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.

mcq questions of circular flow of income
mcq questions of circular flow of income

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


(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)

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