Q Define National Income.
Ans:- National income means the total value of goods and services produced annually in a country. In other words, the total amount of income accruing to a country from economic activities in a year's time is known as national income. It includes payment made to all resources in the form of wages, interest, rent and profit.
Q. Define Gross Natiinal Product (GNP).
Ans:- Gross National Product (GNP) is the total measure of goods and services at market value resulting from current production during a year in a country, including net income from abroad. GNP includes four types of final goods and services :-
a. consumers goods and services ,
b. gross private domestic investment in capital goods consisting of fixed capital formation, residential construction and inventories of finished and unfinished goods,
c. goods and services produced by the government, and
d. net exports of goods and services, i.e. , the differences between value of exports and imports of goods and services, known as net income from abroad.
Q. Define Disposable Income.
Ans:- Disposable income or personal disposable income means the actual income which can be spent on consumption by induviduals and families. In order to obtain the disposable income direct taxes are deducted from personal income. Thus,
Disposable Income = Personal Income - Direct Taxes.
Q. Define Per Capita Income.
Ans:- The average income of the people of a country in a particular year is called Per Capita Income for that year.
Thus,
Per Capita Income for 2019 = National Income for 2019/Population in 2019
Similarly,
Real Per Capita Income for 2019 = Real National Income for 2019/ Population in 2019
Q. Mention the four methods of measuring national income.
Ans:- There are four methods of measuring national income. They are:-
a. Product Method.
b. Income Method.
c. Expenditure Method.
d. Value Added Method.
Q. Define the term flow and stock in economics.
Ans:- A flow is a quantity that is measured with reference to a period of time.
Eg; National Income, National Expenditure, etc.
A stock is a quantity that is measured at a particular point of time.
Eg; National Wealth, National Capital, etc.
Q. Distinguish between stocks and flows in regards to national income.
Ans:- The main difference between stock and flow are:-
a. A flow shows change during a period of time whereas a stock indicates the number of variables at a point of time.
b. Flow is time dimensional whereas stock is not time dimensional.
c. Flow is a dynamic concept whereas stock is a static concept.
Q. What is the circular flow of income and expenditure?
Ans:- The circular flow of income and expenditure refers to the process whereby the income and expenditure of an economy flow in a circular manner continuously through time.
Q. Define goods.
Ans:- In economics, goods are anything which is capable of satisfying human wants or anything which has utility. Eg; a pen, water, etc.
Q. Define economic goods.
Ans:- In economics, goods which are not freely available and which can only be obtained in exchange of other goods or money are economic goods. Eg; a pen, rice, etc.
Q. Define free goods.
Ans:- Goods that are freely available and which can be obtained without any payment are know as free goods. Eg; air, sea water, etc.
Q. What is Intermediate Goods?
Ans:- Goods and services that are purchased by a manufacturer to be used as inputs or components in the production of other goods are referred to as intermediate goods. Eg; papers, cotton, etc.
Q. What is final goods?
Ans:- A final goods or consumer goods is any commodity that is produced or consumed by the consumer to satisfy current wants or needs. Eg; pen, pencil, etc.
Q. What is Investment?
Ans:- Investment refers to the utilization or allocation of savings for the production of both capital goods and consumer goods. In other words, investment means an addition to the capital equipment which leads to an increase in the level of income and production by increasing the production and purchase of capital goods.
Q. Define Gross Investment.
Ans:- Gross Investment refers to the total addition made to the capital stock of the economy in a given period of time. In other words, it is the expenditure on the purchase of fixed capital assets and unsold stock during a given period of time.
Q. Define Net Investment.
Ans:- The actual addition made to the capital stocks of the economy in a given period of time is known as Net Investment.
Net Investment = Gross Investment - Depreciation
Q. What is Depreciation?
Ans:- Depreciation refers to the wear and tear of a capital asset beyond it's expected capacity or utility. In other words, it refers to the continuing, permanent, and gradual decrease in the value of a capital asset due to wear and tear.
Depreciation is also known as:-
a. Current Replacement Cost;
b. Replacement Cost of Fixed Capital;
c. Capital Consumption Allowance.
More Articles:-
Introduction to Microeconomics Part 1
Introduction to Microeconomics Part 2
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