Aggregates related to national income - GDP

Correct answer: C. Market value of final goods and services produced within a country

Explanation: Gross Domestic Product, or GDP, is the market value of all final goods and services produced within a country’s domestic territory during a specified period, usually one year. It measures domestic economic output and avoids double counting by excluding intermediate goods. Therefore, option C is correct.

Correct answer: A. Gross domestic product

Explanation: Gross domestic product, or GDP, measures the market value of final goods and services produced within a country during a specified period. It is a central aggregate used to study national income, output and economic performance. The other options concern individual or trivial matters, not national accounting.

Correct answer: A. Gross Domestic Product

Explanation: GDP stands for Gross Domestic Product. “Gross” means that depreciation of fixed capital has not been deducted, while “domestic” means production within the country’s economic territory. “Product” refers to the value of final goods and services produced during a specified period, usually one year.

Correct answer: A. Domestic territory

Explanation: GDP measures the market value of final goods and services produced within the domestic territory of a country during a given period. It follows the location of production, not the citizenship of the producer. Thus, production by a foreign-owned company inside the country is included, while production by a resident company abroad is excluded from domestic product.

Correct answer: A. Final goods and services

Explanation: GDP includes the value of final goods and services produced during the accounting period. Intermediate goods are not normally added separately because their value is already embodied in the final product; doing so would count the same production more than once. Second-hand sales and gifts also do not represent current production in the usual GDP calculation.

Correct answer: A. Production within the country’s economic territory

Explanation: The word “domestic” in GDP refers to the economic territory of the country. It includes production taking place within that territory regardless of whether the producer is a citizen or a foreign-owned enterprise. It does not mean income earned only by citizens; that broader nationality-based idea is associated with national, rather than domestic, measures.

Correct answer: A. Gross measure

Explanation: GDP is a gross measure because it records production before deducting consumption of fixed capital, commonly called depreciation. If depreciation is subtracted from GDP, the result is NDP, or Net Domestic Product. Therefore, the word “gross” identifies the inclusion of depreciation and distinguishes GDP from its corresponding net aggregate.

Correct answer: B. ₹820 crore

Explanation: The conversion formula is GDPFC = GDPMP − NIT. Substituting the given values gives GDPFC = ₹900 crore − ₹80 crore = ₹820 crore. Adding NIT would incorrectly move from factor cost toward market price, while ₹900 crore is the original market-price GDP and ₹80 crore is only the adjustment amount, not the final aggregate.

Correct answer: A. Because it was not produced in the current year

Explanation: GDP counts current production during the relevant accounting period. An old or second-hand good was already included in GDP when it was originally produced, so adding its full resale price would count the same production again. However, a current brokerage or repair service connected with the resale may be included because it represents current production.

Correct answer: A. Because it is a service produced in the current year

Explanation: The old good itself is not current production, so its full resale price is excluded from GDP. A broker's commission is different: it is payment for a brokerage service actually provided during the current accounting period. That newly produced market service has economic value and is therefore included in current GDP.

Correct answer: A. Scholarship

Explanation: A scholarship is generally a transfer payment because the recipient receives money without providing a current productive service in direct exchange. Wages, rent, and profit are factor incomes: wages reward labour, rent rewards the use of land or property, and profit accrues to the entrepreneur. Transfer payments are excluded from GDP as current production income.

Correct answer: A. Yes, because the production occurred within domestic territory

Explanation: GDP measures the market value of final goods and services produced within a country’s domestic territory during a given period, regardless of whether the producer is domestically or foreign owned. Therefore, output produced by a foreign company inside the country is included in domestic GDP. Ownership matters more for national income and GNP, not for the territorial definition of GDP.

Correct answer: A. Because GDP is based on production within the domestic territory

Explanation: GDP measures the market value of final goods and services produced within a country’s domestic territory during a specified period, irrespective of who owns the factors of production. Therefore, factor income earned abroad by an Indian resident is not domestic production and is excluded from India’s GDP. Such cross-border factor income is relevant when moving from domestic to national income through NFIA.

Correct answer: A. The size of domestic production

Explanation: Gross Domestic Product, or GDP, indicates the monetary value and overall size of final goods and services produced within a country’s domestic territory during a given period, usually one year. It is an important indicator of economic activity and output. However, GDP alone does not show income distribution, population quality, environmental conditions, or complete social welfare.

Correct answer: A. No, GDP is a gross measure

Explanation: GDP is a gross domestic measure, so it is calculated before deducting depreciation, also called consumption of fixed capital. Depreciation represents the loss of value of fixed assets caused by use, wear, or obsolescence. When depreciation is deducted from GDP, the result is Net Domestic Product: NDP = GDP − depreciation. Thus, the word ‘gross’ is the key reason for option A.

Correct answer: A. The gross value of final goods and services produced within domestic territory

Explanation: Gross Domestic Product is the market value or gross value of all final goods and services produced within a country’s domestic territory during a specified period, usually one year. ‘Domestic’ refers to location, ‘gross’ means depreciation is not deducted, and ‘final’ prevents intermediate goods from being counted again.

Correct answer: A. It is included in GDP

Explanation: GDP follows the domestic-territory principle: it measures the market value of final goods and services produced within a country’s economic territory during a period. Ownership or nationality of the producing company does not change this rule, so a foreign company’s domestic production is included in GDP.

Correct answer: A. Because it is a transfer payment

Explanation: An unemployment allowance is a transfer payment. The recipient receives money without providing a currently produced good or service in return. GDP measures the market value of final goods and services produced within the domestic territory during a period, so the allowance itself is excluded. Any later spending of the allowance may be recorded as consumption when it buys current output.

Correct answer: A. By dividing total GDP by population

Explanation: Per capita GDP measures the average value of domestic production available per person. It is calculated by dividing the economy’s total GDP by its population: per capita GDP = GDP ÷ population. It is an average indicator, not a measure of the actual income received by every individual, because people may have unequal incomes.

Correct answer: A. ₹40

Explanation: Per capita GDP is calculated as total GDP divided by total population. Therefore, per capita GDP = ₹10,000 crore ÷ 250 crore = ₹40. The crore units in the numerator and denominator cancel because both quantities use the same unit. The result is ₹40 per person, so option A is correct; ₹400 would be a place-value error.

Correct answer: A. Final output in domestic territory

Explanation: Gross Domestic Product measures the market value of final goods and services produced within the domestic territory of an economy during a specified period, usually one year. It is location-based, so production by foreign-owned firms inside the country is included, while residents' production abroad belongs to another territory's GDP. Hence, option A is correct.

Correct answer: A. Service of a foreign bank within the country

Explanation: GDP follows the principle of domestic territory: it includes production taking place within the country's economic territory, regardless of whether the producer is domestically or foreign owned. Therefore, services supplied by a foreign bank operating within the country are included. A resident's job abroad and an Indian firm's foreign production are not part of domestic GDP, making option A correct.

Correct answer: A. Separate value of tyre used in a final car

Explanation: A tyre fitted into a newly produced final car is an intermediate input whose value is already included in the car's final selling price. Adding the tyre's separate value would count the same production twice. A new car, a paid repair service, and construction of a new house represent final market production and can be included directly, so option A is correct.

Correct answer: B. ₹1550 crore

Explanation: Net Domestic Product is obtained by deducting depreciation, or consumption of fixed capital, from Gross Domestic Product. Thus, NDP = GDP − Depreciation = ₹1800 crore − ₹250 crore = ₹1550 crore. The amount ₹2050 crore would incorrectly add depreciation instead of deducting it.

Correct answer: A. GDPFC = GDPMP − NIT

Explanation: Market price includes net indirect taxes, while factor cost excludes their effect. Therefore, conversion from GDPMP to GDPFC requires subtracting Net Indirect Taxes: GDPFC = GDPMP − NIT. NFIA changes domestic into national aggregates, depreciation changes gross into net aggregates, and imports are not the relevant adjustment here.