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CBSE Class 12 Important Questions for Macro Economics Chapter 2: National Income Accounting

CBSE

Class 12 Important Question

Macro Economics

Chapter 2: National Income Accounting

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CBSE Class 12 Macro Economics Chapter-2 Important Questions - Get Free PDF Download

Economics is one of the most important subjects in the Class 12 curriculum. Students must have studied Microeconomics and Statistics in Class 11 and in Class 12 they get to study Macroeconomics and the Indian economy. National Income including its various methods of calculation is one of the important chapters for both theory and practical questions. Our subject experts at Vedantu have come up with important questions for Class 12 Macroeconomics Chapter 2.

CBSE Class 12 Macro Economics Chapter 2 covers important concepts and theories related to National Income Accounting. To excel in this subject, it is crucial to have a strong understanding of these concepts and their applications. One effective way to enhance your preparation is by practicing important questions that cover a wide range of topics from the chapter. These questions not only help you gauge your understanding but also familiarize you with the pattern and types of questions that could appear in the examinations. While seeking additional study resources, you may come across websites or platforms that offer free PDF downloads of important questions for Chapter 2. These PDFs can be a valuable addition to your study material, providing you with a comprehensive set of questions to practice and consolidate your knowledge.

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Study Important Questions for Class 12 Macro Economics Chapter 2 – National Income Accounting

VERY SHORT ANSWER QUESTIONS (1 Mark)

1. Explain the meaning of non-market activities

a) Production

b) Non-marketable

c) Involuntary

d) Economic

Ans: (b) Non-marketable.

2. Nominal GNP is same as

a) GNP at constant prices

b) Real GNP

c) GNP at current prices

d) GNP less Net factor income from abroad

Ans: (c) GNP at current prices

3. Real flow is the flow of

a) Money

b) Goods only

c) Services only

d) Goods and services

Ans: (d) Goods and services

4. What is national disposable income?

Ans: The term "national disposable income" refers to the amount of money available to the entire economy for spending or disposition.

The formula for calculating national disposable income is NNPMP + Net Current Transfers from Abroad (NDI).

5. What is real flow?

Ans: The flow of services and goods between various segments is referred to as real flow. Flow sector services, for example, flow from household to firm and then back again.

6. Define money flow.

Ans: The flow of money between different sectors of the economy, such as firms, households, and so on, is referred to as money flow. For example, consider the flow of income from firms to households and the flow of consumption expenditure from households to firms.

7. What must be added to domestic factor income to obtain national income?

Ans: To calculate the national income, net factor income from outside the country must be added to domestic factor income.

8. Explain the meaning of non-market activities.

Ans: Non-marketing activities are those that are gained as a result of the purchase of a large number of finished goods and services. They are really not bought and sold on the open market. Vegetables, for example, cultivated in the house kitchen garden.

9. Define Real GNP.

Ans: In economics, real GNP is defined as GNP computed at constant prices, or through a base year price.

10. Money flow is the flow of

a) Factor payments

b) Goods only

c) Services only

d) Goods and services only

Ans: (a) Factor payments

11. State which one of the following is true.

a) Bread is always a consumer good.

b) Gross domestic capital formation is always greater than gross fixed capital

formation.

c) Capital formation is a flow

d) Nominal GDP can never be less that real GDP

Ans: (c) Capital formation is a flow

12. Which of the following is an example of macroeconomics

a) Price determination

b) Consumer’s equilibrium

c) Producer’s equilibrium

d) Inflation

Ans: (d) Inflation

13. Microeconomics is different from macroeconomics as

a) Microeconomics deals with economic behaviour

b) Microeconomics deals with individual behaviour

c) Microeconomics deals with prices only

d) Microeconomics deals with government’s decisions

Ans: (b) Microeconomics deal with individual behaviour

14. Intermediate goods are those

a) Which are sold

b) Which capital can buy

c) Which are for long term use

d) Which are for resale

Ans: (d) Which are for resale

15. An example of transfer payments is

a) Free meals in the company canteen

b) Employers’ contribution for social security

c) Retirement pension

d) Old age pension

Ans: (d) Old age pension

SHORT ANSWER QUESTIONS (3/4 Marks)

16. Distinguish between personal income and private income.

Ans: The distinction between the two is as follows:

Individuals' personal income is the sum of their earned and transfer revenues from all sources of income, both within and outside the country.

Personal Income is computed as follows: Private Income – Corporate Tax – Corporate Savings (undistributed profits)

Factor and transfer income obtained from all private sources within and outside the country is classed as private income.

Personal income (PI) ≡ NI – Undistributed profits – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms.

17. Explain the main steps involved in measuring national income through the product method.

Ans: The most important steps in calculating national income using the product approach:

1. First, divide the manufacturing units into industrial sectors such as primary, secondary, and tertiary.

2. Next, calculate the factor cost's net value added.

3. In the third phase, calculate the output value by adding sales and stock changes.

4. Calculate gross value added by deducting intermediate consumption from output value.

5. Subtract depreciation and net indirect tax from gross value added at market price to get NDPFC (net value added at factor cost).

6. Finally, add net factor income from outside the country to NDPFC to get NNPFC, which is national income once more.

18. What is double counting in the economy? How can it be avoided?

Ans: Doubt counting is the process of calculating the value of goods multiple times at each stage of production.

The following methods can be used to avoid it:

a) When estimating national income, use the value-added technique.

b) Calculating national income only on the basis of the final commodity's worth.

19. Do you agree with the statement, ‘Machine purchased is always a final good’. Give reason for your answer.

Ans: Yes, we agree with the assertion made here. It is up to the user to decide if a machine is a finished product or not. When a machine is purchased by a household, it is referred to as a final good. On the other hand, if a machine is purchased by a business, it is referred to as a final good. However, if it is purchased by a company for resale, it is referred to as an intermediate good.

20. What are the precautions to be taken while calculating national income through product method, specially value-added method?

Ans: The steps will be as follows:

a) Instead of relying on the value added by each production unit, avoid using the production's doubt counting approach.

b) Inclusion of output produced for self-consumption.

c) The cost of intermediary consumption should never be taken into account.

d) The sale and acquisition of used products should never be included.

g) The value of services rendered must always be factored into sales.

LONG ANSWER QUESTIONS (6 Marks)

21. Calculate net value added at market price of a firm:

Items	Amount
Sale	300
Change in stock	-10
Depreciation	20
Net in direct taxes	30
Purchase of machinery	100
Purchase of intermediate product	150

Ans: Value of output: - Sale + Change in stock (300+ (-) 10 = 290/-)
Gross Value added at MP= Value of output - Purchase of intermediate product.

290 - 150 = 140/-

Net Value added at MP = Gross Value added at MP - Depreciation

140 - 20 = 120/-

Thus, the final answer is Rs. 120.

22. Calculate national income and gross national disposable income from the

following data

S.No	Contents	Rs. (in crores)
1	Net indirect tax	05
2	Net domestic fixed capital formation	100
3	Net exports	(-) 20
4	Government’s final consumption expenditure	200
5	Net current transfers from abroad	15
6	Private final consumption expenditure	600
7	Change in stock	10
8	Net factor income from abroad	05
9	Gross domestic fixed capital formation	125

Ans: Putting the equation together

Net national income (NNPFC) = Net disposable income (NNDPM)

= (Government final consumption expenditure + private final consumption

expenditure + net domestic fixed capital formation + net exports)

= 200 + 600 + 100 + 10 + (-) 20

= 910 – 20 = 890

So NDP MP = 890 crores

NNPFC = NNDPM + (Net factor income from abroad – Net indirect tax)

= 890 + 5 – 5

So NNPFC = 890 crores

Depreciation = (Gross domestic fixed capital formation - Net domestic fixed

capital formation)

= 125-100= 25 crores

GNDI = (NNPFC + Net indirect tax + Net current transfers from abroad +

Depreciation)

= 890 + 05 + 15 + 25

GDNI = 935 crores

23. Calculate NNP at market price by production method and income method.

S.No	Contents	Rs. (in crores)
1	Intermediate consumption Primary sector Secondary sector Tertiary sector	500 400 300
2	Value of output of Primary sector Secondary sector Tertiary sector	1000 900 700
3	Rent	10
4	Emoluments of employers	400
5	Mixed income	650
6	Operating surplus	300
7	Net factor income from abroad	-20
8	Interest	05
9	Consumptive of fixed capital	40
10	Net indirect tax	10

Ans: 1. By Production Method:

Value added at MP = Value of output - Intermediate consumption

= (1000 + 900 + 700) – (500 + 400 + 300)

= 2600 - 1200

Hence GDPMP = 1400 crores

NNPMP = GDPMP - (Consumptive of fixed capital + Net factor income from

abroad)

= 1400 – 40 = (-20)

NNPMP is equal to 1380 crores

2. By Income Method:

NNPMP = Emoluments of employers + Mixed income + Operating surplus + Net indirect tax + Net factor income from abroad

= 400 + 650 + 300 + 10 + (-20)

NNPMP = 1350 + 10 - 20

= 1340 crores

24. Giving reason, explain whether the following are included in domestic product

of India.

1. Profits earned by a branch of foreign bank in India

2. Payment of salaries to its staff by embassy located in New Delhi

3. Interest received by an Indian resident from its abroad firms

Ans:

1. Profits earned by a foreign bank branch in India are included in India's domestic income because they are earned within the country's borders.

2. Since the embassy in New Delhi is not part of India's domestic territory, salaries paid to its employees will not be included in the country's domestic income.

3. Interest received by an Indian resident from his or her foreign enterprises is not included in India's domestic income because it is a factor income.

25. Calculate National Income and Private Income from the following data.

S.No	Contents	Rs. (in crores)
1	Net current transfers from rest of the world	10
2	Private final consumption expenditure	600
3	National debt interest	15
4	Net exports	(-)20
5	Current transfers from government	5
6	Net domestic product at factor cost accruing to the government.	25
7	Government final consumption expenditure	30
8	Net indirect tax	05
9	Net domestic capital formation	40
10	Net indirect tax	10

Ans: a) National Income (NNPFC) = (Private final consumption expenditure + Government final consumption expenditure + Net domestic capital formation + Net exports + Net factor income from abroad- Net indirect tax)

= 600 + 100 + 70 + (-20) + 10 - 30

= 780 - 50

= 730 crores

b) Private Income = NNPFC - Net domestic product at factor cost accruing to govt +

Transfer payments + National debt interest

= 730 – 25 + (10 + 5) + 15

= 760 - 25

= 735 crores

National Income Class 12 Important Questions

National Income is one of the Important chapters of Macro Economics of Class 12. This chapter talks about what is national income, what is the difference between national income and domestic income, how to calculate the national income, its various methods, etc. This is important for both theoretical and practical knowledge. The total number of goods and services produced by the residents of the country in an accounting year is termed as the National Income of the country. There are various methods to calculate the national income of the country which we discussed in this chapter such as product method, income method, and expenditure method. Here, we have come up with important questions of National Income Class 12 which will surely help the students to understand important concepts and allow them to practice important questions so that they can solve the practical problems in their board exams.

Why You Should Practice Important Questions of National Income 12?

As national income is one of the most important and difficult chapters of Macroeconomics these important questions will help the students to understand and solve more and more questions.
Understanding the concepts is not enough. The study of any concept is useless until you practice that and these important questions of National Income Class 12 will surely help the students in practicing the concepts of National Income.
If you fail to answer any question, then answers are also given along with the questions so that you can save your time from finding answers and can focus on your studies.
These questions are well framed and are made by the Vedantu experts.
These questions will help the students who face difficulty in finding out the consolidated questions and answers for practice.
These Class 12 Macroeconomics Chapter 2 extra questions will surely help the students to get extra marks in the board exams.

These questions have been created by the experienced faculty at Vedantu. They have prepared these National Income Class 12 important questions for the students of Class 12 especially so that they can practice these questions and can get good marks. You can also find important questions of other chapters and subjects on Vedantu.

Chapter Wise Important Questions for Class 12 Macro Economics

Chapter Wise Important Questions for Class 12 Micro Economics

Study Materials Related to Class 12 Macro Economics Chapter-2

Important Topics in Class 12 Economics Chapter 2

The following subjects and sub-topics are covered in the chapter on National Income Accounting. Our specialists have compiled relevant questions and answers from these themes to assist students in studying for their examinations.

Final Goods
Intermediate Goods
Consumption Goods
Capital Goods
Investment
Gross Investment
Net Investment
Flow
Stock
Circular Flow of Income
Depreciation
Real Flow
Money Flow
Condition for Equilibrium in the Four Sector Economy
Leakages
Factor Incomes
Normal Residents of a Country
Transfer Payment
Domestic Territory of a Country
Methods of Measurement of National Income
Value Added
Planned Change in Inventories
Unplanned Change in Inventories
Final Expenditure
Components of Domestic Factor Income
Domestic Income
National Income
GDP
NNP at Market Price
National Income at Current Price
NNP at Factor Cost
Private Income
Personal Income
National Disposable Income
Personal Disposable Income
Real GDP
Nominal GDP
Consumer Price Index
Externalities
GNP Deflator

Important Topics in Class 12 Economics

What is Demand?
Consumer Protection Act
Consumer Equilibrium
Central Problems of an Economy
Circular Flow of Income

Conclusion

All of the crucial questions and answers provided above are in accordance with the most recent CBSE Class 12 rules. This chapter discusses various essential ideas of national income, such as categories of commodities, investments, requirements for equilibrium in a four-sector economy, GDP, the Consumer Price Index, and so on. With the aid of this question-and-answer style, students will be able to simply prepare these topics.

Students can learn all subjects and subtopics in depth from the NCERT textbook and use the NCERT Answers for Class 12 Macroeconomics Chapter 2 if they have any questions. Pupils can use the revision notes for Class 12 Macroeconomics National Income Accounting to refresh their memory before the test. In addition, for test preparation, students can use the NCERT Answers and other study tools for all topics included in the CBSE Class 12 syllabus.

FAQs on CBSE Class 12 Important Questions for Macro Economics Chapter 2: National Income Accounting

1. What are the important concepts of Chapter 2 of Class 12 Macroeconomics?

In NCERT Solutions for Chapter 2 of Class 12 Macroeconomics, Vedantu provides students with all the important topics and concepts to learn and understand. These important concepts are explained from the examination point of view. Some important concepts in this chapter include types of goods, types of investment, the flow of income and circular flow of income, conditions for equilibrium in a four sector economy, techniques of measurement of national income, components of domestic factor income, national income, and GDP.

2. How can I learn Chapter 2 of Class 12 Macroeconomics using NCERT Solutions?

NCERT Solutions for Class 12 macroeconomics Chapter 2 National Income Accounting covers a huge variety of concepts and topics that students can learn. Vedantu provides students with an opportunity to learn all these important concepts and topics. Chapter 2 helps students understand how to calculate the national income and the related concepts to it. It gives them a complete outlook as to what the students need to understand and what they need to learn about national income accounting.

3. How do we calculate the National Income?

National Income refers to the aggregate of income factors of all the residents living in the country. The National Income of a country can be calculated by using three main methods. These methods include the Income method, Expenditure method, and Product method or output method or value added method. All three methods are equally important to learn and understand. However, students can use the Income method to calculate the National Income as it is faster, easier, and more convenient for students to use.

4. What is National Disposable Income?

National Disposable Income (NDI) refers to the total income that is available for the entire economy in terms of spending purpose and/or for disposition. It is the maximum amount a country can afford to spend for the consumption of services and goods during an accounting year without any added expenditure or increase in liabilities. The NDI formula is as follows:

Net National Disposable Income = Net National Product at Factor Cost + Net Indirect taxes + Net Current Transfers from Rest of the World

5. Where can I find NCERT Solutions for Chapter 2 of Class 12 Macroeconomics?

Vedantu provides students with the best NCERT Solutions for Class 12 Macroeconomics. It provides all the important questions and answers for Chapter 2 “National Income Accounting”. NCERT Solutions covers all types of questions including exercise questions, HOTs questions, and in-text questions. There are a variety of questions that will help students understand the chapter better. These solutions to all the important questions are crucial for all CBSE Students from the examination viewpoint. Students can even download the Solutions PDF for free on the Vedantu Mobile App and official website(vedantu.com).