CUET UG Categorised PYQ Economics Unit 7 -

📚

CUET UG Categorised PYQ Economics Unit 7

Economics

⏱️ 30 Minutes

❓ 27 Questions

📅 2022, 2023 & 2024

✍️ Long Answers

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Categorised PYQ Economics Unit 7

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QUESTION 1 OF 27

Economic variables such as 'National Income' and 'profits' can be classified under which of the following heads ? (PYQ 2022)

Answer Review

1 Economic variables such as 'National Income' and 'profits' can be classified under which of the following heads ? (PYQ 2022)

A Stock concept

B Flow concept

C Depreciation

D Final goods

💡 Short Explanation

National Income is measured over a period of time. Profit is also calculated for a specific accounting period. Variables measured over time are called flow variables.

✅ Correct Answer Explanation

(Detailed) → A flow concept refers to any economic variable measured during a particular period of time. → National Income is calculated for a year, quarter, or any accounting period. → Profits are also calculated over a period, such as monthly profit or annual profit. → Therefore, National Income and profits are classified as flow concepts. → Hence, Option B is the correct answer.

❓ Why Other Options Are Incorrect

A) Stock concept → A stock concept is measured at a particular point of time, such as wealth or capital. National Income and profits are not measured at one point of time.
C) Depreciation → Depreciation means fall in the value of fixed assets due to wear and tear. It is not the category under which National Income and profits are classified.
D) Final goods → Final goods are goods used for final consumption or investment. National Income and profits are not goods.

🎯 Strategy

Used

Option A → Incorrect because stock is measured at a point of time.
Option B → Correct because National Income and profits are measured over a period of time.
Option C → Incorrect because depreciation means loss in asset value.
Option D → Incorrect because final goods refer to finished goods, not economic variables.

Final Answer → Option B.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

2 Which of the following statements are incorrect ? (PYQ 2022)
Statements:
(A) Circular flow of income does not take place in a closed economy.
(B) Real flow consists of flow of factor services from households to firms.
(C) In a two-sector economy, total production is always equal to total consumption.
(D) Money flow consists of flow of factor payments from households to firms.
Choose the correct answer from the options given below :

A (A) and (B) only

B (A), (B) and (C) only

C (A) and (D) only

D (C) and (D) only

💡 Short Explanation

Circular flow exists in a closed economy. Real flow means factor services flow from households to firms. In a two-sector economy, production equals consumption. Money flow of factor payments moves from firms to households, not households to firms.

✅ Correct Answer Explanation

(Detailed) → Statement (A) is incorrect because circular flow of income does take place in a closed economy. → In a simple two-sector closed economy, households and firms exchange goods, services, and factor payments. → Statement (D) is incorrect because money flow consists of factor payments such as rent, wages, interest, and profit moving from firms to households. → Statement (B) is correct because real flow includes the flow of factor services from households to firms. → Statement (C) is also correct in a simple two-sector economy where total production equals total consumption or expenditure. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) (A) and (B) only → This is incorrect because statement (B) is correct, not incorrect.
B) (A), (B) and (C) only → This is incorrect because statements (B) and (C) are correct.
D) (C) and (D) only → This is incorrect because statement (C) is correct, not incorrect.

🎯 Strategy

Used

Option A → Incorrect because it wrongly includes statement (B).
Option B → Incorrect because it wrongly includes statements (B) and (C).
Option C → Correct because only statements (A) and (D) are incorrect.
Option D → Incorrect because it wrongly includes statement (C).

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

3 Suppose a country only produces bread. In the year 2000 it had produced 100 units of bread, price was ₹ 10 per bread. In 2001, the same country produced 110 units of bread at price was ₹ 15 per bread. In 2001, the nominal and real GDP are : (base year is 2000) (PYQ 2022)

A ₹ 1,550 and ₹ 1,000

B ₹ 1,400 and ₹ 2,000

C ₹ 1,650 and ₹ 1,100

D ₹ 1,500 and ₹ 1,000

💡 Short Explanation

Nominal GDP is calculated using current year prices. Real GDP is calculated using base year prices. 2001 quantity = 110 units. 2001 price = ₹ 15; 2000 base price = ₹ 10.

✅ Correct Answer Explanation

(Detailed) → Nominal GDP uses current year price. → Nominal GDP = Current year quantity × Current year price. → Nominal GDP = 110 × 15 = ₹ 1,650. → Real GDP uses base year price. → Real GDP = Current year quantity × Base year price. → Real GDP = 110 × 10 = ₹ 1,100. → Therefore, nominal GDP and real GDP in 2001 are ₹ 1,650 and ₹ 1,100. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) ₹ 1,550 and ₹ 1,000 → This is incorrect because nominal GDP should be 110 × 15 = ₹ 1,650 and real GDP should be 110 × 10 = ₹ 1,100.
B) ₹ 1,400 and ₹ 2,000 → This is incorrect because both values are not obtained from the given price and quantity data.
D) ₹ 1,500 and ₹ 1,000 → This is incorrect because it does not correctly use the 2001 quantity of 110 units.

🎯 Strategy

Used

Option A → Incorrect because both values are wrongly calculated.
Option B → Incorrect because values do not match the GDP formulas.
Option C → Correct because nominal GDP = 110 × 15 and real GDP = 110 × 10.
Option D → Incorrect because it ignores the correct 2001 quantity.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

4 Which of the following is considered as an intermediate good ? (PYQ 2022)

A Mobile purchased by a student

B Car purchased by a household

C Seeds and fertilizers purchased by a farmer

D Vegetables purchased by households

💡 Short Explanation

Intermediate goods are used for further production. Seeds and fertilizers are used by farmers to produce crops. Goods bought by households for final use are final goods. Therefore, seeds and fertilizers purchased by a farmer are intermediate goods.

✅ Correct Answer Explanation

(Detailed) → Intermediate goods are those goods that are used as inputs in the production of other goods. → Seeds and fertilizers are purchased by a farmer not for final consumption, but for producing agricultural output. → Since they enter the production process, they are treated as intermediate goods. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) Mobile purchased by a student → A mobile purchased by a student is used for final consumption, so it is a final good.
B) Car purchased by a household → A car purchased by a household is used for final consumption, so it is a final good.
D) Vegetables purchased by households → Vegetables purchased by households are used for final consumption and are not used for further production.

🎯 Strategy

Used

Option A → Incorrect because it is purchased for final use by a student.
Option B → Incorrect because it is purchased for final use by a household.
Option C → Correct because seeds and fertilizers are used as inputs in production.
Option D → Incorrect because vegetables purchased by households are final consumption goods.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

5 Which of the following is included in the estimation of National Income ? (PYQ 2022)

A Sugar purchased by a restaurant

B Expenditure incurred by a household on goods and services

C Contribution towards social security scheme by an employee

D Steel purchased by a car manufacturing company

💡 Short Explanation

National Income includes final goods and services. Household expenditure on goods and services is final consumption expenditure. Sugar purchased by a restaurant is intermediate consumption. Steel bought by a car company is also intermediate consumption.

✅ Correct Answer Explanation

(Detailed) → In national income estimation, only final goods and services are included to avoid double counting. → Household expenditure on goods and services is treated as private final consumption expenditure. → Since it is final consumption, it is included in the estimation of National Income. → Hence, Option B is the correct answer.

❓ Why Other Options Are Incorrect

A) Sugar purchased by a restaurant → Sugar purchased by a restaurant is used as an input for preparing food items. Hence, it is an intermediate good and is not separately included.
C) Contribution towards social security scheme by an employee → This is a contribution and does not directly represent production of final goods and services.
D) Steel purchased by a car manufacturing company → Steel purchased by a car company is used as an input in production. It is an intermediate good and is not separately included.

🎯 Strategy

Used

Option A → Incorrect because sugar used by a restaurant is intermediate consumption.
Option B → Correct because household expenditure is final consumption expenditure.
Option C → Incorrect because social security contribution is not final goods/services output.
Option D → Incorrect because steel used in car production is an intermediate good.

Final Answer → Option B.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

6 Suppose in an economy there are only two firms A and B. Calculate Gross Domestic Product at Market Price from the following table: (PYQ 2022)

Items	Firm A — Firm B
Sales	50 Cr — 200 Cr
Change in stock	+20 Cr — -30 Cr
Intermediate Consumption	0 — 100 Cr

A ₹ 270 Cr

B ₹ 140 Cr

C ₹ 330 Cr

D ₹ 170 Cr

💡 Short Explanation

GVA = Value of Output − Intermediate Consumption. Value of Output = Sales + Change in stock. Gross Domestic Product at Market Price = Sum of GVA of all firms.

✅ Correct Answer Explanation

(Detailed) → Formula: Value of Output = Sales + Change in stock. → Gross Value Added = Value of Output − Intermediate Consumption. → For Firm A: → Value of Output = 50 + 20 = ₹ 70 Cr. → Intermediate Consumption = 0. → Gross Value Added by Firm A = 70 − 0 = ₹ 70 Cr. → For Firm B: → Value of Output = 200 + (-30) = ₹ 170 Cr. → Intermediate Consumption = ₹ 100 Cr. → Gross Value Added by Firm B = 170 − 100 = ₹ 70 Cr. → GDP at Market Price = GVA by Firm A + GVA by Firm B. → GDP at Market Price = 70 + 70 = ₹ 140 Cr. → Hence, Option B is the correct answer.

❓ Why Other Options Are Incorrect

A) ₹ 270 Cr → This is incorrect because it does not properly subtract intermediate consumption and adjust change in stock correctly.
C) ₹ 330 Cr → This is incorrect because it adds values without applying the value added method properly.
D) ₹ 170 Cr → This is incorrect because it considers only Firm B's value of output after stock adjustment, not total GDP by value added.

🎯 Strategy

Used

Option A → Incorrect because the value added calculation does not give ₹ 270 Cr.
Option B → Correct because total GVA = ₹ 70 Cr + ₹ 70 Cr = ₹ 140 Cr.
Option C → Incorrect because intermediate consumption is not correctly excluded.
Option D → Incorrect because it does not represent total GDP of both firms.

Final Answer → Option B.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

7 Calculate operating surplus from the following: (PYQ 2023)

Item	₹ (in Cr)
Rent & Interest	50
Bonus	80
Profit After Tax	30
Tax rate	40%

A ₹110 Cr

B ₹130 Cr

C ₹80 Cr

D ₹100 Cr

💡 Short Explanation

Operating surplus includes rent, interest and profit. Bonus is part of compensation of employees, not operating surplus. Profit after tax must be converted into profit before tax. Profit before tax = ₹30 ÷ 60% = ₹50 Cr.

✅ Correct Answer Explanation

(Detailed) → Operating Surplus = Rent + Interest + Profit. → Given Rent & Interest = ₹50 Cr. → Profit After Tax = ₹30 Cr. → Tax rate = 40%, so Profit After Tax = 60% of Profit Before Tax. → Profit Before Tax = 30 ÷ 0.60 = ₹50 Cr. → Operating Surplus = ₹50 Cr + ₹50 Cr = ₹100 Cr. → Therefore, Option D is the correct answer.

❓ Why Other Options Are Incorrect

A) ₹110 Cr → This does not correctly adjust profit after tax to profit before tax.
B) ₹130 Cr → This incorrectly includes or overstates some components.
C) ₹80 Cr → This ignores correct calculation of profit before tax or rent and interest.

🎯 Strategy

Used

Option A → Incorrect calculation.
Option B → Incorrect because bonus may be wrongly included.
Option C → Incorrect because full operating surplus is not calculated.
Option D → Correct because Rent & Interest ₹50 Cr + Profit before tax ₹50 Cr = ₹100 Cr.

Final Answer → Option D.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

8 Match List I with List II (PYQ 2023)

List-I	List-II
A. Revenue Receipt	I. Increase in Liability
B. Capital Receipt	II. Do not increase Asset
C. Revenue Expenditure	III. Increase in Asset
D. Capital Expenditure	IV. Do not increase Liability

A A-I, B-III, C-II, D-IV

B A-IV, B-I, C-II, D-III

C A-II, B-III, C-IV, D-I

D A-I, B-IV, C-II, D-III

💡 Short Explanation

Revenue receipts do not create liabilities. Capital receipts increase liabilities or reduce assets. Revenue expenditure does not create assets. Capital expenditure creates assets.

✅ Correct Answer Explanation

(Detailed) → Revenue Receipt neither creates liability nor reduces assets, so it matches with "Do not increase Liability." → Therefore, (A) matches with (IV). → Capital Receipt may create liability, such as borrowing, so it matches with "Increase in Liability." → Therefore, (B) matches with (I). → Revenue Expenditure does not create assets, so it matches with "Do not increase Asset." → Therefore, (C) matches with (II). → Capital Expenditure creates assets, so it matches with "Increase in Asset." → Therefore, (D) matches with (III). → Hence, Option B is the correct answer.

❓ Why Other Options Are Incorrect

A) A-I, B-III, C-II, D-IV → Revenue receipt does not increase liability, and capital receipt is not mainly matched with increase in asset.
C) A-II, B-III, C-IV, D-I → Revenue receipt and capital expenditure are wrongly matched.
D) A-I, B-IV, C-II, D-III → Revenue receipt and capital receipt are wrongly matched.

🎯 Strategy

Used

Option A → Incorrect due to wrong revenue and capital receipt matching.
Option B → Correct matching.
Option C → Incorrect due to multiple wrong pairs.
Option D → Incorrect because A and B are wrongly matched.

Final Answer → Option B.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: Government Budget and the Economy

9 Calculate the factor income from Abroad from the following: (PYQ 2023)

Item	₹ (in crore)
NNP at market price	550
Net indirect taxes	30
NVA at factor cost	540
Factor income to Abroad	50

A ₹70 Crore

B ₹90 Crore

C ₹30 Crore

D ₹50 Crore

💡 Short Explanation

Convert NNPmp into NNPfc. NNPfc = NNPmp − Net indirect taxes. NFIA = NNPfc − Domestic income. Factor income from abroad = NFIA + Factor income to abroad.

✅ Correct Answer Explanation

(Detailed) → Given: NNP at market price = ₹550 crore. → Net indirect taxes = ₹30 crore. → NVA at factor cost or Domestic Income = ₹540 crore. → Factor income to abroad = ₹50 crore. → Step 1: → NNPfc = NNPmp − Net indirect taxes. → NNPfc = 550 − 30 = ₹520 crore. → Step 2: → NFIA = NNPfc − Domestic Income. → NFIA = 520 − 540 = −₹20 crore. → Step 3: → NFIA = Factor income from abroad − Factor income to abroad. → −20 = Factor income from abroad − 50. → Factor income from abroad = 50 − 20 = ₹30 crore. → Therefore, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) ₹70 Crore → This is obtained by wrong adjustment of NFIA.
B) ₹90 Crore → This overstates factor income from abroad.
D) ₹50 Crore → This is factor income to abroad, not factor income from abroad.

🎯 Strategy

Used

Option A → Incorrect calculation.
Option B → Incorrect calculation.
Option C → Correct using NNPfc and NFIA formula.
Option D → Incorrect because it repeats factor income to abroad.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

10 Identify the correct formula of calculating of domestic income by Expenditure Method. (PYQ 2023)

A GDPₘₚ = PFCE + GFCE + NDCF − NE

B GDPₘₚ = PFCE − GFCE + GDCF − NE

C GDPₘₚ = PFCE + GFCE + GDCF + NE

D GDPₘₚ = PFCE − GFCE − NDCF + NE

💡 Short Explanation

Expenditure method adds final expenditure components. PFCE means Private Final Consumption Expenditure. GFCE means Government Final Consumption Expenditure. GDCF and Net Exports are included.

✅ Correct Answer Explanation

(Detailed) → Domestic income by expenditure method is calculated by adding final expenditure on goods and services produced within the domestic territory. → The formula is: → GDPₘₚ = PFCE + GFCE + GDCF + Net Exports. → Therefore, the correct formula is GDPₘₚ = PFCE + GFCE + GDCF + NE. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) GDPₘₚ = PFCE + GFCE + NDCF − NE → It incorrectly uses NDCF and subtracts net exports.
B) GDPₘₚ = PFCE − GFCE + GDCF − NE → Government final consumption expenditure should be added, not subtracted.
D) GDPₘₚ = PFCE − GFCE − NDCF + NE → GFCE should not be subtracted and NDCF is not the correct component here.

🎯 Strategy

Used

Option A → Incorrect because NE is subtracted and NDCF is used.
Option B → Incorrect because GFCE and NE are subtracted.
Option C → Correct expenditure method formula.
Option D → Incorrect because GFCE and NDCF are subtracted.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

11 Calculate compensation of employees from the following items: (PYQ 2023)

Items	₹ in Crores
Profit after tax	20
Interest	45
GDPmp	200
Goods and service tax	10
Depreciation	50r
Rent	5
Corporate tax	5

Choose the correct option:

A 45 Crores

B 42 Crores

C 50 Crores

D 65 Crores

💡 Short Explanation

Find NDPfc or Domestic Income.
NDPfc = GDPmp − Depreciation − Net Indirect Taxes.
Operating Surplus = Profit + Rent + Interest.
Compensation of Employees = NDPfc − Operating Surplus − Mixed Income.

✅ Correct Answer Explanation

❓ Why Other Options Are Incorrect

A) 45 Crores → This equals the given interest amount, not compensation of employees.

B) 42 Crores → This does not follow the national income calculation.

C) 50 Crores → This equals the given depreciation amount, not compensation of employees.

🎯 Strategy

Option A → Incorrect because it is interest.
Option B → Incorrect because formula does not give this value.
Option C → Incorrect because it is depreciation.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

12 Suppose the GDP at market price of a country in a particular year was ₹ 2,100 crores. Net Factor Income from abroad was ₹ 200 crores. The value of Indirect Taxes net of subsidies was ₹ 100 crores and national income was ₹ 1,900 crores. The aggregate value of depreciation in the economy will be : (PYQ 2023)

A ₹ 100 crores

B ₹ 400 crores

C ₹ 200 crores

D ₹ 300 crores

💡 Short Explanation

National Income means NNPfc. NNPfc = GDPmp − Depreciation + NFIA − Net Indirect Taxes. 1900 = 2100 − Depreciation + 200 − 100. Depreciation = ₹300 crores.

✅ Correct Answer Explanation

(Detailed) → Given: GDPmp = ₹2,100 crores. → NFIA = ₹200 crores. → Net Indirect Taxes = ₹100 crores. → National Income = NNPfc = ₹1,900 crores. → Formula: → NNPfc = GDPmp − Depreciation + NFIA − Net Indirect Taxes. → Substitute the values: → 1900 = 2100 − Depreciation + 200 − 100. → 1900 = 2200 − Depreciation. → Depreciation = 2200 − 1900. → Depreciation = ₹300 crores. → Therefore, aggregate depreciation is ₹300 crores. → Hence, Option D is the correct answer.

❓ Why Other Options Are Incorrect

A) ₹100 crores → This is incorrect because ₹100 crores is the value of net indirect taxes, not depreciation.
B) ₹400 crores → This is incorrect because it does not satisfy the national income formula.
C) ₹200 crores → This is incorrect because ₹200 crores is NFIA, not depreciation.

🎯 Strategy

Used

Option A → Incorrect because it identifies NIT.
Option B → Incorrect calculation.
Option C → Incorrect because it identifies NFIA.
Option D → Correct because 2200 − 1900 = 300.

Final Answer → Option D.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

13 What will be compensation of employees? (PYQ 2023)

A Wages and salaries in cash + Rent + Dividend

B Wages and salaries in cash + Wages and salaries in kind + Employees' contribution to provident fund

C Wages and salaries in cash + Wages and salaries in kind + Employer's contribution to social security schemes

D Mixed income + Rent + Corporate Profit Tax

💡 Short Explanation

Compensation of employees includes wages and salaries. It includes both cash and kind payments. It also includes employer's contribution to social security. Employee's own contribution is not added separately.

✅ Correct Answer Explanation

(Detailed) → Compensation of employees includes all payments made by employers to employees in return for factor services. → It includes wages and salaries in cash. → It also includes wages and salaries in kind. → Employer's contribution to social security schemes on behalf of employees is also included. → Therefore, the correct components are listed in Option C. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) Wages and salaries in cash + Rent + Dividend → This is incorrect because rent and dividend are part of operating surplus, not compensation of employees.
B) Wages and salaries in cash + Wages and salaries in kind + Employees' contribution to provident fund → This is incorrect because the employee's own contribution is not counted as an additional employer's compensation component.
D) Mixed income + Rent + Corporate Profit Tax → This is incorrect because mixed income and property income/profit components are not compensation of employees.

🎯 Strategy

Used

Option A → Incorrect because rent and dividend are not employee compensation.
Option B → Incorrect because employee's own PF contribution is not employer's compensation.
Option C → Correct because it includes cash wages, kind wages, and employer's social security contribution.
Option D → Incorrect because it includes mixed income and operating surplus items.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

14 Case Study: Based on the following case study, answer the question: (PYQ 2023)
• Wages and salaries in cash = ₹5,000
• Mixed income of self-employed = ₹3,500
• Rent = ₹4,000
• Corporate Profit Tax = ₹2,000
• Dividend = ₹1,000
• Employees' contribution to provident fund = ₹500
• Wages and salaries in kind = ₹2,000
• Employer's contribution to social security schemes = ₹3,000
• Corporate savings = ₹1,500
• Net factor income from abroad = (−) ₹200
The components of Operating Surplus are:

A Rent + Dividend + Corporate savings

B Mixed income + Dividend + Rent

C Rent + Dividend + Corporate savings + Corporate profit tax

D Rent + Dividend + Corporate profit tax

💡 Short Explanation

Operating surplus includes rent, interest, and profit. Profit includes corporate tax, dividend, and corporate savings. In this case, rent and profit components are given. Hence, rent + dividend + corporate savings + corporate profit tax is correct.

✅ Correct Answer Explanation

(Detailed) → Operating surplus includes income from property and entrepreneurship. → Its major components are rent, interest, and profit. → Profit is further divided into corporate profit tax, dividend, and corporate savings. → Since interest is not given in the case study, the correct operating surplus components here are rent, dividend, corporate savings, and corporate profit tax. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) Rent + Dividend + Corporate savings → This is incomplete because it leaves out corporate profit tax.
B) Mixed income + Dividend + Rent → This is incorrect because mixed income of self-employed is shown separately and is not included in operating surplus.
D) Rent + Dividend + Corporate profit tax → This is incomplete because it leaves out corporate savings.

🎯 Strategy

Used

Option A → Incorrect because corporate profit tax is missing.
Option B → Incorrect because mixed income is not included in operating surplus here.
Option C → Correct because it includes rent and all profit components given.
Option D → Incorrect because corporate savings are missing.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

15 Case Study: Based on the following case study, answer the question: (PYQ 2023)
• Wages and salaries in cash = ₹5,000
• Mixed income of self-employed = ₹3,500
• Rent = ₹4,000
• Corporate Profit Tax = ₹2,000
• Dividend = ₹1,000
• Employees' contribution to provident fund = ₹500
• Wages and salaries in kind = ₹2,000
• Employer's contribution to social security schemes = ₹3,000
• Corporate savings = ₹1,500
• Net factor income from abroad = (−) ₹200
The components of profit are:

A Mixed income + Rent + Corporate saving

B Dividend + Corporate saving + Rent

C Dividend + Corporate saving + Corporate profit tax

D Dividend + Corporate saving + Mixed income

💡 Short Explanation

Profit has three main components. These are dividend, corporate savings, and corporate profit tax. Rent is not a component of profit. Mixed income is separate from profit.

✅ Correct Answer Explanation

(Detailed) → In the income method, profit includes distributed profits, undistributed profits, and corporate profit tax. → Dividend represents distributed profit. → Corporate saving represents undistributed profit. → Corporate profit tax is also part of profit before tax. → Therefore, the components of profit are dividend, corporate saving, and corporate profit tax. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) Mixed income + Rent + Corporate saving → This is incorrect because mixed income and rent are not components of profit.
B) Dividend + Corporate saving + Rent → This is incorrect because rent is operating surplus, but it is not a component of profit.
D) Dividend + Corporate saving + Mixed income → This is incorrect because mixed income of self-employed is separately classified.

🎯 Strategy

Used

Option A → Incorrect because mixed income and rent are not profit components.
Option B → Incorrect because rent is not a profit component.
Option C → Correct because profit = dividend + corporate saving + corporate profit tax.
Option D → Incorrect because mixed income is not a component of profit.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

16 Case Study: Based on the following case study, answer the question: (PYQ 2023)
• Wages and salaries in cash = ₹5,000
• Mixed income of self-employed = ₹3,500
• Rent = ₹4,000
• Corporate Profit Tax = ₹2,000
• Dividend = ₹1,000
• Employees' contribution to provident fund = ₹500
• Wages and salaries in kind = ₹2,000
• Employer's contribution to social security schemes = ₹3,000
• Corporate savings = ₹1,500
• Net factor income from abroad = (−) ₹200
Calculate the value of Domestic Income:

A ₹18,500

B ₹22,000

C ₹22,500

D ₹21,800

💡 Short Explanation

Domestic Income = Compensation of employees + Operating surplus + Mixed income. Compensation of employees = 5,000 + 2,000 + 3,000 = ₹10,000. Operating surplus = 4,000 + 2,000 + 1,000 + 1,500 = ₹8,500. Domestic Income = 10,000 + 8,500 + 3,500 = ₹22,000.

✅ Correct Answer Explanation

(Detailed) → Step 1: Calculate Compensation of Employees. → Compensation of Employees = Wages and salaries in cash + Wages and salaries in kind + Employer's contribution to social security schemes. → Compensation of Employees = 5,000 + 2,000 + 3,000 = ₹10,000. → Step 2: Calculate Operating Surplus. → Operating Surplus = Rent + Corporate Profit Tax + Dividend + Corporate savings. → Operating Surplus = 4,000 + 2,000 + 1,000 + 1,500 = ₹8,500. → Step 3: Add Mixed Income. → Mixed income of self-employed = ₹3,500. → Domestic Income = Compensation of Employees + Operating Surplus + Mixed Income. → Domestic Income = 10,000 + 8,500 + 3,500 = ₹22,000. → Hence, Option B is the correct answer.

❓ Why Other Options Are Incorrect

A) ₹18,500 → This is incorrect because it excludes mixed income or some income components.
C) ₹22,500 → This is incorrect because it likely includes employees' contribution to provident fund incorrectly.
D) ₹21,800 → This is incorrect because it appears to adjust NFIA while calculating domestic income. NFIA is used for national income, not domestic income.

🎯 Strategy

Used

Option A → Incorrect because it misses required components.
Option B → Correct because domestic income = 10,000 + 8,500 + 3,500 = ₹22,000.
Option C → Incorrect because employee's own PF contribution is not added separately.
Option D → Incorrect because NFIA should not be adjusted for domestic income.

Final Answer → Option B.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

17 Case Study: Based on the following case study, answer the question: (PYQ 2023)
• Wages and salaries in cash = ₹5,000
• Mixed income of self-employed = ₹3,500
• Rent = ₹4,000
• Corporate Profit Tax = ₹2,000
• Dividend = ₹1,000
• Employees' contribution to provident fund = ₹500
• Wages and salaries in kind = ₹2,000
• Employer's contribution to social security schemes = ₹3,000
• Corporate savings = ₹1,500
• Net factor income from abroad = (−) ₹200
Calculate the value of National Income:

A ₹18,500

B ₹22,000

C ₹22,200

D ₹21,800

💡 Short Explanation

National Income = Domestic Income + NFIA. Domestic Income = ₹22,000. NFIA = (-) ₹200. National Income = 22,000 - 200 = ₹21,800.

✅ Correct Answer Explanation

(Detailed) → From the previous calculation, Domestic Income = ₹22,000. → Given: Net Factor Income from Abroad = (-) ₹200. → Formula: National Income = Domestic Income + Net Factor Income from Abroad. → National Income = 22,000 + (-200). → National Income = ₹21,800. → Therefore, National Income is ₹21,800. → Hence, Option D is the correct answer.

❓ Why Other Options Are Incorrect

A) ₹18,500 → This is incorrect because it does not include all income method components correctly.
B) ₹22,000 → This is domestic income, not national income. National income must adjust NFIA.
C) ₹22,200 → This is incorrect because NFIA is negative, so it should be subtracted, not added.

🎯 Strategy

Used

Option A → Incorrect because it misses components.
Option B → Incorrect because it is domestic income before NFIA adjustment.
Option C → Incorrect because it adds NFIA as positive instead of negative.
Option D → Correct because 22,000 - 200 = ₹21,800.

Final Answer → Option D.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

18 The difference between national income and domestic income is ______. Choose the correct answer from the following : (PYQ 2023)

A Net indirect taxes

B Net factor income from abroad

C Consumption of fixed capital

D Intermediate goods

💡 Short Explanation

Domestic income is income produced within domestic territory. National income includes income of residents. Difference is Net Factor Income from Abroad. NFIA = factor income from abroad − factor income to abroad.

✅ Correct Answer Explanation

(Detailed) → Domestic income is the income generated within the domestic territory of a country. → National income is the income earned by normal residents of a country. → The difference between national income and domestic income is Net Factor Income from Abroad. → National Income = Domestic Income + NFIA. → Hence, Option B is the correct answer.

❓ Why Other Options Are Incorrect

A) Net indirect taxes → Net indirect taxes convert market price into factor cost, not domestic income into national income.
C) Consumption of fixed capital → It is depreciation and is used to convert gross into net.
D) Intermediate goods → Intermediate goods are not used to find the difference between national and domestic income.

🎯 Strategy

Used

Option A → Incorrect because it is used for MP to FC conversion.
Option B → Correct because the difference is NFIA.
Option C → Incorrect because depreciation converts gross to net.
Option D → Incorrect because it is unrelated.

Final Answer → Option B.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

19 Choose right statement of flows : (PYQ 2023)

A Referred yearly or monthly

B Time period is not mentioned

C Defined at a particular point of time

D Over a period of time

💡 Short Explanation

Flow variables have time dimension. They are measured over a period of time. Examples: income, profit, investment. Stock variables are measured at a point of time.

✅ Correct Answer Explanation

(Detailed) → Flow variables are economic variables measured over a period of time. → For example, monthly income, annual profit and yearly investment are flow variables. → The essential feature of a flow is that it has a time period such as per day, per month, or per year. → Hence, Option D is the correct answer.

❓ Why Other Options Are Incorrect

A) Referred yearly or monthly → This is an example of time period, but not the full conceptual definition.
B) Time period is not mentioned → Flow variables must mention a time period.
C) Defined at a particular point of time → This describes stock variables, not flow variables.

🎯 Strategy

Used

Option A → Partly related but incomplete.
Option B → Incorrect because flows require time period.
Option C → Incorrect because it defines stock.
Option D → Correct definition of flow.

Final Answer → Option D.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

20 Match List - I with List - II. (PYQ 2023)

List-I	List-II
A. Goods used in production process and are durable in character	I. Intermediate goods
B. Inputs for production	II. Flow
C. Machines in a factory	III. Capital goods
D. Annual profits	IV. Stocks

A (A)-(I), (B)-(II), (C)-(III), (D)-(IV)

B (A)-(I), (B)-(III), (C)-(II), (D)-(IV)

C (A)-(I), (B)-(III), (C)-(IV), (D)-(II)

D (A)-(III), (B)-(I), (C)-(IV), (D)-(II)

💡 Short Explanation

Durable goods used in production are capital goods. Inputs used in production are intermediate goods. Machines are stock because they are measured at a point of time. Annual profits are flow because they are measured over a year.

✅ Correct Answer Explanation

(Detailed) → Goods used in the production process and durable in nature are capital goods. Therefore, (A) matches with (III). → Inputs used in production are intermediate goods. Therefore, (B) matches with (I). → Machines in a factory are stock variables because they are measured at a particular point of time. Therefore, (C) matches with (IV). → Annual profits are flow variables because they are measured over a period of one year. Therefore, (D) matches with (II). → Therefore, (A)-(III), (B)-(I), (C)-(IV), (D)-(II) is correct. → Hence, Option D is the correct answer.

❓ Why Other Options Are Incorrect

A) (A)-(I), (B)-(II), (C)-(III), (D)-(IV) → Capital goods, intermediate goods, stock and flow are mismatched.
B) (A)-(I), (B)-(III), (C)-(II), (D)-(IV) → Durable production goods and inputs are wrongly matched.
C) (A)-(I), (B)-(III), (C)-(IV), (D)-(II) → A and B are wrongly matched.

🎯 Strategy

Used

Option A → Incorrect matching.
Option B → Incorrect matching.
Option C → Incorrect because A and B are wrong.
Option D → Correct matching.

Final Answer → Option D.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

21 GDP at factor cost may be derived from using one of the following formula. Choose the correct. (PYQ 2023)

A GDPFC = GDPMP – NFIA

B GDPFC = GDPMP – NIT

C GDPFC = GDPMP – Depr

D GDPFC = GDPMP + NFIA

💡 Short Explanation

Factor cost excludes net indirect taxes. Market price includes net indirect taxes. GDPFC = GDPMP − Net Indirect Taxes. NFIA is used for domestic-national conversion.

✅ Correct Answer Explanation

(Detailed) → GDP at market price includes net indirect taxes. → To convert GDP at market price into GDP at factor cost, net indirect taxes are subtracted. → Formula: GDPFC = GDPMP − NIT. → Hence, Option B is the correct answer.

❓ Why Other Options Are Incorrect

A) GDPFC = GDPMP – NFIA → NFIA converts domestic income into national income, not market price into factor cost.
C) GDPFC = GDPMP – Depr → Depreciation converts gross into net, not market price into factor cost.
D) GDPFC = GDPMP + NFIA → Adding NFIA gives national aggregate, not GDP at factor cost.

🎯 Strategy

Used

Option A → Incorrect because NFIA is for national-domestic conversion.
Option B → Correct formula.
Option C → Incorrect because depreciation converts gross to net.
Option D → Incorrect because NFIA is wrongly added.

Final Answer → Option B.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

22 Find out correct information: (PYQ 2023)
Statements:
(A) Both consumption goods and capital goods are final goods
(B) Intermediate goods, mostly used as raw material
(C) Capital goods are used backbone of production process
(D) Final goods pass through more stages of production
Choose the correct answer:

A B and C only

B A, C and D only

C A, B and C only

D A, C and D only

💡 Short Explanation

Consumption goods and capital goods are final goods. Intermediate goods are used as raw materials. Capital goods support production. Final goods do not pass through further production stages.

✅ Correct Answer Explanation

(Detailed) → Final goods are goods that are not used for further production. → Consumption goods directly satisfy wants, while capital goods help in production. → Therefore, both consumption goods and capital goods are final goods. Statement (A) is correct. → Intermediate goods are used as raw materials in further production. Statement (B) is correct. → Capital goods like machines and tools form the backbone of the production process. Statement (C) is correct. → Statement (D) is incorrect because final goods have already crossed the production boundary and do not pass through more stages of production. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) B and C only → Incorrect because Statement (A) is also correct.
B) A, C and D only → Incorrect because Statement (D) is wrong and Statement (B) is correct but missing.
D) A, C and D only → Incorrect because Statement (D) is wrong and Statement (B) is missing.

🎯 Strategy

Used

Option A → Incorrect because A is also correct.
Option B → Incorrect because D is not correct.
Option C → Correct because A, B and C are correct.
Option D → Incorrect because D is wrong.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

23 When the aggregate revenue received by the firms is paid out to the factors of production, it takes the form of : (PYQ 2023)

A Aggregate Demand (AD)

B Aggregate Supply (AS)

C Aggregate Income

D Profit

💡 Short Explanation

Firms receive revenue by selling goods and services. This revenue is paid to factors of production. Factor payments become income for households. Hence, it takes the form of aggregate income.

✅ Correct Answer Explanation

(Detailed) → In the circular flow of income, firms produce goods and services and receive revenue from their sale. → This revenue is then distributed to factors of production in the form of rent, wages, interest and profit. → These payments together form aggregate income in the economy. → Therefore, the correct answer is Aggregate Income. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) Aggregate Demand (AD) → Incorrect because aggregate demand refers to planned expenditure on goods and services.
B) Aggregate Supply (AS) → Incorrect because aggregate supply refers to total output supplied in the economy.
D) Profit → Incorrect because profit is only one factor payment, not the total income paid to all factors.

🎯 Strategy

Used

Option A → Incorrect because AD is expenditure, not factor income.
Option B → Incorrect because AS is total output.
Option C → Correct because factor payments form aggregate income.
Option D → Incorrect because profit is only one component of income.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

24 Sequence of Circular Flow (PYQ 2023)
Statements:
(A) Factor payments
(B) Goods and services produced and sold in the market
(C) Supply of factors of production by the households
(D) Spending on goods and services
Choose the correct answer from the options given below:

A B, C, D, A

B C, B, A, D

C A, B, D, C

D A, B, C, D

💡 Short Explanation

Households supply factors of production. Firms produce and sell goods and services. Firms pay factor income to households. Households spend income on goods and services.

✅ Correct Answer Explanation

(Detailed) → In the circular flow of income, households first supply factors of production like labour, land and capital to firms. Therefore, Statement (C) comes first. → Firms use these factors to produce goods and services and sell them in the market. Therefore, Statement (B) comes next. → Firms pay factor payments to households. Therefore, Statement (A) comes next. → Households then spend this income on goods and services. Therefore, Statement (D) comes last. → Hence, the correct sequence is C, B, A, D. → Hence, Option B is the correct answer.

❓ Why Other Options Are Incorrect

A) B, C, D, A → Incorrect because production cannot logically come before supply of factors.
C) A, B, D, C → Incorrect because factor payments cannot come before factor supply and production.
D) A, B, C, D → Incorrect because the sequence starts with factor payments instead of factor supply.

🎯 Strategy

Used

Option A → Incorrect because factor supply should come first.
Option B → Correct because it follows circular flow logic.
Option C → Incorrect because payment is placed too early.
Option D → Incorrect because the order is not logical.

Final Answer → Option B.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

25 Which of the following will not be included in the National Income of India: (PYQ 2024)

A Profits earned by an Indian resident from his company abroad

B Salaries earned by Indian residents working in Japan

C Profits earned by a foreign company in India

D Dividends received by Indian shareholders of a company

💡 Short Explanation

National income includes income of normal residents. Indian residents' income abroad is included. Foreign company income in India is not Indian residents' income. Hence, it is excluded from India's national income.

✅ Correct Answer Explanation

(Detailed) → National Income is based on income earned by normal residents of a country, whether earned within domestic territory or abroad. → Profits earned by a foreign company in India are part of India's domestic income. → However, they are not part of India's national income if they belong to non-residents. → Therefore, profits earned by a foreign company in India will not be included in India's national income. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) Profits earned by an Indian resident from his company abroad → Incorrect because income earned abroad by Indian residents is included in India's national income.
B) Salaries earned by Indian residents working in Japan → Incorrect because income of Indian residents abroad is included.
D) Dividends received by Indian shareholders of a company → Incorrect because income received by Indian residents is included.

🎯 Strategy

Used

Option A → Incorrect because Indian resident income abroad is included.
Option B → Incorrect because Indian residents' foreign income is included.
Option C → Correct because foreign company income belongs to non-residents.
Option D → Incorrect because dividend income of Indian shareholders is included.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

26 Identify the correct statement in the context of Circular Flow of Income in a two sector economy : (PYQ 2024)

A Household receives factor services from firms.

B Household invests while firm saves.

C Firms produce goods and services.

D Household supplies factor services to Government.

💡 Short Explanation

Two-sector economy includes households and firms only. Households supply factor services to firms. Firms produce goods and services. Government is not included in a two-sector model.

✅ Correct Answer Explanation

(Detailed) → In a two-sector economy, only households and firms are present. → Households supply factor services such as labour, land, capital, and entrepreneurship to firms. → Firms use these factor services to produce goods and services. → Therefore, the correct statement is that firms produce goods and services. → Hence, Option C is the correct answer.

❓ Why Other Options Are Incorrect

A) Household receives factor services from firms → This is incorrect because households supply factor services to firms, not receive them from firms.
B) Household invests while firm saves → This is incorrect in the simple circular flow model. Households provide factors and consume goods, while firms produce goods and services.
D) Household supplies factor services to Government → This is incorrect because government is not present in a two-sector economy.

🎯 Strategy

Used

Option A → Incorrect because factor services flow from households to firms.
Option B → Incorrect because it wrongly describes household and firm roles.
Option C → Correct because firms produce goods and services.
Option D → Incorrect because government is absent in two-sector model.

Final Answer → Option C.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

27 Which of the following will be included while estimating Gross Domestic Product at market price (GDPmp)? (PYQ 2023)
Statements:
(A) Profit earned by American express Bank from its Branch in India
(B) Dividends paid to shareholders of firm situated in Kerala
(C) Donations made to a religious institution
(D) Salary paid to an Indian working in Japanese Embassy
(E) Purchase of taxi by Travel Services company
Choose the correct answer from the options given below:

A (A), (B) and (C) only

B (A), (B) and (D) only

C (B), (C) and (D) only

D (A), (B) and (E) only

💡 Short Explanation

GDPmp includes production within the domestic territory. Profit of a foreign bank branch in India is in domestic territory. Dividends in Kerala represent domestic production. Purchase of a taxi by a travel company is final investment. Donations and foreign embassy salaries are excluded.

✅ Correct Answer Explanation

(Detailed) → Gross Domestic Product at market price measures the value of all final goods and services produced within the domestic territory of a country. → Statement (A) is included because the branch of American Express Bank operates within India's domestic territory. → Statement (B) is included because the firm is situated in Kerala, which is within the domestic territory. → Statement (E) is included because the purchase of a taxi by a business is treated as final investment expenditure within the economy. → Statement (C) is excluded because donations are transfer payments. → Statement (D) is excluded because a Japanese Embassy is treated as foreign territory in India. → Hence, Option D is the correct answer.

❓ Why Other Options Are Incorrect

A) (A), (B) and (C) only → This is incorrect because donations made to a religious institution are transfer payments and are not included in GDP.
B) (A), (B) and (D) only → This is incorrect because salary paid to an Indian working in the Japanese Embassy is not part of India's domestic territory income.
C) (B), (C) and (D) only → This is incorrect because it includes donations and salary from a foreign embassy, both of which are not included in GDPmp.

🎯 Strategy

Used

Option A → Incorrect because donation is a transfer payment.
Option B → Incorrect because salary from Japanese Embassy is outside domestic territory.
Option C → Incorrect because it includes non-GDP items.
Option D → Correct because all three items are included in GDPmp.

Final Answer → Option D.

🧠 Memory Trick

📚 → Class XII, Introductory Macroeconomics, Chapter: National Income Accounting

CUET UG Categorised PYQ Economics Unit 7

Test Complete!

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