National Income and Circular flow of Income Class 12 MCQ ISC covers certain important topics, which are covered under syllabus for ISCE Class 12 and are coming in Term II examination for the academic year 2022-23. National Income and Circular flow of Income Class 12 MCQ Test contains 55 questions. MCQ on Economics Class 12 ISC have been made for Class 12 students to help check the concept you have learnt from detailed classroom sessions and application of your knowledge.
National Income and Circular flow of Income Class 12 MCQ
National Income
1. _______ is the money value of all final goods and services produced by the normal residents of a country.
(a) Domestic income
(b) Normal income
(c) National income
(d) All of the above
Answer
Answer: (c) National income
2. “National income is the final value of all goods and services produced by domestically owned factors of production within a given Period”. This definition was given by;
(a) Fischer
(b) Kent
(c) Samuelson
(d) Dalton
Answer
Answer: (a) Fischer
3. National income is expressed in monetary terms. (True/False)
Answer
Answer: True
4. The output of different goods and services is valued at;
(a) Production cost
(b) Market price
(c) Factor cost
(d) None of the above
Answer
Answer: (b) Market price
5. ______ are those goods and services which are sold to the final users during the year
(a) Final product
(b) Intermediate product
(c) Both (a)&(b)
(d) None of the above
Answer
Answer: (a) Final product
6. Final goods satisfy the wants of consumers indirectly. (True/False)
Answer
Answer: False
7. Final goods and services are purchased for;
(a) Consumption
(b) Investment
(c) Resale
(d) Both (a)&(b)
Answer
Answer: (d) Both (a)&(b)
8. ______ are the goods that help in the production of other goods.
(a) Final goods
(b) Producer goods
(c) Intermediate goods
(d) Transfer goods
Answer
Answer: (c) Intermediate goods
9. Producer goods are final goods. (True/False)
Answer
Answer: False
10. ________ are the goods and services which are used by the producers as inputs into a further stage of production.
(a) Final goods
(b) Producer goods
(c) Intermediate goods
(d) Transfer goods
Answer
Answer: (b) Producer goods
National Income and Circular flow of Income Class 12 MCQ
11. Intermediate goods are also known as
(a) Output goods
(b) Non-Factor goods
(c) Factor goods
(d) Non-output goods
Answer
Answer: (b) Non-Factor goods
12. Intermediate goods cannot be resold in the market. (True/False)
Answer
Answer: True
13. The error which arises in national income estimation if we add up the total output of all the sectors in the economy, instead of adding up the output of final goods and services only is known as;
(a) Income error
(b) Double counting
(c) Counting error
(d) Estimation error
Answer
Answer: (b) Double counting
14. National income is a low income. (True/False)
Answer
Answer: True
15. _____ is a quantity that is measured over a period of time.
(a) Stock
(b) National income
(c) Flow
(d) None of the above
Answer
Answer: (c) Flow
16. National income measures the value of ______ produced goods and services.
(a) Previously
(b) Continuously
(c) Currently
(d) Lately
Answer
Answer: (c) Currently
17. Transfer payment is____ from national income.
(a) Included
(b) Excluded
(c) Both (a)&(b)
(d) None of the above
Answer
Answer: (b) Excluded
18. Sales and purchase of financial assets are excluded from national income. (True/False)
Answer
Answer: True
19. Which of the following are examples of transfer payments?
(a) Gifts
(b) Donations
(c) Old-age pension
(d) All of the above
Answer
Answer: (d) All of the above
20. ______ are the payments for which no productive services are rendered in return.
(a) Factor payment
(b) Indirect payment
(c) Transfer payment
(d) Direct payment
Answer
Answer: (c) Transfer payment
21. _______ are those persons who ordinarily reside in a country where they live and whose economic interests lie in that country.
(a) Foreign residents
(b) Normal residents
(c) Domestic residents
(d) Permanent residents
Answer
Answer: (b) Normal residents
22. The term normal residents covers;
(a) Individuals
(b) Institution
(c) Both (a)&(b)
(d) None of the above
Answer
Answer: (c) Both (a)&(b)
23. _______ refers to the geographical or political boundary of a country.
(a) Domestic territory
(b) National territory
(c) Normal territory
(d) All of the above
Answer
Answer: (a) Domestic territory
24. Domestic territory includes foreign embassies. (True/False)
Answer
Answer: False
National Income and Circular flow of Income Class 12 MCQ
Circular flow
25. The factor incomes earned or generated are spent on;
(a) Personal expenditure
(b) Factor consumption
(c) Purchasing goods
(d) All of the above
Answer
Answer: (d) All of the above
26. ______ is defined as the flow of payments and receipts for goods and services and factor services between different sectors of the economy.
(a) Factor flow
(b) Circular flow of income
(c) Income flow
(d) Economic flow
Answer
Answer: (b) Circular flow of income
27. Which of the following about circular flow of income is true;
(a) It flows in nature
(b) It is constant
(c) It generates income
(d) All of the above
Answer
Answer: (d) All of the above
28. ______ consists of a flow of factor services and the flow of goods and services among different sectors of an economy.
(a) Circular flow
(b) Income flow
(c) Real flow
(d) Money flow
Answer
Answer: (c) Real flow
29. _______ consists of a flow of money incomes for factor services and money expenditure incurred on the purchase of goods and services.
(a) Circular flow
(b) Income flow
(c) Real flow
(d) Money flow
Answer
Answer: (d) Money flow
30. _______ are the main owners of factors of production.
(a) Households
(b) Business sector
(c) Firms
(d) Government
Answer
Answer: (a) Households
31. Government hires factor services from households for the production process. (True/False)
Answer
Answer: False
32. In the two-sector model, if households spend all their incomes on buying consumer goods produced by the firms, and firms distribute all the money collected from the sale of their products to households as factor income, then the circular flow of income will remain ________
(a) Maximum
(b) Minimum
(c) Constant
(d) None of the above
Answer
Answer: (c) Constant
33. As the households spend all their income on the purchase of goods and services from the firms, total money receipts of the firms will be_____ to the total income of the households.
(a) Equal
(b) More
(c) Less
(d) Not mentioned
Answer
Answer: (a) Equal
34. Total income of the households is equal to the expenditure of the firms on the purchase of factor services. (True/False)
Answer
Answer: true
35. Everything received by households would be passed on to firms, and everything received by firms would be passed back to households, there would be _______in the circular flow of income.
(a) Surplus
(b) Equilibrium
(c) Deficit
(d) None of the above
Answer
Answer: (b) Equilibrium
36. ______ is the part of income that is not spent by households on consumer goods and services.
(a) Investment
(b) Surplus
(c) Savings
(d) Injection
Answer
Answer: (c) Savings
37. _______ is the amount of money that is withdrawn from the flow of income.
(a) Leakage
(b) Injection
(c) Savings
(d) Investment
Answer
Answer: (a) Leakage
38. _____ refers to the expenditure on producer goods that help in producing other goods in the production process.
(a) Leakage
(b) Injection
(c) Savings
(d) Investment
Answer
Answer: (d) Investment
39. ______ are not purchased by the consumers but by the firms only.
(a) Consumer goods
(b) Capital goods
(c) Final goods
(d) Intermediate goods
Answer
Answer: (b) Capital goods
40. Consumer goods are purchased by the consumers only. (True/False)
Answer
Answer: True
41. _____ is the amount of money that is added to the flow of income.
(a) Leakage
(b) Injection
(c) Savings
(d) Investment
Answer
Answer: (b) Injection
42. The firms use______ for undertaking investment.
(a) Undisturbed profit
(b) Dividend
(c) Investment expenditure
(d) Savings
Answer
Answer: (a) Undisturbed profit
43. Households and firms interact with each other through;
(a) Financial institutions
(b) Capital markets
(c) Insurance companies
(d) All of the above
Answer
Answer: (d) All of the above
44. Equilibrium condition of the circular flow of income in a two-sector Economy is;
(a) AD=AS
(b) S=I
(c) Both (a)&(b)
(d) None of the above
Answer
Answer: (c) Both (a)&(b)
45. Which of the following government’s activities are included in the circular flow?
(a) Taxes
(b) Government’s spending on factor services
(c) Transfer payment
(d) All of the above
Answer
Answer: (d) All of the above
National Income and Circular flow of Income Class 12 MCQ
46. Which of the following taxes are levied on consumer goods?
(a) GST
(b) Excise duty
(c) Sales tax
(d) All of the above
Answer
Answer: (d) All of the above
47. Corporation tax is levied on consumer goods. (True/False)
Answer
Answer: false
48. Tax constitutes leakages from the flow. (True/False)
Answer
Answer: True
49. Government expenditure is leakage from the flow. (True/False)
Answer
Answer: False
50. If the government spends its entire income in the form of expenditure and transfer payments, this means;
(a) Contraction of the level of circular flow
(b) Expansion of the level of circular flow
(c) Both (a)&(b)
(d) None of the above
Answer
Answer: (a) Contraction of the level of circular flow
51. Income resulting from taxes is just offset by the expansion of the level of the circular flow of income resulting from the act of government spending. (True/False)
Answer
Answer: True
52. The equilibrium condition of the circular flow of income in three sector model is:
(a) S+T=I+G
(b) S+T
(c) I+G
(d) None of the above
Answer
Answer: (a) S+T=I+G
53. _____ is an economy that doesn’t engage in international trade.
(a) Open market
(b) Closed economy
(c) Open economy
(d) Excluded Economy
Answer
Answer: (b) Closed economy
54. The economy which includes international trade in goods and services is called;
(a) Open market
(b) Closed economy
(c) Open economy
(d) Excluded Economy
Answer
Answer: (c) Open economy
55. Imports constitute ______ and export constitutes_______.
(a) Leakage, injection
(b) Inflows, outflow
(c) Outflow, inflow
(d) Injection, leakage
Answer
Answer: (a) Leakage, injection
Economics Class 12 ISC MCQs – Term 2
- Theory of Income and Employment Class 12 MCQ
- Money : Meaning and Functions
- Banks : Commercial Bank and Central bank
- Balance of Payments and Exchange Rate
- Government Budget
- MCQ on Fiscal Policy Class 12 Economics
- National Income and Circular flow of Income
- National Income Aggregates Class 12 MCQ
- Methods of Measuring National Income Class 12 MCQ