Give reasonsfor your answer. Givereasons for your answer. Give reasons to your answer. Question 3. = Rs. Attiguppe , Bengaluru - 560040, Now reach all our Branches with ease!!!! = 515+(30-5) +15 = 515+25+15 = Rs. Net Exports. How will you treat the following while estimating National Income of India? So we use following Steps Step 1 Calculate Gross Domestic Fixed Capital Formation =Gross Fixed Capital formation =Net Fixed Capital formation +Depreciation =Net Fixed Capital formation +Consumption of Fixed Capital =350+50 =400 Step 2 Calculate Gross Domestic Capital Formation Gross Domestic Capital Formation 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. = [700 + (-30)] 400 -20 + 50 5700 crore, 46. 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. = 1550 190 = 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. Calculate (b) Net National Disposable Income from the following data (Delhi 2008), 82. GDPMP = Net Domestic Product at FC (NDPFC) + Depreciation + Net Indirect Tax #2 - Gross Domestic Product at Factor Cost (GDPFC) It is the total value of domestic production minus net indirect taxes. This is important as failure to take action would result in a decrease in the country's GDP. Ans. According to the formula, national income is calculated by adding together consumption, government expenditure, investments made within the country, net exports (exports minus imports), and foreign production by residents. Final Expenditure It is the expenditure on the purchase of final goods and services during an accounting year. (ii) Payment of interest by a government firm. = 2600 + 1100 + 500+100 + (-100) + (-50) -250 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. This method is also known as 'Income Disposal Method'. It is computed as follows: NNPFC = GNPMP Net Indirect Taxes Depreciation. Why is study of problem of unemployment in India a macroeconomic study? Methods of Calculating National Income, (i) Income method document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . It is considered a key indicator of economic growth of a country. Total National Income - the sum of all wages, rent, interest, and profits. Government Spending3. Calculate NDP accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration. = 630 + 120 30 = Rs. Only factor incomes which are earned by rendering productive services are included. 1600 crore Are the following a part of countrys Net Domestic Product at Market Price? 64. Intermediate Consumption = Value of Output Net Value Added As a result, it provides a more accurate picture of the available resources for consumption or investment. (i) Dividend received by a foreigner from investment in share of an Indian company. The value-added at factor cost is equivalent to the NDP at factor cost. Today its Indias top website and an institution when it comes to imparting quality content, guidance and teaching for IAS Exam. 2. Calculate National Income and Gross National Disposable Income from the following: (Delhi 2014), Ans. In other words, the NDP-FC is calculated by subtracting the indirect taxes and adding the subsidies to the value of output, which is the value of all goods and services produced within a countrys borders. Measuring Economic Conditions: GNI or GDP? NNP Fc = NDP Fc + Net factor income from abroad. (ii) Pension paid after retirement is not included in the estimation of National Income as it is a kind of deffered payment to employees. (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. (Delhi 2008). (a) Gross National Product at Factor Cost and Net Value Added at Factor Cost (NVAFC) = Value of output (Sales + Change in Stock) Purchase ofRaw Materials Consumption of Fixed Capital + Subsidies (ii) Payment of salaries to its staff by an embassy located in New Delhi. Formula - Sheet Chapter 2. 42. Cloudflare Ray ID: 7a11ea707ae6d2cd Displaying ads are our only source of revenue. = [800 + (40 50)] 500 [200 -180] + 60 While estimating National Income, how will you treat the following? It is net money value of Goods and Services Produced in domestic territory after Depreciation It is also called Net Domestic Product at Factor Price (NDP FC ) Formula NDP FC = GDP FC - Depreciation Example Suppose total value of goods and services produced in DOMESTIC TERRITORY is 100 Depreciation on Maintaining Fixed assets is 20 1. = 5500 + 250- 150 + 100 = 5850- 150 The formula for NDP-FC is: NDP-FC = Value of Output - Indirect Taxes + Subsidies In other words, the NDP-FC is calculated by subtracting the indirect taxes and adding the subsidies to the value of output, which is the value of all goods and services produced within a country's borders. The total value of all goods and services produced within a countrys borders is adjusted for the depreciation of physical capital. Find out Net Value Added at Factor Cost (All India 2012), 10. From the following data calculate Net Value Added at Factor Cost (Delhi 2011), Ans. Sales Taxes - consumer taxes imposed by the government on the sales of goods and services. 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. (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. NDP at MP = GDP at MP (+) NFIA [Net Factor Income from Abroad] 3. 340 lakh, 20. (a) National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption (i) Expenditure on free services provided by government. (i) Salaries paid to Russians working in Indian Embassy in Russia will not be included in estimation of National Income of India, as it is a factor income paid to abroad. (i) Family members working free on the farm owned by the family. Using this, they can better understand the resources available for consumption or investment in the country. The $80 million is the amount available for consumption or investment in the economy after accounting for the depreciation of physical capital. (ii) Payment of interest on loan taken by an employee from the employer. (iii) Investment expenditure or gross domestic capital formation. Classify factor payments into various categories like rent, wages, interest, profit and mixed income (or classify factor payments into compensation of employees, mixed income and operating surplus). (i) Profits earned by a branch of foreign bank in India. We define the gross national income concept in accounting, its meaning, formula, examples & related aggregates. (iii) Expenditure by government on providing free education. It may arise due to technological advancement. (iv) Income in terms of windfall gains should not be included. (Delhi 2009), 77. (a) Income method and However, one considers the depreciation of physical capital used to get a more accurate picture of the countrys economic output. The problem of double counting can be avoided by the following two alternative ways: (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. (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. = Rs. Calculate . Its main tools are aggregate demand and aggregate supply of the economy as a whole. = 4100 -2150 You can learn more about it from the following articles . 94 Views. (ii) Interest on a car loan paid by a government owned company. How should the following be treated in estimating National Income of a country? (i) Capital gain on sale of a house. This is the market value of output, while income payments made to factors of production amount to Rs. Investopedia does not include all offers available in the marketplace. = 500+ (80-60)-350-90-50 (iii) Purchase by a foreign tourists will be included while estimating National Income as it is consideredas exports of goods and services. (ii) Rent paid by embassy of Japan in India to a resident Indian. (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. (i)Interest on a car loan paid by an individual. Net Value Added at Factor Cost (NVAFC) = Value of Output [Sales + Change in Stock (Closing Stock Opening Stock)] Purchase of Raw Material Depreciation (Gross Capital Formation Net Capital Formation) + Subsidies Calculate NDP at FC Particular Rs. = 2000+100 + 30+10+60 + 300 + 300 = Rs. = Rs. Gross Domestic Product (GDP): Formula and How to Use It, What Is National Income Accounting? Call us @ 08069405205, Want to work at Insights IAS? 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. National Income equals C + G + I + NX. This has been a guide to what is National Income. PRODUCT METHOD (Value added method): Theory-only the value of final goods is to be included; otherwise there arises a problem of double counting. (v) Commission earned on account of sale and purchase of second hand goods is included. 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. (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. The depreciation accounted for is often referred to as capital consumption allowance and represents the amount needed to replace those depreciated assets. Explain. The formula for NDP can be expressed as follows: Depreciation = Depreciation of capital assets such as equipment, vehicles, housing, and more. Net domestic product (NDP) is an annual measure of the economic output of a nation that is adjusted to account for depreciation. Calculate National Income: (Compartment 2014), = Government Final Consumption Expenditure + Private Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports NIT + NFIA (ii) Value added method This approach or method is a way to avoid the problem of double counting. 59. From the following data calculate Net Value Added at Factor Cost (Delhi 2011 c)
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