ECO. 203 ONLINE QUIZ/ASSIGNMENT (Conceptual Issues of National Income Estimation–15/4/2025)
Essay Questions on Conceptual Issues of National Income Estimation
- Discuss the various definitions of national income and explain the significance of each in the context of economic analysis.
- Compare and contrast the three primary methods of national income estimation: the production method, the income method, and the expenditure method.
- Analyze the challenges and limitations faced in the collection of data for national income estimation in developing countries.
- Explain the role of inflation in national income accounting and the methods used to adjust nominal income to reflect real income.
- Discuss the impact of the informal economy on national income estimation and the implications for policymakers.
- Elaborate on the differences between national income and GDP, and discuss the relevance of each measure for economic policy.
- Assess how national income accounting can be used to analyze income distribution within a country and its implications for economic inequality.
- Critically evaluate the limitations of national income accounting in providing a comprehensive picture of a country’s economic health.
- Discuss the importance of integrating environmental factors into national income accounting and the concept of green national income.
- Describe the various uses of national income data for government policy-making, economic planning, and international comparisons.
Multiple Choice Questions on National Income Estimation and Accounting
- What is the primary purpose of national income accounting? a) To measure economic growth
b) To estimate government revenue
c) To assess income distribution
d) To provide a framework for comparing economies - Which of the following is NOT a method of national income estimation? a) Expenditure method
b) Income method
c) Savings method
d) Production method - The production method of national income estimation focuses on: a) Total income earned by factors of production
b) Total expenditures made in an economy
c) The value of goods and services produced
d) The net exports of a country - Which of the following is included in the calculation of Gross Domestic Product (GDP)? a) Transfer payments
b) Unpaid household work
c) Government spending on public services
d) Illegal economic activities - When adjusting national income for inflation, which measure is typically used? a) Nominal GDP
b) Real GDP
c) Gross National Product (GNP)
d) Net National Product (NNP) - Which of the following is a limitation of national income accounting? a) It provides a comprehensive overview of economic health
b) It may not accurately reflect the informal economy
c) It includes all economic transactions
d) It is easy to measure - The informal economy is significant in national income estimation because it: a) Is fully accounted for in official statistics
b) Represents a large portion of economic activity in many countries
c) Is taxed heavily by the government
d) Is easily measurable - What does Gross National Product (GNP) measure? a) The total value of goods and services produced within a country
b) The total income earned by residents of a country, regardless of where it is produced
c) The value of exports minus imports
d) The net income from abroad - Which of the following best describes the income method of estimating national income? a) It sums up total spending in the economy
b) It aggregates the value added at each stage of production
c) It calculates total income earned by factors of production
d) It measures changes in inventory levels - What is the significance of using Real GDP instead of Nominal GDP? a) Real GDP accounts for changes in the price level
b) Nominal GDP is more accurate
c) Real GDP excludes government spending
d) Nominal GDP reflects purchasing power - When considering national income, which of the following is a component of government expenditure? a) Social security payments
b) Interest payments on national debt
c) Military spending
d) All of the above - In terms of national income accounting, depreciation is accounted for in which measure? a) Gross National Product (GNP)
b) Net National Product (NNP)
c) Gross Domestic Product (GDP)
d) None of the above - What is the primary drawback of using GDP as a measure of economic welfare? a) It includes non-market transactions
b) It does not account for income inequality
c) It is difficult to calculate
d) It includes only domestic production - The concept of “green national income” refers to: a) Income generated from environmental services
b) Adjusting national income for environmental degradation
c) Income from renewable resources
d) Income generated by green technologies - Which of the following is NOT typically included in national income calculations? a) Wages and salaries
b) Corporate profits
c) Illegal drug sales
d) Rental income - The expenditure method of national income accounting includes: a) Consumption, investment, government spending, and net exports
b) Only consumption and investment
c) Only government spending
d) None of the above - How does national income accounting benefit policymakers? a) It provides insights into inflation rates
b) It allows for budget planning and economic forecasting
c) It measures only the standard of living
d) It focuses solely on taxation - Which of the following is considered a transfer payment? a) Social security benefits
b) Government spending on infrastructure
c) Wages paid to government employees
d) Investment in public services - National income accounting can be used to assess: a) Economic growth
b) Fiscal policy effectiveness
c) Income distribution
d) All of the above - The term “per capita income” refers to: a) The total income of a country
b) Average income per person in a specific area
c) Total national income
d) Income generated from exports - Which of the following figures is typically the highest in a national income account? a) Gross National Product (GNP)
b) Net National Product (NNP)
c) Gross Domestic Product (GDP)
d) National Income (NI) - What does the term “income distribution” refer to in national income accounting? a) The allocation of total national income among individuals
b) The total income earned by the government
c) The average income of a country
d) The distribution of consumption - In the context of national income, what is “net exports”? a) Exports minus imports
b) Imports minus exports
c) Total trade balance
d) None of the above - Which of the following is NOT a component of Gross Domestic Product (GDP)? a) Consumption
b) Investment
c) Personal savings
d) Government spending - The income method of national income accounting is primarily concerned with: a) The total expenditures in the economy
b) The total output produced
c) The total income received by factors of production
d) The total savings in an economy - What is the primary limitation of GDP as a measure of economic performance? a) It does not account for unpaid work
b) It is too complex to calculate
c) It includes non-market transactions
d) It only considers government spending - Which of the following is an example of a non-market transaction? a) Selling a home
b) Volunteering at a local charity
c) Buying groceries
d) Renting an apartment - What role does the Central Statistical Office (CSO) play in national income accounting? a) It provides legal frameworks for taxation
b) It collects and compiles national income data
c) It sets interest rates
d) It regulates financial institutions - Which of the following can influence national income accounting? a) Tax policies
b) Government spending
c) Economic shocks
d) All of the above - Which of the following is an example of personal consumption expenditure? a) Government spending on infrastructure
b) Household spending on groceries
c) Corporate investment in machinery
d) Exports to other countries - What is the primary function of the GDP deflator? a) To measure economic growth
b) To adjust nominal GDP for inflation
c) To estimate future economic performance
d) To compare international economies - The term “capital formation” in national income accounting refers to: a) The accumulation of physical assets
b) The total income earned by a country
c) The total savings of individuals
d) The distribution of wealth - Which of the following is a key use of national income data? a) To determine interest rates
b) To formulate fiscal policy
c) To regulate international trade
d) To set up banking systems - Which of the following is the correct formula for calculating GDP using the expenditure approach? a) C + I + G + (X – M)
b) C + I + G + S
c) C + I + X – M
d) C + G + T - What does the term “factors of production” refer to? a) Natural resources
b) Labor, capital, land, and entrepreneurship
c) Government spending
d) International trade - Which of the following would be classified as an intermediate good? a) A car sold to a consumer
b) Steel purchased by a car manufacturer
c) A house sold to a family
d) A loaf of bread sold in a bakery - The income approach to national income accounting emphasizes: a) The total value of goods and services produced
b) The total income generated from production
c) The total spending in an economy
d) The savings behavior of households - What does “per capita GDP” measure? a) The total economic output of a country
b) The average economic output per person
c) The total income of the government
d) The total exports of a country - Which of the following components is NOT included in the calculation of Gross Domestic Product? a) Consumption
b) Business investments
c) Net exports
d) Underground economy - Which of the following metrics is used to evaluate the standard of living? a) Gross National Product (GNP)
b) Net National Product (NNP)
c) Per capita income
d) National Income (NI) - The concept of “value added” is crucial for which method of national income accounting? a) Income method
b) Expenditure method
c) Production method
d) None of the above - Which of the following is a characteristic of national income accounting in a mixed economy? a) It accounts only for private sector transactions
b) It includes both public and private sector activities
c) It excludes government spending
d) It focuses solely on exports - The term “economic growth” is best defined as: a) An increase in the price level
b) An increase in the quantity of goods and services produced
c) An increase in government spending
d) A reduction in unemployment - Which of the following is used to compare the economic performance of different countries? a) Nominal GDP
b) Real GDP per capita
c) Gross National Product (GNP)
d) Net National Product (NNP) - What is the significance of incorporating environmental costs into national income accounting? a) It reduces the GDP
b) It allows for more accurate economic assessments
c) It focuses solely on economic growth
d) It ignores social factors - Which of the following is a common criticism of GDP as a measure of economic health? a) It does not account for underground economic activities
b) It includes all economic activities
c) It is easy to measure
d) It reflects income distribution - In national income accounting, which of the following represents the “savings” of an economy? a) Total investment
b) Government spending
c) Disposable income
d) Net exports - What adjustment is made to Gross Domestic Product to arrive at Net Domestic Product? a) Subtract consumption
b) Add depreciation
c) Subtract depreciation
d) Add government spending - Which of the following is an indicator of economic performance that complements national income accounting? a) Unemployment rate
b) Interest rates
c) Inflation rate
d) All of the above - Why is it important to consider purchasing power parity (PPP) when comparing national incomes? a) It provides a more accurate comparison of living standards
b) It only focuses on government spending
c) It excludes foreign income
d) It simplifies calculations
