introduction to macro economics section 3 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Since 1955 the national income estimates are being prepared by Central Statistical Organization.

The CSO uses different methods like the Product Method, Income Method and Expenditure method for various sectors in the process of estimating the National Income.

Answer: (b)

Closing stock refers to the goods remaining unsold during the year. It includes finished products, raw materials, or work in progress and is deducted from the period's costs in the balance sheets.

The amount of closing stock (properly valued) is used to arrive at the cost of goods sold in a periodic inventory system with the following calculation:

Opening stock + Purchases - Closing stock = Cost of goods sold.

Answer: (d)

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.

Answer: (c)

Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called “State Excise” duty. The Excise duty on rest of goods is called “Central Excise” duty.

Answer: (c)

Capital Output Ratio is the ratio of capital used to produce 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 capital with natural resources in order to increase the output. When countries use their natural resources instead of capital then COR reduces.

Answer: (d)

Intermediate consumption is an accounting flow that consists of the total monetary value of goods and services consumed or used up as inputs in production by enterprises, including raw materials, services and various other operating expenses.

Intermediate consumption (unlike fixed assets) is not normally classified in national accounts by type of good or service, because the accounts will show net output by sector of activity.

Because this value must be subtracted from Gross Output to arrive at GDP, how it is exactly defined and estimated will importantly affect the size of the GDP estimate.