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Question
Other things remaining unchanged, when in a country the price of foreign currency rises, national income is: (choose the correct alternative)
a. Likely to rise
b. Likely to fall
c. Likely to rise and fall both
d. Not affected
Solution
Likely to rise
Currency depreciation takes place when there is an increase in the price of a foreign currency in terms of the domestic currency. Here, more rupees are required to buy one dollar, i.e. the value of domestic currency becomes less valuable in relation to a foreign currency. So, the quantum of imports will reduce and the exports will increase, and thereby, it leads to an increase in national income.
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RELATED QUESTIONS
Calculate National Income from the following data:
| S.No. | Particulars | Rs.in crores |
| (i) | Private final consumption expenditure | 900 |
| (ii) | Profit | 100 |
| (iii) | Government final consumption expenditure | 400 |
| (iv) | Net indirect taxes | 100 |
| (v) | Gross domestic capital formation | 250 |
| (vi) | Change in stock | 50 |
| (vii) | Net factor income from abroad | (-)40 |
| (viii) | Consumption of fixed capital | 20 |
| (ix) | Net imports | 30 |
Calculate the (a) Net National product as markets price. and (b) Gross National Disposable Income:
| (Rs In crores) | |
| (i) Mixed income of self – employed | 8,000 |
| (ii) Rent | 400 |
| (iii) Profit | 900 |
| (iv) Dividend | 100 |
| (v) Interest | 500 |
| (vi) Mixed income of self- employed | 7,000 |
| (vii) Net factor income to abroad | 50 |
| (viii) Net export | 60 |
| (ix) Net indirect taxes | 300 |
| (x) Depreciation | 150 |
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Giving reason explain how the following should be treated in the estimation of national income:
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Answer in detail:
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Distinguish between the following.
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