National Income Definition, Measurement & Top Exam MCQs
MCQs on National Income are a key part of exam preparation for Economics in school boards and competitive tests. This topic focuses on measuring a country’s total economic output through key aggregates and accounting methods. Understanding it will help you quickly solve concept-based questions for exams and daily life business scenarios.
| Aggregate | Full Form | How Calculated | What It Includes |
|---|---|---|---|
| GDP | Gross Domestic Product | Output produced within country | All final goods/services (within borders) |
| GNP | Gross National Product | GDP + Net Factor Income from Abroad | Nationals’ production, anywhere in world |
| NNP | Net National Product | GNP – Depreciation | National output after accounting wear & tear |
| National Income | Net National Income at Factor Cost | NNP at FC (Subtract indirect tax, add subsidies) | All income earned by nationals |
National Income MCQs - Meaning and Relevance
National Income MCQs test your understanding of key economic concepts, definitions, and calculation methods. These questions often appear in board exams, CA Foundation, UPSC, and other Commerce competitive papers. They strengthen your ability to distinguish between similar aggregates and understand practical measurement methods.
Importance of National Income MCQs in Exams
- Most Class 12 board and competitive exams include MCQs on National Income accounting.
- They check your conceptual clarity about GDP, GNP, and related aggregates.
- Application-based questions are popular (e.g., what’s excluded/included, which method applies, etc.).
- Such questions help you revise fast and identify knowledge gaps quickly.
Types of National Income MCQs
| MCQ Type | Examples |
|---|---|
| Definitions & Concepts | What is GDP? What is Net Factor Income from Abroad? |
| Methods of Calculation | Income, Expenditure & Value Added methods |
| Aggregates Distinction | GDP vs. GNP, Factor Cost vs. Market Price |
| Inclusions/Exclusions | What’s not included in National Income? |
| Formula Application | Choose correct formula for NNP at FC |
Sample MCQs on National Income with Answers
-
GDP measures:
a) Total output produced by citizens abroad
b) Total output within country's borders
c) Total imports and exports
d) Only government expenditure
Answer: b) Total output within country's borders -
Which one is subtracted from GNP to get NNP?
a) Subsidies
b) Depreciation
c) Indirect taxes
d) Exports
Answer: b) Depreciation -
Which of the following is not included in the calculation of National Income?
a) Wages of workers
b) Rent received
c) Transfer payments
d) Profits
Answer: c) Transfer payments -
If Net Factor Income from Abroad is positive, then:
a) GDP > GNP
b) GNP > GDP
c) GDP = GNP
d) Not related
Answer: b) GNP > GDP -
What adjustment is made to go from Market Price to Factor Cost?
a) Add indirect taxes
b) Subtract subsidies
c) Subtract indirect taxes and add subsidies
d) Only subtract depreciation
Answer: c) Subtract indirect taxes and add subsidies -
Which method adds up all incomes earned by factors of production?
a) Output method
b) Expenditure method
c) Income method
d) Product method
Answer: c) Income method -
Indirect taxes are ______ from market price to get factor cost.
a) Added
b) Ignored
c) Subtracted
d) Multiplied
Answer: c) Subtracted -
Which of the following reflects “net” concept in national income?
a) GNP at MP
b) NNP at FC
c) NDP at MP
d) GDP at FC
Answer: b) NNP at FC
Download MCQs on National Income PDF
For offline access, download a set of MCQs with answers. This helps with quick practice on mobile or print.
Download National Income MCQ PDF
Exam Tips for National Income MCQs
- Revise definitions of each aggregate (GDP, GNP, NNP).
- Memorize the formulas for all calculation methods.
- Focus on what is included and excluded from National Income.
- Practice distinguishing between factor cost and market price.
- Attempt previous year MCQ patterns for board and competitive exams.
Use Cases and Application
National Income concepts are used in school exams and major competitive tests like UPSC, CA Foundation, and others. They also help in basic business decision-making, understanding the economy, and analyzing government policies. Vedantu provides practice questions and explanations to make learning easier for every student.
Key Internal Resources for Deeper Understanding
- National Income
- Methods of Measuring National Income
- Income Method
- Expenditure Method
- Difference Between GDP and GNP
- Some Macroeconomic Identities
In summary, MCQs on National Income are crucial for mastering economics concepts and scoring high in board as well as competitive exams. With practice on measurement methods, aggregate distinctions, and real exam questions, students can confidently answer any related question. Use Vedantu’s guides and resources for the best results.
FAQs on MCQs on National Income: Practice with Answers & Explanations
1. What is national income with an example?
National income represents the total monetary value of all final goods and services produced within a country's borders during a specific period. For example, India's Gross Domestic Product (GDP) is a key measure of its national income.
2. Which is not included in national income MCQ?
Several items are excluded from national income calculations. These generally include:
- Transfer payments (like pensions or unemployment benefits)
- Intermediate goods (components used in final product creation)
- Illegal activities (black market transactions)
- Second-hand goods sales
- Self-consumed output (goods produced and used by the producer)
3. National income measurement MCQ
National income is measured using three primary methods: the income method, the expenditure method, and the output/value-added method. Each approach offers a different perspective on calculating the total value of goods and services produced within a country's economy. Understanding these methods is key to solving MCQs on national income.
4. True/False: GDP includes depreciation?
False. Gross Domestic Product (GDP) includes the total value of goods and services produced without deducting for depreciation. To arrive at Net Domestic Product (NDP), depreciation is subtracted from GDP.
5. How is national income calculated MCQ?
National income can be calculated using the income method (summing all incomes earned), the expenditure method (summing all spending on final goods and services), or the output method (summing the value added at each stage of production). The choice of method depends on data availability and the specific context of the calculation. Each approach, however, should ideally lead to a similar result.
6. What is national income with example MCQ?
National income measures the total value of final goods and services produced within a country during a specific period. A simple example is the total value of cars, food, clothing, and other goods and services produced in a year. Understanding the difference between GDP, GNP, and NNP is crucial in understanding national income calculations.
7. What are the different methods of calculating national income?
There are three main approaches to calculating national income: the income method, the expenditure method, and the product (or value-added) method. Each method involves summing different components to arrive at the total value of goods and services produced in an economy. MCQs often test your understanding of these methods.
8. What is the difference between GDP and GNP?
Gross Domestic Product (GDP) measures the total value of goods and services produced *within* a country's borders, regardless of who owns the production factors. Gross National Product (GNP) measures the total value of goods and services produced by a country's residents, regardless of where the production takes place. The key difference lies in the location of production versus the nationality of the producers. Many national income MCQs focus on this distinction.
9. How do indirect taxes and subsidies affect national income aggregates?
Indirect taxes increase the market price of goods and services, while subsidies decrease them. To get a more accurate picture of national income at factor cost, indirect taxes are typically subtracted from, and subsidies added to, the market prices. This distinction is significant for understanding various national income measures, such as GDP at market prices versus GDP at factor cost.
10. Where can I download MCQs on national income with answers?
Many websites and educational platforms offer downloadable MCQs on national income with answers. Look for reputable sources that align with your syllabus and exam requirements. These resources can help you practice and prepare efficiently for your exams. Remember to check the reliability and accuracy of the source before relying on any specific question bank.
