MCQ QUESTIONS OF CIRCULAR FLOW OF INCOME
There are _ phases in the circular flow of income.
(a) 2 (b) 3
(c) 4 (d) 5
The distribution phase of the circular flow of income involves :
(a) Production of goods and services (b) Flow of factor income
(c) Expenditure on goods and services (d) None of these
Circular flow of income :
(a) gives information about injections and leakages from the flow of income.
(b) enables estimation of national income
(c) provides knowledge of independence among different sectors.
(d) all of these
From the macro point of view, an economy is divided into _ sectors.
(a) 2 (b) 3
(c) 4 (d) 5
Produces goods and services for the satisfaction of households’ wants.
(a) Government sector (b) Household sector
(c) Producing sector (d) External sector
Following is an example of leakage from the circular flow of income :
(a) Investment (b) Exports (c) Taxes (d) Consumption expenditure.
Following is an example of injection into the circular flow of income :
(a) Saving (b) Taxes
(c) Imports (d) Government expenditure
Which of the following is included in the circular flow of income?
(a) Real flow (b) Money flow
(c) Both (a) and (b) (d) None of these
Which of the following is true about intermediate goods?
(a) Intermediate goods remain within the production boundary
(b) Intermediate goods have derived demand
(c) Value of intermediate goods is merged with the value of final goods.
(d) All the above
Which of the following is not true about final goods?
(a) Final goods satisfy the wants of ultimate consumers and producers
(b) Final goods have direct demand, as they satisfy the wants directly
(c) Final goods are subject to further transformation in the process of production
(d) Final goods are neither used up as raw material for further production of other goods nor for
resale in the same year
Following is the feature of final goods :
(a) Flour used by a baker in making biscuits
(b) Tractor purchased by a farmer
(c) Tires purchased by a transport company
(d) Mobile used in providing defense services.
Following is an example of intermediate good :
(a) Furniture purchased by a school
(b) Sugar used by a household in making sweets
(c) Computers installed in an office
(d) Vehicles used in providing defense services
Following are the features of capital goods :
(a) Non-durable goods (b) Direct demand
(c) Life span of around one year (d) Final investment goods
Which goods are subject to depreciation in the estimation of national income?
(a) Consumer durables (b) Capital goods
(c) Intermediate goods (d) Final goods
Following is an example of a stock variable :
(a) Investment (b) Income
(c) Depreciation (d) Population
Following is an example of a flow variable :
(a) Money supply (b) Mineral wealth of India
(c) Interest (d) Foreign debts
Which of the following is a factor income?
(a) Old age pension
(b) Unemployment allowance
(c) Interest received by a household from deposit in a bank
(d) Pocket money
Identify the transfer income from the following :
(a) Bonus received on Diwali (b) Retirement pension
(c) Dividend (d) None of these
Who are normal residents of India?
(a) Border workers of Nepal who daily cross the border to work in India
(b) WHO located in India
(c) American officials working in the US embassy in India
(d) Indian officials working in the Indian embassy in China
Who are not normal residents of India?
(a) Indians living abroad for a period of more than one year.
(b) Foreign students studying in India
(c) Foreign tourists visiting India for 2 months
(d) All of these
Which of the following falls under the domestic territory of India?
(a) Japanese Embassy in India
(b) Branch of a foreign bank in India
(c) Branch of State Bank of India in the USA
(d) A company located in the UK owned by an Indian
Which of the following statements is true?
(a) Bread is always a consumer good
(b) All producers goods are not capital goods
(c) Transfer income is received for providing a good or service in return
(d) None of these
Identify the capital goods from the following :
(a) Washing machine purchased by a consumer
(b) Purchase of new bus by a transport company
(c) New flat purchased by a household
(d) Both (b) and (c)
Which of the following is an intermediate product?
(a) Purchase of milk by consumers (b) Machine purchased by a firm
(c) Wheat purchased by a flour mill (d) Wheat purchased by a household
Which of the following is not an example of the final good?
(a) Stationery purchased by a school (b) Wheat used by the farmers
(c) Wheat used by the flour mill (d) All the above
The difference between gross investment and net investment is _.
(a) Change in stock (b) Net indirect taxes
(c) Net factor income from abroad (d) Depreciation
Which of the following is not a flow? (Choose the correct alternative)
(a) Capital (b) Income
(c) Investment (d) Depreciation
Market price and factor cost will be equal when :
(a) NIT is zero (b) NFIA is zero
(c) Both (a) and (b) (d) Neither (a) nor (b)
Distance is a _.
(a) Stock concept (b) Flow concept
(c) Both (a) and (b) (d) None of the above
Flow is a _
(a) Static concept (b) Dynamic concept
(c) Both (a) and (b) (d) None of the above
Semi-finished goods are termed as _ goods.
(a) Final goods (b) Intermediate goods
(c) Consumption goods (d) Capital goods
Depreciation of fixed capital assets refers to (Choose the correct alternative)
(a) Normal wear and tear (b) Foreseen obsolescence
(c) Unforeseen obsolescence (d) Normal wear and tear and foreseen obsolescence
Unforeseen obsolescence of capital assets during production is : (choose the correct alternative)
(a) Consumption of fixed capital (b) Capital loss
(c) Income loss (d) None of the above
Disinvestment by government means : (choose the correct alternative)
(a) Selling its fixed capital assets (b) Selling of shares of public enterprises
(c) Selling of its buildings (d) All of these
National income is the sum of factor incomes according to (choose the correct alternative)
(a) Nationals (b) Economic territory
(c) Residents (d) Both residents and non-residents
Which of the following is a flow?
(a) Deposits in a bank (b) Capital
(c) Depreciation (d) Wealth
Foreign embassies in India are a part of India’s : (Choose the correct alternative)
(a) Economic territory (b) Geographical territory
(c) Both (a) and (b) (d) None of the above
Goods purchased for the following purpose are final goods : (choose the correct alternative)
(a) For the satisfaction of wants (b) For investment in the firm
(c) Both (a) and (b) (d) None of the above
ANSWERS
(b); 2. (b); 3. (d); 4. (c); 5. (c); 6. (c); 7. (d); 8. (c); 9. (d); 10. (c); 11. (b); 12. (d); 13.
(d); 14. (b); 15. (d); 16. (c); 17. (c); 18. (d); 19. (d); 20. (d); 21. (b); 22. (b); 23. (d); 24. (c); 25 (d); 26. (d); 27. (a); 28. (a); 29. (a); 30. (b); 31. (b); 32. (d); 33. (b); 34. (b); 35. (c); 36.
(c); 37. (b); 38. (c)