20 multiple-choice (MCQ / objective) questions from this chapter, in the common exam-style shapes. Every question comes with an explanation along with the answer, so you remember why the option is correct, not just which one it is.
Syllabus note
In CBSE 2026-27 the unit ‘National Income and Related Aggregates’ carries 10 marks. Personal income, personal disposable income, CPI and WPI are not in the CBSE syllabus, but the UP, Bihar, Rajasthan and MP boards teach from the same NCERT book. The (½) and (1) marks in numerical answers show step marks as in the CBSE marking scheme.
1 Direct Questions
Direct Questions
- 1 markIn the circular flow of income, measuring the flow of spending from households to firms (point A) is which method?
(A) Product method(B) Expenditure method(C) Income method(D) Value added method - 1 markWhich of these will NOT be included in India’s national income?
(A) Broker’s commission on the sale of a second-hand car(B) Imputed rent of an owner-occupied house(C) A farmer’s own consumption of his output(D) Amount received from the sale of a second-hand car - 1 markGDPMP = ₹800 crore, net factor income from abroad = (−) ₹20 crore, depreciation = ₹50 crore, net indirect taxes = ₹70 crore. National income is:
(A) ₹700 crore(B) ₹680 crore(C) ₹660 crore(D) ₹800 crore - 1 markA firm’s sales are ₹900, change in stock (−) ₹50 and intermediate consumption ₹400. Its gross value added is:
(A) ₹550(B) ₹450(C) ₹500(D) ₹850
2 Assertion-Reason
Assertion-Reason
- 1 markAssertion (A): A machine is a final good even though it is used in production.
Reason (R): Capital goods are not transformed in the production process and serve many cycles of production.
(A) Both A and R are true, and R is the correct explanation of A(B) Both A and R are true, but R is not the correct explanation of A(C) A is true, but R is false(D) A is false, but R is true - 1 markAssertion (A): Investment expenditure is the most unstable component of the expenditure side of GDP.
Reason (R): Investment goods remain with the firm, whereas intermediate goods are used up in production.
(A) Both A and R are true, and R is the correct explanation of A(B) Both A and R are true, but R is not the correct explanation of A(C) A is true, but R is false(D) A is false, but R is true - 1 markAssertion (A): A rise in nominal GDP proves that the economy’s production has increased.
Reason (R): Nominal GDP is measured at current prices, so it can rise merely because prices rise.
(A) Both A and R are true, and R is the correct explanation of A(B) Both A and R are true, but R is not the correct explanation of A(C) A is true, but R is false(D) A is false, but R is true - 1 markAssertion (A): Domestic services performed by a homemaker are not counted in GDP.
Reason (R): These services are not paid for, so they are not evaluated in monetary terms.
(A) Both A and R are true, and R is the correct explanation of A(B) Both A and R are true, but R is not the correct explanation of A(C) A is true, but R is false(D) A is false, but R is true
3 Match the Following
Match the Following
- 1 markMatch List I (factor of production) with List II (remuneration).
List I: (i) Labour (ii) Land (iii) Capital (iv) Entrepreneurship
List II: (1) Interest (2) Profit (3) Wage (4) Rent
(A) i-3, ii-1, iii-4, iv-2(B) i-2, ii-4, iii-1, iv-3(C) i-3, ii-4, iii-1, iv-2(D) i-4, ii-3, iii-2, iv-1 - 1 markMatch List I (aggregate) with List II (formula).
List I: (i) GNPMP (ii) NDPMP (iii) NNPFC (iv) GDPFC
List II: (1) GDPMP − net indirect taxes (2) NDPFC + NFIA (3) GDPMP + NFIA (4) GDPMP − depreciation
(A) i-3, ii-4, iii-2, iv-1(B) i-4, ii-3, iii-2, iv-1(C) i-3, ii-4, iii-1, iv-2(D) i-2, ii-4, iii-3, iv-1
4 Statement-Based Questions
Statement-Based Questions
- 1 markConsider these statements.
(i) GDP measures final production within the domestic territory of a country.
(ii) GNP includes the factor income of the country’s residents working abroad.
(A) Only (i) is true(B) Only (ii) is true(C) Both are true(D) Both are false - 1 markConsider these statements.
(i) Production taxes are levied per unit according to the volume of production.
(ii) Land revenue is a product tax.
(A) Both are true(B) Both are false(C) Only (i) is true(D) Only (ii) is true - 1 markConsider these statements.
(i) A change in real GDP shows only a change in the volume of production.
(ii) Real GDP is used to compare GDP between two years.
(A) Only (i) is true(B) Only (ii) is true(C) Both are false(D) Both are true
5 Arrange in the Correct Order
Arrange in the Correct Order
- 1 markArrange the steps for finding national income by the value added method in the correct order.
1. Add NFIA to NDPFC
2. Deduct intermediate consumption from the value of output to get GDPMP
3. Deduct depreciation from GDPMP
4. Deduct net indirect taxes from NDPMP
(A) 2-3-4-1(B) 2-4-3-1(C) 1-2-3-4(D) 3-2-4-1 - 1 markFollowing the book’s argument, identify the correct chain of effects.
1. Households’ income rises by the same amount
2. Firms produce more
3. Households decide to spend more
4. Firms pay the factors more
(A) 3-4-2-1(B) 2-3-4-1(C) 3-2-4-1(D) 3-2-1-4
6 Fill in the Blanks
Fill in the Blanks
- 1 markA firm’s production in a year is ₹1,000 and its sales ₹800. Change in inventories = ______.
(A) ₹1,800(B) ₹800(C) ₹200(D) (−) ₹200
7 Odd One Out
Odd One Out
- 1 markThe book gives three limitations of GDP as an index of welfare. Which of these is not one of them?
(A) Rise in imports(B) Unequal distribution of GDP(C) Non-monetary exchanges(D) Externalities
8 Passage-Based Questions
Passage-Based Questions
Passage
(Hypothetical press release) The statistics office of a country called Sudesh reported that its GDP at current prices grew by 9.8 per cent over last year, while GDP at constant (base-year) prices grew by 6.5 per cent. The office said the gap between the two figures is due to the rise in the prices of goods and services, and that the constant-price figure is the more reliable measure of growth.
- 1 markAccording to the passage, which figure shows the real growth in the volume of the country’s output?
(A) Growth of GDP at current prices, 9.8%(B) The sum of the two, 16.3%(C) The difference of the two, 3.3%(D) Growth of GDP at constant prices, 6.5%
Passage
A textile mill sold cloth worth ₹50 lakh during the year. At the end of the year its stock of unsold cloth was ₹5 lakh higher than at the start. The mill bought and fully used ₹20 lakh of yarn and dye during the year. Depreciation on its machines for the year was ₹3 lakh.
- 1 markOn the basis of the passage, the mill’s value of output is:
(A) ₹50 lakh(B) ₹45 lakh(C) ₹55 lakh(D) ₹75 lakh
9 True / False
True / False
- 1 markConsider these statements.
(i) In the farmer-baker example, the economy’s total output is ₹250.
(ii) The baker’s value added is ₹200.
(iii) Adding the outputs of the farmer and the baker directly leads to double counting.
(A) Only (i) and (iii) are true(B) Only (ii) is true(C) (i), (ii) and (iii) are all true(D) Only (i) and (ii) are true
Answer Key and Explanations
Direct Questions
- (b) At A the final expenditure received by firms is measured: the expenditure method. B is the product method and C the income method.
- (d) The second-hand car was already counted in the year it was produced; its sale is not fresh production. Brokerage is a fresh service, and imputed rent and own consumption are production, so they are included.
- (c) NI = 800 + (−20) − 50 − 70 = ₹660 crore. ₹700 comes from reversing the sign of NFIA, ₹680 from forgetting NFIA (that is NDPFC), ₹800 from adding net indirect taxes.
- (b) Value of output = 900 + (−50) = ₹850; GVA = 850 − 400 = ₹450. ₹550 comes from reversing the sign of the stock change, ₹500 from ignoring it, ₹850 from not deducting intermediate consumption.
Assertion-Reason
- (a) Both are true and R is the reason: the machine is not used up in production, so it is a final (capital) good, not an intermediate one.
- (b) Both statements are in the book and true, but R explains why investment expenditure is counted in GDP, not why it is unstable.
- (d) A is false: if output stays constant and prices double, nominal GDP doubles anyway. R is true and says exactly this.
- (a) Both are true and R is the reason: GDP counts only activities measured in money, so GDP is underestimated.
Match the Following
- (c) Labour = wage, land = rent, capital = interest, entrepreneurship = profit.
- (a) GNPMP = GDPMP + NFIA; NDPMP = GDPMP − depreciation; NNPFC = NDPFC + NFIA; GDPFC = GDPMP − net indirect taxes.
Statement-Based Questions
- (c) (i) is true: GDP is production within the domestic territory, by residents or non-residents. (ii) is true: GNP ≡ GDP + net factor income from abroad.
- (b) (i) is false: production taxes are independent of the volume of production; per-unit taxes are product taxes. (ii) is false: land revenue is a production tax.
- (d) Both are true: valued at constant prices, real GDP is free of price changes, so comparisons are made with it.
Arrange in the Correct Order
- (a) First GDPMP (2), then depreciation gives NDPMP (3), then net indirect taxes give NDPFC (4), finally NFIA gives NNPFC (1).
- (c) More spending (3) makes firms produce more (2), for which they pay factors more (4), so households’ income rises (1).
Fill in the Blanks
- (c) Change in inventories = production − sales = 1,000 − 800 = ₹200 (accumulation).
Odd One Out
- (a) The book’s three reasons are distribution, non-monetary exchanges and externalities. A rise in imports is not one of them.
Passage-Based Questions
- (d) GDP at constant prices is real GDP; it is free of price changes, so the volume of output grew by 6.5%.
- (c) Value of output = sales + change in stock = 50 + 5 = ₹55 lakh. ₹45 lakh comes from subtracting the stock change, ₹75 lakh from adding the yarn and dye.
True / False
- (a) (i) true: 100 + 150 = 250. (ii) false: the baker’s value added is 200 − 50 = 150. (iii) true: the ₹50 of wheat would be counted twice.
More for this chapter