Class 12 Economics Chapter 2 – National Income Accounting Important Questions
These National Income Accounting Important Questions cover the most important MCQs, one-word questions, assertion and reason questions and descriptive questions from NCERT Class 12 Economics Chapter 2. The questions are prepared from NCERT concepts and important exam-oriented topics for quick revision and practice.
This page is useful for UPSC, SSC, PSC, Railway, Banking, CUET, CBSE and Class 12 Economics preparation, helping students revise important concepts related to national income, GDP, GNP, value added method, income method, expenditure method and circular flow of income.
Table of Contents
Multiple Choice Questions (MCQs)
These MCQs from National Income Accounting are designed for quick objective revision and competitive exam preparation. The questions cover important national income concepts, accounting methods, aggregate measures and economic activities discussed in the NCERT chapter.
MCQ 1
National income accounting measures:
- A. Income of one household
- B. Income of one firm
- C. Economic activity of the entire economy
- D. Income of government employees only
Answer: C. Economic activity of the entire economy
Page Reference: Page 14
MCQ 2
GDP stands for:
- A. Gross Domestic Product
- B. Gross Development Product
- C. General Domestic Product
- D. Gross Demand Product
Answer: A. Gross Domestic Product
Page Reference: Page 15
MCQ 3
The value of final goods and services produced within domestic territory is called:
- A. GNP
- B. NNP
- C. GDP
- D. Personal income
Answer: C. GDP
Page Reference: Page 15
MCQ 4
Intermediate goods are those goods which are:
- A. Used for final consumption
- B. Used in the production of other goods
- C. Exported abroad
- D. Produced by households
Answer: B. Used in the production of other goods
Page Reference: Page 16
MCQ 5
Double counting occurs when:
- A. Final goods are counted once
- B. Intermediate goods are counted multiple times
- C. Only exports are counted
- D. Imports are excluded
Answer: B. Intermediate goods are counted multiple times
Page Reference: Page 16
MCQ 6
Value added refers to:
- A. Selling price of final goods
- B. Difference between value of output and intermediate consumption
- C. Tax revenue earned by government
- D. Export earnings only
Answer: B. Difference between value of output and intermediate consumption
Page Reference: Page 17
MCQ 7
Which method calculates national income through factor incomes?
- A. Product method
- B. Expenditure method
- C. Income method
- D. Inventory method
Answer: C. Income method
Page Reference: Page 18
MCQ 8
Rent, wages, interest and profit are included in:
- A. Transfer payments
- B. Factor income
- C. Indirect taxes
- D. Subsidies
Answer: B. Factor income
Page Reference: Page 18
MCQ 9
The expenditure method measures:
- A. Production only
- B. Total expenditure on final goods and services
- C. Government taxes only
- D. Savings only
Answer: B. Total expenditure on final goods and services
Page Reference: Page 19
MCQ 10
Which of the following is a transfer payment?
- A. Salary
- B. Pension
- C. Rent
- D. Profit
Answer: B. Pension
Page Reference: Page 18
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One-Word / Very Short Answer Questions
These one-word and factual questions help students quickly revise important national income concepts, formulas and accounting methods from the chapter. The section is especially useful for UPSC, SSC, PSC, CUET and other objective examinations.
-
What does GDP stand for?
Answer: Gross Domestic Product -
What are goods used for further production called?
Answer: Intermediate goods -
What is the problem of repeated counting called?
Answer: Double counting -
Which method is also known as the value added method?
Answer: Production method -
Which method measures factor incomes?
Answer: Income method -
Name one factor income.
Answer: Wages -
Which method measures total expenditure on final goods?
Answer: Expenditure method -
What is the wear and tear of fixed capital called?
Answer: Depreciation -
NNP at factor cost is also known as what?
Answer: National income -
Which flow explains movement of income between sectors?
Answer: Circular flow of income
Assertion and Reason Questions
These assertion and reason questions from National Income Accounting help students develop conceptual clarity and analytical understanding of GDP, national income methods and accounting concepts. They are highly useful for board exams and competitive examinations.
Question 1
Assertion (A): GDP measures production within domestic territory.
Reason (R): GDP includes the value of final goods and services produced within a country.
Options:
- A. Both A and R are true and R is the correct explanation
- B. Both A and R are true but R is not the correct explanation
- C. A is true but R is false
- D. A is false but R is true
Correct Option: A
Question 2
Assertion (A): Intermediate goods are excluded from national income calculations.
Reason (R): Including them leads to double counting.
Options:
- A. Both A and R are true and R is the correct explanation
- B. Both A and R are true but R is not the correct explanation
- C. A is true but R is false
- D. A is false but R is true
Correct Option: A
Question 3
Assertion (A): The production method is also called the value added method.
Reason (R): It measures the value added at each stage of production.
Options:
- A. Both A and R are true and R is the correct explanation
- B. Both A and R are true but R is not the correct explanation
- C. A is true but R is false
- D. A is false but R is true
Correct Option: A
Important Exam-Based Concept Questions
These important descriptive and analytical questions from National Income Accounting are useful for board examinations and competitive exams. The questions focus on conceptual understanding, accounting methods, GDP concepts and NCERT-based economic analysis.
- Define national income and explain its importance.
- Differentiate between final goods and intermediate goods.
- Explain the problem of double counting in national income accounting.
- Discuss the production or value added method of calculating national income.
- Explain the income method of national income accounting.
- Discuss the expenditure method with suitable examples.
- Explain the concept of GDP and its significance.
- Differentiate between GDP and GNP.
- Explain the meaning and importance of depreciation.
- Discuss the concept of Net Factor Income from Abroad (NFIA).
- Explain the circular flow of income in a two-sector economy.
- Differentiate between stock variables and flow variables.
- Why are transfer payments excluded from national income?
- Explain the importance of national income accounting in economic planning.
- Compare the three methods of measuring national income.
Quick Revision Points
- GDP means Gross Domestic Product.
- Intermediate goods are used for further production.
- Double counting occurs when intermediate goods are counted repeatedly.
- Production method is also called value added method.
- Factor incomes include:
- Wages
- Rent
- Interest
- Profit
- Expenditure method includes:
- Consumption expenditure
- Investment expenditure
- Government expenditure
- Net exports
- NNP at factor cost is known as national income.
- Depreciation means wear and tear of fixed assets.
- NFIA means Net Factor Income from Abroad.
- Circular flow explains movement of goods, services and money between sectors.
- Wealth is a stock variable.
- National income accounting measures economic performance of an economy.