Economics GK Quiz-13

1.Which among the following
statements is not true when
there is an increase in interest
rate in an economy ?
(1) increase in saving
(2) decrease in loan
(3) increase in production cost
(4) increase in capital return
Answer:
1. (4) Interest rate increase the cost of borrowing, which
results in lesser investment activity and the purchase
of consumer durables. In a low interest-rate environment, shares become a more attractive buy, raising households’ financial assets. This may also contribute to higher consumer spending, and makes
companies’ investment projects more attractive. Lower interest rates also tend to cause currencies to
depreciate: Demand for domestic goods rises when
imported goods become more expensive. All of these
factors raise output and employment as well as investment and consumer spending.

(SSC Section Officer (Audit)
Exam. year 1997)
2. Multiplier process in economic
theory is conventionally taken
to mean :
(1) the manner in which prices increase
(2) the manner in which banks
create credit
(3) income of an economy grows
on account of an initial investment
(4) the manner in which government expenditure increases
Answer:
2. (3) In economics, a multiplier is a factor of proportionality that measures how much an endogenous
variable changes in response to a change in some
exogenous variable. For example, suppose a one-unit
change in some variable x causes another variable y
to change by M units. Then the multiplier is M. In
monetary macroeconomics and banking, the money
multiplier measures how much the money supply
increases in response to a change in the monetary
base. The multiplier may vary across countries, and
will also vary depending on what measures of money
are considered. For example, consider M2 as a measure of the U.S. money supply, and M0 as a measure of the U.S. monetary base. If a $1 increase in
M0 by the Federal Reserve causes M2 to increase by
$10, then the money multiplier is 10.

(SSC Combined Graduate Level
Prelim Exam. 04.07.1999
(First Sitting)
3. Personal disposable income is :
(1) always equal to personal
income.
(2) always more than personal
income.
(3) equal to personal income
minus direct taxes paid by
household.
(4) equal to personal income
minus indirect taxes.
Answer:
3. (3) Disposable income is total personal income minus personal current taxes. In national accounts
definitions, personal income, minus personal current taxes equals disposable personal income. Subtracting personal outlays (which includes the major
category of personal (or, private) consumption expenditure) yields personal (or, private) savings.

(SSC Combined Graduate Level
Prelim Exam. 04.07.1999 (Second
Sitting)
4. Who said ‘Supply creates its
own demand’?
(1) Adam Smith (2) J.B.Saw
(3) Marshall (4) Ricardo
Answer:
4. (2) “Supply creates its own demand” is the formulation of Say’s law by John Maynard Keynes. The rejection of this doctrine is a central component of The
General Theory of Employment, Interest and Money
(1936) and a central tenet of Keynesian economics.
Say’s law, or the law of market, is an economic principle of classical economics named after the French
businessman and economist Jean-Baptiste Say (1767–
1832), who stated that “products are paid for with
products” and “a glut can take place only when there
are too many means of production applied to one
kind of product and not enough to another

(SSC Combined Graduate Level
Prelim Exam. 04.07.1999
(Second Sitting)
5. Investment is equal to :
(1) gross total of all types of
physical capital assets
(2) gross total of all capital assets minus wear and tear
(3) stock of plants, machines
and equipments
(4) None of the above
Answer:
5. (2) Capital formation is frequently thought of as a
measure of total “investment”, in the sense of that
portion of capital actually used for investment purposes and not held as savings or consumed. But in
fact, in national accounts, the concept of gross capital formation refers only to the accounting value of
the “additions of non-financial produced assets to
the capital stock less the disposals of these assets”.
“Investment” is a broader concept that includes investment in all kinds of capital assets, whether physical property or financial assets. The net valuation
method views “depreciation” as the compensation for
the cost of replacing fixed equipment used up or worn
out, which must be deducted from the total investment volume to obtain a measure of the “real” value
of investments; the depreciation write-off compensates and cancels out the loss in capital value of
assets used due to wear & tear, obsolescence, etc.

(SSC Combined Graduate Level
Prelim Exam. 27.02.2000
(First Sitting)
6. Say’s Law of Market holds that
(1) supply is not equal to demand
(2) supply creates its own demand
(3) demand creates its own
supply
(4) supply is greater than demand
Answer:
6. (2) Say’s law, or the law of market, is an economic
principle of classical economics named after the
French businessman and economist Jean-Baptiste
Say (1767–1832), who stated that “supply creates
its own demand”. “Supply creates its own demand”
is the formulation of Say’s law by John Maynard Keynes. The rejection of this doctrine is a central component of The General Theory of Employment, Interest and Money (1936) and a central tenet of Keynesian economics.

(SSC Section Officer (Audit)
Exam. 09.09.2001)ECONOMICS
SGAE–570
7. ‘Marginal efficiency of capital’ is
(1) expected rate of return on
new investment
(2) expected rate of return of
existing investment
(3) difference between rate of
profit and rate of interest
(4) value of output per unit of
capital invested
Answer:
7. (1) The volume of investment depend upon the following two factors: (a) rate of interest; and (b) marginal
efficiency of capital. Before investing the money a
businessman compares interest with the rate of marginal efficiency capital. If they expect that rate of profit
will be greater than the rate of interest, then they
invest the money otherwise not. The expected rate of
return on capital is called the marginal efficiency of
capital. In other words, marginal efficiency of capital
is a return on investment which is based partly on
expectations of future yields and partly on the actual
price of the capital good concerned.

(SSC Section Officer (Audit)
Exam. 09.09.2001)
8. The standard of living in a country is represented by its:
(1) poverty ratio
(2) per capita income
(3) national income
(4) unemployment rate
Answer:
8. (2) Per capita income or average income or income
per person is the mean income within an economic
aggregate, such as a country or city. It is calculated
by taking a measure of all sources of income in the
aggregate (such as GDP or Gross National Income)
and dividing it by the total population. It does notECONOMICS
SGAE–616
attempt to reflect the distribution of income or wealth.
Per capita income is often used to measure a country’s standard of living. However, it is not a good
standard of measuring standard of living as it is income of one person of the country.

(SSC Combined Graduate Level
Prelim Exam. 24.02.2002
(Second Sitting)
9. Capital output ratio of a commodity measures
(1) its per unit cost of production
(2) the amount of capital invested per unit of output
(3) the ratio of capital depreciation to quantity of output
(4) the ratio of working capital
employed to quantity of output
Answer:
9. (2) Capital Output Ratio is the ratio of capital used to
produce an output over a period of time. This ratio
has a tendency to be high when capital is cheap as
compared to other inputs. For instance, a country
with abundant natural resources can use its resources
in lieu of capital to boost its output; hence the resulting capital output ratio is low. The capital output ratio tends to increase if the capital available in a country is cheaper than the other inputs. Therefore, the
countries that are rich in natural resources have a
low capital output ratio. This is because they can
easily substitute the capital with natural resources
in order to increase the output. When countries use
their natural resources instead of capital then COR
reduces.

(SSC CPO Sub-Inspector
Exam. 07.09.2003)
10. The method of calculating the
national income by the product
method is otherwise known as :
(1) Income method
(2) Value added method
(3) Expenditure method
(4) Net output method
Answer:
10. (4) Primarily there are three methods of measuring
national income. Which method is to be employed
depends on the availability of data and purpose. The
methods are product method, income method and
expenditure method. According to product method,
the total value of final goods and services produced
in a country during a year is calculated at market
prices. According to this method only the final goods
and services are included and the intermediary goods
and services are not taken into account. In this method, National Output = National Expenditure (Aggregate Demand) = National Income.

(SSC Section Officer (Commercial
Audit) Exam. 16.11.2003)
11. The best measure to assess a
country’s economic growth is
(1) per capita income at constant prices
(2) per capita income at current prices
(3) gross domestic product at
current prices
(4) gross national product at
current prices
Answer:
11. (1) Gross domestic product (GDP) is the market value of all officially recognized final goods and services
produced within a country in a given period of time.
Per capita income or average income or income per
person is the mean income within an economic aggregate, such as a country or city. It is calculated by
taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and
dividing it by the total population. It does not attempt to reflect the distribution of income or wealth.
Per capita income is often used as average income, a
measure of the wealth of the population of a nation,
particularly in comparison to other nations. It is usually expressed in terms of a commonly used international currency such as the Euro or United States
dollar, and is useful because it is widely known, easily calculated from readily-available GDP and population estimates, and produces a useful statistic for
comparison.

(SSC Section Officer (Commercial
Audit) Exam. 16.11.2003)
12. Which of the following concepts
are most closely associated with
J.M. Keynes ?
(1) Control of money supply
(2) Marginal utility theory
(3) Indifference curve analysis
(4) Marginal efficiency of captial
Answer:
12. (4) The marginal efficiency of capital (MEC) is that
rate of discount which would equate the price of a
fixed capital asset with its present discounted value
of expected income. The term “marginal efficiency of
capital” was introduced by John Maynard Keynes in
his General Theory, and defined as “the rate of discount which would make the present value of the
series of annuities given by the returns expected from
the capital asset during its life just equal its supply
price

(SSC Section Officer (Commercial
Audit) Exam. 16.11.2003)
13. According to Keynesian theory
of income determination, at full
employment, a fall in aggregate
demand causes
(1) a fall in prices of output and
resources
(2) a fall in real gross National
product and employment
(3) a rise in real gross National
product and investment
(4) a rise in prices of output
and resources
Answer:
13. (1) In 1936, John Maynard Keynes published the
book “The General Theory of Employment, Interest
and Money to explain the prolonged and massive unemployment in the Great Depression. The book criticises the classical model. Keynes turns Say’s Law
on its head, arguing that aggregate demand determines national output and employment in the economy. In this sense, demand creates its own supply.
Unlike the Classical economists, Keynes believes that
prices and wages are rigid, especially in the downward direction and hence the economy is not a selfcorrecting mechanism. In other words, Keynes believes that as prices and wages are rigid, the economy can stay at a below-full-employment equilibrium.
Suppose that the economy is at the full-employment
equilibrium. Further suppose that aggregate demand
falls. When this happens, national output will fall
below the full-employment level which will lead to
unemployment resulting in a downward pressure on
wages.

(SSC CPO Sub- Inspector
Exam. 05.09.2004)
14. When aggregate supply exceeds
aggregate demand
(1) unemployment falls
(2) prices rise
(3) inventories accumulate
(4) unemployment develops
Answer:
14. (3) Deflation sets in when aggregate supply exceeds
aggregate demand. Recession sets in. This will lead
to a buildup in stocks (inventories) and this sends a
signal to producers either to cut prices (to stimulate
an increase in demand) or to reduce output so as to
reduce the buildup of excess stocks. Either way -
there is a tendency for output to move closer to the
current level of demand.

(SSC CPO Sub- Inspector
Exam. 05.09.2004)
15. Investment is equal to
(1) gross total of all types of
physical capital assets
(2) gross total of all capital assets minus wear and tear
(3) stock of plants, machines
and equipments
(4) None of these
Answer:
15. (2) Investment” is a broader concept that includes
investment in all kinds of capital assets, whether
physical property or financial assets. In economic
statistics and accounts, capital formation can be valued gross, i.e., before deduction of consumption of
fixed capital (or “depreciation”), or net, i.e., after deduction of “depreciation” write-offs. The net valuation method views “depreciation” as the compensation for the cost of replacing fixed equipment used
up or worn out, which must be deducted from the
total investment volume to obtain a measure of the
“real” value of investments; the depreciation writeoff compensates and cancels out the loss in capital
value of assets used due to wear & tear, obsolescence, etc.

(SSC Tax Assistant (Income Tax &
Central Excise) Exam. 05.12.2004)
16. In a business, raw materials,
components, work in progress
and finished goods are jointly
regarded as
(1) capital stock (2)inventory
(3) investment (4)net worth
Answer:
16. (2) Inventory refers to raw materials, work-in-process goods and completely finished goods that are
considered to be the portion of a business’s assets
that are ready or will be ready for sale. Inventory
represents one of the most important assets that most
businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders/owners.

(SSC Tax Assistant (Income Tax &
Central Excise) Exam. 05.12.2004)
17. The difference between the GNP
and the NNP is equal to the
(1) consumer expenditure on
durable goods
(2) direct tax revenue
(3) indirect tax revenue
(4) capital depreciation
Answer:
17. (4) Depreciation refers to two very different but related concepts: the decrease in value of assets (fair
value depreciation), and the allocation of the cost of
assets to periods in which the assets are used (depreciation with the matching principle). The difference between the GNP and NNP is equal to capital
depreciation. It is the wearing out, breaking down,
or technological obsolescence.

(SSC Tax Assistant (Income Tax &
Central Excise) Exam. 05.12.2004)
18. Investment and savings are kept
equal through a change in the
level of
(1) Consumption
(2) Investment
(3) Government expenditure
(4) Income
Answer:
18. (1) Desired savings are kept equal to desired investment by responses to interest rate changes. Savings
identity or the savings investment identity is a concept in National Income Accounting stating that the
amount saved (S) in an economy will be amount inECONOMICS
SGAE–617
vested (I). . This identity only holds true because investment here is defined as including inventories.
Thus, should consumers decide to save more, and
spend less, the fall in demand would lead to an increase in business inventories. The change in inventories brings savings and investment into balance without any intention by business to increase investment.

(SSC Section Officer (Audit)
Exam. 05.06.2005)
19. Which of the following is not
required while computing Gross
National Product (GNP) ?
(1) Net foreign investment
(2) Private investment
(3) Per capita income of citizens
(4) Purchase of goods by government
Answer:
19. (3) Gross National Product (GNP) is the market value
of all products and services produced in one year by
labour and property supplied by the residents of a
country. Basically, GNP is the total value of all final
goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. GNP
measures the value of goods and services that the
country’s citizens produced regardless of their location.

(SSC Section Officer (Audit)
Exam. 05.06.2005)
20. The sum total of incomes received for the services of labour, land or capital in a country is called :
(1) Gross domestic product
(2) National income
(3) Gross domestic income
(4) Gross national income
Answer:
20. (3) The Gross Domestic Income (GDI) is the total income received by all sectors of an economy within a
nation. It includes the sum of all wages, profits, and
taxes, minus subsidies. Since all income is derived
from production (including the production of services), the gross domestic income of a country should
exactly equal its gross domestic product (GDP).

(SSC Statistical Investigators
Grade–IV Exam. 31.07.2005)
21. Which of the following results
by dividing national income by
size of population ?
(1) Per capita income
(2) Subsistence level
(3) Subsistence expenditure
(4) Per capita production
Answer:
21. (1) Per capita income or average income or income
per person is a measure of mean income within an
economic aggregate, such as a country or city. It is
calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population.

(SSC Section Officer (Commercial
Audit) Exam. 25.09.2005)
22. While determining income the
expenditure on which of the following items is not considered
as investment ?
(1) Construction of factory
(2) Computer
(3) Increase in the stock of unsold articles
(4) Stock and share in joint
stock company
Answer:
22. (3) The gross national product is the sum total of all
final goods and services produced by the people of
one country in one year. The GNP is a flow concept.
It can be calculated with either the expenditure approach or the income approach. The expenditure
approach sums all that is purchased: in a sense, it is
equivalent to the income approach because purchases are only possible if income is present. GDP can
be calculated as the sum of all expenditures: personal consumption expenditure (C), gross private
domestic investment (Ig), government purchases (G),
and net exports (Xn). Increase in the stock of unsold
articles do not come under any of these heads.

(SSC Section Officer (Commercial
Audit) Exam. 25.09.2005)
23. Rate of interest is determined
by
(1) The rate of return on the
capital invested
(2) Central Government
(3) Liquidity preference
(4) Commercial Banks
Answer:
23. (3) According to the classical view, rate of interest is
determined by the interaction of supply of and demand for capital. Thus this theory is popularly called
as the demand and supply of theory of rate of interest. The supply of money together with the liquiditypreference curve in theory interact to determine the
interest rate at which the quantity of money demanded
equals the quantity of money supplied. According to
Keynes, interest is the price paid for surrendering
their liquid assets. Greater the liquidity preference
higher shall be the rate of interest. The liquidity preference constitutes the demand for money.

(SSC Combined Graduate Level
Prelim Exam. 13.11.2005
(First Sitting)
24. In a Laissez-faire economy
(1) the customers take all the
decisions regarding production of all the commodities
(2) the Government does not
interfere in the free functioning of demand and supply forces in the marketECONOMICS
SGAE–571
(3) the private-sector takes all
the decisions for price-determination of various commodities produced
(4) the Government controls
the allocation of all the factors of production
Answer:
24. (2) Laissez Faire is an economic theory from the 18th
century that is strongly opposed to any government
intervention in business affairs. Sometimes it is referred to as “let it be economics.” It is an economic
environment in which transactions between private
parties are free from tariffs, government subsidies,
and enforced monopolies, with only enough government regulations sufficient to protect property rights
against theft and aggression.

(SSC Tax Assistant (Income Tax &
Central Excise) Exam. 11.12.2005)
25. In calculating National Income
which of the following is included ?
(1) Services of housewives
(2) Pensions
(3) Income of smugglers
(4) Income of watchmen
Answer:
25. (4) National Income is defined as the sum total of all
the goods and services produced in a country, in a
particular period of time. Normally this period consists of one year duration, as a year is neither too
short nor long a period. National product is usually
used synonymous with National income. Alfred Marshall in his ‘Principle of Economics’ (1949) defines
National income as “The labour and capital of a country, acting on its natural resources, produce annually a certain net aggregate of commodities, material
and immaterial, including services of all kinds…..and
net income due on account of foreign investments
must be added in. This is the true net National income or Revenue of the country or the national dividend.” So the inocme of watchmen will be included
while computing it.

(SSC Tax Assistant (Income Tax &
Central Excise) Exam. 11.12.2005)
26. The term ‘Green GNP’ emphasises
(1) rapid growth of GNP
(2) increase in per capita income
(3) economic development
(4) sustainable development
Answer:
26. (4) The gross national product (GNP) measures the
welfare of a nation’s economy through the aggregate
of products and services produced in that nation.
Although GNP is a proficient measurement of the
magnitude of the economy, many economists, environmentalists and citizens have been arguing the
validity of the GNP in respect to measuring welfare.
They are calling for a green national product that
would indicate if activities benefit or harm the economy and well-being. This new national product would
differ from the traditional GNP by addressing both
the sustainability and well-being of the planet and its
inhabitants.

(SSC Tax Assistant (Income Tax &
Central Excise Exam. 12.11.2006)
27. Who propounded the ‘market
law ?
(1) Adam Smith
(2) J.B. Say
(3) T.R. Malthus
(4) David Recardo
Answer:
27. (2) Say’s law, or the law of market, is an economic
principle of classical economics named after the
French businessman and economist Jean-Baptiste
Say (1767–1832), who stated that “products are paid
for with products” and “a glut can take place only
when there are too many means of production applied
to one kind of product and not enough to another.

(SSC Section Officer (Audit)
Exam. 10.12.2006)
28. “The national income consists
of a collection of goods and services reduced to common basis by being measured in terms
of money.”–– Who says this ?
(1) Samuelson (2) Kuznets
(3) Hicks (4) Pigou
Answer:
28. (3) British economist John Hicks said that National
income is a collection of goods and services reduced
to a common basis by being measured in terms of
money. Hicks was one of the most important and
influential economists of the twentieth century. The
most familiar of his many contributions in the field of
economics were his statement of consumer demand
theory in microeconomics, and the IS/LM model
(1937), which summarized a Keynesian view of macroeconomics. His book Value and Capital (1939) significantly extended general-equilibrium and value
theory.

(SSC Combined Graduate Level
Prelim Exam. 04.02.2007
(Frist Sitting)
29. Capital : Output Ratio of a measures
(1) its per unit cost of production
(2) the amount of capital invested per unit of output
(3) the ratio of capital depreciation to quantity of output
(4) the ratio of working capital
Answer:
29. (2) Capital output ratio is the ratio of capital used to
produce an output over a period of time. This ratio
has a tendency to be high when capital is cheap as
compared to other inputs. For instance, a country
with abundant natural resources can use its resources
in lieu of capital to boost its output; hence the resulting capital output ratio is low.

employed to quantity of output
(SSC Combined Graduate Level
Prelim Exam. 04.02.2007
(Frist Sitting)
30. “Supply creates its own demand” – Who said this ?
(1) J. B. Say (2) J. S. Mill
(3) J. M. Keynes (4) Senior
Answer:
30. (1) “Supply creates its own demand” is the formulation of Say’s law by John Maynard Keynes. The rejection of this doctrine is a central component of The
General Theory of Employment, Interest and Money
(1936) and a central tenet of Keynesian economics.
Say’s Law (or Say’s Law of Markets), is often summaECONOMICS
SGAE–618
rized as: “Aggregate supply creates its own aggregate demand”, “Supply creates its own demand”, “If
you build it, they will come”, and Inherent in supply
is the wherewithal for its own consumption”.

(SSC Combined Graduate Level
Prelim Exam. 04.02.2007
(Second Sitting)
31. Which of the following is a better measurement of Economic
Development ?
(1) GDP
(2) Disposable income
(3) NNP
(4) Per capita income
Answer:
31. (4) Per capita income or average income or income
per person is the mean income within an economic
aggregate, such as a country or city. It is calculated
by taking a measure of all sources of income in the
aggregate (such as GDP or Gross National Income)
and dividing it by the total population. Measurement
of personal income is the best measure of economic
well-being of individuals and nation. Besides, it helps
to show the level of inequality in a society or country.

(SSC Section Officer (Commercial Audit)
Exam. 30.09.2007
(Second Sitting)
32. Imputed gross rent of owneroccupied buildings is a part of
(1) capital formation
(2) final consumption
(3) intermediate consumption
(4) consumer durable
Answer:
32. (2) The figure of final private consumption expenditure includes the imputed gross rent of owner-occupied dwellings, consumption of own-account production and payment by households of wages and salaries in kind valued at cost, e.g., provision for food,
shelter and clothing to the employees, wherever they
exist. Production for self consumption is a part of
production and hence an income and is also a part of
final consumption expenditure.

(SSC Tax Assistant (Income Tax &
Central Excise) Exam. 25.11.2007)
33. Which of the statements is correct about India’s national income?
(1) Percentage share of agriculture is higher than services
(2) Percentage share of industry is higher than agriculture
(3) Percentage share of services is higher than industry
(4) Percentage share of services is higher than agriculture
and industry put together
Answer:
33. (4) The services sector has the largest share in the
GDP, accounting for 55% in 2007, up from 15% in
1950. Industry accounts for 28% of the GDP and
employ 14% of the total workforce. Agriculture and
allied sectors like forestry, logging and fishing accounted for 15.7% of the GDP in 2009–10.

(SSC CPO Sub-Inspector
Exam. 16.12.2007)
34. Who among the following is not
a classical economist?
(1) David Ricardo
(2) John Stuart Mill
(3) Thomas Malthus
(4) John Maynard Keynes
Answer:
34. (4) Classical economics is widely regarded as the first
modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill.
John Maynard Keynes was a British economist whose
ideas have profoundly affected the theory and practice of modern macroeconomics, and formed the economic policies of governments. He built on and greatly
refined earlier work on the causes of business cycles, and is widely considered to be one of the
founders of modern macroeconomics and the most
influential economist of the 20th century. His ideas
are the basis for the school of thought known as
Keynesian economics, as well as its various offshoots.

(SSC Section Officer (Audit)
Exam. 06.01.2008)
35. Which of the following is not
included in the National Income?
(1) Imputed rent of owner-occupied houses
(2) Government expenditure
on making new bridges
(3) Winning a lottery
(4) Commission paid to an
agent for sale of house
Answer:
35. (3) National income is the total value a country’s final
output of all new goods and services produced in
one year. Transfer payments are not a part of the
national income so they are cut from national income
to get n.n.p in order to arrive national income such
payments are bad debts incurred by banks, payments of pensions, charity, scholarships etc. Privatesector transfers include charitable donations and
prizes to lottery winners.

(SSC Combined Graduate Level
Prelim Exam. 27.07.2008
(Second Sitting)
36. Personal disposable income is
(1) always equal to personal
income
(2) always more than personal
income
(3) equal to personal income
minus indirect taxes
(4) equal to personal income
minus direct taxes
Answer:
36. (4) Disposable income is total personal income minus personal current taxes. In national accounts
definitions, personal income, minus personal current taxes equals disposable personal income. Subtracting personal outlays (which includes the major
category of personal (or, private) consumption expenditure) yields personal (or, private) savings.

(SSC Combined Graduate Level
Prelim Exam. 27.07.2008
(Second Sitting)
37. Who prepared the first estimate
of National Income for the country ?
(1) Central Statistical Organisation
(2) National Income Committee
(3) Dadabhai Naoroji
(4) National Sample Survey
Organisation
Answer:
37. (3) Dadabhai Naoroji prepared the first estimates of
National income in 1876. He estimated the national
income by first estimating the value of agricultural production and then adding a certain percentage as nonagricultural production. However, such method can only
been called as a non-scientific method. The first person to adopt a scientific procedure in estimating the
national income was Dr. VKRV Rao in 1931.

(SSC Combined Graduate Level
Prelim Exam. 27.07.2008
(Second Sitting)
38. ‘Supply creates its own demand’.
This statement is related to
(1) Prof. J.B. Say
(2) John Robinson
(3) Adam Smith
(4) J.S. Mill
Answer:
38. (1) Jean Baptiste Say was a French economist. He is
well known for Say’s Law (or Say’s Law of Markets),
often summarized as: “Aggregate supply creates its
own aggregate demand”; “Supply creates its own demand”, or “Supply constitutes its own demand”. He
argued that production and sale of goods in an economy automatically produces an income for the producers of the same value, which would then be reinjected into the economy and create enough demand
to buy the goods. Thus production is determined by
the supply of goods rather than demand.

(SSC Tax Assistant (Income Tax &
Central Excise) Exam. 14.12.2008)
39. Which one of the following is
not a method of measurement
of National Income ?
(1) Value Added Method
(2) Income Method
(3) Investment Method
(4) Expenditure Method
Answer:
39. (3) Primarily there are three methods of measuring
national income. The methods are product method,
income method and expenditure method. Product
method is given by Dr. Alfred Marshall, income method by A.C. Pigou and expenditure method by Dr.
Irving Fisher. The ‘Investment Method’ is used for
trading properties where evidence of rates is slight,
such as hotels, cinema, car park and etc.

(SSC CPO Sub-Inspector
Exam. 06.09.2009)
40. Which one of the following
would not constitute an economic activity ?
(1) A teacher teaching students
in his class
(2) A teacher teaching students
under Sarva Shiksha Abhiyan
(3) A teacher teaching his own
daughter at home
(4) A teacher providing consultancy services from his residence
Answer:
40. (3) Economic activities are related to production, distribution, exchange and consumption of goods and
services. The primary aim of the economic activity is
the production of goods and services with a view to
make them available to consumer. “Human activities
which are performed in exchange for money or money’s worth are called economic activities.” In other
words, economic activities are those efforts which
are undertaken by man to earn Income, Money, and
Wealth for his life and to secure maximum satisfaction of wants with limited and scarce means. A teacher
teaching his own daughter at home is a non-economic activity. “Human activities which are not performed
for money or money’s worth are called non-economic
activities.” Here, there is no monetary consideration
in exchange for such activities.

(SSC CPO Sub-Inspector
Exam. 06.09.2009)ECONOMICS
SGAE–572
41. Net National Product of a country is
(1) GDP minus depreciation
allowances
(2) GDP plus net income from
abroad
(3) GNP minus net income from
abroad
(4) GNP minus depreciation allowances
Answer:
41. (4) Net national product (NNP) is the total market value of all final goods and services produced by residents in a country or other polity during a given time
period (gross national product or GNP) minus depreciation. The net domestic product (NDP) is the equivalent application of NNP within macroeconomics, and
NDP is equal to gross domestic product (GDP) minus
depreciation: NDP = GDP - depreciation.

(SSC CPO Sub-Inspector
Exam. 06.09.2009)
42. Which one of the following is
not a method of estimating National Income ?
(1) Expenditure method
(2) Product method
(3) Matrix method
(4) Income method
Answer:
42. (3) The matrix method is a structural analysis method used as a fundamental principle in many applications in civil engineering. The method is carried out,
using either a stiffness matrix or a flexibility matrix.
Primarily there are three methods of measuring national income. The methods are product method, income method and expenditure method.

(SSC Combined Graduate Level
Tier-I Exam. 16.05.2010
(First Sitting)
43. National Income is the
(1) Net National Product at
market price
(2) Net National Product at factor cost
(3) Net Domestic Product at
market price
(4) Net domestic Product at factor cost
Answer:
43. (2) Net National Product at factor cost is also called
as national income. Net National Product at factor
cost is equal to sum total of value added at factor
cost or net domestic product at factor cost and net
factor income from abroad. NNP at factor cost = NNP
at Market Price -Net Indirect Tax. National income
measures the money value of the flow of output of
goods and services produced within an economy over
a period of time.ECONOMICS
SGAE–619

(SSC Combined Graduate Level
Tier-I Exam. 16.05.2010
(First Sitting)
44. The terms “Micro Economics”
and “Macro Economics” were
coined by
(1) Alfred Marshall
(2) Ragner Nurkse
(3) Ragner Frisch
(4) J.M. Keynes
Answer:
44. (3) The terms microeconomics and macroeconomics
were coined by Professor Ragnar Frisch of Oslo University for the first time in 1933 and since then they
gained popularity and were widely used by other economists. Now they have become an integral part of
economic terminology. Ragnar Anton Kittil Frisch was
a Norwegian economist and the co-winner with Jan
Tinbergen of the first Nobel Memorial Prize in Economic Sciences in 1969. Frisch was one of the
founders of economics as a modern science. He made
a number of significant advances in the field of economics and coined a number of new words.

(SSC Combined Graduate Level
Tier-I Exam. 16.05.2010
(Second Sitting)
45. Who defined investment as “the
construction of a new capital
asset like machinery or factory
building” ?
(1) Hansen (2) J.M. Keynes
(3) Harrod (4) J.R. Hicks
Answer:
45. (2) Investment expenditure refers to the creation of
new assets i.e. an addition to the stock of existing
capital assets. According to Keynes investment demand depends upon two factors: (a) Expected rate
of profit which he calls as Marginal Efficiency of Capital (MEC). Investment demand increases with the
increase in the expected rate of profit; (b) the rate of
interest (IR). Investment demand decreases with the
increase in the rate of interest.

(SSC (South Zone) Investigator
Exam. 12.09.2010)
46. An individual’s actual standard
of living can be assessed by
(1) Gross National Income
(2) Net National Income
(3) Per Capita Income
(4) Disposable Personal Income
Answer:
46. (3) The standard of living is a measure of the material welfare of the inhabitants of a country. The baseline measure of the standard of living is real national
output per head of population or real GDP per capita. This is the value of national output divided by the
resident population. Other things being equal, a sustained increase in real GDP increases a nation’s standard of living providing that output rises faster than
the total population.

(SSC Combined Graduate Level
Tier-I Exam. 19.06.2011
(First Sitting)
47. Rate of interest is determined by
(1) The rate of return on the
capital invested
(2) Central Government
(3) Liquidity preference
(4) Commercial Banks
Answer:
47. (4) Bank Rate is determined by the Reserve Bank of
India. The rate of interest is determined by the commercial banks in India. As per RBI notification, banks
are free to determine rates of interest subject to BPLR
and spread guidelines. Banks may, however, offer
loans at below BPLR to exporters or other creditworthy borrowers including public enterprises based on
a transparent and objective policy approved by their
Boards.

(SSC Combined Graduate Level
Tier-I Exam. 26.06.2011
(Second Sitting)
48. The total value of goods and
services produced in a country
during a given period is
(1) Disposable income
(2) National income
(3) Per capita income
(4) Net national income
Answer:
48. (2) National income is the total value a country’s final
output of all new goods and services produced in
one year. Understanding how national income is created is the starting point for macroeconomics.

(SSC CPO(SI, ASI & Intelligence
Officer) Exam. 28.08.2011 (Paper-1)
49. Per capita income is equal to
(1) National Income
Total Population of thecountry
(2) National Income + Population
(3) National Income – Population
(4) National Income × Population
Answer:
49. (1) Per capita income or average income or income
per person is the mean income within an economic
aggregate, such as a country or city. It is calculated
by taking a measure of all sources of income in the
aggregate (such as GDP or Gross National Income)
and dividing it by the total population.

(FCI Assistant Grade-II
Exam. 22.01.2012 (Paper-1)
50. ‘Personal Income’ equals
(1) The household sector’s income
(2) Private income minus savings of the corporate sector minus corporation tax
(3) Personal disposable income
plus miscellaneous receipts
of the Goverment
(4) All of the above
Answer:
50. (3) Disposable income is total personal income minus personal current taxes (or plus receipts of the
government). In national accounts definitions, personal income, minus personal current taxes equals
disposable personal income. Subtracting personal
outlays (which includes the major category of personal (or, private) consumption expenditure) yields
personal (or, private) savings

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