NY AND RELATED AGGREGATES ASSERTION AND REASON

NATIONAL INCOME AND RELATED AGGREGATES ASSERTION AND REASON Q.1 ASSERTION and REASONING ASSERTION (A): The goods which are used either for resale or for further production in the same year are Intermediate Goods REASONING (R) : Intermediate Goods are included in National Income Ans: A is true, but R is false Q2. Read the following statements - Assertion (A) and Reason (R). Assertion (A): Value addition can also take place even when the commodity does not go through any transformation. Reason(R): It happens when a commodity is purchased for resale. Alternatives: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (c) Assertion (A) is true but Reason (R) is false. (d) Assertion (A) is false but Reason (R) is true. Q.3 Choose one of the correct alternatives given below: Assertion (A):Gross domestic capital formation can be less than gross fixed capital formation Reason(R):If change in stock is negative. (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (c) Assertion (A) is true but Reason (R) is false (d) Assertion (A) is false but Reason (R) is true. Q.4 Assertion (A): An item that is meant for final use and will not pass through any more stages of production or transformations is called a final good Reason (R): It will not undergo any further transformation at the hands of any producer, but many such final goods are transformed during their consumption Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

Q.5 Assertion(A ) The problem of double counting leads to under estimation of the national income of the country. (1 M) Reason (R ) Double counting arises when value of a good is counted more than once while measuring the value of national income during the production process. (Choose correct alternative) a. Both Assertion and Reason are true and Reason is the correct explanation of Assertion. b. Both Assertion and Reason are true and Reason is not correct explanation of the Assertion c. Assertion is true but Reason is false d. Assertion is false and Reason is true. Q.6 Assertion (A): Domestic income of a country can be more than its National income. Reason(R): It is possible when factor income paid abroad is more than factor income received from abroad Both (A) and (R) are true and (R)is the correct explanation of (A) Q.7 Assertion(A): Growing vegetables in a kitchen garden of the house is included in national income Reason (R): It is difficult to estimate value of production as it is non market transaction (A) is false and (R) is correct explanation of (A) Q.8 Assertion: Compensation to flood victims is not included while computing national income. Reason: Transfer income does not contribute to the current flow of good and services. Both assertion and reason are true and reason is the correct explanation of assertion. Q.9 Assertion: National Income is always greater than domestic income. Reason: National Income is greater than domestic income only when net factor income from abroad is some positive number Ans. If both assertion and reason are true, and reason is the correct explanation of assertion. Q.10 ASSERTION (A): Nominal Value is money value or value measured in term of prices that prevail at the time of measurement.

REASON (R): A Russian worker who lives and works in Spain and sends a large part of her income to her family in Russia. The value of output is included in Spain’s GDP, but her income sent to Russia is part of Russia’s GNI. Ans. Both Assertion (A) and Reason (R)are true and Reason (R)is not the correct explanation of Assertion (A). Q.11 Assertion (A): NDPFC is the income earned by the factors of production in the form of wages, profits, rent, interest, etc. within the domestic territory of a country. Reason (R): Domestic income generated in the production process within the domestic territory of the country get distributed among the factors of production. Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.12 Assertion: Finance Minister Nirmala Sitharaman has announced another ―Rahat package programme‖ to revive GDP of country. Reason: IMF says, India’s GDP may contract 10.3% in FY21.. Ans. both assertion and reason are true but reason is not the correct explanation of assertion Q.13 Assertion (A): Purchase of a car always means the purchase of a final good. Reason (R): It depends on the end-use of the car. If it is purchased by a household, it is a final good. It is like a consumer durable, If it is purchased by taxi. Assertion (A) is false but Reason (R) is true. 1 Q.14 Assertion (A): The change of inventories of a firm during a year ≡ production of the firm during the year – sale of the firm during the year. Reason (R): Inventory is a stock variable. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). Q.15 Assertion (A): Change in taste and preference of Indian consumers towards MNCs and imported goods leads to decrease in its GDP. Reason (R): Expenditure on imports of goods is subtracted from final expenditure in order to estimate GDP. Both A and R are true and R is the correct explanation of A. Q16 Assertion (A): Expansion of Indian industries abroad leads to increase in income of the country but does not adds to the per capita GDP of the country. Reason (B): Production done in subsidiaries of Indian industries abroad adds to the

GDP of the country in which they are operating. Both A and R are true and R is the correct explanation of A. Q.17 Assertion: Services are non material goods which cannot be seen or touched. Reason: Goods satisfy human wants directly whereas Services satisfy human wants indirectly. Assertion(A) is true but Reason(R) is false. Q.18 Assertion (A): Part of the output produced by a farmer and used for his own family consumption is not included under product method. Reason (R): One of the ways to avoid double counting, is to take only value added instead of total output Assertion (A) is false, but Reason (R) is true. Q.19 Assertion : Real GNP is used for making comparisons of international standards of living and rates of economic growth of various countries. Reason : Nominal GNP may be increasing due to rise in price level, the quantity of goods and services produced may remain constant. Both A and R is true and R is the correct explanation of A. Q.20 Assertion: Intermediate goods refer to those goods which are used for resale or for further production in the same year. Reason: These goods are purchased by firms for capital formation. : Assertion (A) is true but Reason (R) is false. . Q.21 Assertion (A): Services produced for self consumption by consumers are not included in the estimation of national income.

Reason (R): These services do not enter the market and there is no data available of these non market transactions eg. - electric faults repaired by households. Answer :- Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.22 Assertion (A): Purchase of wheat in the wholesale market done by the traders is to be treated as the purchase of intermediate good and by the households is to be treated as the purchase of final good. Reason (R): Both traders and households purchase wheat from the wholesale market in bulk but traders are not the final users of wheat. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.23 Assertion (A): During the second quarter of 2020, GDP growth of India has been -23% Reason (R): Negative GDP growth has adversely affected welfare of people Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A) Q.24 Assertion (A) – Sneha has a kitchen garden in her house. In the year 2019-20, she grew vegetables like tomatos, potatos, carrots and beans in her garden. The market value of these vegetables was Rs. 8200, so the GDP of the country increased by Rs. 8200. Reason (R) – The value of GDP increased because the value of goods for self- consumption is included in national income accounting. Both A and R are true and R is the correct explanation of A. Q.25 Assertion (A): Households are the owners of the factors of production. Reason (R): National Income is the sum total of factor Income. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)

Q.26 Assertion (A): When calculating the total value of goods and services produced in a country, the value of all goods and services at each stage of production should be calculated. Reason (R) : At each stage of production, some value is added to a good or service, therefore, the value added at each stage of production is added to derive the total value of goods and services in the economy. Both A and R are false. Q.27 Assertion(A):Decline in G.D.P. Reason (R) : India’s economy is affected by demand depression, high unemployment , resulting in poverty. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion(A). Q.28 Assertion(A): About 27.79 lakh of loss is recorded in primary sector due to COVID-19 Pandemic. Reason (R) : Limited migratory harvest labour and Agri-machinery due to absence of transport facilities clubbed with vigilant blocking of roads with other factors. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion(A). Q.29 Assertion (A) – Government provides services for social welfare. Reason (R)– Government provides free medical services. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.30 Assertion: Expenditure on replacement of engine in a car owned by a corporate enterprise is intermediate consumption. Reason: Expenditure on new parts of the fixed assets is included in intermediate consumption. Both A and R are wrong. Although expenditure on new parts of the fixed assets is included in intermediate consumption but the conditions are i) the life of new part may be around one year or slightly more .ii) The value should be relatively small. Replacement of engine thus does not qualify for intermediate consumption.

Q.31 Assertion(A ) The problem of double counting leads to under estimation of the national income of the country. Reason (R ) Double counting arises when value of a good is counted more than once while measuring the value of national income during the production process. (Choose correct alternative) Assertion is false and Reason is true. Q.32 Assertion : India’s GDP contracted by 23.9 % in the last quarter Reason : COVID -19 had a negative impact on the world economy. Assertion is correct and Reason is supporting assertion Q.33 Assertion(A): ―Gross Domestic Product (GDP) does not give us a clear indication of economic welfare of a country.‖ Reason (R) : GDP may not take into account Non-monetary exchanges like services of housewife, Externalities i.e. benefits and harms which are caused due to economic activities and Distribution of income. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion(A). Q.34 Assertion(A): All capital goods are producer goods, but all producer goods are not capital goods. Reason (R) : Producers goods are defined as all those goods which are used in the production of others goods which includes capital and intermediate goods, whereas, capital goods are the fixed assets (like machinery, building, etc) used by the producers in the production of goods and services Ans: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion(A). Q.35 Assertion (A): Machine bought by a firm for its own use is a final good. Reason (R): Final goods include both consumption and investment expenditure.

Ans-Both Assertion (A) and Reason (R) are true and the Reason (R) is the correct explanation of Assertion (A) Q.36 Assertion (A): Payment of Corporate Tax by a firm is not included in national income. Reason (R): Profit is a residual factor payment by the production unit to factor service providers. Ans-Both Assertion (A) and Reason (R) are true and the Reason (R) is not the correct explanation of Assertion (A) Q.37 Assertion (A) : Decline in G.D.P. Reason (R) : India’s economy is affected by demand depression, high unemployment , resulting in poverty. Ans: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). Q.38 Assertion (A): About 27.79 lakh of loss is recorded in primary sector due to COVID-19 Pandemic. Reason (R) : Limited migratory harvest labour and Agri-machinery due to absence of transport facilities clubbed with vigilant blocking of roads with other factors. Ans: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct Q.39 Assertion- Interest on debenture is an integral part of National Income.Reason- Debenture represents a loan by production unit, thus interest on it is a factor payment. Both Assertion and Reason are true and reason is the correct explanation of assertion. Q.40 Assertion (A) : Public debt is treated as a transfer income. Reason ( R) : public depth taken by the government from general public is generally used to meet its consumption or administration. .Both Assertion (A)and Reason (R )are true and Reason(R) is the correct explanation of assertion (A).

Q.41 Assertion (A) : Exports of goods and services included in in Gross Domestic Product. Reason (R) : Yes, it will be included in national income as sum total of expenditure of the domestically produced goods and services during an accounting year is called GDP. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). Q.42 Assertion: Wages earned by Labour will be included in N.I. Reason: Wages are factor Income. Answer: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). Q.43 Assertion: Factor incomes contribute to increase in GDP. Reason: Scholarship will be added in N.I. as it is a factor payment. Answer: Assertion (A) is true and Reason (R) is false. Q.44 Assertion: Rewards of factor of production are included in calculation of N.I. Reason: These are the vital components of N.I. Answer: Both Assertion (A) and Reason (R) is true and Reason (R) is the correct explanation of Assertion (A). Q.45 Assertion: To calculate Value of Output we will add Sales + Exports. Reason: Sales are equals to Value of Output is there is no Change in Stock. Answer: Assertion (A) is False but Reason (R) is True. Q.46 Assertion: National income of a country is a stock concept. Reason: It is a flow concept as it is measured over a period of time. A is true but R is false.

Q.47 Assertion (A) : Services of housewives are not included in national income. Reason (R) : Love and affection for family members cannot be measured in terms of money. Ans. a) Both (A) and (R) are true and (R) is the correct explanation of (A). Q.48 ASSERTION (A): Corporation Tax is not include in National Income REASONING (R) : All transfer payments are not included in National Income. Ans: Both A and R are true and R is not the correct explanation of A Q.49 ASSERTION (A): An American working in World Bank in India for more than one year is considered as Normal resident of India. REASONING (R) : Normal resident is said to be one who ordinarily resides in the country concerned and whose center of economic interest lies in that country. Ans: A is false, but R is True Q.50 Assertion (A) Gross Domestic Product at factor cost is greater than Gross Domestic Product at market price. Reason (R): When subsidies are more than indirect taxes Q.51 Assertion (A): Double counting means counting the value of the same product more than once. Reason(R): Value of intermediate goods get included because every producer treat the commodity he/ she sells as final. Both Assertion (A) and Reason(R) are true, and Reason ® is not the correct explanation of Assertion. Q.52 Assertion (A): Real GDP is a True indicator economic growth as compared to Nominal GDP. Reason (R): Real GDP is based on base year prices whereas Nominal on current year prices. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

Q.53 Assertion: India is one of the worst affected countries in terms of GDP due to Covid 19. Reason: GDP does not take into account non-monetary transactions Ans. Both A and R are correct but R is not the correct explanation for A Q.54 Assertion (A) : There is decline National Income of India in past few years. Reason (R) : India’s economy is suffering from high rate of unemployment , resulting in poverty. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). Q.55 A: NNPfc = NDPfc + Factor income earned by normal residents from abroad – factor payments made to abroad R: Domestic income incorporates all the activities which are produced within domestic territory irrespective of the fact whether it's been produced by normal residents or non residents. Ans: Both A and R are true but R is not the correct explanation of A. Q.56 Assertion (A) Government purchases Rafale fighter for defence purpose. It is included in the estimation of national income. Reason (R) It is part of intermediate consumption of the government Q.57 Assertion (A) Pension to retired government employee is not included in the estimation of national income Reason (R) It is deferred payment which employees get later. It is already included in estimation of national income when it is deducted Q.58 Assertion (A) : Exports of goods and services included in in Gross Domestic Product. Reason (R) : Yes, it will be included in national income as sum total of expenditure of the domestically produced goods and services during an accounting year is called GDP. Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Q.59 Assertion (A) : Public debt is treated as a transfer income. Reason ( R) : public depth taken by the government from general public is generally used to meet its consumption or administration. Both Assertion (A)and Reason (R )are true and Reason(R) is the correct explanation of assertion(A). Q.60 Assertion (A):- Payment of bonus to school teachers is included while estimating national income. Reason (R) :- It is compensation of employees and is paid to the teachers for the services rendered to the school. Alternatives: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.61 (A) In national income subsidies are added indirect taxes are substracted. (R) Indirect taxes are not received by factors of production but subsidies are received by factors of production for contributing towards production. Alternatives Both (A) and (R) are true and (R) is the correct explanation of (A) Q.62 Assertion (A): Indians working in the office of the United Nations Organization in India are normal residents of India Reason (R): Normal resident is one whose center of economic interest lies in the domestic territory of the country in which he lives. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). Q.63 Assertion (A): With every increase in the level of GDP, social welfare increases in an economy. Reason (R): If increase in the level of GDP is associated with higher level of income inequalities, social welfare may not increase. Assertion (A) is false but Reason (R) is true

Q.64 Assertion (A): India’s GDP shrank 7.5% yoy in Q3 2020, less than expectations of an 8.8% drop, amid easing of lockdown restrictions from June. Reason (R): Higher demand during festival season and a rebound in manufacturing and utilities. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.65 Assertion: indirect taxes accrue to the government, and not to the production units. Reason: indirect taxes are paid directly to the government as no good and service is provided in return. Both, A and R, are true but R is not the correct explanation of A Q.66 Assertion(A) . All producer goods are not capital goods. Reason(R) . All capital goods are producer goods. Assertion(A) is false but Reason(R)is true. Q.67 Assertion (A): GDP is the market value of all final goods and services produced within a domestic territory of a country measured in a year. Reason (R): All production done by the national residents or the non-residents in a country gets included, regardless of whether that production is owned by a local company or a foreign entity. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.68 Assertion: In India National Income is rising, but not the per capita income Reason: In India the rate of population growth is higher than the growth of national income. Both reason and assertion are true and reason is the correct explanation of the assertion Q.69 Assertion: Unilateral transfers are not treated in the calculation of national

income. Reason: Unilateral transfers come in the form of gifts, donations etc. Both reason and assertion are true and reason is not the correct explanation of the assertion Q.70 Assertion: National income at current prices can increase even when quantum of goods and services produced during the year remains constant. Reason: Increase in price level can cause an increase in national income at current prices without increase in quantum of goods and services produced. Both reason and assertion are true and reason is the correct explanation of the assertion Q.71 Assertion: Services of a housewife are included in estimating national income. Reason: Services of a housewife increase the social welfare and there are no appropriate data for the same. Reason is true, but assertion is false Q.72 Assertion: Externalities may be positive or negative. Reason: Externalities are not at all related with social welfare. Q.73 Assertion (A): Transfer earning are not to be included in the national income estimation. Reason (R): Transfer earning are not payments for factor services. Both A and R are not true but R is the correct explanation of A. Q.74 Assertion (A): Continuous increase in Real National Income is an indication of economics growth. Reason (R): Increase in National Income does not necessarily reflect increase in per capita income. Both A and R are true but R is not correct explanation of A.

Q.75 Assertion (A): The GNP is the value of goods and services produced annually in the nation. Reason (R): The most comprehensive measure of national output is the GNP. A is true but R is false. Q.76 Assertion (A): banking sector’s contribution to national income is zero. Reason (R): By the usual methods of calculation, the net factor payment in the banking sector amount to zero. A is false but R is true. Q.77 Assertion: GDP per capita income shows the level of economic development in comparison to other countries. Reason: GDP rate of growth shows the performance of economy. Answer: (a) both A and R are true and R is the correct explanation of A. Q.78 ASSERTION: Non-monetary exchanges are not considered for the estimation of domestic income. REASON: This transaction such as domestic services rendered by a housewife and a parent teaching her child.it is difficult to ascertain their market value and not rendered for the purpose of earning income. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.79 Assertion (A): An item that is meant for final use and will not pass through any more stages of production or transformations is called a final good. Reason (R): It will not undergo any further transformation at the hands of any producer, but many such final goods are transformed during their consumption Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.80 Assertion (A): Purchase of a car by a consumer is included in calculation of National Income. Reason (R): Gross Domestic Capital Formation is a part of National Income. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct

explanation of Assertion (A) Assertion(A) and Reason(R), both are correct but Reason(R) is not a correct explanation since purchase of a car by a consumer is part of Private Final Consumption Expenditure and not Gross Domestic Capital Formation.. Q.81 Assertion—Income from self consumed output is to be included in National income, Reasoning –A house owner living in his own house is assumed to be paying rent to himself for using up of the factor services. both are correct as self consumed output is definitely a part of the current year’s production. Q.82 Assertion(A): Goods that are ultimately consumed rather than used in the production of another good are known as final goods. Reasoning(R): Components sold to car manufacturers are type of final goods. Q.83 Assertion (A): Domestic income of a country can be more than its national income Reason (R) ; it is possible when factor income to abroad is more than factor income received from abroad Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) Q.84 Assertion(A):GDP can be greater than GNP. Reason (R) : NFIA can never be negative. Assertion (A) is true but Reason (R) is false. Q.85 Assertion (A): India’s GDP is forecast to contract 5.9% in 2020 and recover to 3.9% next year, the UNCTAD report said Reason (R): India is experiencing impacts of world-wide deep recession amid a still- unchecked pandemic. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion(A).