TERMINOLOGIES

Question 1

What is circular flow economy?

Answer 1

It is an economy where all the transactions between households and firms in a simple economy.
It simplifies matters by assuming that all goods and services are bought by households and that
households spend all of their income.

Question 2

Different ways to measure flow of money (GDP)?

Answer 2

1) Expenditure method
2) Income method
3) Value Added method

Question 3

What are the 4 different ways to calculate income of nation?

Answer 3

1) GDP
2) GNP
3) NDP
4) NNP

Question 4

What is GDP?

Answer 4

GDP or Gross domestic product refers to total market value of all the final goods and services
produced in an economy in a given period of time. For India, this time period is from 1st April to 31st March.

Question 5

How to avoid double or triple counting in GDP?

Answer 5

By measuring the value of only final goods

Question 6

How to consider MNC in GDP?

Answer 6

GDP measures the value of final goods and services produced within a **geographic boundary **regardless of the nationality of the individual or firm.
For instance, cars manufactured in India by Japanese company will be included in Indian GDP. Similarly, the Jaguar cars manufactured in UK by Tata will not be counted in India’s GDP.

Question 7

What is nominal GDP?

Answer 7

Refers to current year production of final goods and services valued at current
year prices.

Question 8

What is real GDP?

Answer 8

Refers to the current year production of goods and services valued at base year prices. Such base year prices are constant prices.