National Income Quiz: Indian Economy Practice

Spoilers! These are the Starter quiz’s answers. Easy, Medium, Hard and Mixed rounds show their own answers when you finish.

1. Gross Domestic Product (GDP) measures the market value of all final goods and services produced:

   • by the citizens of a country, wherever they live
   • within the domestic territory of a country in a given period
   • in a country, including all intermediate goods used
   • by the public sector of a country in one financial year

   Answer: within the domestic territory of a country in a given period. GDP is a territorial measure: it counts what is produced inside the country, by residents or foreigners. Counting by nationals wherever they are gives GNP, and intermediate goods are left out to avoid double counting.

2. Gross National Product (GNP) is obtained by adding which of the following to GDP?

   • Net factor income from abroad
   • Depreciation
   • Net indirect taxes
   • Net exports

   Answer: Net factor income from abroad. GNP = GDP + net factor income from abroad (factor income earned by residents abroad minus factor income earned by non-residents in India). Depreciation is subtracted to move from gross to net, not from domestic to national.

3. Which of the following is NOT counted while estimating national income?

   • Salary paid to a government school teacher
   • Imputed rent of a house lived in by its owner
   • Old-age pension paid by the government
   • Profit earned by a private company

   Answer: Old-age pension paid by the government. An old-age pension is a transfer payment: money is paid without any good or service being produced in return, so it is excluded. Imputed rent of owner-occupied housing is included because housing services are actually consumed.

4. In the traditional definition, Net National Product at factor cost is also known as:

   • Gross value added
   • Personal income
   • Disposable income
   • National income

   Answer: National income. NNP at factor cost (GNP minus depreciation minus net indirect taxes) is the income earned by all factors of production of a nation, which is what economists call national income.

5. In a year, nominal GDP is Rs 250 lakh crore and real GDP (at base-year prices) is Rs 200 lakh crore. What is the GDP deflator?

   • 80
   • 125
   • 150
   • 112.5

   Answer: 125. GDP deflator = (nominal GDP / real GDP) x 100 = (250 / 200) x 100 = 125. It means prices are 25% higher than in the base year across everything included in GDP.

6. Which body compiles and releases India's official GDP estimates?

   • National Statistics Office (NSO), Ministry of Statistics and Programme Implementation
   • Reserve Bank of India
   • NITI Aayog
   • Office of the Economic Adviser, DPIIT

   Answer: National Statistics Office (NSO), Ministry of Statistics and Programme Implementation. National accounts are compiled by the NSO under MoSPI (formed in 2019 by merging the CSO and NSSO). The Office of the Economic Adviser compiles the Wholesale Price Index, not GDP.

7. Under the expenditure method, GDP = C + I + G + ______. Fill in the blank.

   • (X + M)
   • Depreciation
   • (X - M)
   • Net factor income from abroad

   Answer: (X - M). Spending on domestic output = consumption + investment + government purchases + net exports (exports minus imports). Imports are subtracted because they are spending on output produced abroad.

8. Who made the first estimate of India's national income, for the year 1867-68?

   • V. K. R. V. Rao
   • P. C. Mahalanobis
   • R. C. Dutt
   • Dadabhai Naoroji

   Answer: Dadabhai Naoroji. Dadabhai Naoroji estimated India's per capita income for 1867-68 in 'Poverty and Un-British Rule in India'. V. K. R. V. Rao made the first scientific estimate later, and Mahalanobis headed the National Income Committee of 1949.

9. GVA at basic prices + product taxes - product subsidies gives:

   • GDP at market prices
   • NNP at factor cost
   • GVA at factor cost
   • GNP at basic prices

   Answer: GDP at market prices. Since the 2015 revision, India measures sector output as GVA at basic prices. Adding taxes on products (like GST) and removing product subsidies converts it to GDP at market prices.

10. Consider the following statements about the sale of a used car this year: 1. The price of the car is counted in this year's GDP. 2. The commission earned by the dealer who arranged the sale is counted in this year's GDP. Which is/are correct?

    • 1 only
    • 2 only
    • Both 1 and 2
    • Neither 1 nor 2

    Answer: 2 only. The car was counted in GDP the year it was produced, so resale is only a change of ownership. The dealer's commission, however, pays for a service produced this year and is included.