15 extra multiple-choice questions for National Income (12th Standard Economics, Samacheer Kalvi), beyond the ones printed in the textbook — each with the correct option highlighted and a clear, worked explanation. Free to read in English and Tamil.
Q1
Who was the Nobel laureate that first introduced the concept of national income?
- A. Alfred Marshall
- B. Simon KuznetsCorrect
- C. Adam Smith
- D. John Maynard Keynes
Explanation. The concept of national income was first introduced by the Nobel laureate Simon Kuznets.
Q2
According to Alfred Marshall, the true net annual income of a country is also referred to as which of the following?
- A. Gross domestic product
- B. National dividendCorrect
- C. Personal disposable income
- D. Net domestic capital
Explanation. Alfred Marshall defined national income as the net annual aggregate of commodities and services, calling it the national dividend.
Q3
In the expenditure method of calculating Gross Domestic Product (GDP), what does the term (X - M) represent?
- A. Gross private domestic investment
- B. Government purchases of goods and services
- C. Net factor income from abroad
- D. Net exports of goods and servicesCorrect
Explanation. In the expenditure method, X stands for exports and M stands for imports, so their difference represents net exports.
Q4
Which of the following is subtracted from Gross Domestic Product (GDP) to calculate Net Domestic Product (NDP)?
- A. Subsidies
- B. DepreciationCorrect
- C. Indirect taxes
- D. Net factor income from abroad
Explanation. Net Domestic Product is the value of net output after deducting depreciation or capital consumption allowance from GDP.
Q5
If current price national income is divided by the ratio of the current year price index to the base year price index (P1 / P0), what is the resulting measure?
- A. Per capita nominal income
- B. Real income at constant priceCorrect
- C. Disposable personal income
- D. Gross domestic product deflator
Explanation. Dividing national income at current prices by the price index ratio adjusts for inflation to yield real income.
Q6
How is the GDP deflator calculated?
- A. (Nominal GDP / Real GDP) * 100Correct
- B. (Real GDP / Nominal GDP) * 100
- C. (GDP at Market Prices - Depreciation) * 100
- D. (GDP at Factor Cost + Indirect Taxes) * 100
Explanation. The GDP deflator is a price index calculated by dividing nominal GDP in a given year by real GDP.
Q7
The product method of measuring national income is also commonly known as which of the following?
- A. Factor earning method
- B. Outlay method
- C. Inventory methodCorrect
- D. Social accounting method
Explanation. The product method is also referred to as the inventory method, which measures total sector output.
Q8
In India, the gross value of agricultural output is estimated by multiplying the average yield per hectare by the area sown of how many agricultural commodities?
- A. 12 commodities
- B. 50 commodities
- C. 64 commoditiesCorrect
- D. 100 commodities
Explanation. India estimates its gross agricultural output value by measuring the total production of 64 agricultural commodities.
Q9
In the income method formula, Y = w + r + i + \pi + (R - P), what does the symbol '\(\pi\)' represent?
- A. Personal taxes
- B. ProfitsCorrect
- C. Price index
- D. Portfolio investment
Explanation. In the income method equation, wages, rent, interest, profits, and net export earnings are added together.
Q10
Under the expenditure method, why are expenditures on the purchase of old shares and bonds in the secondary market excluded from national income?
- A. They represent transfer payments by the government
- B. They do not represent a new flow of goods or services in the current yearCorrect
- C. They are already included under corporate profit taxes
- D. They are classified as capital consumption allowances
Explanation. Secondary market stock purchases are financial transactions and do not correspond to any new production of goods.
Q11
Which of the following is true regarding the concept of factor cost?
- A. It includes indirect taxes paid to the government
- B. It excludes subsidies received from the government
- C. It represents the cost of production incurred by a firm for using inputsCorrect
- D. It is calculated by adding depreciation to the market price
Explanation. Factor cost represents the actual cost of production incurred by a firm for using productive factors.
Q12
To derive Net National Product (NNP) at factor cost from NNP at market price, which adjustment must be made?
- A. Add depreciation and subtract subsidies
- B. Subtract indirect taxes and add subsidiesCorrect
- C. Add indirect taxes and subtract subsidies
- D. Subtract depreciation and add transfer payments
Explanation. NNP at factor cost is derived from market price NNP by subtracting indirect taxes and adding subsidies.
Q13
Due to untrained statistical staff and indifference to official inquiries, the national income estimates in India are estimated to have a margin of error of at least what percentage?
- A. 2 percent
- B. 5 percent
- C. 10 percentCorrect
- D. 20 percent
Explanation. Indian national income estimates suffer from statistical issues, yielding a margin of error of at least ten percent.
Q14
Under the social accounting method, which sector specifically handles saving and investment activities?
- A. Household sector
- B. Corporate sector
- C. Capital sectorCorrect
- D. Government sector
Explanation. The capital sector in social accounting records all financial transactions related to saving and investment activities.
Q15
Why does a rise in GDP or per capita income not always promote economic welfare?
- A. A greater proportion of capital goods may be produced instead of consumer goods
- B. Production may generate higher environmental hazards and pollution
- C. Longer working hours, child labor, or war goods production may drive the rise
- D. All of the aboveCorrect
Explanation. GDP growth may fail to enhance welfare due to high pollution, poor labor conditions, or war goods production.
Frequently asked questions
How many MCQs are there in National Income?
This chapter has 15 book-back multiple-choice questions, each with the correct answer and a step-by-step explanation.
Are these 12th Standard Economics MCQs free to practise online?
Yes. Every question, answer and explanation here is free, and you can also take them as a timed practice test.
Where can I find the National Income book-back answers?
The correct option for each question is highlighted on this page with a worked explanation, plus a quick answer-key summary at the top.
