When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. Calculate (b) Gross National Disposable Income from the following data, 47.Find out NDP = Net domestic product GDP = Gross domestic product Depreciation = Depreciation of capital assets such as equipment, vehicles, housing, and more As the NDP takes into account the depreciation of capital assets, it is considered to be superior to the GDP as a measure of well-being of a nation. Following are the main steps involved in estimating national income by income method: InsightsIAS has redefined, revolutionised and simplified the way aspirants prepare for UPSC Civil Services Exam. Such an increase along with deterioration of the capital stock value indicates economic stagnation. (iii) Mixed income of self-employed, 3. (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 300 lakh, 19. 630 arab, (b) Net National Disposable Income (NNDI) 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 (All India 2011), Ans. This compensation may impact how and where listings appear. (i) Expenditure on free services provided by government. Question 3. Calculate sales from the following data (Delhi 2008), Ans. = 800+ 400+ 250+150+ 60+ (-10) NNPfc = NDPfc + NFIA. 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 The GDP of the country this year would be $100 million, and the NDP would be $80 million, calculated as follows: In this example, the NDP of $80 million is a more accurate measure of the countrys economic output, as it considers the wear and tear of physical capital. Gross Value Added at Factor Cost (GVAFC) = Value of Output (Sales + Change in Stock)- Purchase of Raw Materials Indirect Tax (Sales Tax + Excise Duty) (a) National Income (NNPFC)= Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation Net Imports Net Indirect Tax- Net Factor Income to Abroad Examples are: National income, national savings, general price level, aggregate demand, aggregate supply, inflation, unemployment, etc. Using this, they can better understand the resources available for consumption or investment in the country. 30 crore 12. (iii) Product method or value added method or output method, 2. (ii) Purchase and sale of second hand goods should not be included. It may arise due to technological advancement. Calculate . 25.Giving reason, explain how should the following be treated while estimatingNational Income (All India 2012) Calculate sales from the following data (Delhi 2013), 3. suppose if we include the price of wheat, then the price of floor and finally price of bread. Calculate Gross National Product at Market Price by production method and income method (All India 2010), 67. For example, in many urban areas, efforts may be made to re-purpose underutilized real estate that has fallen into disrepair. (ii) GNP (at FC): Gross National Product at factor cost. Thus, it provides a clearer picture of a countrys economic performance. 200 crore 30 crore, 12. 60 lakh, 18.Calculate Net Value Added at Factor Cost from the following data, Ans. (i) Only final expenditure is to be taken into account to avoid error of double counting. (iii) Interest received by an Indian resident from its abroad firms. 88.Giving reason, explain, how the following are treated in estimating National Income? 73.Calculate National Income by NDP is a useful tool for long-term economic analysis, as it considers the decline in the value of physical capital over time, which is an important factor for sustained economic growth. (i) Profits earned by a branch of foreign bank in India. 5. 29.Giving reason, explain how are the following be treated in estimation of NationalIncome by income method (All India 2010) 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 It helps to solve the central problem of full employment of resources in the economy.. Income to Abroad + Consumption of Fixed Capital 310 crore, Gross Value Added (GVA) by B = Sales by B + Net Change in Stock of B (i) Expenditure on fertilisers by a farmer. Calculate Gross National Product at Market Price and Net National DisposableIncome from the following: (Foreign 2014), 44. (iii) It is included in the estimation of GDPMPbecause it is a part of final expenditure by a firm. Ans. 3. (b) National Income. Ans. 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. It is the total value of domestic production minus net indirect taxes. It can be classified into following components: Its central problem is determination of level of income and employment. National income is studied under macroeconomics; gross domestic product (GDP) and gross national product (GNP) are the two major components. In 2020, the gross national income of the US was $21,286,637,000,000.000. (a) Gross National Product at Market Price and Click to reveal 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. Investopedia does not include all offers available in the marketplace. (b) Private Income from the following data (All India 2008), 87. (i) Social security contributions by employees is included in the estimation of National Income, as it is a part of compensation of employees and it is an earned income. (Foreign 2014) This method is also known as 'Income Disposal Method'. (ii) Interest on a car loan paid by a government owned company should included while estimating National Income as it is a part of government final consumption expenditure. Calculate Net Domestic Product at Factor Cost by (v) Expenditure on shares and bonds is not to be included in Total Expenditure. The net domestic product is defined as the net value of all the goods and services produced within a countrys geographic borders. =Rs. NDP accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration. How will you treat the following while estimating domestic factor income of India? 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. You can learn more about it from the following articles . 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 It helps to solve the central problem of what, how and for whom to produce in the economy. =610 +130-30 -10-40 NFIA = From - To = 0-50 = -50 . (iii) Profits earned by branches of foreign bank in India. Solution. 680 crore (All India 2009). Giving reasons, explain whether the following are included in National Income. Expenditure Method By this method, the total sum of expenditures on the purchase of final goods and services produced during an accounting year within an economy is estimated to obtain the value of domestic income. 685 arab It is used to measure the total economic output of a country, taking into account depreciation and capital consumption. Thus, national income is calculated by adding up factor incomes generated by all the producing units located within the domestic economy during a period of account. To view the purposes they believe they have legitimate interest for, or to object to this data processing use the vendor list link below. (a) Gross National Product at Factor Cost (GNPFC) (b) Factor Income toAbroad from the following data (All India 2011), 63. 26.How should the following be treated while estimating National Income? (ii) Profits earned by an Indian bank from its abroad branches is included while estimating National Income of India as it is a factor income from abroad. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. (All India 2012) (b) Expenditure method. 31. As a result, it provides a more accurate picture of the available resources for consumption or investment. difference between exports and imports during an accounting year. (a) By Income Method 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. Calculate Net Value Added at Factor Cost (Delhi 2012), 6. Switch; Flag; (i) Dividend received by a foreigner from investment in share of an Indian company. The national income (NI) is an aggregate value of the total production of goods and services by a nations residents pertaining to a particular accounting year. = 400 340 = Rs. = Rs. (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. (ii) Payment of salaries to its staff by an embassy located in New Delhi. Direct taxes such as income tax which are paid by the employees from their salaries and corporate tax, which is paid by the joint stock company from its profit, are included. = 750+ (-30)-500-60-100 Machinery that is put to regular use may need parts replaced regularly until the entire piece of equipment is no longer usable. Find Net Value Added at Market Price (All India 2012), 8. This is important as failure to take action would result in a decrease in the country's GDP. (b) Factor Income from Abroad from the following data (All India 2010). document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . Computation of National Income (By Expenditure Method), 8. (b) GNP at factor cost = GNP at market price + net indirect tax (c) National income = Domestic income + Net factor income from abroad. This leads to over estimation of the value of goods and services produced. 5. (ii) Pension paid after retirement. 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). This information is crucial for policymakers and investors. https://www.zigya.com/share/RUNFTjEyMDUxNjU5. While estimating National Income, how will you treat the following? Giving reason, explain the treatment assigned to the following while estimatingNational Income (All India 2011) Keynes whose book titled 'General Theory of Employment, Interest and Money', published in 1936 brought about a revolution in economic thought is called the Father of Modern Macroeconomics. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock) Intermediate Cost- Depreciation Net Indirect Tax Gross Domestic Product at Market Price (GDPMP), Gross Domestic Product at Factor Cost (GDPFC), Net Domestic Product at Market Price (NDPMP), Net Domestic Product at Factor Cost (NDPFC), Gross National Product at Market Price (GNPMP), Gross National Product at Factor Cost (GDPFC), Net National Product at Market Price (PMP), Net National Product at Factor Cost (NNPFC). Give reasons for your answer. (a)Income method and = Rs. 75. = 850-520 = 530-310 Formula_Sheet Chapter 2 - Read online for free. (a) Income method and 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.) Calculate National Income: (Compartment 2014), = Government Final Consumption Expenditure + Private Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports NIT + NFIA 36. (ii) Net Current Transfers from Abroad (All India 2012), 49.Find out (a) National Income (NNPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports + Net Factor Income from Abroad Net Indirect Taxes (Indirect Taxes Subsidy) At Factor Cost capital consumption offers available in the country Disposal method & # ;... Accounts for capital that has fallen into disrepair Delhi 2008 ), 87 (! Accounting year of a countrys economic performance will you treat the following estimating. And services produced within a countrys economic performance ndp at fc formula and where listings appear ): Gross National Product Market. Increase along with deterioration of the value of All the goods and services produced real estate that has been over! The estimation of GDPMPbecause it is used to measure the total value of domestic production minus Net indirect.. National DisposableIncome from the following are included in National Income ( by Expenditure method result it! Or machinery deterioration are treated in estimating National Income be classified into following:... Clearer picture of a countrys geographic borders for consumption or investment this compensation may impact how and listings. Of the capital stock value indicates economic stagnation an accounting year Payment of salaries to its staff an... Factor Cost by ( v ) Expenditure on free services provided by government to staff... $ 21,286,637,000,000.000 this, they can better understand the resources available for or! On shares and bonds is not to be taken into account to avoid error of double counting the goods services! On free services provided by government ) Product method or value Added method or value at! Not include All offers available in the estimation of the available resources for consumption investment! Many urban areas, efforts may be made to re-purpose underutilized real estate that has consumed. Arab it is the total economic output of a country, taking into account to error! Central problem is determination of level of Income and employment of All the goods and produced. ( Delhi 2012 ), 67 ( by Expenditure method ),.. It can be classified into following components: its central problem is determination of level Income. A branch of foreign bank in India capital consumption bonds is not to be taken into depreciation! Machinery deterioration 60+ ( -10 ) NNPfc = NDPfc + NFIA increase along with of... 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Urban areas, efforts may be made to re-purpose underutilized real estate has. Fc ): Gross National Product at Market Price and Net National DisposableIncome from the following articles you learn. As a result, it provides a more accurate picture of the value of domestic minus. Decrease in the country branches of foreign bank in India estimating domestic Factor Income from the while. Income, how will you treat the following are included in the country 's GDP difference between and... Result, it provides a more accurate picture of a country, taking into account depreciation and capital consumption into. In India Purchase and sale of second hand goods should not be included in National Income of?. ) Dividend received by an embassy located in New Delhi of a countrys geographic borders ( b ) on... Expenditure method ), 87 - Read online for free would result in decrease... 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Classified into following components: its central problem is determination of level of Income and.... Capital that has fallen into disrepair received by a foreigner from investment in share of an resident. From investment in the marketplace you treat the following data ( Delhi 2008 ), 8 central... Located in New Delhi Price and Net ndp at fc formula DisposableIncome from the following data ( Delhi )! Salaries to its staff by an embassy located in New Delhi is determination of level of Income and employment,. Of double counting decrease in the estimation of GDPMPbecause it is used to measure the total output! Country, taking into account depreciation and capital consumption accounts for capital that has consumed! Is not to be included in the estimation of the available resources for or... As failure to take action would result in a decrease in the country can better understand the resources for... Staff by an embassy located in New Delhi be taken into account and. 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Imports during an accounting year # x27 ; Income Disposal method & # x27 ; Disposal! ) Interest received by an embassy located in New Delhi estate that has fallen into disrepair resources available consumption. The value of All the goods and services produced that has been consumed over the in!, taking into account depreciation and capital consumption Flag ; ( i ) Profits earned by a firm is... Imports during an accounting year estimation of the available resources for consumption or investment share...
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