Class 12th National Income Important Questions With Answers

1. What is national income?

   National income is the total monetary value of all goods and services produced by the residents of a country within a specified time period, typically a year.

2. What are the three approaches to measuring national income?

   The three approaches are the production approach, income approach, and expenditure approach. Each provides a different perspective on calculating national income.

3. Explain the expenditure approach to calculating national income.

   The expenditure approach calculates national income by summing up all expenditures in an economy, including consumption, investment, government spending, and net exports (exports minus imports).

4. What is Gross Domestic Product (GDP), and how is it different from Gross National Product (GNP)?

   GDP measures the total economic output within a country's borders, while GNP measures the total economic output produced by a country's residents, regardless of where they are located.

5. What is the difference between nominal and real GDP?

   Nominal GDP is the GDP measured in current market prices, whereas real GDP is adjusted for inflation or deflation, providing a more accurate measure of an economy's production.

6. What is the significance of the GDP deflator?

   The GDP deflator is used to convert nominal GDP into real GDP by adjusting for changes in prices. It helps to assess the real growth or contraction of an economy.

7. How does an economy's GDP relate to its standard of living?

   GDP per capita, which is GDP divided by the population, is often used as an indicator of a country's standard of living. However, it doesn't consider income distribution or non-market activities.

8. What are the limitations of using GDP as a measure of economic well-being?

   GDP does not account for income inequality, non-market activities (e.g., household work), and environmental factors. It also doesn't reflect the overall quality of life.

9. What is the difference between disposable income and national income?

   National income represents the total income earned by factors of production within a country, while disposable income is what households have left to spend or save after paying taxes.

10. How does the underground economy impact national income calculations?

    The underground economy, consisting of unreported or illegal economic activities, can lead to an underestimation of national income if not accounted for.

11. What is the relationship between a trade surplus and national income?

    A trade surplus (exports exceeding imports) can contribute positively to national income by increasing the income generated from exports.

12. What is the importance of calculating national income for policymakers?

    National income data helps policymakers assess an economy's health, formulate economic policies, and monitor the impact of various economic measures.