4. Export minus Import

Answer: B

24. In an open economy, the National Income of the economy is:

(C= Consumption, I= Investment, G= Government expenditure, X= Total exports, M= Total Import)

  1. Y= C+I+G+X
  2. Y= I+ G-X+M
  3. Y= C+ I+ G+ (X-M)
  4. Y= C+ I-G + X-M

Answer: C

25. The Per Capita Income in India was ₹20 in 1867-68 was ascertained for the first time by:

  1. Dadabhai Naoroji
  2. R.C. Dutta
  3. M. G. Ranade
  4. W. Hunter

Answer: A

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