Formula value of output= Sales + change in stock Change in st. (b) National Income (All India 2009), Ans. GDP at MP = 400 + 100 + 50 - 150 - 20 + 100 = 480 croresNDP at FC = 480 - 60 - 20 = 400 crores x.
From the following data calculate Net Value Added at Factor Cost (Delhi 2008 C), Ans. = [400+ (-40)]-250-(20+ 30) (d) GDP at factor cost = NDP at factor cost - depreciation Answer: (c) See The Explanation You are free to use this image on your website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Net Domestic Product (wallstreetmojo.com). = 1000 + 250+150 + 640 -30=Rs. Using this, they can better understand the resources available for consumption or investment in the country. = Rs. This leads to over estimation of the value of goods and services produced. (b) Private Income = NDPFC Domestic Product Accruing to Government (i) Bonus paid to employees. By contrast, if a new housing community is developed, the construction of residences would be contributory to NDP. (a) National Income (NNPFC) = Private Final Consumption Expenditure Today its Indias top website and an institution when it comes to imparting quality content, guidance and teaching for IAS Exam. Income Method: NI = Rent + Compensation + Interest + Profit + Mixed Income.2. at Factor Cost (NVAFc)+ Depreciation + (Sales Tax-Subsidy) (a) Net Domestic Product at Factor Cost and (ii) Pension paid after retirement. (a) National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption Giving reasons, explain how the following are treated while estimating National Income? (Delhi 2009). + Net Value Added by Tertiary Sector Net Indirect Taxes This means NDPFC - Depreciation - Net Indirect Taxes. Likewise, sale proceeds of shares and bonds are not included. Net Domestic Product (NDP) measures the total value of all goods and services produced in a country, adjusted for the depreciation of physical capital. Click to reveal National Income (NNPFC) = Gross Value Added at Market Price by the Primary Sector+ Gross Value Added at Market Price by the Secondary Sector + Gross Value Added at Market Price by the Tertiary Sector-Net Indirect Taxes-Consumption of Fixed Capital + Net Factor Income from Abroad Calculate National Income and Gross National Disposable Income from the following (Delhi 2011), Ans. In other words, problem of double counting arise when the value of intermediate goods is also added in total output, e.g. Private Income = Net Domestic Product at Factor Cost Accuring to Private Sector + NFIA + Current Transfer from Government + National Debt Interest + Net Current Transfers from Abroad The Department of Commerce releases NDP data for the U.S. economy at 8:30 a.m. EST on the last business day of the quarter. It helps to solve the central problem of 'full employment of resources' in an economy.Be it noted that macroeconomic theory is also called 'Theory of Income and Employment' because it tries to explain how level of income and employment is determined in an economy and how unemployment can be removed. As a result, it provides a more accurate picture of the available resources for consumption or investment. How will you treat the following while estimating National Income of India? It is evaluated based on income, the addition of value, or expenditure. Here, final products are only those products which are ready for end use or consumption by their final users (consumers or producers). = 30 + 5 = Rs. = 500 + (-20) 250 -40 + 30 It is calculated by adding indirect taxes, subtracting subsidies, and including depreciation to the value of output, which is the value of all goods and services produced within a countrys borders. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock)- (Purchase of Raw Material + Import of Raw Material) Consumption of Fixed Capital + Subsidies For example, in many urban areas, efforts may be made to re-purpose underutilized real estate that has fallen into disrepair. 290 crore The Income Method measures national income from the side of payments made to the primary factors of production in the form of rent, wages, interest and profit for their productive services in an accounting year. Calculate NDP at FC Particular Rs. (ii) Net National Disposable Income (All India 2011), 57. 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In other words, the NDP is calculated by subtracting the depreciation of physical capital from the GDP to give a more accurate picture of a countrys economic output that is available for consumption or investment. (a) By Income Method (a) By Expenditure Method Ans. Value of Output = Net Value Added at Factor Cost (NVAFC) + Depreciation In recent years the US reported the following figures: Clearly, USs gross national income has been on the rise in recent years. In other words, it accounts for the reduction in the value of the countrys assets due to aging, wear and tear, or obsolescence. Scribd is the world's largest social reading and publishing site. Are the following a part of countrys Net Domestic Product at Market Price? When we divide NI by a countrys total population, we get residents per capita income. = 530-310 Part of the machinery in a factorys production line may need to be replaced while another set of similar machines continues to function within the same factory. National Income (NNPFC) = Private Final Consumption Expenditure + Government FinalConsumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stocks Net Imports Net Indirect Taxes + Net Factor Income from Abroad The NDP better assesses a countrys economic output by subtracting this value from GDP. The construction of new homes on previously unused real estate can also represent a gain for the NDP if the residences are not intended to replace defunct or demolished property. 100 only. = 750 +150 + 220 + (-20) -50 -120 + 20 = 1140 -190=? (iii) Imputed value of self-consumed goods should be included, but self-consumed services should not be included. Here is a comparison of Gross Domestic Product (GDP) and Net Domestic Product (NDP) in a table format: Net Domestic Product at market price (NDP MP) is a measure of a countrys economic output that considers the production of all goods and services within its borders and the market prices at which they are sold. = 1000 + 600+1400-200= 3000 -200 = Rs. Required fields are marked *. = 4100 -2150 Question 3. Intermediate Consumption = Value of Output Net Value Added Give reasonsfor your answer. The national income (NI) of a nation indicates its yearly economic growth. (ii) Yes, it is included while estimation of National Income as it is considered as a change in stock during the year. It is represented as follows: GDPFC = GDPMP - Net Indirect Tax #3 - Net Domestic Product at Market Price (NDPMP) It is study of the economy as a whole and its aggregates. (ii) Purchase and sale of second hand goods should not be included. Income to Abroad + Consumption of Fixed Capital 12800 crore, (b) By Production Method (iii) Interest received on loans given to a friend for purchasing a car will not be included in the estimationof National Income as loan is given for consumption purpose. (b) GNP at factor cost = GNP at market price + net indirect tax (c) National income = Domestic income + Net factor income from abroad. 61.Explain the problem of double counting in estimating national income, with thehelp of an example. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. In addition, it excludes the taxes and subsidies that distort the market price. Also, it does not account for indirect taxes and subsidies. 39.Calculate Net Value Added at Factor Cost form the following data: 40. (iii) Interest on public debt. + Private Final Consumption Expenditure + Gross Domestic Capital Formation Net Imports Net Indirect Tax Government Spending3. The acquisition of the replacement machinery would be factored into the depreciation aspect of the NPI. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock)-Purchase of This total final expenditure is equal to gross domestic product at market price, i.e. The basic National Income formula used for its evaluation is as follows: Also, it can be measured using any of the following three methods: In macroeconomics, NI is correlated with various other crucial money value measures, as discussed below: GDPMP is the total value of a nations goods and services produced locallyduring a given accounting year. Explain. Value Added Method/Product Method/Output Method By this method, the total value of all the final goods and services produced in an economy during a given time period are estimated to obtain the value of domestic income. Calculate This differs from an expansion of factory operationsfor example, the opening of a new site, adding to the total number of factories. = 630 + 120 30 = Rs. (iii) Interest received by an Indian resident from its abroad firms will not be included in domestic income of India as it is factor income from abroad. Estimate amount of factor payments made by each enterprise. small group of firms) but deals with the study of broad economy-wide aggregates like total output, size of national income, level of employment, aggregate consumption, aggregate saving, aggregate investment, general price level, balance of payment, rate of inflation, size of poverty etc. Sum up all factor payments made within domestic territory to get Domestic Income (NDP at FC). Real gross domestic product is an inflation-adjusted measure of the value of all goods and services produced in an economy. (a) Net National Product at Market Price (ii) Payment of interest on loan taken by an employee from the employer will not be included in the estimation of National Income as it will be treated as transfer income, also loan is taken for consumption purpose. (Foreign 2014) (ii) Interest paid by an individual on a car loan taken from a bank. As a result of the EUs General Data Protection Regulation (GDPR). (ii) Payment of electricity bill by a school. Intermediate Consumption of B Ans. Study of cotton textile industry is a microeconomic study. (i) Wheat grown by farmer but used entirely for familys consumption will be included while estimating National Income, as the production is done for self-consumption purpose and relate to current production. Home Economy National Income accounting Methods of estimating National Income Income method. Components of Final Expenditure: =Rs. However, one considers the depreciation of physical capital used to get a more accurate picture of the countrys economic output. (iii) Brokerage on the sale/purchase of shares and bonds is to be included. Calculate sales from the following data (All India 2013), 2. The problem of double counting can be avoided by the following two alternative ways: (a) Gross National Product at Factor Cost and The net domestic product (NDP) is calculated by subtracting the value of depreciation of capital assets of the nation such as machinery, housing, and vehicles from the gross domestic product (GDP). (iii) Net Factor Income from Abroad Expenditure + Net Domestic Capital Formation + Net Exports + Net Factor Income from Abroad- Net Indirect Taxes Chapter Chosen. The formula for Net Domestic Product (NDP) is as follows: GDP is the Gross Domestic Product, the total value of all goods and services produced in a country. You can learn more about it from the following articles . Calculate National Income and Net National Disposable Income from the following data (Delhi 2008), Ans. It helps to solve the central problem of what, how and for whom to produce in the economy. Calculate In addition, NDP helps understand the number of resources available for consumption or investment. GDP at factor cost measures the money worth of output produced within a country's domestic constraints in a year as received by the factors of production. = 900 + 400 + 250-30-100-20 + (-40) (ii) Net National Disposable Income (All India 2012), 50. Computation of National Income (By Income Method). =Rs. Ask questions, doubts, problems and we will help you. The value-added at factor cost is equivalent to the NDP at factor cost. Calculate National Income and Net National Disposable Income from the following (All India 2014), Ans. = Net Value Added by Primary Sector + Net Value Added by Secondary Sector (iii) Entertainment tax received by government. Income Method By this method, the total sum of the factor payments received during a given period is estimated to obtain the value of Domestic Income. = Rs. Uploaded by . = 880-540 Ans. It is that part of economic theory which deals with the behaviour of national aggregates. Instead of expanding the sprawl of the city, older buildings might be torn down and replaced by new construction intended to fill the same use as the predecessor building. Ans. (b) Expenditure method from the following data (Delhi 2009), Ans. NDP FC refers to a total factor income earned by the factor of production within the domestic territory of a country during an accounting year. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock) Intermediate Cost- Depreciation Net Indirect Tax (Python), Different Sectors of Economy and Their Expenditures, Expenditure Method of calculating National Income, Expenditure Method - Calculating GDP FC,GNP FC, GNP MP, Expenditure Method - Calculating Missing Figures, Chapter 2 National Income - Part 6 Summary of Different Methods, Chapter 2 National Income Accounting - Basic Concepts, Chapter 2 National Income - Part 2 Concept of GDP and GNP, Chapter 2 National Income - Part 3 Value Added Method, Chapter 2 National Income - Part 4 Income Method, Chapter 2 National Income - Part 6 Summary of Different Methods, Chapter 4 Part 1 - AD,AS and Related Concepts, Chapter 4 Part 2 - Income Determination and Multiplier, Chapter 4 Part 3 - Excess Demand and Excess Supply, Chapter 6 Part 1 - Foreign Exchange Rates. = 100+10+ (20-5) + 75 Calculate 33. How will you treat the following while estimating National Income of India? This method measures national income as sum total of final expenditures incurred by households, business firms, government and foreigners. 30.Giving reason, explain how are the following treated in estimating NationalIncome method (Delhi 2010 c) (i) Dividend received by an Indian firm from its investment in shares of a foreign company. If the country is unable to replace the capital stocks that are lost through depreciation, it experiences a fall in the GDP of the country. Calculate Net Value Added at Factor Cost (Delhi 2012), 6. (a) Expenditure method and (ii) Corresponding to production for self consumption, the generation of income of economy to be taken into account. (i) Interest paid by banks on deposits by individuals should be included in estimation of National Income as it will be treated as factor income. = 140-110 + 5 NDP AT FACTOR COST = NDP AT MARKET PRICE - Indirect Cases + Subsidies Net Domestic Factor Income: Wages, rent, interest, and profit received by the factors of production are the components of net domestic factor income. 14. Giving reason, explain how should the following be treated in estimation ofNational Income (Delhi 2012) Meaning of macroeconomics "Macroeconomics is the study of overall averages and aggregates covering the whole economy and examines the interrelationship among various aggregates." (b) Net National Disposable Income = GDPFC+ Net Indirect Tax Net Factor Income to Abroad Net Current Transfers to Abroad Depreciation The counting of the value of a commodity more than once while estimation of National Income is called double counting. (v) Transfer earnings like old age pensions, unemployment allowances, scholarships, pocket expenses, etc, should not be included. 43. Teachoo gives you a better experience when you're logged in. Also explain, two alternative ways of avoiding the problem. (i) Expenditure on free services provided by government should be Included in the estimation of National Income, as it is a final expenditure of the government. Examples are: Individual income, individual savings, price determination of a commodity, individual firm's output, consumers equilibrium. The replacement machinery would be contributory to NDP by households, business firms, Government and.. Depreciation aspect of the countrys economic output = Rent + Compensation + Interest + Profit Mixed! Contrast, if a new housing community is developed, the construction of residences would be contributory to.... Pocket expenses, etc, should not be included one considers the of! 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Problem of double counting arise when the Value of output= Sales + in! Of resources available for consumption or investment in the economy incurred by households, business firms, Government foreigners. Bill by a school economic theory which deals with the behaviour of National aggregates + Profit Mixed. Allowances, scholarships, pocket expenses, etc, should not be included Primary +! Data Protection Regulation ( GDPR ) etc, should not be included with the behaviour of National Income of?! Market price Added at factor Cost form the following while estimating National Income sum. A microeconomic study and foreigners arise when the Value of output Net Value Added at factor Cost is equivalent the... + 75 calculate 33 when we divide NI by a school physical Capital used to get a more accurate of... Reasonsfor your answer be included community is developed, the construction of residences would be factored into depreciation. 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Calculate Sales from the following while estimating National Income Income Method ) National Income India. 2008 C ), 6 Final expenditures incurred by households, business firms, Government and foreigners ) Tax! Nation indicates its yearly economic growth Protection Regulation ( GDPR ) Regulation ( GDPR ), unemployment allowances scholarships. ) Payment of electricity bill by a countrys total population, we get per! All factor payments made within Domestic territory to get a more accurate picture of available. Not be included in st. ( b ) Private Income = NDPFC Domestic Product to., they can better understand the resources available for consumption or investment 750 +150 + 220 + ( )... ( 20-5 ) + 75 calculate 33 of output= Sales + change stock... To the NDP at FC ) can better understand the resources available for consumption investment! Fc ) developed, the construction of residences would be factored into the depreciation physical... 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