Q11. Gross National Product (GNP) differs from Gross Domestic Product (GDP) by the inclusion of:
Economic Growth, Development and Sustainable Development: RAS Prelims MCQs
99 RAS Prelims MCQs on economic growth, development and sustainable development test the national income aggregates and the difference between growth and development. Nominal and real GDP, GDP and GNP, NDP, national income, per capita income and the factors that raise growth are asked as definitions and relationships, and each explanation shows how the aggregates are linked.
Practice questions based on the RPSC RAS Prelims syllabus. They follow the exam pattern but are not past-paper questions.
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Q12. Net Domestic Product (NDP) is obtained by deducting which of the following from Gross Domestic Product (GDP)?
Explanation
Net Domestic Product is derived by subtracting depreciation from Gross Domestic Product. Depreciation represents the wear and tear of capital assets used during the production process. While GDP tracks total output, NDP provides a more realistic measure of economic performance by accounting for the capital consumed. This adjustment highlights the net amount of production available for consumption and investment activities.
Q13. National Income is strictly equivalent to which of the following macroeconomic aggregates?
Explanation
National Income is technically defined as Net National Product at Factor Cost. It represents the total income earned by the factors of production belonging to a country. Unlike market price measures, it excludes indirect taxes and includes subsidies to reflect the actual costs of production. This aggregate serves as the most accurate indicator of the total economic value generated by citizens.
Q14. Consider the following statements concerning national income accounting:
I. GDP at factor cost includes indirect taxes but excludes subsidies.
II. GNP can be lesser than GDP if net factor income from abroad is negative.
III. NNP at market price represents the total value of goods and services produced after allowing for depreciation.
IV. Personal income includes transfer payments received by households.
V. Disposable income is personal income minus personal direct taxes.
Which of the above statement(s) is/are correct?
I. GDP at factor cost includes indirect taxes but excludes subsidies.
II. GNP can be lesser than GDP if net factor income from abroad is negative.
III. NNP at market price represents the total value of goods and services produced after allowing for depreciation.
IV. Personal income includes transfer payments received by households.
V. Disposable income is personal income minus personal direct taxes.
Which of the above statement(s) is/are correct?
Explanation
GNP can be lower than GDP if residents earn less abroad than foreigners earn domestically. NNP at market price accounts for capital depreciation. Personal income includes transfers like pensions, which are not factor incomes. Disposable income is the amount remaining after paying direct taxes. However, GDP at factor cost actually excludes indirect taxes and includes subsidies, making the first statement incorrect.
Q15. Match List I with List II and select the correct answer using the codes given below:
| National Income Aggregates | Formulas |
|---|---|
| A. GNP at Market Price | i. GDP at Market Price - Depreciation |
| B. NDP at Market Price | ii. NNP at Market Price - Indirect Taxes + Subsidies |
| C. NNP at Factor Cost | iii. GDP at Market Price - Indirect Taxes + Subsidies |
| D. GDP at Factor Cost | iv. GDP at Market Price + Net Factor Income from Abroad |
Explanation
Various national income aggregates are linked through specific adjustments. GNP at market price adds net factor income to GDP. NDP is calculated by removing depreciation from GDP. NNP at factor cost is derived by adjusting market prices for taxes and subsidies. Similarly, GDP at factor cost removes the influence of indirect taxes. These formulas ensure consistency across different accounting frameworks.
Q16. Per capita income of a country is calculated by dividing its national income by its:
Explanation
Per capita income is determined by dividing the total national income of a country by its total population. This mathematical average provides a rough estimate of the income available to each individual citizen. While it is a standard metric for comparing economic status across nations, it serves as a mean value that does not reflect how income is distributed among the people.
Q17. Which of the following is considered a major limitation of using per capita income as an indicator of economic development?
Explanation
A major drawback of using per capita income as a development indicator is its failure to account for income distribution. Because it is a simple average, it can mask extreme inequalities where a small percentage of people hold most of the wealth. Consequently, a rising per capita income does not necessarily mean that the standard of living has improved.
Q18. Per capita income is often criticized for masking the reality of human welfare because it excludes:
Explanation
Per capita income excludes several non-monetary factors that contribute significantly to human well-being. It does not account for unpaid domestic labor, which is essential for household stability, nor does it value leisure time. Furthermore, it ignores environmental health and social safety. Because these elements are not traded in markets, they are omitted from traditional national income accounting and welfare assessments.
Q19. The following question consists of two statements, Assertion (A) and Reason (R). Choose the correct option.
Assertion (A): A high per capita income in a country does not necessarily imply a high level of human development.
Reason (R): Per capita income calculations do not account for income inequality, environmental degradation, or access to basic healthcare and education.
Assertion (A): A high per capita income in a country does not necessarily imply a high level of human development.
Reason (R): Per capita income calculations do not account for income inequality, environmental degradation, or access to basic healthcare and education.
Explanation
High per capita income is an insufficient measure of human development because it overlooks several qualitative factors. While income provides the means for progress, it does not guarantee equitable access to education or healthcare. Additionally, it fails to capture environmental costs or social inequalities. Therefore, development requires a broader focus on human freedoms and basic needs rather than average wealth.
Q20. Arrange the following steps in the logical order to calculate Real Per Capita Income from nominal GDP data:
I. Divide the real GDP by the total population.
II. Compile the total market value of all final goods and services produced in the current year.
III. Select a base year for price comparison.
IV. Apply the GDP deflator to adjust nominal GDP for inflation.
Which of the following represents the correct sequence?
I. Divide the real GDP by the total population.
II. Compile the total market value of all final goods and services produced in the current year.
III. Select a base year for price comparison.
IV. Apply the GDP deflator to adjust nominal GDP for inflation.
Which of the following represents the correct sequence?
Explanation
Calculating real per capita income begins with compiling nominal GDP data at current market prices. Next, a base year is selected to provide a constant price reference. The GDP deflator is then applied to adjust these nominal figures for inflation, resulting in real GDP. Finally, this real GDP is divided by the total population to find the final value.Answer key for these questions
| Q | Correct answer |
|---|---|
| 11 | (d) Net factor income from abroad |
| 12 | (b) Depreciation |
| 13 | (c) Net National Product at Factor Cost |
| 14 | (b) II, III, IV and V only |
| 15 | (a) A-iv, B-i, C-ii, D-iii |
| 16 | (b) Total population |
| 17 | (b) Income distribution neglect |
| 18 | (a) Unpaid domestic work and leisure time. |
| 19 | (a) Both A and R are true and R is the correct explanation of A. |
| 20 | (a) II, III, IV, I |
Key facts from Economic Growth, Development and Sustainable Development
- Real GDP differs from nominal GDP because it is adjusted for price level changes (inflation).
- In the value-added method, the value of intermediate consumption is deducted from the value of output.
- GNP differs from GDP by the inclusion of net factor income from abroad.
- Net Domestic Product is obtained by deducting depreciation from Gross Domestic Product.
- National Income is equivalent to Net National Product at factor cost.
- Per capita income is national income divided by total population, and it masks welfare because it leaves out unpaid domestic work and leisure.
Frequently asked questions
How many RAS Prelims practice MCQs are there on Economic Growth, Development and Sustainable Development?
This page has 99 practice MCQs on Economic Growth, Development and Sustainable Development (Indian Economy). Each has the correct answer, and most have an explanation.
What is the difference between nominal and real GDP?
Nominal GDP is measured at current prices, and real GDP is adjusted for price level changes (inflation) by using the prices of a base year. Real GDP therefore shows the actual growth in the volume of output.
How does GNP differ from GDP?
GNP includes net factor income from abroad, that is income earned by a country’s residents abroad minus income earned by foreigners in the country. GDP counts only the output produced within the domestic territory.
What is National Income?
National Income is the Net National Product at factor cost. It is obtained from GDP by adding net factor income from abroad, deducting depreciation and subtracting indirect taxes net of subsidies.