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Economy Quiz
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- Question 1 of 5
1. Question
1 pointsConsider the following statement about Gross National Product
1.It Includes Factor income earned by the factors of production of the rest of the world employed in the domestic economy
2.It excludes Factor income earned by the domestic factors of production employed in the rest of the world
Choose the correct answer from the following code:CorrectGNP = GDP + Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy
Hence, GNP = GDP + Net factor income from abroad (Net factor income from abroad = Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy).IncorrectGNP = GDP + Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy
Hence, GNP = GDP + Net factor income from abroad (Net factor income from abroad = Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy). - Question 2 of 5
2. Question
1 pointsConsider the following statements:
1.Net National Product at market price = Gross Domestic Product Depreciation
2.Net National Income at factor cost = Personal Income
Choose the correct answer from the following code:CorrectWe have already noted that a part of the capital gets consumed during the year due to wear and tear. This wear and tear is called depreciation. Naturally, depreciation does notbecome part of anybody’s income. If we deduct depreciation from GNP the measure of aggregate income that we obtain is called Net National Product (NNP).
NNP = GNP – Depreciation
It is to be noted that all these variables are evaluated at market prices. Through the expression given above, we get the value of NNP evaluated at market prices.
Thus, NNP at factor cost = National Income (NI ) = NNP at market prices – (Indirect taxes– Subsidies) = NNP at market prices – Net indirect taxes (Net indirect taxes = Indirect taxes – Subsidies)
IncorrectWe have already noted that a part of the capital gets consumed during the year due to wear and tear. This wear and tear is called depreciation. Naturally, depreciation does notbecome part of anybody’s income. If we deduct depreciation from GNP the measure of aggregate income that we obtain is called Net National Product (NNP).
NNP = GNP – Depreciation
It is to be noted that all these variables are evaluated at market prices. Through the expression given above, we get the value of NNP evaluated at market prices.
Thus, NNP at factor cost = National Income (NI ) = NNP at market prices – (Indirect taxes– Subsidies) = NNP at market prices – Net indirect taxes (Net indirect taxes = Indirect taxes – Subsidies)
- Question 3 of 5
3. Question
1 pointsConsider the following statements:
1.Real GDP increases when the value of goods and services increases.
2.Nominal GDP is the value of GDP at current prevailing prices
Choose the correct answer from the following code:CorrectReal GDP is calculated in a way such that the goods and services are evaluated at someconstant set of prices (or constant prices). Since these prices remain fixed, if the Real GDP changes we can be sure that it is the volume of production which is undergoing changes. Nominal GDP, on the other hand, is simply the value of GDP at the current prevailing prices. For example, suppose a country only produces bread. In the year 2000 it had produced 100 units of bread, price was Rs 10 per bread. GDP at current price was Rs 1,000. In 2001 the same country produced 110 units of bread at price Rs 15 per bread. Therefore nominal GDP in 2001 was Rs 1,650 (=110 × Rs 15). Real GDP in 2001 calculated at the price of the year 2000 (2000 will be called the base year) will be 110 × Rs 10 = Rs 1,100.
IncorrectReal GDP is calculated in a way such that the goods and services are evaluated at someconstant set of prices (or constant prices). Since these prices remain fixed, if the Real GDP changes we can be sure that it is the volume of production which is undergoing changes. Nominal GDP, on the other hand, is simply the value of GDP at the current prevailing prices. For example, suppose a country only produces bread. In the year 2000 it had produced 100 units of bread, price was Rs 10 per bread. GDP at current price was Rs 1,000. In 2001 the same country produced 110 units of bread at price Rs 15 per bread. Therefore nominal GDP in 2001 was Rs 1,650 (=110 × Rs 15). Real GDP in 2001 calculated at the price of the year 2000 (2000 will be called the base year) will be 110 × Rs 10 = Rs 1,100.
- Question 4 of 5
4. Question
1 pointsWhich of the following is a measure of Inflation in an economy
1.GDP deflator
2.Consumer Price Index
3.Wholesale Price Index
Choose the correct answer from the following codeCorrectNotice that the ratio of nominal GDP to real GDP gives us an idea of how the prices have moved from the base year (the year whose prices are being used to calculate the real GDP) to the current year. In the calculation of real and nominal GDP of the current year, the volume of production is fixed. Therefore, if these measures differ it is only due to change in the price level between the base year and the current year. The ratio of nominal to real GDP is a well known index of prices. This is called GDP Deflator.
There is another way to measure change of prices in an economy which is known as theConsumer Price Index (CPI). This is the index of prices of a given basket of commodities which are bought by the representative consumer.
Wholesale Price Index is a measure of the changes in the price of product which are traded in bulk.
IncorrectNotice that the ratio of nominal GDP to real GDP gives us an idea of how the prices have moved from the base year (the year whose prices are being used to calculate the real GDP) to the current year. In the calculation of real and nominal GDP of the current year, the volume of production is fixed. Therefore, if these measures differ it is only due to change in the price level between the base year and the current year. The ratio of nominal to real GDP is a well known index of prices. This is called GDP Deflator.
There is another way to measure change of prices in an economy which is known as theConsumer Price Index (CPI). This is the index of prices of a given basket of commodities which are bought by the representative consumer.
Wholesale Price Index is a measure of the changes in the price of product which are traded in bulk.
- Question 5 of 5
5. Question
1 pointsConsider the following statements:
1.An increase in GDP implies a better quality of life of the people of the country
2.Services provided by women in their household is not calculated in the GDP
Choose the correct answer from the following code:CorrectStatement 1 is incorrect: Quality of life is not only dependent on the income of an individual. Again, an increase in GDP does not even indicate an overall increase in income because of skewed distribution of Income.
Statement 2 is correct: Services provided by women in their household is not paid for so it not attributed to the GDP.
IncorrectStatement 1 is incorrect: Quality of life is not only dependent on the income of an individual. Again, an increase in GDP does not even indicate an overall increase in income because of skewed distribution of Income.
Statement 2 is correct: Services provided by women in their household is not paid for so it not attributed to the GDP.