Time: 3 Hours | Maximum Marks: 80
CBSE Class 12 Economics
Sample Paper – National Income Accounting (With Answers)
Time: 3 Hours | Maximum Marks: 80
SECTION A – Multiple Choice Questions (1 mark each)
1. Which method measures National Income by adding all factor incomes?(1)
Income Method.
2. What does GNP stand for?(1)
Gross National Product – value of final goods and services produced by nationals (in India and abroad).
3. In the expenditure method, which formula is used to calculate GDP?(1)
GDP = C + I + G + (X – M)
4. Which of the following is a leakage from the circular flow of income?(1)
Savings / Taxes / Imports (any one).
5. Nominal GDP is measured at ________ prices.(1)
Current year prices.
6. What is added to GDP to obtain GNP?(1)
Net Factor Income from Abroad (NFIA).
7. Define “Depreciation”.(1)
Loss of value of capital assets due to wear and tear or obsolescence.
8. What does GDP Deflator measure?(1)
It measures overall price level changes (inflation) in an economy.
9. Which sector is added in the three-sector model of circular flow?(1)
Government sector.
10. Name one limitation of GDP as a measure of welfare.(1)
It ignores income distribution and environmental degradation.
SECTION B – Short Answer Questions (3 marks each)
11. Differentiate between Nominal GDP and Real GDP with examples.(3)
| Basis | Nominal GDP | Real GDP |
|---|---|---|
| Price Used | Current year prices | Base-year prices |
| Inflation Effect | Included | Removed |
| Example | GDP ₹10 000 at 2025 prices | ₹8 000 at 2020 prices |
12. Explain the three methods of measuring national income.(3)
- Product Method: Sum of value added by all industries (GVA).
- Expenditure Method: Sum of final expenditures (C + I + G + (X–M)).
- Income Method: Sum of factor incomes (wages, rent, interest, profit).
13. What is the difference between Factor Cost and Market Price?(3)
| Basis | Factor Cost | Market Price |
|---|---|---|
| Definition | Sum of factor payments | Price paid by consumers |
| Includes | Subsidies | Indirect Taxes |
| Formula | GDP at FC | GDP at FC + Indirect Tax – Subsidy |
14. Explain the concept of Circular Flow of Income in a two-sector model.(3)
It shows continuous movement of income and goods between households and firms.
- Households supply factors of production → receive factor payments.
- They spend their income on goods → expenditure returns to firms as revenue.
- Hence, total income = total output = total expenditure.
15. Write any three uses of National Income data in India.(3)
- Used by Government of India for budget and planning.
- Used by RBI for monetary policy and interest rate decisions.
- Used by NITI Aayog for policy recommendations and growth analysis.
SECTION C – Long Answer Questions (5 or 6 marks each)
16. Calculate the following using given data:
Wages ₹2500, Rent ₹800, Interest ₹400, Profit ₹300, Mixed Income ₹500.(5)
Wages ₹2500, Rent ₹800, Interest ₹400, Profit ₹300, Mixed Income ₹500.(5)
Using Income Method:
NI = Wages + Rent + Interest + Profit + Mixed Income = 2500 + 800 + 400 + 300 + 500 = ₹4500.National Income = ₹ 4 500.
17. Discuss five limitations of GDP as an indicator of economic welfare.(5)
- Ignores distribution of income (inequality).
- Excludes non-market activities like household work.
- Ignores environmental damage and pollution.
- Does not consider leisure and quality of life.
- Excludes illegal / underground activities.
18. Explain the steps involved in the Product or Value Added Method of National Income calculation.(5)
- Classify productive units into Primary, Secondary and Tertiary sectors.
- Estimate Gross Output (Quantity × Price of final goods).
- Subtract Intermediate Consumption to find GVA (Value Added).
- Add up GVA of all industries = GDP at Factor Cost.
- Adjust for taxes and subsidies → GDP at Market Price.
19. Given C = ₹7000, I = ₹1500, G = ₹2300, X = ₹200, M = ₹1000, Depreciation = ₹500, NFIA = ₹300. Find GDP, GNP and NNP.(6)
GDP = C + I + G + (X – M)
= 7000 + 1500 + 2300 + (200 – 1000) = ₹10 000.
GNP = GDP + NFIA = 10 000 + 300 = ₹10 300
NNP = GNP – Depreciation = 10 300 – 500 = ₹9 800
GDP = ₹10 000, GNP = ₹10 300, NNP = ₹ 9 800.
GNP = GDP + NFIA = 10 000 + 300 = ₹10 300
NNP = GNP – Depreciation = 10 300 – 500 = ₹9 800
GDP = ₹10 000, GNP = ₹10 300, NNP = ₹ 9 800.
20. Explain the importance of National Income Accounting for economic planning and policy formulation.(6)
- Provides statistical basis for planning and budgeting.
- Helps measure economic growth and sectoral performance.
- Guides RBI in formulating monetary policy.
- Enables international comparison of economic development.
- Assists in identifying areas of poverty and inequality.
- Helps in evaluation of welfare schemes and reforms.
— End of Sample Paper —
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