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ABHYAS PREP: INDIAN ECONOMY (UPSC AND MPSC) · NATIONAL INCOME

National income and inflation

GDP, GNP, NDP, real and nominal, and every kind of inflation.

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Worked examples

Example 1 · level 1

In economics, what does "Deflation" mean?

  1. the value of output minus the value of the inputs used up in making it
  2. a sustained fall in the general level of prices
  3. extremely fast, out-of-control inflation
  4. high inflation together with slow growth and high unemployment
Show solution
  1. Deflation: a sustained fall in the general level of prices.
  2. Gross Value Added (GVA): the value of output minus the value of the inputs used up in making it.
  3. Stagflation: high inflation together with slow growth and high unemployment.
  4. Hyperinflation: extremely fast, out-of-control inflation.
  5. Source: https://ncert.nic.in/textbook.php

Answer: a sustained fall in the general level of prices

Example 2 · level 2

Consider the following statements: 1. "Hyperinflation" means extremely fast, out-of-control inflation. 2. "Net National Product (NNP)" means GDP minus depreciation (wear and tear of machines and buildings). 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
Show solution
  1. Statement 1 is correct: Hyperinflation: extremely fast, out-of-control inflation.
  2. Statement 2 is wrong: it pairs Net National Product (NNP) with "GDP minus depreciation (wear and tear of machines and buildings)". In fact, Net National Product (NNP): GNP minus depreciation.
  3. Source: https://ncert.nic.in/textbook.php

Answer: 1 only

Example 3 · level 3

Consider the following pairs (Term : Meaning): 1. Gross National Product (GNP) : GDP plus net factor income from abroad 2. Demand-pull inflation : inflation caused when demand grows faster than supply 3. Real GDP : GDP measured at the prices of a fixed base year, so that price rises are taken out How many of the pairs given above are correctly matched?

  1. Only one pair
  2. Only two pairs
  3. All three pairs
  4. None of the pairs
Show solution
  1. Pair 1 is correct: Gross National Product (GNP): GDP plus net factor income from abroad.
  2. Pair 2 is correct: Demand-pull inflation: inflation caused when demand grows faster than supply.
  3. Pair 3 is correct: Real GDP: GDP measured at the prices of a fixed base year, so that price rises are taken out.
  4. So 3 of the 3 pairs are correctly matched.
  5. Source: https://ncert.nic.in/textbook.php

Answer: All three pairs

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