Ch:6 National Income

Question 1

Define National income in the words of Prof Marshall?

Answer 1

Ans: Individualsof a country produce a certain quantity of goods and services using the resources of the country with the help of their capital. It is called national income.

Question 2

Define National income in the words of Prof Pigou?

Answer 2

Ans: National income is that Part of material wealth of a nation which can be measured by the scale of money.

Question 3

Define National income in the words of Prof Paul A Samuelson?

Answer 3

Ans: It is the loose name we give for the money measure of the over all annual flow of goods and services in an economy.

Question 4

Define National income in the words of Prof Ackley Gardener?

Answer 4

Ans: Individual income is the amount of his earning from the productive services
currently rendered by him or by his property National income is nothing more than the sum of all the individual incomes.

Question 5

Define National income in the words of Prof Fisher?

Answer 5

Ans: Quantity of goods and services which is consumed during a year is called national
income.

Question 6

What are various concepts of notional income?

Answer 6

Ans: Following are the various concepts of national income.

1-Goss National Product (G.N:P).
2-Net National Product (N.N.P).
3-Goss Domestic Product (G.D.P).
4-National Income (N.I).
5-Disposable Personal income (D.P.I).
6-Personal Income (P.I).
7-Per Capita Income (P.C.I).

Question 7

Define Gross National product?

Answer 7

Gross National product of a country is the total market value of all final goods and services produced during a period of one year.
All agricultural goods, industrial goods, mineral goods and services of
individuals, government and semi government institutions are included in it.

Question 8

Explain meanings of Net National product?

Answer 8

If we subtract depreciation allowance or replacement cost of machines from
Gross national product (G.N.P), we get Net National Product

Net national Product= Goss National Product - Depreciation allowance.

Question 9

What is meant by Depreciation allowance?

Answer 9

: We use machines and tools to manufacture goods. These machines often break down during the year owing to wear and tear.
We have to repair these machines. The expenditures made on their repair are
called depreciation allowance.

Question 10

Explain the meanings of Goss Domestic Product?

Answer 10

Total market value of all final goods and
services Produced within a country during a year is called gross domestic product.
Thus when we subtract net foreign income from gross national product, we get gross domestic product.

G.D.P= G.N.P - F.I

Question 11

Concept of National Income: Explain the concept of National income?

Answer 11

If indirect taxes are subtracted from Net National Product (N.N.P) and subsidies
are added in N.N.P, We get National income (N.I).
It is the income which is the aggregate of net rewards of four factors of Production e.g, rents + wages + interest+Profits.

National Income = Net National Product - indirect taxes + Subsidies.

Question 12

What is Subsidy?

Answer 12

Sometimes government wants to provide some goods to the public at a
lower Price than market Price. The government purchases them at higher price and sells at a low price to the public at utility stores and Cooperative stores. It means some part of the price of these goods is paid by the government, it is called Subsidy.

For example, if government purchases flour at Rs 10/-per kg and sells it
at Rs 8/- per kg, then subsidy will be Rs 2/-per kg.

Question 13

Explain the concept of Personal income?

Answer 13

It is the income which a person individually earns in a year. For example, a lawyer earns 10 lac in a year, it is his personal income.
Transfer payments and indirect taxes are included in personal income.

Question 14

Explain the concept of Disposable Personal income?

Answer 14

The income in the possession of an
individual after the payment of direct taxes is called disposable personal income.
It is at the disposal of the person and he can spend it according to his own free
will.
Disposable personal income=personal income - direct taxes

Question 15

Write methods to measure national Income?

Answer 15

Methods to Measure National Income:

There are three methods to measure the
national income.
1-Product Method.
2-Income Method.
3-Expenditure Method.

Question 16

Differentiate between Personal Income and disposable Personal Income?

Answer 16

Difference Between Personal Income and Disposable Income:

Personal income is the income which a person individually earns in a years. After subtracting direct taxes from personal income, disposable personal income is obtained.

Question 17

What is meant by circular flow of national income?

Answer 17

Meaning of Circular Flow of National Income:
Circulation of national income between households and firms is called circular flow of national income.

Or

It is the process whereby national income and expenditure flows in a circular manner continuously.

Question 18

What is meant by transfer Payments?

Answer 18

Meaning of Transfer Payments:
Transfer payments are the amounts of money which a person gets without labour. These are donations, alms, pension, unemployment allowance, scholarship and gifts etc.

Question 19

When does national income increase?

Answer 19

Ans: National income increases when the quantity of goods and services is increasing in the country.

Question 20

Differentiate between real national income and nominal national income?

Answer 20

Difference Between Real National Income and Nominal National Income:

Real national income means total quantity of goods and services produced in a country. Therefore, real national income increases with the increase in the quantity of goods and services in the country
while nominal national income
means monetary value of goods and services at the market prices.

Question 21

Write precautions of the product method to measure national income.

Answer 21

Ans: Following are precautions of the product method to measure national income:

1-Avoid double counting.
2-Subtract indirect taxes.
3-Subtract depreciation allowance.
4-Value of free services should not be counted.
5-Subsidies should be counted.

Question 22

Write precautions of income method to measure national income?

Answer 22

Following are precautions of income method to measure national income:

1-Earnings from unfair means should not be counted in national income.
2-Transfer payments should not be included.

Question 23

Make a diagram of circular of national income?

Answer 23

Draw the diagram loser

Question 24

Write five factors of national income?

Answer 24

Ans: Following are five factors of national income:
1-National resources.
2-Man made resources
3-human resources
4-capital goods
5-technical know-how

Question 25

Write four points of importance of study of national income?

Answer 25

Following are four points of importance of national income: Study of national
income.

1-Helps to analyse the economic conditions.
2-Helps to examine the economic growth rate of the country.
3-Helps to analyse the economic problems.
4-Helps in framing economic policies.