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Economics · 2022 · 3 marks
National Income AccountingCircular Flow of Income and Methods of Calculating National Income3 marksApplyshort answer
CBSE 2022 · Region 4 · Set 1 · Q9
(a) Briefly explain the different phases of circular flow of income.
(a)
Briefly explain the different phases of circular flow of income.
OR
(b)
In an economy, if the Real Gross Domestic Product (GDP) is ₹ $\displaystyle 300$ crore and Price Index (with base = $\displaystyle 100$) is $\displaystyle 110$, calculate the Nominal Gross Domestic Product.
Marking-scheme solution
Three phases of circular flow of Income:
Firms hire factor services from the households (owner of factor services).
Households receive factor income for rendering their services to the firms.
Households spend factor income earned on purchase of final goods and services produced by firms, thereby completing the circular flow.
$$\text{Real GDP} = \frac{\text{Nominal GDP}}{\text{Price Index}} \times 100$$
$$300 = \frac{\text{Nominal GDP}}{110} \times 100$$
$$\text{Nominal GDP} = \frac{300}{100} \times 110$$
Nominal GDP = ₹ $\displaystyle 330$ crores
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CBSE Class 12 Economics past-paper question from the 2022 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.