MCQ on National income

MCQ AND TRUE FALSE

Q1- Which of the following is likely to raise the value of national
output/income?
Rise in withdrawals exceeding the rise in injections.
Rise in the combined value of savings, taxes and imports, injections
unchanged.
Rise in withdrawals matching the rise in injections.
Rise in withdrawals falling short of the rise in injections.

Answers..
Rise in withdrawals falling short of the rise in injections.

Question 2.
Which of the following is likely to reduce the value of national
output/income?

Rise in withdrawals matching the rise in injections.

Rise in withdrawals exceeding the rise in injections.

Rise in the combined value of investment, public expenditure and

exports, withdrawals unchanged.
Rise in withdrawals falling short of the rise in injections.

Answers.
Rise in withdrawals exceeding the rise in injections.

Question 3.
The value of national output produced by residents located within the
country, before depreciation and including the influence of taxes and
subsidies, is known as:

GDP at factor cost

GDP at market prices

GNP at factor cost

GNP at market prices

NNP at factor cost

Answers
GDP at market prices

Question 4.
The value of national output produced by residents of a country, whether
located at home or overseas, after depreciation and excluding the influence
of taxes and subsidies, is known as:

GDP at market prices

GDP at factor cost

NNP at factor cost

GNP at factor cost

GNP at market prices

Answers
NNP at factor cost

Question5
The standard of living is often measured by :
Real GDP per capita
Real GDP
Real GDP * population
Real GDP plus depreciation

Answers
Real GDP

Question 6.
Which of the following types of unemployment might be involved if the rest of
the coal industry collapses in the UK as a result of individuals and firms
switching over to oil, gas and other sources of energy?

Demand deficient unemployment

Real wage unemployment

Regional unemployment

Frictional unemployment

Answers
Regional unemployment

Question 7.
Which of the following situations are most likely to result in 'demand pull'
inflation?

A rise in the combined value of investment and government spending of

5 per cent with no change in productivity.

Increases in the rate of savings and the rate of taxation.

A rise in investment of 5 per cent with a rise of productivity of 5 per cent.

A fall in the rate of savings and the rate of taxation for an economy with
a considerable amount of excess capacity.

Answers
A rise in the combined value of investment and government spending of 5
per cent with no change in productivity.

Question 8.
If National Income rises by 10 billion after an injection of 2 billion, then the
'National Income Multiplier' is one-fifth. True or false?
True

False

Answers
False

Question 9.
From the options below, which is a type of injection into the circular flow of
income?

Exports

Imports

Taxes

Savings

Answer
Exports

Question 10.
Name a type of withdrawal from the circular flow of income?

Investment

Government expenditure

Savings

Exports

Answers
Savings

Question 11.
If the measured value of National Income via the 'expenditure method' is
greater than the measured value of National Income via the 'income
method', we speak of a 'Black Economy'. True or false?
True
False

Answers
True

Question 12.
Consumption expenditure is the largest single component of aggregate
demand. True or false?

True
False

Answers
True

Question 13.
If everyone saves more, then (all other things being equal) withdrawals from
the circular flow will increase and National Income will fall. True or false?
True

False

Answers
True

Question 14.
The Phillips curve suggests that a fall in unemployment is likely to lead to lower
rates of wage and price inflation. True or false?

True

False

Answers
False

Question 15.
If injections exceed withdrawals at the 'full capacity' level of National Income,
then we have a 'deflationary gap'. True or false?
True

False

Answers
False

Question 16.
If withdrawals fall short of injections at the 'full capacity' level of National
Income, then we have an 'inflationary gap'. True or false?

True

False

Answers
True

Question 17.
A substantial fall in the sterling exchange rate might lead to cost-push inflation
in the UK by raising the sterling price of imports. True or false?

True

False

Answers
False

Question 18.
What type of unemployment is involved when new publishing software
reduces the number of people needed to produce books?

Demand deficient unemployment

Technological unemployment

Structural unemployment

Answers
Demand deficient unemployment

Question 19.
What type of unemployment is involved when a sustained fall in the demand
for the movement of goods by ships results in a smaller merchant navy?

Structural unemployment

Demand deficient unemployment

Technological unemployment

Answers
Structural unemployment

Question 20.
What type of unemployment is involved when a fall in consumer expenditure
leads to excess supply in the product markets and layoffs in UK industry.

Technological unemployment

Structural unemployment

Demand deficient unemployment

Answers
Demand deficient unemployment

Question21
GNP deflator show change in GNP because of change in price level
YES

NO

Answer:
yes

Question22
Other thing equal, which two of the following to raise the equilibrium value of
national income
Rise in government spending.

Rise in exports.
Rise in savings.
Rise in imports.

Answer
Rise in government spending.
Rise in exports.

Question23
Other thing equal, which two of the following are likely to lower the equilibrium
value of national income?
Rise in investment expenditure.

Fall in imports.
Rise in tax revenue.
Fall in exports.

Answer
Rise in tax revenue.
Fall in exports.

Question24
To move from GDP and GNP we must add to GDP the
Depreciation of plant and equipment.
Subsidies minus taxes.
Taxes minus subsidies.
Net property income from abroad.

Answer
Net property income from abroad.

Question25
Where we have an excess of injections over withdrawals at the full capacity
level of national income, we call this which one of the following?
Paradox or thrift.

Deflationary gap.
Inflationary gap.
Cost push inflation.

Answer
Inflationary gap.

Question26
Which two of the following are excluded when measuring national income?
Value added in the output method.
Consumer spending in the expenditure method.
Value of intermediate inputs in the output methods.Value of intermediate
inputs in the output methods.

Answers
Value of intermediate inputs in the output methods.
Value of intermediate inputs in the output methods.

Question27
An increase in inflation and GDP is likely to reflect?
Cost push inflation
Demand pull inflation
Rising input prices
Unemployment

Answer
Demand pull inflation

Question28
A rise in inflation in and a fall in GDP are likely to reflect?
Cost push inflation
Demand pull inflation
Structural unemployment
Frictional unemployment

Answer
Cost push inflation.

Question29
All the following statements are correct except:
Per capita real GDP is often used as a measure of a nations standard of
living.

A changing distribution of income does not affect per capita GDP.

In a comparison per capita real GDP over time, changing population
growth does not affect the measure.
Growth per capita real GDP is often used as a measure of a nations
changing standard of living.

Answer
In a comparison per capita real GDP over time, changing population
growth does not affect the measure.

Question30
The following are all example of demand pull inflation except :
Lower taxes
Higher unemployment benefits
An increase in the interest rate
An increase in net exports

Answer
An increase in the interest rate

Question31
Cost push inflation can be caused by:
Higher labour costs.
Lower taxes
An increase in private investment
Higher private consumption

Answer
Higher labour costs.

Question32
All the following definition of economic activity are correct except:
Value added is net output, after deducting goods and services used up
during the production processes.

National income at market prices account for the distortion of taxes and
subsidies.
GNP is GDP adjusted for net factor income from abroad.
GDP per capita is the GDP for the economy divided by the population of
the economy.

Answer
National income at market prices account for the distortion of taxes and
subsidies.

Question33
Real GDP is a measure of a countrys:
Wealth
Money
Economic transactions
Physical output

Answer
Physical output

Question34
Which of the following is not a leakage from the circular flow of income and
expenditure:
Imports

Government purchases
Taxes net of government transfer
Savings

Answer
Government purchases

Question35
GDP measures:
A countrys income
A countrys wealth
Consumer spending
Net trade income

Answer
A countrys income

Question36
Gross national product equal:
Net national product adjusted for inflation
Gross domestic product adjusted for inflation
Gross domestic product plus net property income from abroad
Net national product plus net property income from abroad

Answer
Gross domestic product plus net property income from abroad

Question37
Net national product equals:
GNP adjusted for inflation
GDP adjusted for inflation
GDP plus net property income from abroad
GNP minus depreciation

Answer
GNP minus depreciation

Question38
Real national income measures :
Nominal national income adjusted for population change
Nominal national income adjusted for unemployment
Nominal national income adjusted for inflation
Nominal national income adjusted for exchange rate

Answer
Nominal national income adjusted for inflation

Question39
To adjust GDP from market price to factor cost :
Add indirect taxes
Subtract subsidies
Deduct indirect taxes and deduct subsidies
Deduct indirect taxes and add subsidies

Answer
Deduct indirect taxes and add subsidies

Question40
To adjust from NNP to GNP:
Add depreciation
Deduct indirect taxes
Add subsidies
Add inflation

Answer
Add depreciation

Thank you