{"id":17002,"date":"2021-01-12T12:30:20","date_gmt":"2021-01-12T07:00:20","guid":{"rendered":"https:\/\/mcq-questions.com\/?p=17002"},"modified":"2022-03-02T11:16:09","modified_gmt":"2022-03-02T05:46:09","slug":"ncert-solutions-for-class-12-economics-chapter-2","status":"publish","type":"post","link":"https:\/\/mcq-questions.com\/ncert-solutions-for-class-12-economics-chapter-2\/","title":{"rendered":"NCERT Solutions for Class 12 Economics Chapter 2 National Income Accounting"},"content":{"rendered":"

Detailed, Step-by-Step NCERT Solutions for Class 12 Economics<\/a> Chapter 2 National Income Accounting Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.<\/p>\n

National Income Accounting NCERT Solutions for Class 12 Economics Chapter 2<\/h2>\n

National Income Accounting Questions and Answers <\/span>Class 12 Economics Chapter 2<\/h3>\n

Question 1.
\nWhat are the four factors of production and what are the remunerations to each of these called?
\nAnswer:
\nThe four factors of production and their respective remunerations: Land – Rent; Labour – Wage; Capital – Interest; and Entrepreneur – Profit.<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nWhy should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.
\nAnswer:
\nThe aggregate final expenditure of an economy should always be equal to the aggregate factor payments (or incomes) because of the circular flow of income. The final expenditure and aggregate factor payments are two sides of the same coin. The firms hire or purchase factor services from households and use them to produce goods and services.<\/p>\n

Factor payments made by the firms become factor incomes in the hands of households. Households spend their income on purchase of goods and services, which are produced by firms. Expenditure by household implies income to the firms. Thus, the income of economy goes througn the two sectors, firms and households, in a circular way. This is represented in the following figure:<\/p>\n

\"NCERT<\/p>\n

In the figure, the uppermost arrow moving from the households to the firms represents the spending of households on goods and services produced by the firms. The second arrow moving from the firms to the households is the counterpart of the arrow above. It stands for the goods and services, which are flowing from the firms to the households.<\/p>\n

Similarly, the two arrows at the bottom of the diagram represent the factor of the production market The lowermost arrow moving from the households to the firms symbolises the services that the households are rendering to the firms. Using these services, the firms are manufacturing the output. The arrow above’-this, moving from the firms to the households,<\/p>\n

represents the payments made by the firms xo the households for the services provided by the latter. Thus, there is no leakage from this circular flow of income between households and firms. That is, the money spent by the firms on factor services is exactly equal to the money they receive for the goods and services sold to the households.<\/p>\n

\"NCERT<\/p>\n

Question 3.
\nDistinguish between stock and flow. (C.B.S.E. Outside Delhi 2013,2017).
\nBetween net investment and capital, which is a stock and which is a flow? Compare net investment and capital with flow of water into a tank.
\nAnswer:
\nFollowing are the points of difference between stock and flow:<\/p>\n\n\n\n\n\n\n\n
S.No.<\/strong><\/td>\nStock<\/strong><\/td>\nFlow<\/strong><\/td>\n<\/tr>\n
1.<\/td>\nStock is an economic variable that is
\nmeasured at a specific point of time.<\/td>\n		Flow is an economic variable that is measured over a specific period of time.<\/td>\n<\/tr>\n
2.<\/td>\nStock is a static concept.<\/td>\nFlow is a dynamic concept.<\/td>\n<\/tr>\n
3.<\/td>\nStock does not have a time dimension.<\/td>\nFlow has time dimension in terms of per hour, per month, per year, etc.<\/td>\n<\/tr>\n
4.<\/td>\nExample: Wealth<\/td>\nExample: Income<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Net investment is a flow while capital is a stock. Net investment is a flow variable because its magnitude is measured over a period of time, say, one year. Capital is a stock because its magnitude is measured at a point of time, say, on 31 st March, 2017. Net investment and capital can be compared with flow of water into a tank.<\/p>\n

Capital is like water in tank while net investment is the water flowing in to and out of the tank. Flow of water into tank is measured over a period of time while water in the tank is measured at a particular point of time.
\n\"NCERT<\/p>\n

Question 4.
\nWhat is the difference between planned and unplanned inventory accumulation? Write down the relation between change in inventories and value added of a firm.
\nAnswer:
\nThe change in inventories may be planned or unplanned. Following points explain the difference between the two:<\/p>\n\n\n\n\n\n\n
S.No.<\/strong><\/td>\nPlanned Inventory<\/strong><\/td>\nUnplanned Inventory<\/strong><\/td>\n<\/tr>\n
1.<\/td>\nPlanned inventories refer to the changes in the stock of inventories, which take place in an anticipated way.<\/td>\nUnplanned inventories refer to the changes in the stock of inventories, wriiph’takerplace’ in an unanticipated manner,<\/td>\n<\/tr>\n
2.<\/td>\nIn a situation of planned inventory accumulation, firm plans to raise its inventories.<\/td>\nIn case of an unexpected fall in sales, the firm will have unsold stock of goods, which ft had not anticipated. Hence, there will be jyhpianned: accumulation of inventories ;;<\/sub><\/td>\n<\/tr>\n
3.<\/td>\nIn a situation of planned inventory dispersal, firm plans to reduce its inventories.<\/td>\nIri cise:<\/sub>:Of ah unexpected rise in sales, the firm: will fall short of stock of goods. Hence, there will be unplanned dispersal of inventories<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Value added is the difference between the value of the total output and the value of intermediary goods used by each production unit in an economy. It includes the change in firm\u2019s stock of inventories. Thus, Gross Value Added of firm = Value of sales by the firm + Value of change in inventories : – Value of intermediate goods used by the firm
\nGVA = V + A – Z
\nThe change in inventories means difference between opening inventories and closing inventories. The change in inventories affects the Gross Value Added. It is derived from the production and sales of the firm.<\/p>\n

\"NCERT<\/p>\n

Question 5.
\nWrite down the three identities of calculating the GDP of a country by the three methods. Also ; briefly explain why each of these should give us the same value of GDP.
\nAnswer:
\nFollowing are the three methods and their respective identities for calculating GDP:
\n(i) Value Added Method:
\nGDPMp <\/sub>= GVA1 <\/sub>+ GVA2 <\/sub>+………….+GVAN
\n<\/sub>\\(G D P_{M P}=\\sum_{j=1}^{N} G V A\\)<\/p>\n

(ii) Income Method:
\nGDPMp<\/sub> = Rent + Wage + Interest + Profit + Depreciation + Met Indirect Taxes
\nGDPMp<\/sub>= R + W+ ln<\/sub> + P + Depreciation + NIT<\/p>\n

(iii) Expenditure Method:
\nGDPW<\/sub> = Private Consumption + Investment + Government Consumption + (Exports-lmports)
\nGDPmp<\/sub> = C + I + G + (X-M)<\/p>\n

All the three methods of measuring National: Income give the same value of GDP. Each method reflects three different phases of the same circular flow of income.<\/p>\n