Understanding National Income Concepts

What is the primary purpose of national income accounting?

• To determine the country's geographical boundaries.

• To calculate the population growth rate.

• To assess the environmental impact of industries.

• To measure a country's economic performance and guide policy decisions.

Define Gross Domestic Product (GDP) and its significance.

• Gross Domestic Product (GDP) is the total monetary value of all finished goods and services produced within a country's borders in a specific time period.

• GDP is the average income of individuals in a country.

• GDP is the total value of all imports and exports of a country.

• Gross Domestic Product (GDP) measures the happiness of a country's citizens.

How is Net National Product (NNP) calculated from GDP?

• NNP = GDP - Depreciation

• NNP = GDP + Depreciation

• NNP = GDP x Depreciation

• NNP = GDP / Depreciation

What are the main factors that influence income distribution in an economy?

• Education and skill levels, labor market conditions, government policies, economic growth, and social factors.

• Cultural traditions and customs

• Personal preferences and hobbies

• Geographic location and climate

Identify at least three factors that contribute to economic growth.

• Increased government spending

• Capital accumulation, technological advancement, labor force growth

• Decreased international trade

• Higher interest rates

Explain the relationship between inflation and national income.

• Inflation can positively influence national income by increasing wages and spending, but excessive inflation can harm economic growth.

• Inflation has no effect on national income.

• Inflation only affects prices, not income.

• National income decreases as inflation rises.

What is the difference between nominal and real GDP?

• Nominal GDP is always higher than Real GDP.

• Real GDP measures total economic output without considering inflation.

• Nominal GDP includes only government spending.

• Nominal GDP is not adjusted for inflation, while Real GDP is adjusted for inflation.

How does government policy impact national income levels?

• National income is solely determined by global market trends.

• Government policy affects national income by influencing spending, taxation, and investment.

• Government policy has no effect on national income levels.

• Government policy only impacts income distribution, not overall national income.