42. = (800 + 50) (400 +100) 40 + 30 Only factor incomes which are earned by rendering productive services are included. (ii)Earning of shareholders from the sale of shares will not be included while National Income, as it will be considered as transfer payment. (i) Social security contributions by employees. National income accounting refers to the bookkeeping system that governments use to measure the level of the economic activity, such as GDP. It refers to the market value of final goods aand servicess produced within the domestic territory of a country during the period of an accounting year, exclusiive of depreciation. Calculate national income or NNP at FC. Methods of Calculating National Income, (i) Income method (ii) Rent paid by the embassy of Japan is not included in the domestic factor income as the embassy is a part of Japans domestic operation territory. Briefly explain the following basic concepts related to NI: Is study of cotton textile industry a microeconomic study or macroeconomic study? (iv) Imputed value of expenditure on goods produced for self consumption should be taken into account. = 4100 -2150 The value-added at factor cost is equivalent to the NDP at factor cost. Intermediate Goods Consumption of Fixed Capital Indirect Taxes 3900 crore, Gross National Product at Factor Cost(GNPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Consumption of Fixed Capital + Net Exports + Net Factor Income from Abroad Net Indirect Taxes NDPFC = Compensation of Employees + Profit + Rent & Royalty + Interest + Mixed income. (i) Fees to a mechanic paid by a firm. 39.Calculate Net Value Added at Factor Cost form the following data: 40. Domestic income is the sum total of factor incomes generated by all the production units located within the domestic territory of a country during a period of account. 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. (ii) National debt interest. 5. 30 crore, 12. (a) Net Domestic Product at Factor Cost and Ans. Givereasons. Ans. However, one considers the depreciation of physical capital used to get a more accurate picture of the countrys economic output. This concept is about NDP or net domestic product that serves as an important factor for determining the economic health of a country. Ans. Gross National Product at Factor Cost (GNPFC) = Compensation of Employees + (Rent + Interest+ Profits) + Net Factor Income from Abroad + Consumption of Fixed Capital 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. Thus, it includes indirect taxes and subsidies, as well as the depreciation of physical capital. (b) Net National Disposable income from the following data What do you understand by domestic income (NDP FC)? Giving reason, explain whether the following are included in domestic product of India. Calculate = Rs. Give an example of showing the difference between microeconomics and. Gross Value Added at Factor Cost (GVAFC) = Value of Output (Sales + Change in Stock)- Purchase of Raw Materials Indirect Tax (Sales Tax + Excise Duty) On the other hand, the Domestic Net Product at factor cost (NDP-FC) only considers the labor and capital used to produce them. In addition, it excludes the taxes and subsidies that distort the market price. Here, final products are only those products which are ready for end use or consumption by their final users (consumers or producers). Value of Output = Net Value Added at Factor Cost (NVAFC) + Depreciation Give two examples of macroeconomic studies. For calculating domestic income, we will subtract the amount of depreciation and net indirect tax from the Gross Domestic Product at Market Price (GDPMP). 805 crore, 55. (a) Income method and How will you treat the following while estimating National Income of India? 950 crore (ii) National debt interest. 5500 crore Difference Between Monetary Policy and Fiscal Policy, Your Mobile number and Email id will not be published. 7. Giving reason explain how should the following be treated in estimating GrossDomestic Product at Market Price ? (d) GDP at factor cost = NDP at factor cost - depreciation Answer: (c) See The Explanation D denotes Domestic Production of the Countrys Non-Residents. Give reasons for your answer. Calculate sales from the following data (Delhi 2013), 4. Calculate National Income and Gross National Disposable Income from the following: (Delhi 2014), Ans. The result provides a more accurate picture of a countrys economic output. Identify enterprises which employ factors of production (land, labour, capital and enterprise). 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. Estimate amount of factor payments made by each enterprise. 660 crore, 54. NDP FC 55,915 Indirect Tax 2,590 Less Subsidies 1540 Net Indirect Taxes 1,050 Step 1 We calculate NNPMP NNPMP = GNPMP - Dep = 58,350 - 1625 = 56,725 Step 2 We calculate NDPMP NDPFC - Factor income from abroad + Factor income to abroad = 56,725 - 625 + 865 = 56,965 Step 3 We calculate Net Indirect tax . Such an increase along with deterioration of the capital stock value indicates economic stagnation. 1950 crore, (b) By Production Method Sales Taxes - consumer taxes imposed by the government on the sales of goods and services. (ii) Interest paid by an individual on a car loan taken from a bank. 27. Sum up all factor payments made within domestic territory to get Domestic Income (NDP at FC). It helps to solve the central problem of full employment of resources in the economy.. The agriculture sector produces 100 units of crops with a value of $100 per unit for a total GDP of $10,000. 1950 crore, 66. Depreciation - cost allocated to a tangible asset over its useful life. It measures the output generated by a country's organizations located domestically or abroad. = 3950-50 = Rs. Calculate Ans. (iii) Expenditure by government on providing free education. Calculate sales from the following data (Delhi 2013), 3. Please login :). By contrast, if a new housing community is developed, the construction of residences would be contributory to NDP. In other words, GDP measures the total value of all goods and services produced within a country. 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. (ii) Net exports = [800 + (40 50)] 500 [200 -180] + 60 The acquisition of new machines for the new factory would represent a gain because the demand was driven by the need to increase the scope of the operations, rather than serve as a replacement. Calculate Gross National Product at Market Price by production method and income method (All India 2010), 67. = 4100- (600 + 700 + 700) 50 -100 515 crore, (b) Net National Disposable Income (NNDI) = NNPFC + Net Indirect Taxes + Net Current Transfers fromAbroad (a) Net Domestic Product at Factor Cost (NDPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports Net Indirect Taxes (Indirect Taxes Subsidies), NDPFC= 250+ 50+ 30+ (- 10)- (20- 10) crore = 330 -20 =Rs. This is important as failure to take action would result in a decrease in the country's GDP. (Delhi 2009). 1. Calculate intermediate consumption from the following data, Ans. (i) Gross National Product at Market Price In addition, NDP helps understand the number of resources available for consumption or investment. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . Question 3. Factor cost might have been used to calculate GDP at market prices, but Indian GDP was presented as GDP at . It is calculated by subtracting depreciation from the gross domestic product (GDP). Its main tools are aggregate demand and aggregate supply of the economy as a whole. 90 lakh, 15. = 200-[80+ 20+ (15 -5)] National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports Net Indirect Taxes Net Factor Income to Abroad 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). Calculate 35 lakh, 17. Hence, according to the value-added method: National Income = (NDP FC) + Net factor income from abroad. Required fields are marked *. This total final expenditure is equal to gross domestic product at market price, i.e. In this example, the countrys Gross Domestic Product (GDP) would be $20,000 ($10,000 from agriculture + $10,000 from manufacturing). 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. (a) National income = NDP at factor cost-net factor income from abroad. (All India 2011), Ans. = Rs. Ask questions, doubts, problems and we will help you. While that may take many years, barring unexpected damage or defects, there is a cycle of equipment failure and replacement. You are free to use this image on your website, templates, etc., Please provide us with an attribution link, Net Domestic Product at factor cost (NDP-FC), Gross Domestic Product vs Net Domestic Product. = Rs. There are only two producing sectors A and B in an economy. Ans. 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. National Income equals Rent + Wages + Interest + Profit + Mixed-Income. (iii) Entertainment tax received by government is not included while estimating the National Income ofIndia as it is a indirect tax and not included at factor cost. (i) Imputed rent of self occupied houses. (a) Net Domestic Product at Factor Cost (NDPFC) = Wages and Salaries + Rent + Interest Paid byProduction Units + Corporation Tax + Dividends + Undistributed Profits + Social Security Schemes by Employers (i) Only final expenditure is to be taken into account to avoid error of double counting. 510 crore, 79. (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. (ii) Value added method This approach or method is a way to avoid the problem of double counting. suppose if we include the price of wheat, then the price of floor and finally price of bread. 62.Calculate(a) Gross Domestic Product at Market Price and Calculate NDP at FC Particular Rs. NDP does not consider the effects of indirect taxes and subsidies, which can distort market prices. = [140+ (-10)]-90-20-(-5) Since net value added by an enterprise is the result of services of factors of production, therefore, the same is distributed in the form of money income (rent, wages, interest, etc.) (i) Income from illegal activities like smuggling, theft, gambling, etc, should not be included. (i) Salaries paid to Russians working in Indian Embassy in Russia. Nanda Ashirwad Complex, 3rd Floor, (iii) Interest on public debt will not be included while estimating National Income, as it is the loan takenfor consumption purpose. = 600 + 100 + 110-20-(120-20)-5 (ii) Net Current Transfers from Abroad (All India 2012), 49.Find out The national income (NI) of a nation indicates its yearly economic growth. = 1000 + 250+150 + 640 -30=Rs. (b) GNP at factor cost = GNP at market price + net indirect tax (c) National income = Domestic income + Net factor income from abroad. 600 crore, (NNPFC) = Gross Value Added by A and B Indirect Taxes Depreciation + Net Factor Income Abroad = 600-80-30+20= 620-110=Rs. It is evaluated based on income, the addition of value, or expenditure. = 400 340 = Rs. (v) Expenditure on shares and bonds is not to be included in Total Expenditure. 68.Calculate Gross National Product at Factor Cost from the following data by Calculate Net National Product at Market Price and Gross National Disposable Income from the following: ( All India 2014). (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. Nominal gross domestic product measures the value of all finished goods and services produced by a country at their current market prices. Giving reasons, explain whether the following are included in National Income. In 2020, the gross national income of the US was $21,286,637,000,000.000. NDP, along with GDP, gross national income (GNI), disposable income, and personal income, is one of the key gauges of economic growth that is reported on a quarterly basis by the Bureau of Economic Analysis (BEA). (ii) GNP (at FC): Gross National Product at factor cost. Are the following a part of countrys Net Domestic Product at Market Price? Manage Settings The counting of the value of a commodity more than once while estimation of National Income is called double counting. (ii) Operating surplus (rent, profit and interest) (iii) Financial help received by flood victims are not included while estimating National Income, as it is akind of transfer payment. Switch; Flag; Answer (1 of 17): National income(NNP fc) basically calculated in three ways :- 1. 1390 crore, 51. What is essential is that production is . Consumption2. 61.Explain the problem of double counting in estimating national income, with thehelp of an example. The site owner may have set restrictions that prevent you from accessing the site. Gross National Product at Factor Cost (GNPFC) = Compensation of Employees + Profits + Rent+ Interest + Consumption of Fixed Capital + Net Factor Income from Abroad = Rs. Sale and purchase of second-hand goods are excluded since they are not part of production of current year but commission paid on sale of second-hand goods is included as it is reward for rendering productive services. = 30 + 5 = Rs. (iii) Product method or value added method or output method, 2. An increase in NDP would indicate growing economic health, while a decrease would indicate economic stagnation. Meaning of macroeconomics "Macroeconomics is the study of overall averages and aggregates covering the whole economy and examines the interrelationship among various aggregates." 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