L1: National Income

Question 1

What is national income?

Answer 1

National income is the total value of all goods and services produced by a country over a specific time period.

Question 2

Which method is NOT used to calculate national income?

Answer 2

The ‘social welfare’ method is NOT used to calculate national income.

Question 3

True or False: National income includes only the income earned by residents.

Answer 3

True

Question 4

What are the three primary methods to calculate national income?

Answer 4

The three primary methods are the production method, income method, and expenditure method.

Question 5

Fill in the blank: National income can be measured by the ______ method, which focuses on the total output of goods and services.

Answer 5

production

Question 6

What is GDP?

Answer 6

GDP, or Gross Domestic Product, is the total monetary value of all finished goods and services produced within a country’s borders in a specific time period.

Question 7

What does GNP stand for?

Answer 7

GNP stands for Gross National Product.

Question 8

True or False: GNP includes income earned by residents from investments abroad.

Answer 8

True

Question 9

What is the formula for calculating national income using the income method?

Answer 9

National Income = Wages + Rent + Interest + Profit

Question 10

Which component is NOT part of the expenditure method?

Answer 10

Government subsidies are NOT part of the expenditure method.

Question 11

Fill in the blank: The ______ method calculates national income based on total spending on final goods and services.

Answer 11

expenditure

Question 12

What is the difference between nominal and real national income?

Answer 12

Nominal national income is measured in current prices, while real national income is adjusted for inflation.

Question 13

True or False: Depreciation is considered when calculating net national income.

Answer 13

True

Question 14

What does NNP stand for?

Answer 14

NNP stands for Net National Product.

Question 15

What is the relationship between GDP and GNP?

Answer 15

GNP equals GDP plus net income from abroad.

Question 16

Fill in the blank: The ______ is the total income that residents earn from all sources.

Answer 16

national income

Question 17

What is a limitation of using GDP as a measure of national income?

Answer 17

GDP does not account for income inequality or non-market transactions.

Question 18

True or False: National income accounting helps in economic planning and policy formulation.

Answer 18

True

Question 19

What is the primary goal of national income accounting?

Answer 19

The primary goal is to provide a comprehensive overview of a country’s economic performance.

Question 20

What is the significance of the base year in calculating real national income?

Answer 20

The base year allows for comparisons over time by adjusting for inflation.

Question 21

Fill in the blank: National income can also be referred to as ______ income.

Answer 21

aggregate

Question 22

Which of the following is NOT included in national income? A) Government spending B) Transfer payments C) Consumer spending

Answer 22

B) Transfer payments

Question 23

What is the purpose of the circular flow of income model?

Answer 23

The model illustrates how money moves through the economy between households and firms.

Question 24

True or False: The income method of calculating national income is based on the total output of goods and services.

Answer 24

False

Question 25

What is the impact of inflation on national income measurements?

Answer 25

Inflation can distort the true value of national income if not adjusted for.

Question 26

What is an example of a non-market transaction?

Answer 26

Household chores performed without payment are an example of non-market transactions.

Question 27

Fill in the blank: The ______ is the value added at each stage of production.

Answer 27

value added

Question 28

What is the significance of calculating per capita national income?

Answer 28

Per capita national income provides an average income per person, indicating the standard of living.

Question 29

True or False: National income accounting is only relevant for developed countries.

Answer 29

False

Question 30

What does the term 'aggregate demand' refer to?

Answer 30

Aggregate demand refers to the total demand for all goods and services in an economy.

Question 31

Fill in the blank: The ______ approach to national income focuses on the distribution of income among factors of production.

Answer 31

income

Question 32

What is the primary limitation of GNP?

Answer 32

GNP does not accurately reflect the economic activities occurring within the country's borders.

Question 33

What role do government policies play in influencing national income?

Answer 33

Government policies can affect taxation, spending, and investment, thereby influencing national income.

Question 34

True or False: National income can be used to compare economic performance across different countries.

Answer 34

True

Question 35

What is 'disposable income'?

Answer 35

Disposable income is the amount of money that households have available for spending and saving after taxes.

Question 36

Fill in the blank: The ______ method is based on the total income earned by factors of production.

Answer 36

income

Question 37

What is the significance of calculating net national income?

Answer 37

Net national income accounts for depreciation, providing a clearer picture of economic health.

Question 38

What does the term 'economic growth' refer to?

Answer 38

Economic growth refers to an increase in the production of goods and services in an economy over time.

Question 39

True or False: An increase in national income always indicates an improvement in living standards.

Answer 39

False

Question 40

What is the difference between gross and net income?

Answer 40

Gross income is the total income before deductions, while net income is what remains after deductions.

Question 41

Fill in the blank: The ______ effect refers to the impact of changes in national income on consumption and investment.

Answer 41

multiplier

Question 42

What is the purpose of the national income identity?

Answer 42

The national income identity shows that total output equals total income equals total expenditure.

Question 43

True or False: National income statistics are always accurate and reliable.

Answer 43

False

Question 44

What are transfer payments?

Answer 44

Transfer payments are payments made by the government to individuals without any goods or services being exchanged.

Question 45

Fill in the blank: ______ is the sum of all final goods and services produced in a country during a specific period.

Answer 45

National product

Question 46

What role do exports and imports play in national income?

Answer 46

Exports contribute positively, while imports are subtracted from national income.

Question 47

What is the significance of the income distribution in relation to national income?

Answer 47

Income distribution affects economic inequality and overall economic health.