This article is helpful for those seeking important MCQs on National Income. Class 12 Economics Chapter 1 MCQs are easy to understand and of high quality based on the Economics PYQs. You can also get the detailed explanation video of this chapter on our YouTube Channel.

National Income Important MCQ

Here are the National Income Important MCQ. Solve the questions completely and then check the answers, which are given below the questions at the end. I have given these questions based on my own experience of class 12, where I achieved 98 out of 100 in Economics.

National Income and Related Aggregates – 40 MCQs for CBSE Class 12 Economics

Instructions

• Each question carries 1 mark
• Choose the most appropriate option from the given choices
• Based on CBSE syllabus and previous year question patterns

---

Questions

1. National Income is:
(a) GDP MP
(b) NDP FC
(c) NNP FC
(d) GNP FC

2. Domestic income is:
(a) GDP MP
(b) NDP FC
(c) NNP MP
(d) GNP FC

3. The difference between gross and net is:
(a) Depreciation
(b) NFIA
(c) Net Indirect Tax
(d) Subsidies

4. National income is which concept?
(a) Territorial
(b) National
(c) Economical
(d) None of the above

5. Domestic income is which concept?
(a) National
(b) Economic
(c) Territorial
(d) None of the above

6. The difference between domestic income and National income is:
(a) NFIA
(b) Net Indirect Tax
(c) Depreciation
(d) All of the above

7. How is GDP MP different from NNP FC?
(a) NFIA
(b) Net Indirect Tax
(c) Depreciation
(d) All of the above

8. Market price includes:
(a) NFIA
(b) Depreciation
(c) Net Indirect Tax
(d) None of the above

9. The word national in national income means:
(a) Goods produced by normal resident
(b) Goods produced in domestic territory
(c) Services produced by normal resident
(d) Both (a) and (c)

10. The word gross means:
(a) Inclusive of NFIA
(b) Inclusive of indirect tax
(c) Exclusive of depreciation
(d) Inclusive of depreciation

11. Which of the following is a method to measure National Income?
(a) Income method
(b) Product method
(c) Expenditure method
(d) All of these

12. Why are intermediate goods not included in National Income?
(a) To avoid double counting
(b) They are not final goods
(c) They don’t add value
(d) Both (a) and (b)

13. GNP MP = ?
(a) GDP MP – Depreciation
(b) GDP MP + Depreciation
(c) GDP MP ÷ Depreciation
(d) GDP MP + Net factor income from abroad

14. NDP MP = ?
(a) GDP MP – Depreciation
(b) GDP FC + Net factor income from abroad
(c) NNP FC + Net indirect taxes
(d) All of these

15. GDP FC = ?
(a) GDP MP – Net indirect taxes
(b) GDP MP + Net indirect taxes
(c) GDP MP + Subsidies
(d) GDP MP – Indirect taxes

16. Transfer payments are:
(a) Included in national income
(b) Not included in national income
(c) Partially included
(d) Included only in GNP

17. Which is an example of transfer payment?
(a) Wages
(b) Rent
(c) Old age pension
(d) Interest

18. Real GDP is measured at:
(a) Current prices
(b) Constant prices
(c) Market prices
(d) Factor cost

19. Nominal GDP is measured at:
(a) Current prices
(b) Constant prices
(c) Base year prices
(d) Factor cost

20. Which is not included in GDP?
(a) Purchase of new house
(b) Sale of old car
(c) Government expenditure
(d) Investment

21. Imputed rent of owner-occupied houses is:
(a) Included in GDP
(b) Not included in GDP
(c) Included only in GNP
(d) None of these

22. Value added method is also known as:
(a) Income method
(b) Product method
(c) Expenditure method
(d) Output method

23. In income method, we add:
(a) Wages + Rent + Interest + Profit
(b) C + I + G + (X-M)
(c) Value added at each stage
(d) None of these

24. In expenditure method, we add:
(a) Wages + Rent + Interest + Profit
(b) C + I + G + (X-M)
(c) Value added at each stage
(d) None of these

25. Stock variable is:
(a) National income
(b) Wealth
(c) Investment
(d) Consumption

26. Flow variable is:
(a) Capital
(b) Money supply
(c) National income
(d) Population

27. Final goods are:
(a) Goods ready for consumption or investment
(b) Goods used in production process
(c) Intermediate goods
(d) Raw materials

28. Intermediate goods are:
(a) Final goods
(b) Goods used in production of other goods
(c) Consumer goods
(d) Capital goods

29. Personal income is:
(a) National income + Transfer payments – Corporate tax
(b) National income – Transfer payments
(c) Disposable income + Direct taxes
(d) Both (a) and (c)

30. Disposable income is:
(a) Personal income – Direct taxes
(b) Personal income + Direct taxes
(c) National income – Savings
(d) Personal income – Consumption

31. Depreciation is also known as:
(a) Capital formation
(b) Consumption of fixed capital
(c) Gross investment
(d) Net investment

32. NFIA stands for:
(a) Net Foreign Investment Abroad
(b) Net Factor Income from Abroad
(c) National Foreign Income Account
(d) Net Financial Investment Abroad

33. When NFIA is positive:
(a) GNP > GDP
(b) GNP < GDP
(c) GNP = GDP
(d) Cannot determine

34. Circular flow of income shows:
(a) Flow of goods only
(b) Flow of money only
(c) Flow of both goods and money
(d) Static economy

35. Green GDP accounts for:
(a) Environmental degradation
(b) Only economic growth
(c) Population growth
(d) Technological progress

36. Per capita income is:
(a) National income ÷ Population
(b) GDP ÷ Population
(c) GNP ÷ Population
(d) All of these depending on context

37. GDP deflator measures:
(a) Inflation rate
(b) Price level changes
(c) Real vs nominal GDP relationship
(d) All of these

38. Which organization calculates national income in India?
(a) RBI
(b) Planning Commission
(c) Central Statistical Office
(d) Finance Ministry

39. Base year for GDP calculation in India is currently:
(a) 2004-05
(b) 2011-12
(c) 2014-15
(d) 2018-19

40. Capital goods are:
(a) Goods used for further production
(b) Consumer durables
(c) Final goods for household use
(d) Intermediate goods

---

Answer Key with Explanations

1. (c) NNP FC
Explanation: National Income refers to Net National Product at Factor Cost (NNP FC)

2. (b) NDP FC
Explanation: Domestic income is Net Domestic Product at Factor Cost

3. (a) Depreciation
Explanation: Gross includes depreciation while Net excludes depreciation

4. (b) National
Explanation: National income is based on national concept (normal residents)

5. (c) Territorial
Explanation: Domestic income is based on territorial concept (within domestic territory)

6. (a) NFIA
Explanation: National Income = Domestic Income + NFIA

7. (d) All of the above
Explanation: GDP MP to NNP FC: subtract depreciation, net indirect taxes, and add NFIA

8. (c) Net Indirect Tax
Explanation: Market price = Factor cost + Net indirect taxes

9. (d) Both (a) and (c)
Explanation: National refers to production by normal residents whether within or outside domestic territory

10. (d) Inclusive of depreciation
Explanation: Gross includes depreciation in the calculation

11. (d) All of these
Explanation: There are three methods to calculate national income

12. (d) Both (a) and (b)
Explanation: Intermediate goods are excluded to avoid double counting as they are not final goods

13. (d) GDP MP + Net factor income from abroad
Explanation: GNP = GDP + Net Factor Income from Abroad

14. (a) GDP MP – Depreciation
Explanation: Net Domestic Product = Gross Domestic Product – Depreciation

15. (a) GDP MP – Net indirect taxes
Explanation: GDP at Factor Cost = GDP at Market Price – Net Indirect Taxes

16. (b) Not included in national income
Explanation: Transfer payments don’t represent production activity so are excluded

17. (c) Old age pension
Explanation: Pension is a transfer payment as no production activity is involved

18. (b) Constant prices
Explanation: Real GDP is calculated at constant prices (base year prices)

19. (a) Current prices
Explanation: Nominal GDP is calculated at current market prices

20. (b) Sale of old car
Explanation: Sale of second-hand goods is not included as no new production is involved

21. (a) Included in GDP
Explanation: Imputed rent is included to account for housing services

22. (b) Product method
Explanation: Value added method is another name for product method

23. (a) Wages + Rent + Interest + Profit
Explanation: Income method adds all factor incomes

24. (b) C + I + G + (X-M)
Explanation: Expenditure method: Consumption + Investment + Government spending + Net exports

25. (b) Wealth
Explanation: Wealth is measured at a point of time, making it a stock variable

26. (c) National income
Explanation: National income is measured over a period of time, making it a flow variable

27. (a) Goods ready for consumption or investment
Explanation: Final goods are ready for final use by consumers or investors

28. (b) Goods used in production of other goods
Explanation: Intermediate goods are used as inputs in production process

29. (d) Both (a) and (c)
Explanation: Personal income includes transfer payments and is disposable income plus direct taxes

30. (a) Personal income – Direct taxes
Explanation: Disposable income is what remains after paying direct taxes

31. (b) Consumption of fixed capital
Explanation: Depreciation represents consumption/wear and tear of fixed capital

32. (b) Net Factor Income from Abroad
Explanation: NFIA is Net Factor Income from Abroad

33. (a) GNP > GDP
Explanation: Positive NFIA means income from abroad exceeds payment to abroad, so GNP > GDP

34. (c) Flow of both goods and money
Explanation: Circular flow shows real flow (goods/services) and money flow

35. (a) Environmental degradation
Explanation: Green GDP adjusts GDP for environmental costs and resource depletion

36. (a) National income ÷ Population
Explanation: Per capita income is typically National Income divided by population

37. (d) All of these
Explanation: GDP deflator measures price level changes and helps calculate real GDP from nominal

38. (c) Central Statistical Office
Explanation: CSO (now NSO) is responsible for calculating national income in India

39. (b) 2011-12
Explanation: Current base year for GDP calculation in India is 2011-12

40. (a) Goods used for further production
Explanation: Capital goods like machinery are used to produce other goods and services

---

Key Formulas of National Income

• National Income = NNP FC = NDP FC + NFIA
• GNP = GDP + NFIA
• NNP = GNP – Depreciation
• GDP FC = GDP MP – Net Indirect Taxes
• Personal Income = National Income + Transfer Payments – Corporate Tax – Undistributed Profits
• Disposable Income = Personal Income – Direct Taxes

Important Points

1. Three Methods of Calculating National Income:

• Income Method (Factor incomes)
• Product/Value Added Method (Sum of value added)
• Expenditure Method (C + I + G + X – M)

1. Key Concepts:

• Gross vs Net (difference is depreciation)
• Market Price vs Factor Cost (difference is net indirect taxes)
• National vs Domestic (difference is NFIA)

1. Exclusions from National Income:

• Transfer payments
• Sale of second-hand goods
• Illegal activities
• Non-market activities

---

Class 12 Geography Chapter 3 Question Answer | Human Development Important questions