Please login :). (a) Expenditure method and 50: Solution: GNP at MP = NDP at FC + Depreciation - Net Factor income from abroad + Indirect tax =3,200 + 400-50 + 70 = 3,620 crores. (b) Private Income from the following data (All India 2008), 87. Calculate NDP at FC from the following data: Direct purchases from abroad by residents households, Direct purchase by non-residents in domestic market, GDP at MP = 400 + 100 + 50 - 150 - 20 + 100 = 480 croresNDP at FC = 480 - 60 - 20 = 400 crores. Ans. (i) Compensation of employees Calculate Gross Value Added at Factor Cost from the following data, Ans. Sales = Net Value Added at Factor Cost (NVAFC)+ Intermediate Consumption Change in Stock+ Indirect Tax + Depreciation Ans. = 1450 + 400 + [200 + (- 50)] (-50) -100 = Rs. Required fields are marked *, 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. Introductory Macroeconomics Subject Chosen. Government Spending3. (iii) Scholarship given to Indian students studying in India by a foreign firm will not be included while estimating National Income, as it is a transfer payment. 60. Value Added or Product Method: NI = GDP Depreciation Indirect Taxes + Overseas Net Factor Income., Following are the four components of NI accounts:1. (a) National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption (ii) Expenditure on second hand goods is not to be included. It is computed as follows: The net domestic product at factor cost is the value acquired by deducting the net indirect tax and depreciation from the gross market value of domestic goods and services. 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. How will you treat the following while estimating National Income? It facilitates standard of living comparisons between different nations. (ii) Rent free house to an employee by an employer. It is computed as follows: The net national product at factor cost is the value of overall goods or services manufactured by a nations residents, excluding indirect taxes and depreciation. (All India 2009). By contrast, if a new housing community is developed, the construction of residences would be contributory to NDP. 73.Calculate National Income by (iii) Expenditure by government on providing free education will be included while estimating NationalIncome, as it is a part of governments final consumption expenditure. Also, it does not account for indirect taxes and subsidies. (iii) Capital gains to Indian residents from sale of shares of a foreign company. (a)Income method and Suppose the agriculture sector experiences a decline in the value of physical capital of $2,000, and the manufacturing sector experiences a decline of $5,000. 805 crore, 55. 68.Calculate Gross National Product at Factor Cost from the following data by = 560-45 = Rs. Expenditure + Net Domestic Capital Formation + Net Exports + Net Factor Income from Abroad- Net Indirect Taxes Estimate amount of factor payments made by each enterprise. Calculate NDP at FC Particular Rs. (i) it is included in the GDPMP,as it is a part of government final consumption expenditure. Formula - Sheet Chapter 2. NDP does not consider the effects of indirect taxes and subsidies, which can distort market prices. If the gap between the GDP and NDP is narrower or smaller, then it is considered good for an economy. Question 3. = Rs. However, a wider gap between the GDP and NDP shows an increase in the value of obsolescence. 12800 crore, (b) By Production Method 85. (i) Net Indirect Taxes (i) Social security contributions by employees. 31. Simply put 'it is study of the economy as a whole'. 220 lakh, 22.Giving reason, explain how should the following be treated in estimating NationalIncome (Delhi 2012) Attiguppe , Bengaluru - 560040, Now reach all our Branches with ease!!!! = 750-450 = Rs. The depreciation accounted for is often referred to as capital consumption allowance and represents the amount needed to replace those depreciated assets. = 1000+ 500 + 200 + 60 + (- 20) 80 + (-10) 39.Calculate Net Value Added at Factor Cost form the following data: 40. (ii) Gross National Disposable Income from the following data, Ans. (a) National income = NDP at factor cost-net factor income from abroad. The resulting total is called Domestic Income or Net Domestic Product at FC (NDP FC)- By adding net factor income from abroad to domestic income, we get National Income (NNP FC)- Mind, in income method national income is measured at the stage when factor incomes are paid out by enterprises to owners of factors of productionland, labour, capital and enterprise. What Is GDP and Why Is It So Important to Economists and Investors? It is study of individual economic units of an economy. (a) Gross National Product at Factor Cost (GNPFC) = 1600-300-(-20)+ 30+ 40+0 3. (b) Personal Disposable Income from the following data (All India 2011), 53.Calculate It is evaluated based on income, the addition of value, or expenditure. 355 crore, 81. Calculate Net Domestic Product at Factor Cost and Net National DisposableIncome from the following (Delhi 2014), 32. = 1000 + 600+1400-200= 3000 -200 = Rs. It is computed by subtracting depreciation from the gross value. =1850 + (400 + 500+1100 + 100 + (-50) (ii) Money received by a family in India from relatives working abroad. (vi) Gross National Product at FC: It is the sum total of factor incomes earned by normal residents of a country along with depreciation, during an accounting year. (iii) Expenditure by government on providing free education. 830 crore Precautions While Using Value Added Method Give reasonsfor your answer. NDP is a more accurate measure of a countrys economic output, as it considers the wear and tear of physical capital, which is a key factor in long-term economic growth. The site owner may have set restrictions that prevent you from accessing the site. = 920-110 = Rs. 36. While that may take many years, barring unexpected damage or defects, there is a cycle of equipment failure and replacement. (iv) Net exports, i.e. There are only two producing sectors A and B in an economy. = 810 + 60 + 80-(-10) Ans. Net national product (NNP) is the total value of finished goods and services produced by a country's citizens overseas and domestically, minus depreciation. It is a measure of economic activities carried out by the residents of that countryboth domestically and while residing in a foreign country. (vii) If intermediate purchases are given, then imports are not included. (ii) Payment of interest on loan taken by an employee from the employer. Calculate sales from the following data (Delhi 2008), Ans. (i) Final output or final product method In this method, only final products (goods and services) are added to obtain the GDP. There are only two producing sectors A and B in an economy. Thus, it includes indirect taxes and subsidies, as well as the depreciation of physical capital. (i) It is not included in the estimation of National Income as it does not involve any production of goods and services. (i)Interest on a car loan paid by an individual. It is useful in comparing the economic output of different countries. Ans. Computation of National Income (By Expenditure Method), 8. = [140+ (-10)]-90-20-(-5) Net Domestic Product at Factor Cost or NDP FC : It refers to the net money value of all the final goods and services that are produced within the domestic territory of a nation excluding the net indirect taxes and depreciation. From the following information about firm X, calculate Net Value Added at Factor Cost (Delhi 2008 C), Ans. Gross National Product at Factor Cost (GNPFC) = Compensation of Employees + Profits + Rent+ Interest + Consumption of Fixed Capital + Net Factor Income from Abroad It does not matter whether the producer is the normal resident or foreigner. Imputed rent of owner occupied dwellings and value of production for self-consumption is included but value of self-consumed services like those of housewife is not Included. (i) Interest on a car loan paid by an individual should not be included while estimating National Income as the loan is taken for consumption purpose. Giving reason, explain whether the following are included in domestic product of India. NNPFC = NDPFC + NFIA. (Delhi 2009). (a) By Expenditure Method 2800 crore, 65. It deals with aggregates like national income, general price level and national output, etc. Net Value Added at Factor Cost (NVA FC) = Sales + Change in Stock (Closing Stock- Opening Stock)- Purchase of Intermediate Goods - Consumption of Fixed Capital - Indirect Tax = 500+ (80-60)-350-90-50 = 520-490 = Rs. (a) Gross Value Added at Market Price by A and B Ans. Download the PDF Question Papers Free for off line practice and view the Solutions online. = 500 + (-20) 250 -40 + 30 Nominal gross domestic product measures the value of all finished goods and services produced by a country at their current market prices. The net domestic product is defined as the net value of all the goods and services produced within a countrys geographic borders. It is computed as follows: NNPFC = GNPMP Net Indirect Taxes Depreciation. (i) Remittances from non-resident Indians to a resident in India should not be included in the estimation of domestic factor income as it is not a part of domestic income and the income is not generated in domestic territory of India. Study of problem of unemployment in India or general price level is a macroeconomic study because they relate to Indian economy as a whole.Let it be known that an English economist J.M. Calculate National Income and Net National Disposable Income from the following data (Delhi 2008), Ans. 7. Income Method NDP (FC) = F I F I = COE + OS + MISE COE = W SC + W SK + SS OS = Rent + Interest + Royalty + P rofit Rent = PO + IR NI = ITR IP. Distinguish between microeconomics and macroeconomics. (b) Net National Disposable Income = GDPFC+ Net Indirect Tax Net Factor Income to Abroad Net Current Transfers to Abroad Depreciation (iii) Capital gains to Indian residents from sale of shares of a foreign company will not be included whileestimating National Income in India, as it is a kind of transfer income. Calculate (b) Gross National Disposable Income from the following data, Ans. Switch; Flag; Calculate Ans. 660 crore, 54. Final Expenditure = GDP MP. (i) National Income This has been a guide to Net Domestic Product & its meaning. To view the purposes they believe they have legitimate interest for, or to object to this data processing use the vendor list link below. Calculate National Income and Net National Disposable Income from the following (All India 2014), Ans. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. 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(i) Dividend received by an Indian firm from its investment in shares of a foreign company. This method is also known as 'Income Disposal Method'. = 185+15 (iii) Purchase by foreign tourists. The action you just performed triggered the security solution. Total National Income - the sum of all wages, rent, interest, and profits. (ii) Expenditure method 5. 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). Intermediate Consumption = Value of Output Net Value Added 6. = [400+ (-40)]-250-(20+ 30) It is a measure of the total value of all goods and services produced within a countrys borders, adjusted for the decline in the value of physical capital over time due to wear and tear, obsolescence, and other factors. (ii) National debt interest. For example, in many urban areas, efforts may be made to re-purpose underutilized real estate that has fallen into disrepair. Governments consider NI crucial for the following reasons: NI is the sum of the monetary value of all the goods and services produced during a financial yearan aggregation of production units belonging to a countrys residents. (ii) Payment of interest by a government firm should not be included in the estimation of National Income, as it is a transfer payment. It deals with individual income, individual prices and individual outputs, etc. (vi) If sales are given, then exports are not included separately. Let us have a look at the examples to understand the concept better. = 1000+100 + 130 + 50+100 + 20+200 = Rs. (iii) Financial help received by flood victims are not included while estimating National Income, as it is akind of transfer payment. Ans. The depreciation accounted for is often referred to as capital consumption allowance and represents the amount needed to replace those depreciated assets. 60 crore = 140-110 + 5 (ii) National debt interest will not be included while estimating National Income by income method, as the government takes loan for both productive and non-productive activities. As a result, it provides a more accurate picture of the available resources for consumption or investment. = 880-540 = 5000 + 2000 + 500 + (-30) + (-150) + 100-50- 800 = 7600-1030 = Rs. NCERT Solutions for Class 6, 7, 8, 9, 10, 11 and 12, 1. Consumption2. NDP is an important economic indicator because it provides a more accurate picture of a countrys economic output that is available for consumption or investment. Gross Domestic Product (GDP) at Market Price (MP) = Private Final Consumption Expenditure (+) Private Final Investment Expenditure (+) Government Final Expenditure (+) Net Exports 2. The total value of all goods and services produced within a countrys borders. 1. This is because it only counts the value of the factors of production used to produce the goods and services. This is the market value of output, while income payments made to factors of production amount to Rs. (i) Profits earned by a branch of foreign bank will not be included while estimating National Income, as it is a factor income paid to abroad. 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. = [800 + (40 50)] 500 [200 -180] + 60 (ii) Money received by a family in India from relatives working abroad will not be included while estimating National Income, as it is merely remittance from abroad and no flow of goods or services are involved. How will you treat the following while estimating National Income of India? (a) By Expenditure Method at Factor Cost (NVAFc)+ Depreciation + (Sales Tax-Subsidy) 510 crore, 79. Calculate sales from the following data (All India 2013), 2. = 600+100 +70+(-20)+ 10-30 = 780-50 (i) National Income The resulting total is called Domestic Income or Net Domestic Product at FC (NDPFC)- By adding net factor income from abroad to domestic income, we get National Income (NNPFC)- Mind, in income method national income is measured at the stage when factor incomes are paid out by enterprises to owners of factors of productionland, labour, capital and enterprise. Net Exports. 232, Block C-3, Janakpuri, New Delhi, The $80 million is the amount available for consumption or investment in the economy after accounting for the depreciation of physical capital. National Income (NNPFC) = Compensation of Employees + Rent + Interest + Profit Net Factor Income to Abroad are excluded. (i) Expenditure on education of children by a family is included in the estimation of National Income as it is a part of final consumption expenditure by the household. (iii) Mixed income of self-employed, 3. Continue with Recommended Cookies, Chapter 2 National Income - Part 5 Expenditure Method. As the price of wheat is included three time and that of floor two times. Calculate = 100+10+ (20-5) + 75 (i) Remittances from non-resident Indians to their families in India. This could negatively impact laborers, as their role is now performed by a machine.3. (Delhi 2009). (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. Ans. Step 4 The last step of calculating National Income through the Income Method is the estimation of Net Factor Income from Abroad (NFIA). = 680 + 20+100- (-5) = Rs. An increase in NDP signifies a growing economy, while a decrease denotes economic stagnation. = 600 + (-10)-300 = Rs. (b) By Expenditure Method 400. Ask questions, doubts, problems and we will help you. This website is using a security service to protect itself from online attacks. Calculate Net Value Added at Factor Cost from the following data, Ans. (i) The value of intermediate goods should not be included. Thus, it eliminates the distorting effect of indirect taxes and subsidies, which can vary greatly across countries. Meaning of microeconomics Briefly, microeconomics is the study of individual economic units of an economy. Calculate Gross National Product at Market Price and Net National Disposable Income from the following data (Delhi 2009 c), 80. 4,000 crores + Rs. Call us @ 08069405205, Want to work at Insights IAS? 70. = 500+ (80-60)-350-90-50 835 arab. 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. Income, general price level and National output, etc All the goods and produced... It eliminates the distorting effect of indirect taxes ( i ) Social security contributions by employees fallen disrepair. 1450 + 400 + [ 200 + ( - 50 ) ] ( ). Included separately Income of India the available resources for consumption or investment GNPMP... 2008 C ), 32 GDP and Why is it So Important to Economists Investors!, Promote, or Warrant the Accuracy or Quality of WallStreetMojo is narrower or smaller, then exports are included. If a new housing community is developed, the construction of residences would be contributory to NDP,! 08069405205, Want to work at Insights IAS ) capital gains to Indian residents from sale shares...: NNPFC = GNPMP Net indirect taxes and subsidies to understand the concept better Income! Then exports are not included while estimating National Income, as it is not included separately factors production... Free education, Rent, interest, and profits countryboth domestically and while residing in a foreign.... + 60 + 80- ( -10 ) -300 = Rs Income and National! Following ( All India 2013 ), Ans the factors of production used to produce goods. + intermediate consumption Change in Stock+ indirect Tax + depreciation Ans with aggregates like National Income - sum... India 2014 ), Ans DisposableIncome from the following information about firm X, calculate Net Value Added at Cost! 2800 crore, ( b ) Gross National Disposable Income from the following data ( India! On providing free education may take many years, barring unexpected damage or defects, is. Which can distort market prices ) it is akind of transfer Payment, Net! Needed to replace those depreciated assets 08069405205, Want to work at Insights IAS vii ) if intermediate purchases given. 800 = 7600-1030 = Rs in shares of a foreign company market prices floor two.... = 1600-300- ( -20 ) + 30+ 40+0 3 vii ) if sales are given, then exports not... A ) Gross National Disposable Income from the following ( All India )! Damage or defects, there is a measure of economic activities carried by. On providing free education economic stagnation taken by an employee by an employee from the following data,.! Car loan paid by an individual -300 = Rs indirect Tax + +. -10 ) -300 = Rs - part 5 Expenditure Method, a wider between! Added at Factor Cost ( Delhi 2008 ), 87 its meaning crore Precautions Using... Has been a guide to Net Domestic Product & its meaning the GDP and Why is it Important! = 5000 + 2000 + 500 + ( -150 ) + intermediate consumption Change in Stock+ Tax... Consumption allowance and represents the amount needed to replace those depreciated assets Net Income... To Economists and Investors of indirect taxes ( i ) it is a of. Into disrepair with aggregates like National Income of India the available resources for consumption or investment you the!, there is a part of government final consumption Expenditure whole ' this is... Contributions by employees is also known as & # x27 ; this is the Value. An individual microeconomics Briefly, microeconomics is the study of the factors of production amount to Rs x27... Income, individual prices and individual outputs, etc production of goods and services & # x27 ; Disposal! Contrast, if a new housing community is developed, the construction of residences would be contributory NDP! Capital consumption allowance and represents the amount needed to replace those depreciated assets ndp at fc formula.! Factor cost-net Factor Income from the following data ( Delhi 2008 ), 87 ) Dividend by. A machine.3 or Quality of WallStreetMojo because it only counts the Value of output Net Value Added market. Factor Cost from the following data, Ans would be contributory to NDP 30+ 40+0 3 and represents amount. In comparing the economic output of different countries by a and b Ans is! ( by Expenditure Method 2800 crore, 65, 7, 8, 9,,... Ii ) Rent free house to an employee from the following data ( Delhi 2009 C ),.. Consumption allowance and represents the amount needed to replace those depreciated assets,. Are excluded 50 ) ] ( -50 ) -100 = Rs, explain whether following! X27 ;, 65 flood victims are not included separately to protect itself from online attacks -50., 2 across countries ( GNPFC ) = Rs 8, 9 10! Simply put 'it is study of individual economic units of an economy i ) interest on loan taken by individual... Physical capital services produced within a countrys geographic borders + Rent + interest + Net! Using Value Added 6 distorting effect of indirect taxes ( i ) it is not included separately 2009 C,. Thus, it provides a more accurate picture of the factors of production to. ) 510 crore, 79 Warrant the Accuracy or Quality of WallStreetMojo while residing in foreign... A car loan paid by an employee from the following data, Ans price wheat... Calculate ( b ) Private Income from abroad market price by a and b an! Two times, 87 Method Give reasonsfor your answer is Using a security service to protect itself from attacks! 40+0 3 NNPFC = GNPMP Net indirect taxes and subsidies, which can distort prices... Of economic activities carried out by the residents of that countryboth domestically and while residing in a foreign.... Crore Precautions while Using Value Added at Factor Cost from the following ( All India 2013 ), 80 individual! Rent + interest + Profit Net Factor Income from the employer with Cookies. Of floor two times while Using Value Added at Factor Cost from the following data Ans. ) National Income - part 5 Expenditure Method ndp at fc formula, Ans Domestic Product & its.! An individual of economic activities carried out by the residents of that countryboth domestically and while residing in a country... Income = NDP at Factor Cost from the Gross Value Added at cost-net. As & # x27 ; Income Disposal Method & # x27 ; Income Disposal Method #! Following are included in the GDPMP, as it is study of individual economic units of an economy of. Is often referred to as capital consumption allowance and represents the amount needed to replace those depreciated assets this is. 2008 ), Ans is narrower or smaller, then imports are not included separately government on providing education... And that of floor two times = 680 + 20+100- ( -5 ) = 1600-300- -20... ) Social security contributions by employees loan paid by an employee from the following data, Ans level National! 1450 + 400 + [ 200 + ( - 50 ) ] -50... ( -30 ) + 100-50- 800 = 7600-1030 = Rs we will help you needed! Of transfer Payment, 10, 11 and 12, 1 about firm X, calculate Net Value at... Market price by a machine.3 smaller, then exports are not included in the estimation National. Unexpected damage or defects, there is a measure of economic activities carried by... This could negatively impact laborers, as it is study of individual economic units of an economy included.. Tax-Subsidy ) 510 crore, 65 represents the amount needed to replace those depreciated assets economic stagnation increase. 2013 ), 80 on providing free education the total Value of available... Following information about firm X, calculate Net Domestic Product & its meaning a growing,. Method Give reasonsfor your answer Private Income from the employer = 600 + ( -10 ) Ans 79. Of microeconomics Briefly, microeconomics is the study of the economy as a result, it a... Market prices allowance and represents the amount needed to replace those depreciated assets government... Help received by flood victims are not included are given, then it akind! Is useful in comparing the economic output of different countries in Stock+ indirect Tax + depreciation Ans urban. Included in Domestic Product of India Solutions online + 20+200 = Rs taxes and subsidies, which can greatly... Two times resources for consumption or investment -30 ) + 75 ( i ) Net indirect and. Following information about firm X, calculate Net Domestic Product of India sale of shares of a company! As follows: NNPFC = GNPMP Net indirect taxes and subsidies, as it does not any... Method & # x27 ; Domestic Product at Factor Cost ( GNPFC ) Rs... By foreign tourists GDPMP, as well as the price of wheat is included in the,. Wheat is included three time and that of floor two times giving reason, explain the... Gap between the GDP and NDP is narrower or smaller, then it akind... X27 ; Income Disposal Method & # x27 ; Income Disposal Method & # x27 ; Income Disposal Method #... Ndp does not consider the effects of indirect taxes depreciation 12800 crore, 65 the construction of would... House to an employee by an individual restrictions that prevent you from accessing the site an increase in the of. Doubts, problems and we will help you Value of output, while a decrease denotes economic.! Or defects, there is a part of government final consumption Expenditure and residing... Role is now performed by a and b in an economy included time! Or investment its meaning ( sales Tax-Subsidy ) 510 crore, 65 ncert Solutions for Class 6,,... = 600 + ( -30 ) + 75 ( i ) interest loan!
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