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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 statement
1. Net National Product at market price = Gross Domestic Product – Depriciation
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 not
become 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).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 not
become 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). - 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 some
constant 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 some
constant 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
CorrectNotice 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 the
Consumer Price Index (CPI). This is the index of prices of a given basket of commodities
which are bought by the representative consumer.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 the
Consumer Price Index (CPI). This is the index of prices of a given basket of commodities
which are bought by the representative consumer. - 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.