A very high rise in National Income at current market prices and a low rise at constant prices reveals
(a) the high rate of growth in the economy at the current period
(b) the increased production in the current period
(c) the improper growth of the economy
(d) the high rate of inflation prevailing in the economy
Solution: (d)
When national output is multiplied by present ruling price, we obtain national income at current prices. On the other hand if the national output is multiplied by the base price if called national income at constant price. But what is seen is that prices of commodities go on changing. When the current out puts are multiplied by the current prices it will give rise to monetary national income. So a very rise in National Income at current or constant prices does not indicate increase in product or output, but is rather due to the rise in price level.
The self-employed in a developing country who are engaged in small-scale labor-intensive work belong to the
(a) Informal sector
(b) Primary sector
(c) Secondary sector
(d) Tertiary sector
Solution: (b)
Such a scenario is seen in the case of primary economic activities such as agriculture in the developing countries like India. Most of the primary activities are labour intensive where the volume of manpower substitutes the lack of technology. Besides, farmers are ‘self-employed.’
The consumptions function refers to
(a) relationship between income and employment
(b) relationship between savings and investment
(c) relationship between input and output
(d) relationship between income and consumption
Solution: (d)
The Consumption function is a single mathematical function used to express consumer spending. It was developed by John Maynard Keynes and detailed most famously in his book The General Theory of Employment, Interest, and Money. It is made up of autonomous consumption that is not influenced by current income and induced consumption that is influenced by the economy’s income level.
The functional relationship between income and consumption expenditure is explained by
(a) Consumer’ Surplus
(b) Law of Demand
(c) Law of Supply
(d) Keynes’s psychological law of consumption
Solution: (d)
Keynes defined Psychological Law of Consumption in terms of, “The fundamental psychological law, upon which we are entitled to depend with great confidence both a priori from our knowledge of human nature and from the detailed facts of experience, is that men are disposed, as a rule and on the average, Keynes defined Psychological Law of Consumption in terms of, “The fundamental psychological law, upon which we are entitled to depend with great confidence both a priori from our knowledge of human nature and from the detailed facts of experience, is that men are disposed, as a rule and on the average,
What is needed for creating demand?
(a) Production
(b) Price
(c) Income
(d) Import
Solution: (a)
Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. So for demand to originate, a product is required first.
National Income Estimates in India are prepared by:
(a) National Development Council
(b) National Productivity Council
(c) National Income Committee
(d) Central Statistical Organisation
Solution: (d)
Since 1955 the national income estimates are being prepared by Central Statistical Organization. The CSO uses different methods like the Product Method, Income Method and Expenditure method for various sectors in the process of estimating the National Income.
The value of output and value-added can be distinguished if we know:
(a) the value of intermediate consumption
(b) the value of net indirect taxes
(c) the value of the sales
(d) the value of consumption of fixed capital
Solution: (a)
Intermediate consumption is an accounting flow which consists of the total monetary value of goods and services consumed or used up as inputs in pro duction by enterprises, including raw materials, services and various other operating expenses. Inter mediate consumption (unlike fixed assets) is not normally classified in national accounts by type of good or service, because the accounts will show net output by sector of activity. Because this value must be subtracted from Gross Output to arrive at GDP, how it is exactly defined and estimated will importantly affect the size of the GDP estimate.
Effective demand depends on
(a) capital-output ratio
(b) output-capital ratio
(c) total expenditure
(d) supply price
Solution: (d)
Effective Demand is “the demand in which the consumer are able and willing to purchase at conceivable price” simply saying if the product price is low more will buy; but if the rates go high then the quantity of the demand goes down. Keynes used two Effective Demand is “the demand in which the consumer are able and willing to purchase at conceivable price” simply saying if the product price is low more will buy; but if the rates go high then the quantity of the demand goes down. Keynes used two
National Income is generated from:
(a) any money-making activity
(b) any laborious activity
(c) any profit-making activity
(d) any productive activity
Solution: (b)
National income is the monetary value of all goods and services produced by nationals of a country. Only productive activities are included in the computation of national income. All incomes earned through productive activities are included in national income. Income earned through unproductive activities is not included.
The consumption function expresses the relationship between consumption and
(a) savings
(b) income
(c) investment
(d) price
Solution: (b)
The consumption function is a mathematical formula laid out by famed economist John Maynard Keynes. The formula was designed to show the relationship between real disposable income and consumer spending, the latter variable being what Keynes considered the most important determinant of short-term demand in an economy.
