ANSWER TYPE QUESTIONS

ANSWER TYPE QUESTIONS

VERY SHORT ANSWER TYPE QUESTIONS: - (1 Mark Each)

Q.1. When is the national income less than domestic income?

Ans. When NFIA is negative.

Q.2. When is the national income larger than domestic factor income?

Ans. When NFIA is positive.

Q.3. What is the effect of an indirect tax and a subsidy, on the price of the commodity?

Ans. The effect of an indirect tax on a commodity is to increase the price and the effect of subsidy is to reduce the price in the market.

Q.4. Are the wages and salaries received by Indians working in American Embassy in India a part of Domestic Product of India?

Ans. No, because American embassy is not a part of domestic territory of India.

Q.5. Why is the study of the problem of unemployment in India considered a macro economic study?

Ans. The problem of unemployment in India is an economic issue at level of economy as a whole, hence considered as macroeconomic study.

Q.6. When is gross domestic product of an economy equal to gross national product?

Ans. When NFIA is zero.

SHORT ANSWER TYPE QUESTIONS: (3/4 Marks Each)

Q.1. Will the following be included in gross domestic product / Domestic Income of India? Give reasons for each answer.

(i) Consultation fee received by a doctor.

(ii) Purchase of new shares of a domestic firm.

(iii) Profits earned by a foreign bank from its branches in India.

(iv) Services charges paid to a dealer (broker) in exchange of second hand goods.

Ans. (i) Yes, It is a factor income. It is his salary.

        (ii) No, It is not included in GDP, because it is a merely financial transaction which does not help directly in production.

        (iii) Yes, It is a factor income in domestic territory.

        (iv) It is included because it is his factor income (salary).

Q.2. How will you treat the following while estimating domestic product of India? Give reasons.

(i) Rent received by a resident Indian from his property in Singapore.

(ii) Profits earned by a branch of an American Bank in India.

iii) Salaries paid to Koreans working in Indian embassy in Korea.

Ans. (i) It will not be included in domestic product of India as this income is earned outside the domestic (economic) territory of India.

        (ii) It will be included in domestic product of India as the branch of American bank is located within the domestic territory of India.

        (iii) It will be a part of domestic product of India because this income is earned within the domestic territory of India. Indian embassy in Korea is treated as located within the domestic territory of India.

Q.3. State whether the following is a stock or flow:

(a) Wealth, (b) Cement production, (c) Saving of a household, and (d) Income of household.

Ans. Stock – (a) & (b), since these are variables measurable at a point of time. Flow – (c) & (d), since these are variables measurable over period of time.

Q.4. State whether the following is a stock or flow:

(a) National capital, (b) Exports, (c) Capital formation, and (d) Expenditure on food by households.

Ans. Stock – (a), since national capital is a variable measurable at a point of time. Flow – (b), (c) & (d), since these are variables measurable over period of time.

Q.5. Are the following included in the estimation of National Income a country? Give reasons.

(i) Bonus received by employees.

(ii) Government expenditure on defence.

(iii) Money sent by a worker working abroad to his family.

(iv) Profit earned by a branch of Indian Bank in London.

ANS. (i) It should be included in NI because it is a part of the compensation of employees (salary in cash).

         (ii) It should be included in NI because defence service is considered final service so far as it provides peaceful and secure environment to the citizens.

         (iii) It is included in NI because it is a part of NFIA.

         (iv) It is included in NI of India because it is a part of NFIA.