Who gave the idea of national income in 1934?

Simon Kuznets gave the idea of national income in 1934. Keynes is associated with macroeconomic theory, while Amartya Sen and Mahbub ul Haq are linked with the Human Development Index. National income is commonly expressed as GDP.

Consider the following statements about national income: 1. It is the total money value of all final goods and services produced during a specific period. 2. It includes only the private sector. Which of the statements given above is/are correct?

1 only. Statement 1 is correct because national income values final goods and services produced during a specified period. Statement 2 is incorrect because both public and private sectors are included. Intermediate goods are not counted separately.

Assertion (A): Foreign embassies in India are not part of India’s domestic territory. Reason (R): Indian embassies abroad are part of India’s domestic territory.

Both A and R are true but R is not the correct explanation of A. Both the assertion and reason are true, but the reason does not explain the assertion. Foreign embassies in India are excluded from India’s domestic territory, whereas Indian embassies abroad are included. Domestic territory is the geographical area administered by the Government of India.

Which expression correctly converts Market Price (MP) into Factor Cost (FC)?

FC = MP - Indirect Taxes + Subsidies. Factor Cost equals Market Price minus indirect taxes plus subsidies. Market Price includes indirect taxes and excludes subsidies, whereas Factor Cost excludes indirect taxes and includes subsidies. This distinction is used in measures such as GDP at factor cost.

Match List I with List II: List I A. Nominal Price B. Base Price List II 1. Market price in the base year 2. Market price in the current year Select the correct answer using the code below.

A-2, B-1. Nominal Price is the market price in the current year, while Base Price is the market price in the base year. Current prices include the effect of prevailing inflation. Constant prices are another name for base-year prices.

Depreciation is also called:

Depreciation is also called Consumption of Fixed Capital. It is the loss in value of fixed assets due to wear and tear, accidental damage, or obsolescence. NFIA concerns factor income across countries, not loss in asset value.

Net Factor Income from Abroad (NFIA) is calculated as:

Factor income from abroad to India - factor income from India to abroad. NFIA is factor income earned abroad by normal residents of India minus factor income earned in India by non-residents. Factor income includes rent, wages, interest and profit. Exports minus imports is net exports, not NFIA.

Which of the following is NOT included in national income?

A scholarship received by a student. A scholarship is a transfer payment and is not included in national income. Transfer payments are one-sided payments for which no goods or services are exchanged. Wages, profit and rent are factor incomes linked to production.

Assertion (A): A higher Capital Output Ratio (COR) indicates lower efficiency of an economy. Reason (R): COR is the amount of capital needed to produce one unit of output.

Both A and R are true and R is the correct explanation of A. Both statements are true, and the reason explains the assertion. COR equals capital divided by output; more capital required for each unit of output implies lower efficiency. A lower COR therefore indicates higher efficiency.

What does Incremental Capital Output Ratio (ICOR) measure?

Additional capital needed to produce an additional unit of output. ICOR measures the additional capital required to produce an additional unit of output. It equals incremental capital divided by incremental output. Total capital divided by total output is COR, not ICOR.

Consider the following statements about GDP: 1. It counts only final goods and services. 2. It includes production by foreign nationals within the domestic territory. Which of the statements given above is/are correct?

Both 1 and 2. Both statements are correct. GDP measures final goods and services produced within domestic territory, including production by resident citizens and foreign nationals living within the country. Intermediate goods are excluded to avoid double counting.

In the expenditure identity GDP = C + I + G + NX, what does NX denote?

NX denotes net exports, which equals exports minus imports. C stands for consumption, I for investment and G for government spending. NFIA is used in the relation between GDP and GNP.

Which one of the following correctly describes GDP at Market Price (GDP MP)?

It includes indirect taxes and excludes subsidies. GDP at Market Price includes indirect taxes and excludes subsidies. GDP at Factor Cost has the opposite treatment: it excludes indirect taxes and includes subsidies. GDP MP is the market value of final goods and services produced within domestic territory in a financial year.

Match the factor of production with its place in GDP at Factor Cost: A. Land B. Labour C. Capital D. Entrepreneurship Which set contains only factors whose income is included in GDP at Factor Cost?

A, B, C and D. GDP at Factor Cost is the total income earned by all four factors of production: land, labour, capital and entrepreneurship. It excludes indirect taxes and includes subsidies. The question therefore requires all four items.

Match List I with List II: A. Real GDP B. Nominal GDP List II 1. Current market prices 2. Constant prices Select the correct answer using the code below.

A-2, B-1. Real GDP is measured at constant, or base-year, prices and does not include inflation. Nominal GDP is measured at current market prices and includes inflation. Thus A-2 and B-1 is the correct match.

The GDP Deflator is measured as:

Nominal GDP / Real GDP. GDP Deflator equals Nominal GDP divided by Real GDP. It compares national income at current prices with that at base-year prices and is therefore a measure of inflation. The other ratios are not the GDP Deflator formula.

Topic

National Income - Part 1 - Topic Guide and MCQs

Part of General Knowledge > Indian Economy - 16 questions, about 8 min, with an explanation after every answer.

Question count

about 8 min

Estimated time

Mixed

Difficulty

02 Nov 2026

Last updated

Quick answer

National Income - Part 1 is a topic inside General Knowledge (Indian Economy). It runs 16 untimed MCQs - roughly 8 min - and the review explains every answer once you submit.

Topic introduction

What National Income - Part 1 covers

The shape of the set before you start it.

National Income - Part 1 sits inside General Knowledge, under the Indian Economy lane, and the portal keeps it as one self-contained set: 16 questions, four options each, no clock and a written explanation behind every answer.

Attempt it once to find the gaps, read why each distractor is wrong, then retake the same set a few days later. The questions you miss twice are the ones worth writing down.

Curated by Gurpreet Singh · Punjab Police SI, Rank 2 (713/800) · Founder, House of Aspirants · Read his story →

Question bank

National Income - Part 1: all 16 questions

Read the question, pick an option, then open the answer.

Who gave the idea of national income in 1934?
1. Simon Kuznets
2. J. M. Keynes
3. Amartya Sen
4. Mahbub ul Haq
Show answer

Answer: (A) Simon Kuznets

Explanation: Simon Kuznets gave the idea of national income in 1934. Keynes is associated with macroeconomic theory, while Amartya Sen and Mahbub ul Haq are linked with the Human Development Index. National income is commonly expressed as GDP.
Consider the following statements about national income:1.It is the total money value of all final goods and services produced during a specific period.2.It includes only the private sector.Which of the statements given above is/are correct?
1. 2 only
2. 1 only
3. Both 1 and 2
4. Neither 1 nor 2
Show answer

Answer: (B) 1 only

Explanation: Statement 1 is correct because national income values final goods and services produced during a specified period. Statement 2 is incorrect because both public and private sectors are included. Intermediate goods are not counted separately.
Assertion (A): Foreign embassies in India are not part of India’s domestic territory.Reason (R): Indian embassies abroad are part of India’s domestic territory.
1. Both A and R are true and R is the correct explanation of A
2. A is true but R is false
3. Both A and R are true but R is not the correct explanation of A
4. A is false but R is true
Show answer

Answer: (C) Both A and R are true but R is not the correct explanation of A

Explanation: Both the assertion and reason are true, but the reason does not explain the assertion. Foreign embassies in India are excluded from India’s domestic territory, whereas Indian embassies abroad are included. Domestic territory is the geographical area administered by the Government of India.
Which expression correctly converts Market Price (MP) into Factor Cost (FC)?
1. FC = MP + Indirect Taxes - Subsidies
2. FC = MP - Indirect Taxes - Subsidies
3. FC = MP + Indirect Taxes + Subsidies
4. FC = MP - Indirect Taxes + Subsidies
Show answer

Answer: (D) FC = MP - Indirect Taxes + Subsidies

Explanation: Factor Cost equals Market Price minus indirect taxes plus subsidies. Market Price includes indirect taxes and excludes subsidies, whereas Factor Cost excludes indirect taxes and includes subsidies. This distinction is used in measures such as GDP at factor cost.
Match List I with List II:List IA.Nominal PriceB.Base PriceList II1.Market price in the base year2.Market price in the current yearSelect the correct answer using the code below.
1. A-2, B-1
2. A-1, B-2
3. A-1, B-1
4. A-2, B-2
Show answer

Answer: (A) A-2, B-1

Explanation: Nominal Price is the market price in the current year, while Base Price is the market price in the base year. Current prices include the effect of prevailing inflation. Constant prices are another name for base-year prices.
Depreciation is also called:
1. Net Factor Income from Abroad
2. Consumption of Fixed Capital
3. Intermediate Consumption
4. Net Exports
Show answer

Answer: (B) Consumption of Fixed Capital

Explanation: Depreciation is also called Consumption of Fixed Capital. It is the loss in value of fixed assets due to wear and tear, accidental damage, or obsolescence. NFIA concerns factor income across countries, not loss in asset value.
Net Factor Income from Abroad (NFIA) is calculated as:
1. Factor income from India to abroad - factor income from abroad to India
2. Exports - imports
3. Factor income from abroad to India - factor income from India to abroad
4. Indirect taxes - subsidies
Show answer

Answer: (C) Factor income from abroad to India - factor income from India to abroad

Explanation: NFIA is factor income earned abroad by normal residents of India minus factor income earned in India by non-residents. Factor income includes rent, wages, interest and profit. Exports minus imports is net exports, not NFIA.
Which of the following is NOT included in national income?
1. Wages earned for providing a service
2. Profit earned from production
3. Rent received for use of property
4. A scholarship received by a student
Show answer

Answer: (D) A scholarship received by a student

Explanation: A scholarship is a transfer payment and is not included in national income. Transfer payments are one-sided payments for which no goods or services are exchanged. Wages, profit and rent are factor incomes linked to production.
Assertion (A): A higher Capital Output Ratio (COR) indicates lower efficiency of an economy.Reason (R): COR is the amount of capital needed to produce one unit of output.
1. Both A and R are true and R is the correct explanation of A
2. Both A and R are true but R is not the correct explanation of A
3. A is true but R is false
4. A is false but R is true
Show answer

Answer: (A) Both A and R are true and R is the correct explanation of A

Explanation: Both statements are true, and the reason explains the assertion. COR equals capital divided by output; more capital required for each unit of output implies lower efficiency. A lower COR therefore indicates higher efficiency.
What does Incremental Capital Output Ratio (ICOR) measure?
1. Capital needed to produce total output
2. Additional capital needed to produce an additional unit of output
3. Loss in value of fixed capital
4. Value of output minus intermediate consumption
Show answer

Answer: (B) Additional capital needed to produce an additional unit of output

Explanation: ICOR measures the additional capital required to produce an additional unit of output. It equals incremental capital divided by incremental output. Total capital divided by total output is COR, not ICOR.
Consider the following statements about GDP:1.It counts only final goods and services.2.It includes production by foreign nationals within the domestic territory.Which of the statements given above is/are correct?
1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2
Show answer

Answer: (C) Both 1 and 2

Explanation: Both statements are correct. GDP measures final goods and services produced within domestic territory, including production by resident citizens and foreign nationals living within the country. Intermediate goods are excluded to avoid double counting.
In the expenditure identity GDP = C + I + G + NX, what does NX denote?
1. Non-tax revenue
2. National expenditure
3. Net factor income
4. Net exports
Show answer

Answer: (D) Net exports

Explanation: NX denotes net exports, which equals exports minus imports. C stands for consumption, I for investment and G for government spending. NFIA is used in the relation between GDP and GNP.
Which one of the following correctly describes GDP at Market Price (GDP MP)?
1. It includes indirect taxes and excludes subsidies
2. It excludes indirect taxes and includes subsidies
3. It excludes both indirect taxes and subsidies
4. It includes both indirect taxes and subsidies
Show answer

Answer: (A) It includes indirect taxes and excludes subsidies

Explanation: GDP at Market Price includes indirect taxes and excludes subsidies. GDP at Factor Cost has the opposite treatment: it excludes indirect taxes and includes subsidies. GDP MP is the market value of final goods and services produced within domestic territory in a financial year.
Match the factor of production with its place in GDP at Factor Cost:A.LandB.LabourC.CapitalD.EntrepreneurshipWhich set contains only factors whose income is included in GDP at Factor Cost?
1. A and B only
2. A, B, C and D
3. A, B and C only
4. B, C and D only
Show answer

Answer: (B) A, B, C and D

Explanation: GDP at Factor Cost is the total income earned by all four factors of production: land, labour, capital and entrepreneurship. It excludes indirect taxes and includes subsidies. The question therefore requires all four items.
Match List I with List II:A.Real GDPB.Nominal GDPList II1.Current market prices2.Constant pricesSelect the correct answer using the code below.
1. A-1, B-2
2. A-1, B-1
3. A-2, B-1
4. A-2, B-2
Show answer

Answer: (C) A-2, B-1

Explanation: Real GDP is measured at constant, or base-year, prices and does not include inflation. Nominal GDP is measured at current market prices and includes inflation. Thus A-2 and B-1 is the correct match.
The GDP Deflator is measured as:
1. Real GDP / Nominal GDP
2. GNP / GDP
3. GDP at Factor Cost / GDP at Market Price
4. Nominal GDP / Real GDP
Show answer

Answer: (D) Nominal GDP / Real GDP

Explanation: GDP Deflator equals Nominal GDP divided by Real GDP. It compares national income at current prices with that at base-year prices and is therefore a measure of inflation. The other ratios are not the GDP Deflator formula.

Why it matters

Why National Income - Part 1 is worth the hours

Where the marks actually come from.

National Income - Part 1 is factual rather than analytical: you either recall it in seconds or you lose the mark to somebody who did. That makes it one of the cheapest sections to convert - a handful of short sittings usually settles the whole cluster.

Exam relevance

Exams where National Income - Part 1 matters

Derived from the subject and lane this topic belongs to.

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A tighter syllabus: general awareness, Punjabi and basic reasoning. Perfect for a daily quiz habit - short sessions, high consistency.

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Punjab Police recruits across several posts - Constable, ASI, Sub-Inspector, Intelligence Assistant and Jail Warder each have their own page below. Start with your post, then drill the shared subjects as daily MCQs.

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Expected questions

Expected questions from National Income - Part 1

What an examiner usually reaches for in this cluster.

Expect one-line recall questions - definitions, stand-for expansions, identifiers and the ordering of things. Practise the wording as well as the concept: these papers test terminology, and the set above uses the same four-option shape they do.

Daily habit

Keep the Expected MCQs habit running

20 fresh mixed questions a day, plus the current-affairs sets examiners keep reusing.

Daily Quiz Expected MCQs

Previous year questions

Previous Year Questions

How this topic behaves in real papers.

Past papers reuse clusters like this almost verbatim across years and posts. Run the same set until every distractor is familiar - previous-year style questions stop being recall and start being free marks.

Where the previous-year sets live

The portal's previous-year practice runs through the General Knowledge lane and the daily mixed quiz.

Previous Year Questions Daily Quiz

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Take the National Income - Part 1 quiz

16 questions, about 8 min, instant scoring and a full review at the end.

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Questions

National Income - Part 1 - common questions

Answered against the set as it is published today.

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How long is the National Income - Part 1 quiz?

National Income - Part 1 runs 16 untimed questions - about 8 min at a steady pace. The set clears at 40% and you can retake it as often as you like.

What kind of questions does National Income - Part 1 ask?

The set answers that: each question carries four options and a full explanation, so you learn the wording an examiner uses, not just the fact behind it.

Where else can I practise General Knowledge?

Open the quiz page above, or start from the General Knowledge subject page if you want to drill neighbouring lanes in the same sitting.

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