The Core Books

Ch 2 National Income Accounting

Written by

Sri

in

, ,
Class 12 • Introductory Macroeconomics

NCERT Class 12 Economics Chapter 2 Questions (MCQ, One-Word or Descriptive)

This page provides complete NCERT Class 12 Introductory Macroeconomics Chapter 2 questions, including MCQs, one-word and descriptive questions. All questions are extracted line-by-line from NCERT for full syllabus coverage and exam preparation.

This chapter, National Income Accounting, introduces the fundamental concepts and methods for measuring the aggregate economic activity of a nation. It begins by distinguishing between final goods (meant for ultimate use, not further transformation) and intermediate goods (used as inputs in further production). Final goods are further classified into consumption goods (both durable and non-durable) and capital goods.

The chapter explains the critical distinction between stocks (variables measured at a point in time, like capital stock) and flows (variables measured over a period, like income, output, or profits). The concept of depreciation (wear and tear of capital) is introduced, leading to the relationship: Net Investment = Gross Investment – Depreciation.

The chapter also explains inventory changes : planned versus unplanned :and how change in inventory equals production minus sales. The core of the chapter presents the three methods of calculating GDP, all of which yield the same value due to the circular flow of income.

The product (value added) method sums the gross value added of all firms (value of output minus value of intermediate goods). The expenditure method sums final expenditures: GDP = C + I + G + (X – M) (Private Final Consumption Expenditure, Investment Expenditure, Government Expenditure, and Net Exports). The income method sums factor payments: GDP = Wages + Profits + Interest + Rent.

The chapter then builds the hierarchy of national income aggregates: GDP, GNP (adds net factor income from abroad), NNP (subtracts depreciation), and National Income (NNP at factor cost, subtracting net indirect taxes). Further derivations include Personal Income (adjusting for undistributed profits, corporate tax, transfer payments) and Personal Disposable Income (subtracting personal taxes).

The distinction between nominal GDP (current prices) and real GDP (constant prices) is explained, along with price indices: GDP Deflator, Consumer Price Index (CPI), and Wholesale Price Index (WPI). Finally, the chapter critically examines why GDP is an imperfect measure of welfare : due to unequal distribution, non-monetary exchanges (barter, domestic work), and externalities (pollution, etc.).

Tables from the Reserve Bank of India show that India’s GDP at constant 2024-25 prices was approximately Rs 1,87,96,955 crore, with Private Final Consumption Expenditure being the largest component.

Topics Covered:

All-in-One Portal

Master NCERT Chapters Faster

Get MCQs, One-Liners, and Descriptive Questions mapped to exact page numbers. Designed for effortless memorization for Boards & Civil Services.

Enter Portal

Section A: Descriptive Questions

  1. What are the four factors of production and their respective remunerations? Page 14
  2. What is the difference between final goods and intermediate goods? Page 10-11
  3. What are consumption goods? Give examples. Page 10
  4. What are capital goods? Page 10
  5. What are consumer durables? Page 11
  6. What is the problem of double counting? How is it avoided? Page 11
  7. Distinguish between stocks and flows with an example. Page 11-12
  8. What is depreciation? Page 12
  9. What is the relationship between net investment, gross investment, and depreciation? Page 12
  10. What is inventory? What is change in inventory? Page 18
  11. What is the difference between planned and unplanned change in inventories? Page 19
  12. What is Gross Domestic Product (GDP)? Page 20
  13. What is the expenditure method of calculating GDP? Page 21
  14. What is the income method of calculating GDP? Page 22
  15. What is the value added method of calculating GDP? Page 17-18
  16. What is the difference between factor cost, basic prices, and market prices? Page 24
  17. What is Gross National Product (GNP)? Page 25
  18. What is Net National Product (NNP) at market prices? Page 25
  19. What is National Income (NNP at factor cost)? Page 25
  20. What is Personal Income (PI)? How is it derived from National Income? Page 26
  21. What is Personal Disposable Income (PDI)? Page 26
  22. What is the difference between Nominal GDP and Real GDP? Page 29
  23. What is the GDP Deflator? Page 29
  24. What is the Consumer Price Index (CPI)? Page 29-30
  25. How does CPI differ from GDP Deflator? Page 30
  26. What are the three limitations of using GDP as an index of welfare? Page 30-31
  27. What are externalities? Give examples. Page 31
  28. What is National Disposable Income? Page 26-27

↑ Back to Contents

All-in-One Portal

Master NCERT Chapters Faster

Get MCQs, One-Liners, and Descriptive Questions mapped to exact page numbers. Designed for effortless memorization for Boards & Civil Services.

Enter Portal

Section B1: Objective MCQs

Page 9

Who named his most influential work “An Enquiry into the Nature and Cause of the Wealth of Nations”?

A) B) C) D)
View Answer
Correct Answer: Adam Smith
Reference: NCERT Page 9
Page 10

Which of the following is NOT a final good?

A) Bread purchased by a consumerB) Cloth purchased by a consumerC) Wheat purchased by a baker for making breadD) Television purchased by a household
View Answer
Correct Answer: Wheat purchased by a baker for making bread
Reference: NCERT Page 10
Page 10

Which of the following is an example of a capital good?

A) BreadB) ClothingC) MachineryD) Tea leaves
View Answer
Correct Answer: Machinery
Reference: NCERT Page 10
Page 11

Which of the following is a consumer durable?

A) FoodB) Television setC) PetrolD) Raw cotton
View Answer
Correct Answer: Television set
Reference: NCERT Page 11
Page 17

In the farmer-baker example, if farmers produce Rs 100 worth of wheat and bakers produce Rs 200 worth of bread using Rs 50 worth of wheat, the GDP is

A) Rs 300B) Rs 250C) Rs 200D) Rs 150
View Answer
Correct Answer: Rs 250
Reference: NCERT Page 17
Page 18

Gross value added of a firm is equal to

A) Value of output – Value of intermediate goodsB) Value of output + Value of intermediate goodsC) Sales – Change in inventoryD) Value of output – Depreciation
View Answer
Correct Answer: Value of output – Value of intermediate goods
Reference: NCERT Page 18
Page 18

Net value added is equal to

A) Gross value added + DepreciationB) Gross value added – DepreciationC) Gross value added × DepreciationD) Gross value added / Depreciation
View Answer
Correct Answer: Gross value added – Depreciation
Reference: NCERT Page 18
Page 18

Change in inventories of a firm during a year is equal to

A) Production + SaleB) Production – SaleC) Sale – ProductionD) Production × Sale
View Answer
Correct Answer: Production – Sale
Reference: NCERT Page 18
Page 19

If a firm starts with inventory of 100 shirts, produces 1000 shirts, and sells only 600 shirts, the unplanned accumulation of inventories is

A) 100 shirtsB) 200 shirtsC) 300 shirtsD) 400 shirts
View Answer
Correct Answer: 400 shirts
Reference: NCERT Page 19
Page 21-22

In the expenditure method, GDP is equal to

A) C + I + G + (X – M)B) C + I + G – (X – M)C) C + I – G + (X – M)D) C – I + G + (X – M)
View Answer
Correct Answer: C + I + G + (X – M)
Reference: NCERT Page 21-22
Page 22

In the income method, GDP is equal to

A) W + P + In + RB) W – P + In + RC) W + P – In + RD) W + P + In – R
View Answer
Correct Answer: W + P + In + R
Reference: NCERT Page 22
Page 23-24

In the numerical example with firms A and B, if A pays Rs 20 wages and keeps Rs 30 profits, and B pays Rs 60 wages and keeps Rs 90 profits, GDP by income method is

A) Rs 150B) Rs 200C) Rs 100D) Rs 250
View Answer
Correct Answer: Rs 200
Reference: NCERT Page 23-24
Page 25

GNP is equal to

A) GDP + Net factor income from abroadB) GDP – Net factor income from abroadC) GDP + DepreciationD) GDP – Depreciation
View Answer
Correct Answer: GDP + Net factor income from abroad
Reference: NCERT Page 25
Page 25

NNP at market prices is equal to

A) GNP + DepreciationB) GNP – DepreciationC) GDP – DepreciationD) GDP + Depreciation
View Answer
Correct Answer: GNP – Depreciation
Reference: NCERT Page 25
Page 25

National Income (NNP at factor cost) is equal to

A) NNP at market prices – Net indirect taxesB) NNP at market prices + Net indirect taxesC) GDP at market prices – Net indirect taxesD) GNP at market prices + Net indirect taxes
View Answer
Correct Answer: NNP at market prices – Net indirect taxes
Reference: NCERT Page 25
Page 29

If nominal GDP is Rs 1,650 and real GDP is Rs 1,100, the GDP deflator is

A) 0.67B) 1C) 1.5D) 2
View Answer
Correct Answer: 1.5
Reference: NCERT Page 29
Page 30

In the CPI example with rice and cloth, if base year cost is Rs 1,400 and current year cost is Rs 1,950, the CPI is approximately

A) 100B) 120.5C) 139.29D) 150
View Answer
Correct Answer: 139.29
Reference: NCERT Page 30
Page 30-31

Which of the following is NOT a reason why GDP may not be a good index of welfare?

A) Unequal distribution of GDPB) Non-monetary exchanges not countedC) Externalities not accounted forD) GDP includes only final goods
View Answer
Correct Answer: GDP includes only final goods
Reference: NCERT Page 30-31
Page 34

According to Table 2.5, India’s GDP at constant (2024-25) prices was approximately

A) Rs 1,71,87,446 croreB) Rs 1,60,95,09 croreC) Rs 1,87,96,955 croreD) Rs 18,79,55 crore
View Answer
Correct Answer: Rs 1,87,96,955 crore
Reference: NCERT Page 34
Page 35

According to Table 2.6, the largest component of GDP in India (2024-25) is

A) Government Final Consumption ExpenditureB) Gross Fixed Capital FormationC) Private Final Consumption ExpenditureD) Net Exports
View Answer
Correct Answer: Private Final Consumption Expenditure
Reference: NCERT Page 35

↑ Back to Contents

All-in-One Portal

Master NCERT Chapters Faster

Get MCQs, One-Liners, and Descriptive Questions mapped to exact page numbers. Designed for effortless memorization for Boards & Civil Services.

Enter Portal

Section B2: Factual One-Liners

What is the term used for the net contribution made by a firm? Page 17

Reveal Answer
Value added (Page 17)

What is the payment for the service of entrepreneurship called? Page 14

Reveal Answer
Profit (Page 14)

What is the payment for capital called? Page 14

Reveal Answer
Interest (Page 14)

What is the stock of unsold finished goods a firm carries from one year to the next called? Page 18

Reveal Answer
Inventory (Page 18)

What is the term for addition to the stock of capital of a firm? Page 19

Reveal Answer
Investment (Page 19)

What is the term for rise in the value of inventories of a firm over a year? Page 19

Reveal Answer
Inventory investment (Page 19)

What is the full form of GDP? Page 20

Reveal Answer
Gross Domestic Product (Page 20)

What is the full form of GNP? Page 25

Reveal Answer
Gross National Product (Page 25)

What is the full form of NNP? Page 25

Reveal Answer
Net National Product (Page 25)

What is the full form of NI? Page 25

Reveal Answer
National Income (Page 25)

What is the full form of PI? Page 26

Reveal Answer
Personal Income (Page 26)

What is the full form of PDI? Page 26

Reveal Answer
Personal Disposable Income (Page 26)

What is the full form of CPI? Page 29

Reveal Answer
Consumer Price Index (Page 29)

What is the full form of WPI? Page 30

Reveal Answer
Wholesale Price Index (Page 30)

What is the full form of CSO? Page 24

Reveal Answer
Central Statistics Office (Page 24)

What is the full form of NFIA? Page 25

Reveal Answer
Net Factor Income from Abroad (Page 25)

In which year did the CSO replace GDP at factor cost with GVA at basic prices? Page 24

Reveal Answer
2015 (Page 24)

What is the term for unexpected fall in sales leading to unsold stock? Page 19

Reveal Answer
Unplanned accumulation of inventories (Page 19)

What is the term for a pollution-creating factory harming others without penalty (in economics)? Page 31

Reveal Answer
Negative externality (Page 31)
All-in-One Portal

Master NCERT Chapters Faster

Get MCQs, One-Liners, and Descriptive Questions mapped to exact page numbers. Designed for effortless memorization for Boards & Civil Services.

Enter Portal

↑ Back to Contents

More posts