In a business, raw materials, components, work in progress and finished goods are jointly regarded as
(a) capital stock
(b) inventory
(c) investment
(d) net worth
Solution: (b)
Inventory refers to raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders/owners.
Investment and savings are kept equal through a change in the level of
(a) Consumption
(b) Investment
(c) Government expenditure
(d) Income
Solution: (a)
Desired savings are kept equal to desired investment by responses to interest rate changes. Savings identity or the savings investment identity is a concept in National Income Accounting stating that the amount saved (S) in an economy will be amount invested (I). This identity only holds true because investment here is defined as including inventories. Thus, should consumers decide to save more, and spend less, the fall in demand would lead to an increase in business inventories. The change in inventories brings savings and investment into balance without any intention by business to increase investment
The sum total of incomes received for the services of labour, land or capital in a country is called :
(a) Gross domestic product
(b) National income
(c) Gross domestic income
(d) Gross national income
Solution: (c)
The Gross Domestic Income (GDI) is the total income received by all sectors of an economy within a nation. It includes the sum of all wages, profits, and taxes, minus subsidies. Since all income is derived from production (including the production of services), the gross domestic income of a country should exactly equal its gross domestic product (GDP)
While determining income the expenditure on which of the following items is not considered as investment?
(a) Construction of factory
(b) Computer
(c) Increase in the stock of unsold articles
(d) Stock and share in joint stock company
Solution: (c)
The gross national product is the sum total of all final goods and services produced by the people of one country in one year. The GNP is a flow concept. It can be calculated with either the expenditure approach or the income approach. The expenditure approach sums all that is purchased: in a sense, it is equivalent to the income approach because purchases are only possible if income is present. GDP can be calculated as the sum of all expenditures: personal consumption expenditure (C), gross private domestic investment (Ig), government purchases (G), and net exports (Xn). Increase in the stock of unsold articles do not come under any of these heads.
In a Laissez-faire economy
(a) the customers take all the decisions regarding production of all the commodities
(b) the Government does not interfere in the free functioning of demand and supply forces in the market
(c) the private-sector takes all the decisions for price-determination of various commodities produced
(d) the Government controls the allocation of all the factors of production
Solution: (b)
Laissez Faire is an economic theory from the 18th century that is strongly opposed to any government intervention in business affairs. Sometimes it is referred to as “let it be economics.” It is an economic environment in which transactions between private parties are free from tariffs, government subsidies, and enforced monopolies, with only enough government regulations sufficient to protect property rights against theft and aggression.
The term ‘Green GNP’ emphasizes
(a) rapid growth of GNP
(b) increase in per capita income
(c) economic development
(d) sustainable development
Solution: (d)
The gross national product (GNP) measures the welfare of a nation’s economy through the aggregate of products and services produced in that nation. Although GNP is a proficient measurement of the magnitude of the economy, many economists, environmentalists and citizens have been arguing the validity of the GNP in respect to measuring welfare. They are calling for a green national product that would indicate if activities benefit or harm the economy and well-being. This new national product would differ from the traditional GNP by addressing both the sustainability and well-being of the planet and its inhabitants.
“The national income consists of a collection of goods and services reduced to common basis by being measured in terms of money.” Who said this ?
(a) Samuelson
(b) Kuznets
(c) Hicks
(d) Pigou
Solution: (c)
British economist John Hicks said that National income is a collection of goods and services reduced to a common basis by being measured in terms of money. Hicks was one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model (1937), which summarized a Keynesian view of macroeconomics. His book Value and Capital (1939) significantly extended general-equilibrium and value theory.
Which of the following is a better measurement of Economic Development ?
(a) GDP
(b) Disposable income
(c) NNP
(d) Per capita income
Solution: (d)
Per capita income or average income or income per person is the mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population. Measurement of personal income is the best measure of economic well-being of individuals and nation. Besides, it helps to show the level of inequality in a society or country.
Who prepared the first estimate of National Income for the country ?
(a) Central Statistical Organisation
(b) National Income Committee
(c) Dadabhai Naoroji
(d) National Sample Survey Organisation
Solution: (c)
Dadabhai Naoroji prepared the first estimates of National income in 1876. He estimated the national income by first estimating the value of agricultural production and then adding a certain percentage as non-agricultural production. However, such method can only been called as a non-scientific method. The first person to adopt a scientific procedure in estimating the national income was Dr. VKRV Rao in 1931.
Which one of the following is not a method of measurement of National Income ?
(a) Value Added Method
(b) Income Method
(c) Investment Method
(d) Expenditure Method
Solution: (c)
Primarily there are three methods of measuring national income. The methods are product method, income method and expenditure method. Product method is given by Dr. Alfred Marshall, income method by A.C. Pigou and expenditure method by Dr. Irving Fisher. The ‘Investment Method’ is used for trading properties where evidence of rates is slight, such as hotels, cinema, car park and etc.
