Notes of National Income Accounting Class 12 Chapter 2 Economics

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PART B-INTRODUCTORY MACRO ECONOMICS

Unit VI: NATIONAL INCOME AND RELATED AGGREGATES: KEY CONCEPTS

  • Macro Economics: Its meaning
  • Consumption goods, capital goods, final goods, intermediate goods, stock and flow, gross investment and depreciation.
  • Circular flow of income
  • Methods of calculation of national income
  • Value added method (product method)
  • Expenditure method
  • Income method
  • Concepts and aggregates related to national income
  • Gross national product
  • Net National product
  • Gross and Net domestic product at market price and at factor cost.
  • National disposable income (Gross and net)
  • Private income
  • Personal income
  • Personal disposable income
  • Real and Nominal GDP
  • GDP and welfare

Macro Economics: – Macroeconomics is the study of aggregate economic variables of an economy.

Consumption goods:- Are those which are bought by consumers as final or ultimate goods to satisfy their wants.

Eg: Durable goods car, television, radio etc.

Non-durable goods and services like fruit, oil, milk, vegetable etc.

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Semi durable goods such as crockery etc.

Capital goods – capital goods are those final goods, which are used and help in the process of production of other goods and services. E.g.: plant, machinery etc.

Final goods: Are those goods, which are used either for final consumption or for investment. It includes final consumer goods and final production goods. They are not meant for resale. So, no value is added to these goods. Their value is included in the national income. Intermediate goods intermediate goods are those goods, which are used either for resale or for further production. Example for intermediate good is- milk used by a tea shop for selling tea.

Stock: – Quantity of an economic variable which is measured at a particular point of time. Stock has no time dimension. Stock is static concept.

Eg: wealth, water in a tank.

Flow: Flow is that quantity of an economic variable, which is measured during the period of time.

Flow has time dimension- like per hr, per day etc.

Flow is a dynamic concept.

Eg: Investment, water in a stream.

Investment: Investment is the net addition made to the existing stock of capital.

Net Investment = Gross investment – depreciation.

Depreciation: – depreciation refers to fall in the value of fixed assets due to normal wear and tear, passage of time and expected obsolescence.

Circular flow in a two sector economy.

Payment for goods and services (Money Flow)

Firms

Supply of goods and services (Real Flow)

House hold

Supply of Factors of Production (Real Flow)

Payment for Factor services (Money Flow)

Producers (firms) and households are the constituents in a two sectors economy.

Households give factors of production to firm and firms in turn supply goods and services to households.

Related aggregates

Gross Domestic product at market price

It is the money value of all final goods and services produced during an accounting year with in the domestic territory of a country.

Gross National product at market price:

It is a money value of all final goods and services produced by a country during an accounting year including net factor income from abroad.

Net factor income from abroad:

Difference between the factor incomes earned by our residents from abroad and factor income earned by non-residents with in our country.

Components of Net factor income from abroad

  • Net compensation of employees
  • Net income from property and entrepreneurship (other than retained earnings of resident companies of abroad)
  • Net retained earnings of resident companies abroad

Formulas

  • NNP Mp = GNP mp – depreciation
  • NDP Mp GDPmp – depreciation
  • NDP Fc = NDP mp – Net indirect taxes (indirect tax – subsidies)
  • GDP Fc = NDP fc + depreciation
  • NNP Fc = GDP mp – depreciation + Net factor income from abroad – Net indirect taxes
  • (NNP FC is the sum total of factor income earned by normal residents of a country during the accounting year)
  • NNP fc = NDP fc + Net factor income from abroad.

Concept of domestic (economic) territory

Domestic territory is a geographical territory administered by a government within which persons, goods and capital circulate freely. (Areas of operation generating domestic income, freedom of circulation of persons, goods and capital)

Scope identified as

*Political frontiers including territorial waters and air space.

*Embassies, consulates, military bases etc. located abroad but including those locates within the political frontiers.

*Ships, aircrafts etc., operated by the residents between two or more countries.

*Fishing vessels, oil and natural gas rigs etc. operated by the residents in the international waters or other areas over which the country enjoys the exclusive rights or jurisdiction.

Resident (normal resident) :-

Normal resident is a person or an institution who ordinarily resides in that country and whose center of economic interest lies in that country.

(The Centre of economic interest implies 🙁 1) the resident lives or is located within the economic territory. (2) The resident carries out the basic economic activities of earnings, spending and accumulation from that location 3. His center of interest lies in that country. Relation between national product and Domestic product.

Domestic product concept is based on the production units located within domestic (economic) territory, operated both by residents and non-residents.

National product concept based on resident and includes their contribution to production both within and outside the economic territory.

National product = Domestic product + Residents contribution to production outside the economic territory (Factor income from abroad) – Non- resident contribution to production inside the economic territory (Factor income to abroad)

Methods of calculation of national income

I – PRODUCT METHOD (Value added method):

  • Sales + change in stock = value of output
  • Change in stock = closing stock – opening stock
  • Value of output – Intermediate consumption = Gross value added (GDPMp)
  • NNP Fc (N.I) = GDPMp (-) consumption of fixed capital (depreciation)

(+) Net factor income from abroad ( -) Net indirect tax.

Income method:

  1. Compensation of employees.
  2. Operating surplus.

Dm

Income from property

m t

Rent & Royalty Interest

Income from^Entrepreneurship
1

Profit

Corporate

Tax

Corporate dividend Savings (Net retained earnings)

3. Mixed income of self-employed.

  • NDP fc = (1) + (2) + (3)
  • NNP fc = NDP fc (+) Net factor income from abroad
  • GNP mp = NDP fc + consumption of fixed capital + Net indirect tax

(Indirect tax – subsidy)

Expenditure method:

  1. Government final consumption expenditure.
  2. Private final consumption expenditure.
  3. Net Export.
  4. Gross domestic capital formation.

Gross Domestic fixed + Change in stock

Capital formation

GDPmp = (1) + (2) + (3) + (4)

NNP fc = GDPmp – consumption of fixed capital + NFIA- Net indirect taxes Note: If capital formation is given as Net domestic capital formation we arrive at NDPmp. Capital formation = Investment

CALCULATION OF NATIONAL DISPOSABLE INCOME, PRIVATE INCOME, PERSONAL INCOME AND PERSONAL DISPOSABLE INCOME

Private Income includes factor Personal Income National Disposable income as well as Transfer

income income (Earned income +

Unearned income)

Factor income from net domestic product accruing to private sector includes income from enterprises owned and controlled by the private individual.

Excludes:-

It is the income from all the sources (Earned Income as well as transfer payment from abroad) available to resident of a country for consumption expenditure or saving during a year.

NNPFC + Net Indirect tax + Net current transfer from abroad =Net National

disposable income. (Gross National

Disposable Income includes depreciation)

PI is the income Actually received by the individuals and households from all sources in the form of factor income and current transfers.

Personal income = Private Income (-) corporation tax. (-) Corporate Savings OR Undistributed profits

Personal disposable

income

Pe rs o n al i n come (-) Direct Personal tax (-) Miscellaneous Receipts of the govt. Administrative department (fees and fines paid by house hold.)

  1. Property and entrepreneurial income of the Gov. departmental enterprise
  2. Savings of the Non-departmental Enterprise.

Factor Income from NDP Accruing to private

sector = NDPfc (-) income from properly entrepreneurship accruing to the govt departmental Enterprises (-) savings of Non departmental enterprises.

Private Income Includes

* Factor income from net domestic product accruing to private sector.

+ Net factor income from abroad + Interest on National Debt + Current transfer from Govt.

+ Current transfer from rest of the world.

One Mark questions.

  1. When will the domestic income be greater than the national income?

Ans: When the net factor income from abroad is negative.

  1. What is national disposable income?

Ans.It is the income, which is available to the whole economy for spending or disposal NNP Mp + net current transfers from abroad = NDI

  1. What must be added to domestic factor income to obtain national income?

Ans. Net factor income from abroad.

  1. Explain the meaning of non-market activities

Ans. Non marketing activities refer to acquiring of many final goods and services not through regular market transactions. E.g. vegetable grown in the backyard of the house.

  1. Define nominal GNP

Ans. GNP measured in terms of current market prices is called nominal GNP.

  1. Define Real GNP.

Ans. GNP computed at constant prices (base year price) is called real GNP.

  1. Meaning of real flow.

Ans. It refers to the flow of goods and services between different sectors of the economy. Eg. Flow of factor services from household to firm and flow of goods and services from firm to household.

  1. Define money flow.

It refers to the flow of money between different sectors of the economy such as firm, household etc. Eg. Flow of factor income from firm to house hold and consumption expenditure from house hold to firm.

3- 4 Mark Questions

  1. Distinguish between GDPMp and GNP fc

Ans. The difference between both arise due to (1) Net factor income from abroad. and 2) Net indirect taxes. In GDPMp Net factor income from abroad is not included but it includes net indirect taxes.

GNP fc – GDPMp + net factor income from abroad – net indirect taxes

  1. Distinguish between personal income and private income

Ans. Personal income: -It is the sum total of earned income and transfer incomes received by persons from all sources within and outside the country.

Personal income – private income – corporate tax -corporate savings (undistributed profit) Private income consists of factor income and transfer income received from all sources by private sectors within and outside the country.

  1. Distinguish between nominal GNP and real GNP

Ans. Nominal GNP is measured at current prices. Since this aggregate measures the value of goods and services at current year prices, GNP will change when volume of product changes or price changes or when both changes.

Real GNP is computed at the constant prices. Under real GNP, value is expressed in terms of prices prevailing in the base year. This measure takes only quantity changes. Real GNP is the indicator of real income level in the economy.

  1. Explain the main steps involved in measuring national income through product method

Ans.

  1. classify the producing units into industrial sectors like primary, secondary and tertiary sectors.
  2. Estimate the net value added at the factor cost.
  3. Estimate value of output by sales + change in stock
  4. Estimate gross value added by value of output – intermediate consumption
  5. Deduct depreciation and net indirect tax from gross value added at market price to arrive at net value added at factor cost – NDP Fc
  6. Add net factor income received from abroad to NDP Fc to obtain NNP FC which is national income
  7. Explain the steps involved in calculation of national income through income method
  8. Classify the producing enterprises into industrial sectors like primary, secondary and tertiary.
  9. Estimate the following factor income paid out by the producing units in each sector i.e.

Compensation of employees

*Operating surplus

*Mixed income of self employed

  1. Take the sum of the factor income by all the industrial sectors to arrive at the NDP Fc (Which is called domestic income)
  2. Add net factor income from abroad to the net domestic product at factor cost to arrive at the net national product at factor cost.
  3. Explain the main steps involved in measuring national income through expenditure method.
  4. Classify the economic units incurring final expenditure into distant groups like households, government, firms etc.
  5. .Estimate the following expenditure on final products by all economic units
  • Private final consumption expenditure
  • Government final consumption expenditure
  • Gross domestic capital formation
  • Net export

(Sum total of above gives GDPMp)

  1. Deduct depreciation, net indirect taxes to get NDP Fc
  2. Add net factor income from abroad to NDP Fc to arrive at NNP FC.
  3. What are the precautions to be taken while calculating national income through product method (value added method)
  4. Avoid double counting of production, take only value added by each production unit.
  5. The output produced for self-consumption to be included
  6. The sale & purchase of second hand goods should not be included.
  7. Value of intermediate consumption should not be included
  8. The value of services rendered in sales must be included.
  9. Precautions to be taken while calculating national income through income method.
  10. Income from owner occupied house to be included.
  11. Wages & salaries in cash and kind both to be included.
  12. Transfer income should not be included
  13. Interest on loans taken for production only to be included. Interest on loan taken for consumption expenditure is non-factor income and so not included.
  14. Precautions to be taken while calculations N.I under expenditure method.
  15. Avoid double counting of expenditure by not including expenditure on intermediate product
  16. Transfer expenditure not to be included
  17. Expenditure on purchase of second hand goods not to be included.
  18. Write down the limitations of using GDP as an index of welfare of a country
  19. The national income figures give no indications of the population, skill and resources of the country. A country may be having high national income but it may be consumed by the increasing population, so that the level of people’s wellbeing or welfare standard of living remains low.
  20. High N. I may be due to greater area of the country or due to the concentration of some resources in out particular country.
  21. National income does not consider the level of prices of the country. People may be having income but may not be able to enjoy high standard of living due to high prices.
  22. High N. I may be due to the large contribution made by a few industrialists
  23. Level of unemployment is not taken into account.
  24. National income does not care to reduce ecological degradation. Due to excess of economic activity which leads to ecological degradation reduces the welfare of the people. Hence GNP and economic welfare are not positively related. Income in GNP does not bring about increase in economic welfare.
  25. ‘Machine purchased is always a final good’ do you agree? Give reason for your answer

Whether machine is a final good or it depends on how it is being used (end use). If machine is bought by a household, then it is a final good. If machine is bought by a firm for its own use, then also it is a final good. If the machine is bought by a firm for resale then it is an intermediate good.

  1. What is double counting? How can it be avoided?

Counting the value of commodities at every stage of production more than one time is called double counting.

It can be avoided by

  1. taking value added method in the calculation of the national income.
  2. By taking the value of final commodity only while calculating N.I

6 Mark questions

  1. State whether following is true or false. Give reason for your answer.
  2. Capital formation is a flow

True, because it is measured over a period of time.

  1. Bread is always a consumer good.

False, it depends upon the end use of bread. When it is purchased by a household it is a consumer good. When purchased by restaurant for making sandwich, it is an intermediate (producer) good.

  1. Nominal GDP can never be less that real GDP

False. Nominal GDP can be less than the real GDP when the prices in the base year is more than the current year.

  1. Gross domestic capital formation is always greater than gross fixed capital formation.

False, gross domestic capital formation can be less than gross fixed capital formation if change in stock is negative.

  1. Why are exports included in the estimation of domestic product by the expenditure method? Can the gross domestic product be greater than the gross national product? Explain

Expenditure method estimates expenditure on domestic product i.e., expenditure on final goods and services produced within the economic territory of the country. It includes expenditure by residents and non-residents both. Exports though purchased by non residents are produced within the economic territory and therefore a part of domestic product. Domestic product can be greater than national product, if the factor income paid to the rest of the world is greater than the factor income received from the rest of the world i.e, when net factor income received from abroad is negative.

  1. How will you treat the following while estimating domestic product of India?
  2. Rent received by resident Indian from his property in Singapore.

No, it will not be included in domestic product as this income is earned outside the economic territory of India.

  1. Salaries of Indians working in Japanese Embassy in India

It will not be included in domestic product of India as embassy of Japan is not a part of economic territory of India.

  1. Profits earned by branch of American bank in India.

Yes, it is included as part of domestic product since the branch of American bank is located within the economic territory of India.

  1. Salaries paid to Koreans working in the Indian embassy in Korea

Yes, it will be part of domestic product of India because the income is earned within the economic territory of India. Indian embassy in Korea is a part of economic territory of India.

  1. How are the following treated in estimating national income from expenditure method? Give reason.
  2. Purchase of new car by a household: purchase of car is included in the national income because it is final consumption expenditure, which is part of national income.
  3. Purchase of raw material by purchase unit: purchase of raw material by purchase unit is not included in the national income because raw material is intermediate goods and intermediate goods and service are excluded from the national income. Purchase of raw material, if included in national income will result in double counting.
  4. Expenditure by the government on scholarship to student is not included in the national income because it is a transfer payment and no productive service is rendered by the student in exchange.
  5. Are the following item included in the estimating a country‘s national income? Give reason.
  6. Free cloth given to workers: free cloth given to worker is a part of wages in kind i.e. compensation to employee such compensation to employee is paid for the productive services in the economy, it is included in the national income.
  7. Commission paid to dealer in old car: commission paid to dealer in old car is included in the estimation of national income because it is the income of the dealer for his productive services to various parties.
  8. Growing vegetable in a kitchen garden of the house: growing vegetable in a kitchen garden of the house amount to production, though not for sale for self-consumption. It is included in the national income because it adds to the production of goods.

NATIONAL INCOME – NUMERICALS

1. Calculate Value Added at factor cost from the following.

 

ITEMS Rs. CRORES

 

a.

Purchase of raw materials

30

b.

Depreciation

12

c.

Sales

200

d.

Excise tax

20

e.

Opening stock

15

f.

Intermediate consumption

48

g.

Closing stock

10

Ans:

Sales + A in stock = value of output 200 + (cl. St – op. st)

200 +(l0-15)

 

= 200 -5=195

Value of output – intermediate consumption

= value added at MP 195-48 = 147

V.A at FC = V.A at MP – Net indirect tax 147 – 20

127 crores

  1. Calculate (a) Net National Product at MP, and (b) Gross National Disposable Income

ITEMS

Rs. crores

200

20

(–)15 (–)10

50

15

30

5

10

Private final Consumption expenditure

a.

b.

c.

d.

e.

f.

g.

h.

i.

Ans:

Net indirect taxes

Change in stocks

Net current transfers from abroad

Govt. final consumption expenditure

Consumption of fixed capital

Net domestic capital formation

Net factor income from abroad

Net imports

(a) + (e) + (g) + (-i) = NDP mp

200 + 50+ 30 -10 280 -10 = 270 crores NNP mp = NDP mp + NFIFA 270 + 5 = 275 NNP MP + 275 crores

GNDI = NNP PC + NFIFA + Net indirect taxes + Net current transfers from abroad + Depreciation (comp of fixed capital)

NNP MP – net in tax = 275 – 20 =255 crores GNDI = 255 + 20 + 5 + (-10) + 15 = 295 – 10 = 285 crores GNDI = 285 crores

3. Calculate Gross Domestic Product at Market Price by

 

(a) Production Method and (b) Income Method

 

ITEMS

Rs. crores

a.

Intermediate consumption by

 
 

i) Primary sector

500

 

ii) Secondary sector

400

 

iii) Tertiary sector

400

b.

Value of output by

 
 

i) Primary sector

1000

 

ii) Secondary sector

900

 

iii) Tertiary sector

700

c.

Rent

10

d.

Compensation of employees

400

e.

Mixed income

550

f.

Operating surplus

300

h.

Net factor income from abroad

(–)20

i.

Interest

5

j.

Consumption of fixed capital

40

k.

Net indirect taxes

10

Ans: GDP Mp by production method

(b) (i) + (ii) + (iii) – a (i) + (ii) + ( iii) = value added

(1000+ 900 + 700) – (500 -400-400)

2600 – 1300 = 1300 crores Value added at MP (GDP MP)

Income method

Compensation of employees + operating surplus + mixed income = NDP FC = 400 + 300 + 550 = 1250 crores GDP mp = NDP fc + conspn of fixed capital + net In. tax = 1250+ 40 + 10 GDP mp =1300

4. Calculate Net National Disposable Income from the following data.

 

ITEMS

Rs. crores

a.

Gross domestic product at MP

1000

b.

Net factor income from abroad

(-) 20

c.

Net indirect taxes

120

d.

Consumption of fixed capital

100

e.

Net current transfers from abroad

50

Ans: NNDI = GDP MP – consumption of fixed capital + Net FIFA + Net current transfer from abroad

= 1000- 100 + 50 + (-20)

= 880 + 50 = 930 crores

5. Calculate Gross National Disposable Income from the following.

 

ITEMS

Rs. crores

a)

National Income

2000

b)

Net current transfers from rest of the world

200

c)

Consumption of fixed capital

100

d)

Net factor income from abroad

(-) 50

e)

Net indirect taxes

25

Ans:

GNDI= (a) + (b) +(c) + (e) = 2000 + 200 + 100 + 250

 

GNDI

= 2550 crores

 
  1. ESTIMATE NATIONAL INCOME BY

(a) EXPENDITURE METHOD (b) INCOME METHOD FROM THE FOLLOWING DATA Rs. in crores

1. Private final consumption expenditure

210

2. Govt: final consumption expenditure

50

3. Net domestic capital formation

40

4. Net exports

(-) 5

5. Wages & Salaries

170

6. Employer’s contribution

10

7. Profit

45

8. Interest

20

9. Indirect taxes

30

10. Subsidies

05

11. Rent

10

  1. Factor income from abroad 03
  2. Consumption of fixed capital 25
  3. Royalty 15

Ans: National Income (NNP FC)

Expenditure Method

  1. + (2) + (3) + (4) = NDP mp

210 + 50 + 40 + (-5) = 295

NNP FC = NDP MP + factor Income from abroad – net Indirect tax ( Indirect tax – subsidy) 295 + 3 – (30 -5)

295 + 3 – 25 = 298 – 25 = 273 NNP FC= 273 crores Income method:

(5) + (6) + (7) + (8) + (11) + (15)

170 + 10 + 45 + 20 + 10 + 15 = 270 (NDP FC)

NDP fc = NDP fc + FIFA = 270 + 3= 273 crores

  1. FROM THE FOLLOWING DATA CALCULATE
 

(a) NATIONAL INCOME (b) PERSONAL DISPOSIBLE INCOME.

1.

Profit

500

2.

Rent

200

3.

Private income

2000

4.

Mixed income of self-employed

800

5.

Compensation of employers

1000

6.

Consumption of fixed capital

100

7.

Net factor income from abroad

-(50)

8.

Net retained earnings of private employees’

150

9.

Interest

250

10.

Net exports

200

11.

Co-operation

100

12.

Net indirect tax

160

13.

Direct taxes paid by houses hold’s

120

14.

Employers contribution to social security scheme.

60

Ans: NNP FC (N. I) = (5) + (9) + (4) + (1) + (2) 1000 + 250+ 800 + 500 + 200 NDP FC = 2750 crores NNP FC = NDP FC + (7)

= 2750 + (-50)

NNP Fc = 2700 crores PDI = (3) – (8) – (11) – (13)

2000 – 150 – 100 -120

PDI = 2000 – 370 = 1630 crores

  1. CALCULATE NATIONAL INCOME AND GROSS NATIONAL DISPOSABLE INCOME FROM THE FOLLOWING DATA.

Net indirect tax 05

Net domestic fixed capital formation

100

Net exports

(-) 20

Gov.: final consumption expenditure

200

Net current transfer from abroad

15

Private final consumption expenditure

600

Change in stock

10

Net factor from abroad

05

Gross domestic fixed capital formation

125

Ans: National Income (NNP FC)

= (4) + (6) + (2) + (7) + (3) = NDP mp = 200 + 600 + 100 + 10 + (-20)

= 910 -20 = 890

NDP MP = 890 crores

NNP fc = NDP mp + (8) — (1)

= 890 + 5 -5 NNP fc = 890 Depreciation = (9) – (2)

125 – 100 = 25 crores

GNDI = NNP FC + Net Indirect Tax + Net Current transfers from abroad + depreciation = 890 = 05+ 15 + 25 GNDI = 935 crores

9. CALCULATE NNP AT MARKET PRICE BY PRODUCTION METHOD AND

 

INCOME METHOD

Crores

1.

Inter mediate consumption

 
 

(a) primary sector

500

 

(b) Secondary sector

400

 

(c) tertiary sector

300

2.

Value of output of

 
 

(a) primary sector

1,000

 

(b) Secondary sector

900

 

(c) tertiary sector

700

3.

Rent

10

4.

Emoluments of employers

400

5.

Mixed income

650

6.

Operating surplus

300

7.

Net factor income from abroad

-20

8.

Interest

05

9.

Consumptive of fixed capital

40

10.

Net indirect tax

10

Ans:

NNP MP by production method

 

(2) Value of output – (1) Intermediate

conspn = value added at MP

(2) a + b+ c – (1) a + b + c

 

1000 + 900 + 700 – 500 + 400 + 300

 

2600

– 1200

 

1400

= GDP mp

 

NNP mp = GDP mp – (9) + (7)

= 1400 – 40 + (-20)

NNP mp = 1340 Income Method:

NNP mp = (4) + (5) + (6) + (10) + (7)

= 400 + 650 + 300 + 10 + (-20)

NNP mp = 1350 + 10 – 20

  1. CALCULATE GNP at FACTOR COST BY INCOME METHOD AND

EXPENDITURE METHOD. Rupees in crores

  1. Private final consumption expenditure 1000
  2. Net domestic capital formation 200
  3. Profit 400
  4. Compensation of employers 800
  5. Rent 250
  6. Gov.: final consumption expenditure 500
  7. Consumption of fixed capital 60
  8. Interest 150
  9. Net current transfer from row (-)80
  10. Net factor income from abroad (-) 10
  11. Net exports (-)20
  12. Net indirect taxes 80

Ans: GNP FC by Income method

GNP FC = 4 + 3 + 5 + 8 + 10 + 7

800 + 400 +250 + 150 + (-10) + 60 GNP FC = 1650 crores GNP FC by Expenditure Method GNP FC = 1 + 2 + 6 + 10 + 11 -12 + 7

= 1000 + 200 + 500 + (-10) + (-20) -80 + 60 = 1700-110+ 60 GNP FC = 1650 crores

  1. CALCULATE PRIVATE INCOME AND PERSONAL DISPOSABLE INCOME

FROM THE FOLLOWING DATA

Rupees in crores

  1. National income
  2. Income from property and entrepreneurship to gov. administrative department
  3. Saving of non-department public enterprises
  4. Corporation tax
  5. Current transfer from govt: administrative depart
  6. Net factor income from abroad
  7. Direct personal tax
  8. Indirect taxes
  9. Current transfer from Raw
  10. Saving of private corporate sector

5050

500

100

80

200

-50

150

220

80

500

Ans: Private Income = 1 – 2- 3 + 5 + 9

5050 – 500 – 100 + 200 + 80 5430 – 500

Private Income = 4930 crores PDI = Private Income – 4 -10 -7 4930 -80 -500 -150 PDI = 4200 crores

  1. Calculate private income
  2. Income from domestic product accruing to private sector 250
  3. Net current transfer from raw 40

3Net current transfer from govt: administrative dept 10

  1. National debt interest 20
  2. Net factor income from abroad 05

Ans: Private Income = 1 + 2+ 3 + 4 + 5

250 + 40 + 10 + 20 + 5 = 325 crores

13. CALCULATE NET NATIONAL DISPOSABLE INCOME AND PERSONAL INCOME FROM THE FOLLOWING DATA

 

Rs. In crores

1. Net indirect taxes

90

2. Compensation of employers

400

3. Personal taxes

100

4. Operating surplus

200

5. Corporation profit tax

80

6. Mixed income of self-employed

500

7. National debt interest

70

8. Saving of non-departmental enterprises

40

9. Current transfer from govt

60

  1. Income from property and entrepreneurship to govt administrative

Department 30

  1. Net current transfer from RAW 20
  2. Net factor income from abroad -50
  3. saving of private corporate sector 20

Ans: NDPfc = (2) + (4) + (6)

400 + 200 + 500 = 1100 crores NNDI = NDP fc + (12) + (1) + (11)

=1100 + (-50) + 90 + 20 NNDI = 1210 – 50 = 1160 crores

Personal Income Ans:

Private Income = NDP FC -(8) – (10)

1160 -40 – 30=1090 crores 1090 + 7 + 9 +11 +12 1090 + 70 + 60 + 20 + (-50) = 1190 crores

Personal income = Private Income – Corporation Profit Tax – Savings of private corporate sectors

1190 – 80 – 20= 1090 crores

  1. CALCULATE FROM THE FOLLOWING DATA (A) PRIVATE INCOME (B) PERSONAL INCOME (C) PERSONAL DISPOSABLE INCOME.

RS IN CRORES

  1. Factor income from NDP accruing to private sector 300
  2. Income from entrepreneurship and property
  3. Accruing to govt administrative departmental 70
  4. Savings of non-departmental enterprises 60
  5. Factor income from abroad 20
  6. Consumption of fixed capital 35
  7. Current transfer from rest of the world 15
  8. Corporation taxes 25
  9. Factor income to abroad 30
  10. Current transfer from govt governmental admi depart 40
  11. Direct taxes paid by house hold 20
  12. National dept interest 05
  13. saving of private corporate sector 80
  14. Net national product at factor cost 700

Ans Private Income = 1 + 5 + 7 -9 + 10 + 12 300 + 20 + 15 -30 + 40 + 05 Private Income = 350 crores Personal Income = Private income – 8 – 13 = 350 – 25 – 80 Personal Income = 245 crores PDI = Personal Income – 11 245 – 20 PDI = 225 crores

15. From the following data, calculate:

  1. Gross national Disposable Income
  2. Private Income
  3. Personal Disposable Income

(Rs. In Crores)

  1. Indirect taxes 60
  2. Subsidies 10
  3. Consumption of fixed capital 40
  4. Income from property and entrepreneurship

Accruing to government administrative departments 50

  1. Current transfers from rest of the world 45
  2. Profits 100
  3. Direct tax paid by households 50
  4. Savings of private corporate sector 60
  5. Saving of non-departmental enterprises 25
  6. Current transfer from govt: administrative departments 70
  7. A factor income abroad 20
  8. Factor income to abroad 30
  9. Corporation tax 35

Ans GNDI = 1 + 2 -3 + 6 + 4

700 + 60 – 10 + 45 + 40= 805 -10 + 40 GNDI = 835 crores b) Private Income = 1 – 5 -10 + 6 +11

(Rs. In Crores)

  1. National income 2000

700 – 50 -25 + 45 +70 Private Income = 740 crores c) PDI = Private Income – 14 – 9 – 8 740 – 35 – 60 – 50 PDI = 594 crores

16. Calculate Gross National Disposable Income from the following data:

  1. Net current transfer from rest of the world 200
  2. Consumption of fixed capital 100
  3. Net factor income from abroad (-)50
  4. Net indirect taxes 250

Ans: GNDI = 1 + 5 + 2 + 3

2000 + 250 + 200 + 100 GNDI = 2550 crores

  1. Gross national product at factor cost 800

17. Calculate Net National Disposable Income from the Following Data:

(Rs. In Crores)

  1. Net current transfer from rest of the world 50
  2. Net indirect taxes 70
  3. Consumption of fixed capital 60
  4. Net factor income from abroad (-)10

Ans: NNDI = 1 + 2 + 3 -4

800 + 50 + 70 -60 = 860 crores

NUMERICALS TO BE CALCULATED BY STUDENTS

(Rs. In Crores)

1. Calculate Net National Disposable Income From The Following Data:

  1. Gross domestic product at market price 1,000
  2. Net factor income from abroad (-)20
  3. Net indirect taxes 120
  4. Consumption of fixed capital 100
  5. Net current transfer from rest of the world 70

2. Calculate Gross National Disposable Income The Following Data:

(Rs. In Crores)

  1. National income (or NNPfc) 800
  2. Net indirect taxes 100
  3. Net factor income from abroad 30
  4. Net current transfer from rest of the world 50
  5. Consumption of fixed capital 70
  6. Calculate Gross National Disposable Income And net National Disposable Income from the Following Data:

(Rs. In Crores)

  1. Consumption of fixed capital 30
  2. Net national product at market price 240
  3. Net Indirect taxes 40
  4. Net current transfers from rest of the world (-)20
  5. Net factor income from abroad (-) 10
  6. Find Out GNPmP, NDPfc And Gross National Disposable Income.

(Rs. In Crores)

  1. National income 520
  2. Net factor income from abroad 10
  3. Indirect taxes 40
  4. Subsidies 10
  5. Consumption of fixed capital 50
  6. Net current transfer received from abroad 20
  7. Calculate NNPfc, net National Disposable Income and Gross National Disposable Income from following data:

(Rs. In Crores)

  1. GNPmp 1000
  2. Net Indirect taxes 100
  3. Net current transfer received from rest of the world (-)20
  4. Subsidies 25
  5. Consumption of fixed capital 50
  6. Net factor income paid to the rest of the world (-)10
  7. Find Out (a) Personal Income and (b) Personal Disposable Income from following data:

(Rs. In Crores)

1.Private income 48,800

  1. Interest on national debit 1,000
  2. Net factor income from abroad 300
  3. Corporate Savings 800
  4. ) Corporation tax 210
  5. Personal income tax 540
  6. From The Following Data Calculate:

Private Income and (b) Personal disposable income.

(Rs. In Crores)

  1. Income from Domestic product accruing to the private sector 4,000
  2. Savings of non-departmental public enterprises 200
  3. Current transfer from government administrative departments 150
  4. Savings of private corporate sector 400
  5. Current transfers from rest of the world 50
  6. Net factor income from abroad (-) 4
  7. Corporation tax 60
  8. Direct Personal tax 140
  9. Calculate (a) Personal Income (b) Personal Disposable Income from following data:

(Rs. In Crores)

  1. Income from property and entrepreneurship accruing to

Government administrative department 500

  1. Savings of non-departmental public enterprises 100
  2. Corporation tax 80
  3. Income from Domestic product accruing to the private sector 4,500
  4. Current transfer from government administrative departments 200
  5. Net factor income from abroad (-)50
  6. Direct Personal tax 150
  7. Indirect taxes 220
  8. Current transfers from rest of the world 80
  9. Savings of private corporate sector 500

(Rs. In Crores)

9.From the following data calculate National Income by (i) Income method and (ii) Expenditure method.

  1. Compensation of employees 1,200
  2. Net factor income from abroad (-)20
  3. Net indirect taxes 120
  4. Profit 800
  5. Private final consumption expenditure 2,000
  6. Net domestic capital formation 770
  7. Consumption of fixed capital 130
  8. Rent 400
  9. Interest 620
  10. Mixed income of self- employed 700
  11. Net exports (-)30
  12. Government final consumption expenditure 1,100
  13. Mixed income of self-employed 400

10.From the following data, calculate Gross national product at Market Price by (i) Income method. (ii) Expenditure method:

(Rs. In Crores)

  1. Compensation of employees 500
  2. Private final consumption expenditure 900
  3. Net factor income from abroad (-)20
  4. Net indirect taxes 100
  5. Consumption of fixed capital 120
  6. Net domestic capital formation 280
  7. Net exports (-)30
  8. Profits 350
  9. Rent 100
  10. Interest 150
  11. Government final consumption expenditure 450

11.Calculate (a) National Income and (b) Gross National Disposable Income from the following data

(Rs. In Crores)

  1. Net factor income from abroad (-)20
  2. Government final consumption expenditure 200
  3. Subsidies 10
  4. Private final consumption expenditure 800
  5. Net current transfers from the rest of the world 30
  6. Net domestic fixed capital formation 100
  7. Indirect taxes 80
  8. Consumption of fixed capital 40
  9. Change in stock (-)10
  10. Net exports (-)50

12.From the following data, calculate ‘gross value added at factor cost’

(Rs. In Crores)

  1. Sales 500
  2. Change in stock 30
  3. Subsidies 40
  4. Consumption of fixed capital 60
  5. Purchases of intermediate products 350
  6. Profit 70

13.From the following data, calculate:

(a) National income, and (b) Personal disposable income

(Rs. In Crores)

(i) Compensation of employees

1,200’

 

(ii) Rent

400

 

(iii) Profit

800

 

(iv) Consumption of fixed capital

300

 

(v) Mixed income of self- employed

1,000

 

(vi) private income

3,600

 

(vii) net factor income from abroad

(-)50

 

(viii) net trained earnings of private enterprises

200

 

(ix)interest

250

 

(x) net indirect taxes

350

 

(xi) net exports

(-)60

 

(xii) direct taxes paid by households

150

 

(xiii) corporation tax

100

 

14. From the following data calculate national

income by

(a) Income method and (b) Expenditure method.

 
 

(Rs. In cores)

(i) Private final consumption expenditure

 

2,000

(ii) Net capital formation

 

400

(iii) Change in stock

 

50

(iv) Compensation of employees

 

1,900

(v) Rent

 

200

(vi) Interest

 

150

(vii) operating surplus

 

720

(viii) Net indirect tax

 

400

(x) Employers’ contribution to social security schemes

100

(xi) Net exports

 

20

(xii) Net factor income from aboard

 

(-)20

(xii) Government final consumption expenditure (xvi) Consumption of fixed capital

600

100

15.

Find gross national product at market price by

income method and expenditure

method.

 
 

ITEMS

Rs. CRORES

a.

Mixed income of the self-employed

400

b.

Compensation of employees

500

c.

Private final consumption expenditure

900

d.

Net factor income from abroad

(-)20

e.

Net indirect taxes

100

f.

Consumption of fixed capital

20

g.

Net domestic capital formation

280

h.

Net exports

(–) 30

i.

Rent

100

j.

Interest

150

k.

Government final consumption expenditure

450

FREQUENTLY ASKED CBSE BOARD QUESTIONS

1.

Give two examples of macro economics

   

(1)

2.

Differentiate between micro and macroeconomics

   

(3)

3.

Distinguish between intermediate goods and final goods.

 

(3)

4.

Distinguish between domestic product and national product

 

(3)

5.

What do you understand by net factor income from abroad? Explain

(3)

6.

While estimating national income how will you treat the following?

Give reasons for

 

your answer

  1. Imputed rent of self occupied houses.
  2. Interest received on debentures
  3. Financial help received by flood victims
  4. Capital gains
   

(4)

7.

Distinguish between transfer payments and factor payments.

Give an example of each.

       

(4)

8.

From the following data calculate national income

by income

method and expenditure

 

method

   

(6)

   

Rs in Crores

 
 

a) Interests

150

   
 

b) Rent

250

   
 

c) Govt. final consumption expenditure

600

   
 

d) Private final consumption expenditure

1200

   
 

e) Profit

640

   
 

f) Compensation of employees

1000

   
 

g) Net factor income from abroad

30

   
 

h) Net indirect taxes

60

   
 

i) Net exports

(-) 40

   
 

j) Depreciation

50

   
 

k) Net domestic capital formation

340

   
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