In This Post we are providing NATIONAL INCOME AND RELATED AGGREGATES NCERT MOST IMPORTANT QUESTIONS for Class 12 MACROECONOMICS which will be beneficial for students. These solutions are updated according to 2021-22 syllabus. These MCQS can be really helpful in the preparation of Board exams and will provide you with a brief knowledge of the chapter
NCERT MOST IMPORTANT QUESTIONS ON NATIONAL INCOME AND RELATED AGGREGATES
1. Distinguish between stock and flow variables with suitable examples.
Ans:- Difference between stock and flow is.
| Basis | Stock | Flow |
| Time | It relates to a point of time | It relates to the period of time |
| Dimension | It is not time dimensional | It is time dimensional as per hour, per month, per year. |
| Impact | It influences the flow. for example, more is capital, greater is the flow of goods and services. | It influences the stock, for example, the more is the flow of investment, the greater would be the capital. |
| Concept | Static concept | Dynamic concept |
| Example | capital, wealth, bank balance | Income, expenditure, profit |
2. What are capital goods? How are they different from consumption goods?
Ans:- Capital goods are those final goods that are capable of being used for producing other goods and services. These are goods are used for generating income.
For example:- plant and machinery, equipment, etc.
| Basis | Consumption Goods | Capital Goods |
| Meaning | These goods are purchased or own produced by consumers to satisfy their wants and not for resale | These goods are purchased or own produced by producers for the production of other goods. such goods are not meant for resale. |
| Use | used by consumers for consumption purposes. | Used by producers to produce other goods and services |
| Demand | High | Less |
| Example | bread, butter, tv fridge by consumers. | equipment, machinery, plant by producers |
3. Which among the following are final goods and which are intermediate goods? Give reasons.
a) Milk purchased by a tea stall
b) Bus purchased by a school
c) Juice purchased by a student from the school canteen.
Ans:-
a) Milk purchased by a tea stall is an intermediate consumption. As milk will be used as a raw material to make tea (final goods) within a year.
b) Bus purchased by a school is the final goods. As it would be used by schools for the long term and not meant for resale.
c) Juice purchased by a student from the school canteen is the final good. As it is purchased by a consumer (student) for the satisfaction of his own wants not for resale.
4. Explain with the help of an example. the basis of classifying goods into final goods and intermediate goods.
Ans:- The basis of classification of final goods and intermediate goods is the end-user or end use of the product.
If the goods are in the hand of the end-user (final user) and not going to be sold further. It is termed as final goods. For example, machines purchased by producers, food purchased by households. such goods have come out of the production boundary line and are in the hand of the final user.
On the other hand, if the goods are within the production boundary line and will still be used as raw material in making further goods or if it is final goods but meant for resale. Such products are not in the hand of end-users and are termed as intermediate goods.
5. Distinguish between final goods and intermediate goods. Give an example of each.
Ans:- difference between intermediate goods and final goods.
| Basis | Intermediate Goods | Final Goods |
| end-user | end-user is a producer | end-user may producer or consumer |
| Purpose | used as raw material in producing other goods. | is used as consumption goods by consumer or capital goods by producer |
| Production Boundary | is still within the production boundary | is outside the production boundary |
| Examples | leather used in the shoe industry, the steel used in the production of kitchen utensils | fridge purchased by households, Machine purchased by producers |
6. Explain the circular flow of Income. [All India 2017], [Delhi c 2014], [All India C 2012]
Ans:- Circular flow of Income refers to unending flows of production of goods and services and income and expenditure in an economy.
It show the redistribution of income in a circular manner between production units and households
It comprises of three phases:-
Production Phase:- This phase is also called the income generation phase. In this phase, households provide factor services to production units and produce goods and services. Income is generated.
Income Distribution Phase:- Production units distribute this income to the factor owners.
Expenditure Phase:- Income received by households, spent on goods and services produced by those units. In this phase, all income received by households returns to production units.
Once, the goods and services purchased by households are completely consumed. They again demand goods. Now again producer has the opportunity to produce goods and these three phases go on in circular format again & again.
It can be better understood with the diagram given below.
7. Distinguish between real and nominal gross domestic product. [All India c 2014], [All India 2010]
Ans:- Difference between the Real and Gross domestic product is.
| Basis | Real GDP | Nominal GDP |
| Other Name | It is also called GDP at a constant price | It is also called GDP at the current year price. |
| Definition | It is the market value of the final goods and services produced within the domestic territory of a country during an accounting year, as estimated at base-year prices. | It is the market value of the final goods and services produced within the domestic territory of a country during an accounting year, as estimated at current year prices. |
| Welfare | It is a better measure of the welfare of people than Nominal GDP | It is not a good measure of the welfare of people |
| Changes | Its value changes, when the quantity of output changes. | Its value can changes either quantity of output or price changes. |
8. Find Net Value Added at Factor Cost.
| Items | (₹ in lakh) |
| i) Durable use producer goods with a life span of 10 years | 10 |
| ii) Single-use producer goods | 5 |
| iii) Sales | 20 |
| iv) Unsold output produced during the year | 2 |
| v) Taxes on production | 1 |
Ans:-
Value of Output = Sales + Change in Stock
Value of Output = iii) + iv) = ₹ 20 + ₹ 2 = ₹ 22
GVA at MP = Value of Output – Intermediate Consumption
Intermediate Consumption = Single use producer goods = ₹ 5
GVA at MP = ₹ 22 – ₹ 5 = ₹ 17
Consumption of fixed capital = Total value of durable use goods/Total life span = ₹10/₹10 = ₹ 1 lakh
Net Indirect tax = Taxes on production – subsidy of production = ₹ 1 – ₹ 0 = ₹ 1
Net Value added at FC = GVA at MP – consumption of fixed capital – Net Indirect tax (Indirect Tax – Subsidy)
NVA at FC = ₹ 17 – ₹ 1 – ₹ 1 = ₹ 15
9. Find the Net Value Added at Market Price.
| Items | (₹ in crore) |
| 1. Output Sold (units) | 800 |
| 2. Price per unit of output | 20 |
| 3. Excise | 1600 |
| 4. Import Duty | 400 |
| 5. Net Change in Stock | – 500 |
| 6. Depreciation | 1000 |
| 7. Intermediate cost | 8000 |
Ans:-
Sales = Quantitiy * Price
Sales = 800 * 20 = ₹ 16000 crore.
Value of Output = Sales + Change in Stock
Value of Output = 16000 + (- 500)
Value of Output = ₹ 15500
GDP at MP = Value of Output – Intermeciate cost
GDP at MP = 15500 – 8000
GDP at MP = ₹ 7500 crore
NDP at MP = GDP at MP – Depreciation
NDP at MP = 7500 – 1000
NDP at MP = ₹ 6500 crore
10. Find Net Value Added at Market Price.
| Items | (₹ in crore) |
| 1. Depreciation | 700 |
| 2. Output Sold (Units) | 900 |
| 3. Price per nit of Output | 40 |
| 4. Closing Stock | 1000 |
| 5. Opening Stock | 800 |
| 6. Sales tax | 3000 |
| 7. Intermediate cost | 20000 |
Ans:-
Sales = Quantity * Price
Sales = 900 * 40 = 36000
Value of Output = Sales + Change in Stock (Closing stock – Opening stock)
Value of Output = 36000 + (1000 – 800)
Value of Output = 36200
GDP at MP = Value of Output – Intermediate cost
GDP at MP = 36200 – 20000 = 16200
NDP at MP = GDP at MP – Depreciation
NDP at MP = 16200 – 700