Tag: some macroeconomic identities

Questions Related to some macroeconomic identities

In a closed economy, gross domestic product is always equal to gross national product. 

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. True

  2. False

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Correct Option: A
Explanation:
This happens because net factor income from abroad is zero due to no interaction with the rest of the world.

The concept of normal resident applies to individuals only. 

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. True

  2. False

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Correct Option: B
Explanation:

A person is treated as resident of a country in the country in which his interest actually lies. It can be an individual living in the same country or in another country. If a person lives in foreign country he should live in other country for less than a year. It not only involves individuals but also involves institutions. Hence, the concept of normal residents applies not only to individuals but also to institutions.

If factor cost is greater than market price, then it means that ____________________.

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. Indirect Taxes$ >$ Subsides

  2. Indirect Taxes $=$ Subsidies

  3. Indirect Taxes $<$ Subsides

  4. Indirect Taxes $\ge$ subsidies

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Correct Option: C
Explanation:

If factor cost is greater than market price, then it means Indirect taxes < Subsidies. Market price can be less than factor cost when subsidies will be more than the indirect tax.

Formula: Market price - indirect tax + subsidies = Factor cost

Which of the following constitute the reason for difference between Market Prices and Factor Cost?

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. Indirect Taxes

  2. Subsidies

  3. Both (a) and (b)

  4. Neither (a) nor (b)

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Correct Option: C
Explanation:

Market price is basically the current price at which an asset is bought or sold in the market. It includes the cost of production in the  form of wages,rent,interest,profit.etc. whereas factor cost may not reflect the effect of taxes and subsidies unlike market price. It takes into account only of the actual cost of production including the profit. Hence, the reason for difference between market price and factor cost is indirect taxes and subsidies.

Mixed income refers to the income of: ______.

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. small enterprises

  2. traders

  3. self employed persons

  4. all the three

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Correct Option: D

In Dx$=$f(Px, T, Y)Y is?

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. Income level of consumer

  2. Tastes of consumer

  3. Quantity of demand of goods

  4. None of the above

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Correct Option: A

Personal income distribution is relatively ___________________.

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. More unequal in urban areas than in rural areas

  2. More equal in urban areas than in rural areas

  3. More or less the same in rural and urban areas

  4. More unequal in rural areas than in urban areas

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Correct Option: A

Which of these is/are not included in net domestic product at factor cost?

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. Wages or compensation of employees

  2. Rent, interest, profit or operating surplus

  3. Mixed income

  4. None of the above

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Correct Option: D

For most economies which of these statement is true?

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. National income accounts and national output accounts are equal to each other.

  2. Estimation of national income is just impossible

  3. National output is less than national Income

  4. National income is less than national output

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Correct Option: A

GNP at MP=Rs. 99,000 Net factor income abroad=(-) 560
Capital consumption allowance= Rs. 6100, Net indirect tax=Rs. 8470
From the above, estimate of GNP at factor cost.

economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

  1. Rs. 90,530

  2. Rs. 91,000

  3. Rs. 89,990

  4. Rs. 93,100

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Correct Option: A