National Income - Part 2 - Topic Guide and MCQs

1. In 2015, the Government shifted the GDP base year from 2004-05 to which year?

   1. 2011-12
   2. 2010-11
   3. 2009-10
   4. 2022-23
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   Answer: (A) 2011-12

   Explanation: In 2015, the base year was shifted from 2004-05 to 2011-12. The measurement was also shifted from factor cost to market prices. The later series released on 27 February 2026 uses 2022-23 as its base year.

2. According to the GDP series released on 27 February 2026, India uses which base year for national-income calculation?

   1. 2011-12
   2. 2022-23
   3. 2020-21
   4. 2015-16
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   Answer: (B) 2022-23

   Explanation: The series released on 27 February 2026 uses 2022-23 as the base year. Earlier base years listed are 2011-12 and 2004-05. A base year enables comparison of national income across years at constant prices.

3. Consider the following statements about GNP:1.It measures production by a country’s citizens wherever they are.2.It excludes production by foreign nationals living in the country.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
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   Answer: (C) Both 1 and 2

   Explanation: Both statements are correct. GNP is based on citizens rather than territory, so it includes production by resident and non-resident citizens. Production by foreign nationals living in the country is not counted in GNP.

4. Which equation correctly states the relationship between GNP and GDP?

   1. GNP = GDP - NFIA
   2. GNP = GDP + Depreciation
   3. GNP = GDP - Depreciation
   4. GNP = GDP + NFIA
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   Answer: (D) GNP = GDP + NFIA

   Explanation: GNP equals GDP plus Net Factor Income from Abroad (NFIA). Depreciation is deducted to derive net measures such as NDP and NNP. NFIA captures the difference in cross-border factor income.

5. Assertion (A): GDP defines an economy on a territorial basis.Reason (R): GNP measures production by the citizens of a country.

   1. Both A and R are true but R is not the correct explanation of A
   2. Both A and R are true and R is the correct explanation of A
   3. A is true but R is false
   4. A is false but R is true
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   Answer: (A) Both A and R are true but R is not the correct explanation of A

   Explanation: Both statements are true, but the reason describes GNP rather than explaining the territorial basis of GDP. GDP measures production within domestic territory, whereas GNP measures production by citizens. This is the central difference between the two measures.

6. Gross Value Added (GVA) is obtained by:

   1. GDP + indirect taxes - subsidies
   2. GDP - indirect taxes + subsidies
   3. GDP - depreciation
   4. GNP - depreciation
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   Answer: (B) GDP - indirect taxes + subsidies

   Explanation: GVA equals GDP minus indirect taxes plus subsidies. It is the value of output minus the value of intermediate consumption and indicates the contribution of labour and capital to production. GDP minus depreciation is NDP, while GNP minus depreciation is NNP.

7. Match List I with List II:A.NDPB.NNPList II1.GNP - Depreciation2.GDP - DepreciationSelect 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
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   Answer: (C) A-2, B-1

   Explanation: NDP equals GDP minus depreciation, while NNP equals GNP minus depreciation. Depreciation is also called Consumption of Fixed Capital. Both NDP and NNP are net measures.

8. Which of the following is NOT one of the three methods of computing national income?

   1. Income Method
   2. Expenditure Method
   3. Production Method
   4. Exchange Rate Method
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   Answer: (D) Exchange Rate Method

   Explanation: Exchange Rate Method is not one of the three methods listed for computing national income. The three methods are Income, Expenditure and Production Method. Production Method is also called the Value Added Method or Output Method.

9. Gross National Happiness (GNH) measures, apart from economic output, which of the following?1.Environmental impact2.Mental and physical health3.Spiritual and cultural growthSelect the correct answer using the code below.

   1. 1, 2 and 3
   2. 2 and 3 only
   3. 1 and 3 only
   4. 1 and 2 only
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   Answer: (A) 1, 2 and 3

   Explanation: All three items are covered by GNH. It also considers the strength of corporate and political systems. GNH therefore goes beyond a measure based only on economic output.

10. The term Gross National Happiness was coined by:

    1. Mahbub ul Haq
    2. Jigme Singye Wangchuck
    3. Amartya Sen
    4. Simon Kuznets
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    Answer: (B) Jigme Singye Wangchuck

    Explanation: Jigme Singye Wangchuck, the King of Bhutan, coined the term Gross National Happiness in the early 1970s. Mahbub ul Haq and Amartya Sen developed HDI. Simon Kuznets gave the idea of national income.

11. Gross Sustainable Development Product (GSDP) was developed by which pair?

    1. UNDP and World Bank
    2. RBI and NITI Aayog
    3. Global Community Assessment Centre and Society for World Sustainable Development
    4. IMF and WTO
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    Answer: (C) Global Community Assessment Centre and Society for World Sustainable Development

    Explanation: GSDP was developed by the Global Community Assessment Centre and the Society for World Sustainable Development. It measures the economic impact of environmental and health degradation or improvement, resource depletion, and human activity on the environment. The other pairs are not identified as GSDP developers.

12. Which of the following are dimensions of the Human Development Index (HDI)?1.Health2.Education3.Standard of livingSelect the correct answer using the code below.

    1. 1 and 2 only
    2. 2 and 3 only
    3. 1 and 3 only
    4. 1, 2 and 3
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    Answer: (D) 1, 2 and 3

    Explanation: All three are dimensions of HDI. Health is measured through life expectancy at birth, education through mean and expected years of schooling, and standard of living through GNI per capita on a PPP basis. HDI is a summary measure of average achievement in these dimensions.

13. Match List I with List II:A.HealthB.EducationC.Standard of livingList II1.GNI per capita on PPP basis2.Life expectancy at birth3.Mean years of schooling and expected years of schoolingSelect the correct answer using the code below.

    1. A-2, B-3, C-1
    2. A-1, B-2, C-3
    3. A-3, B-1, C-2
    4. A-2, B-1, C-3
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    Answer: (A) A-2, B-3, C-1

    Explanation: Health is measured by life expectancy at birth, education by mean and expected years of schooling, and standard of living by GNI per capita on a PPP basis. Hence A-2, B-3 and C-1 is correct. These are the three stated HDI dimensions.

14. HDI was developed by Pakistani economist Mahbub ul Haq with which Indian economist?

    1. J. M. Keynes
    2. Amartya Sen
    3. Simon Kuznets
    4. Jigme Singye Wangchuck
    Show answer

    Answer: (B) Amartya Sen

    Explanation: Mahbub ul Haq developed HDI with Indian economist Amartya Sen. Simon Kuznets is associated with the idea of national income, while Jigme Singye Wangchuck coined GNH. HDI summarises average achievement in health, education and standard of living.

15. Which organisation publishes the Human Development Report every year?

    1. WTO
    2. IMF
    3. UNDP
    4. World Bank
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    Answer: (C) UNDP

    Explanation: UNDP publishes the Human Development Report every year. HDI is published in this report. IMF, WTO and the World Bank have different international economic roles.

16. What is Green GDP?

    1. GDP plus NFIA
    2. GDP measured at current prices
    3. GDP minus depreciation
    4. GDP adjusted for environmental damage
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    Answer: (D) GDP adjusted for environmental damage

    Explanation: Green GDP is GDP adjusted for environmental damage, including biodiversity loss and climate change. Nominal GDP is measured at current prices, NDP is GDP minus depreciation, and GNP is GDP plus NFIA. Green GDP incorporates environmental factors into the picture of economic growth.

National Income - Part 2 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.

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.

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.