National Income & Gross Domestic Product

11. Suppose an Indian citizen makes an investment abroad and earns a posit

Suppose an Indian citizen makes an investment abroad and earns a positive return on her investment. Which of the following is correct ?

[amp_mcq option1=”Her income is part of India’s GDP, but not part of India’s national income.” option2=”Her income is part of India’s national income, but not part of India’s GDP.” option3=”Her income is part of both India’s GDP and national income.” option4=”Her income is neither part of India’s GDP, nor its national income.” correct=”option2″]

This question was previously asked in
UPSC CAPF – 2023
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Gross Domestic Product (GDP) measures the total value of goods and services produced *within the geographic boundaries* of a country during a specific period. Gross National Income (GNI), often referred to historically as Gross National Product (GNP), measures the total income earned by the *residents* of a country, regardless of where the income is earned. GNI = GDP + Net Factor Income from Abroad (NFIA). NFIA is the difference between factor income (like wages, profits, interest, dividends) earned by residents from abroad and factor income paid to non-residents for their contributions within the country. Income earned by an Indian citizen on an investment abroad is factor income earned by a resident from outside India. This income contributes to India’s national income (GNI) but is not part of India’s GDP as it was generated outside the country’s borders.
– GDP measures production within geographical boundaries.
– National Income (GNI/GNP) measures income earned by residents, regardless of location.
– Income earned by residents from abroad is part of National Income but not GDP.
For many developed countries with significant foreign investments or income from citizens working abroad, GNI is typically higher than GDP. For countries with substantial foreign investment within their borders or many non-residents earning income domestically, GDP may be higher than GNI. The transaction described is a positive component of NFIA for India.

12. In the first quarter of fiscal year 2020-21, GDP contracted by 23·9 pe

In the first quarter of fiscal year 2020-21, GDP contracted by 23·9 percent and in the second quarter, by 7·5 percent. The Economic Survey, 2020-21 preferred to call it a recovery in

[amp_mcq option1=”U-shape” option2=”V-shape” option3=”K-shape” option4=”W-shape” correct=”option2″]

This question was previously asked in
UPSC CAPF – 2022
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The correct answer is B) V-shape.
– The data presented (GDP contraction of 23.9% in Q1 and 7.5% in Q2) shows a sharp decline followed by a significant rebound (or lessening of the decline).
– A V-shaped recovery is characterized by a rapid fall in economic activity followed by an equally rapid and sustained recovery. This pattern aligns with the data reflecting the impact of and recovery from the COVID-19 pandemic and associated lockdowns.
– The Economic Survey 2020-21 explicitly used the term “V-shaped recovery” to describe India’s economic trajectory after the initial steep contraction caused by the pandemic-induced lockdown.
– Other shapes describe different recovery patterns: U-shape (prolonged slump before recovery), K-shape (different sectors/groups recover at different rates, widening inequality), W-shape (double-dip recession).

13. The amount by which the equilibrium level of real GDP exceeds the full

The amount by which the equilibrium level of real GDP exceeds the full employment level of GDP is called

[amp_mcq option1=”recessionary gap” option2=”inflationary gap” option3=”income multiplier” option4=”automatic stabilizer” correct=”option2″]

This question was previously asked in
UPSC CAPF – 2021
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The amount by which the equilibrium level of real GDP exceeds the full employment level of GDP is called the inflationary gap.
– Full employment level of GDP (also known as potential output) is the maximum sustainable level of output that an economy can produce.
– Equilibrium level of real GDP is the level of output where aggregate demand equals aggregate supply.
– A recessionary gap occurs when the equilibrium level of real GDP is *below* the full employment level. This indicates insufficient aggregate demand, leading to unemployment.
– An inflationary gap occurs when the equilibrium level of real GDP is *above* the full employment level. This indicates that aggregate demand is too high relative to the economy’s potential to produce, leading to upward pressure on prices (inflation).
– The income multiplier describes the magnified effect of a change in autonomous spending on equilibrium output.
– An automatic stabilizer is a fiscal policy that automatically adjusts to stabilize the economy without explicit government intervention.
– The question describes a situation where equilibrium GDP exceeds full employment GDP, which corresponds to an inflationary gap.
Inflationary gaps typically lead to rising price levels because aggregate demand exceeds the economy’s capacity to produce at stable prices. Governments might use contractionary fiscal or monetary policies to close an inflationary gap.

14. How is the magnitude of price elasticity for an individual good

How is the magnitude of price elasticity for an individual good determined?

[amp_mcq option1=”1, 2 and 3″ option2=”1 and 4 only” option3=”1, 2 and 4″ option4=”3 and 4″ correct=”option1″]

This question was previously asked in
UPSC CAPF – 2021
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Based on the common factors determining price elasticity and likely intended factors for this question (although the factors 1, 2, 3, 4 were missing in the prompt), the combination of factors 1, 2, and 3 is the most accurate choice among the given options. Assuming factors 1, 2, and 3 refer to the nature of the good (necessity/luxury), availability of substitutes, and proportion of income spent, respectively, these are all significant determinants.
Key factors that determine the price elasticity of demand for a good include: 1. The nature of the good (necessity vs. luxury); 2. The availability and closeness of substitutes; 3. The proportion of income spent on the good; and 4. The time period under consideration (short run vs. long run).
Assuming the original question listed common factors such as ‘Nature of the good’, ‘Availability of substitutes’, ‘Proportion of income spent’, and ‘Time horizon’ corresponding to options 1, 2, 3, and 4, then all four are valid determinants. However, given the provided answer choices, option A (1, 2 and 3) suggests that factors 1, 2, and 3 (likely Nature, Substitutes, and Proportion of income) were considered the primary determinants relevant to the question’s design, or factor 4 (Time horizon) was either different or not included in the intended correct combination.

15. According to simple Keynesian theory, the slope of the aggregate consu

According to simple Keynesian theory, the slope of the aggregate consumption curve against income is

[amp_mcq option1=”Positive” option2=”Negative” option3=”Zero” option4=”Infinity” correct=”option1″]

This question was previously asked in
UPSC CAPF – 2019
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The correct answer is A, Positive.
According to simple Keynesian theory, the consumption function is typically represented as C = a + bY, where C is consumption, a is autonomous consumption (consumption independent of income), b is the marginal propensity to consume (MPC), and Y is income. The slope of the aggregate consumption curve (plotting C against Y) is given by the coefficient of Y, which is the MPC (b).
The marginal propensity to consume (MPC) represents the proportion of an additional unit of income that is spent on consumption. It is a fundamental assumption in Keynesian economics that the MPC is positive and less than one (0 < MPC < 1). Therefore, the slope of the aggregate consumption curve is positive, indicating that as income increases, aggregate consumption also increases.

16. In a closed economy with no taxes, if the marginal propensity to consu

In a closed economy with no taxes, if the marginal propensity to consume is always 0.90, then the value of the multiplier will be

[amp_mcq option1=”10.00″ option2=”1.00″ option3=”0.90″ option4=”0.10″ correct=”option1″]

This question was previously asked in
UPSC CAPF – 2019
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The correct answer is A, 10.00.
In a simple Keynesian model with a closed economy and no government (no taxes or government spending), the expenditure multiplier (k) is given by the formula k = 1 / (1 – MPC), where MPC is the marginal propensity to consume.
Given that the marginal propensity to consume (MPC) is 0.90, the multiplier is calculated as k = 1 / (1 – 0.90) = 1 / 0.10 = 10. This means that a initial change in autonomous spending will lead to a tenfold larger change in equilibrium income.

17. Multipliers will be lower with which one of the following?

Multipliers will be lower with which one of the following?

[amp_mcq option1=”High marginal propensity to consume” option2=”Low marginal propensity to consume” option3=”High marginal propensity to invest” option4=”Low marginal propensity to save” correct=”option2″]

This question was previously asked in
UPSC CAPF – 2018
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The correct answer is B) Low marginal propensity to consume.
In the simple Keynesian model, the multiplier (k) is given by the formula k = 1 / (1 – MPC), where MPC is the Marginal Propensity to Consume. MPC is the proportion of an increase in income that is spent on consumption.
– If MPC is high, (1 – MPC) is low, and the multiplier (1 / (1 – MPC)) is high.
– If MPC is low, (1 – MPC) is high, and the multiplier (1 / (1 – MPC)) is low.
Therefore, multipliers will be lower with a low marginal propensity to consume.
The Marginal Propensity to Save (MPS) is the proportion of an increase in income that is saved. MPC + MPS = 1. So, the multiplier can also be written as k = 1 / MPS. A low MPC means a high MPS, and k = 1 / (high MPS) will be low. Conversely, a high MPC means a low MPS, and k = 1 / (low MPS) will be high.

18. In National Income (NI) accounts, Personal Income (PI) is defined as

In National Income (NI) accounts, Personal Income (PI) is defined as

[amp_mcq option1=”NI – undistributed profits – net interest payments made by households – corporate tax + transfer payments to the households from the government and firms” option2=”NI – undistributed profits – corporate tax + transfer payments to the households from the government and firms” option3=”undistributed profits – net interest payments made by households + transfer payments to the households from the government and firms” option4=”undistributed profits – net interest payments made by households – corporate tax” correct=”option2″]

This question was previously asked in
UPSC CAPF – 2018
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The correct answer is B) NI – undistributed profits – corporate tax + transfer payments to the households from the government and firms.
Personal Income (PI) is the income received by households and non-profit institutions serving households before the payment of personal income taxes. It is derived from National Income (NI) by subtracting components of NI that are not received by households and adding income received by households that is not earned in the current production process (transfer payments). The standard formula is approximately: PI = NI – Corporate Income Tax – Undistributed Corporate Profits – Social Security Contributions + Transfer Payments. Option B closely matches this formula, excluding Social Security Contributions, which may not be included in all simplified representations or options. Option A includes “net interest payments made by households” as a subtraction, which is not standard in deriving PI from NI; interest paid by households is a disposition of income, not a deduction from earned income components of NI.
National Income is the total income earned by the factors of production in a country during a period. Personal Income represents the actual income available to individuals and households before direct taxes. Disposable Personal Income is PI minus personal income taxes.

19. Which one among the following countries has the highest consumption of

Which one among the following countries has the highest consumption of food in terms of kcal per day per person?

[amp_mcq option1=”USA” option2=”Australia” option3=”Netherland” option4=”Saudi Arabia” correct=”option1″]

This question was previously asked in
UPSC Geoscientist – 2020
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The correct answer is USA. Among the given options, the United States of America consistently ranks among the countries with the highest average daily caloric intake per person globally.
– High per capita food consumption is often correlated with developed economies and dietary habits that include high consumption of processed foods, meat, and sugars.
– According to data from organizations like the FAO, average daily caloric supply per person in the USA is typically over 3600 kcal, which is higher than Australia, Netherlands, and significantly higher than Saudi Arabia.
While many factors influence food consumption, including economic development, dietary patterns, availability, and cost of food, the USA’s high average intake is a well-documented phenomenon. Other countries like Ireland, Belgium, and Turkey also report very high per capita caloric intake.

20. Which of the following two states have the highest per capita income i

Which of the following two states have the highest per capita income in India?

[amp_mcq option1=”Punjab and Kerala” option2=”Kerala and Goa” option3=”Goa and Haryana” option4=”Haryana and Punjab” correct=”option3″]

This question was previously asked in
UPSC Geoscientist – 2020
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Based on recent economic data, Goa and Haryana are typically among the states with the highest per capita Net State Domestic Product (NSDP), which is a measure of per capita income at the state level. Goa often ranks highest or among the top two, followed closely by states like Sikkim, Delhi (UT), and Haryana.
Per capita income is a measure of the average income earned per person in a given area in a specified year. It is often used to gauge the standard of living and economic development. Factors contributing to high per capita income can include industrialization, services sector growth, favorable demographics, and efficient resource utilization.
While Punjab and Kerala have relatively high per capita incomes compared to the national average, they are generally not ranked as high as Goa, Sikkim, or Haryana. Kerala, for example, is known for high human development indicators but not always for the highest per capita income compared to the leading states.
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