Math of National Income
Question 1.
GDP of a country is $5000 billion. Income of the citizens who lives in foreign
country is $150 billion & income of the foreigners living in that country is $ 90
billion. Find out the GNP of that country?
Solution 1
Given that,
GDP=$5000 billion
Income from abroad= $150 billion
Income to abroad= $ 90 billion
We Know,
GNP= GDP- Income to abroad+ Income from abroad
=$5000-$ 90+$150
=$5060
Question 2.
Suppose that, GNP=$5000 billion. If depreciation cost is $550 billion & indirect
tax is $ 800 billion, what will be the national income?
Solution 2
Given that,
GNP=$5000 billion.
Depreciation cost = $550 billion
Indirect tax = $ 800
GNP = $ 5000 billion
- Depreciation = -$ 550 billion
NNP = $ 4450 billion
indirect tax = -$ 800 billion
NI =$ 3650 billion
Question 3: Calculate National Income from the following information
Items ($ in Crore)
i. Compensation of Employees 2000
ii. Profit 800
iii. Interest 250
iv. Rent 300
v. Mixed income of self-employed 7000
vi. Net exports -100
vii. Net indirect taxes 1500
viii. Factor income to abroad 60
ix. Consumption of fixed capital 120
Solution 3
NDP at FC = Compensation of Employees + Mixed income of self-employed+ Interest + Rent + Profit
= $2000 + $7000 +$250 + $300 + $800
= $10350
NNP at FC = NDP at FC + NFIA (Factor income from abroad - Factor income to abroad)
= $10350 + (0 – $ 60)
= $10290
Question 4: Calculate Net National Product at Market Price from the following information
Items ($ in Crore)
i. Compensation of Employees 250
ii. Profit 80
iii. Interest 40
iv. Rent 30
v. Mixed income of self-employed 600
vi. Net exports 15
vii. Net indirect taxes 10
viii. Factor income from abroad 10
ix. Consumption of fixed capital 20
Solution 4
(Domestic Income) NDP at FC= Compensation of Employees + Mixed income of self-
employed+ Interest + Rent + Profit
=$250 + $600 +$40 + $30 + $80
NDP at FC = $1000
NNP at FC = NDP at FC + NFIA (Factor income from abroad - Factor income to abroad
NNP at FC = $1000 + ($10-0)
= $1010
NNP at MP = NNP at FC + Net indirect taxes (Indirect tax- Subsidy)
= $1010 +$ 10 = $1020
Question 5: Calculate Net National Product at Market Price from the following information
Items ($ in Crore)
i. Gross domestic fixed capital formation 400
ii. Private final consumption expenditure 8000
iii. Government final consumption expenditure 3000
iv. Change in stock 50
v. Consumption of fixed capital 40
vi. Net indirect taxes 100
vii. Net exports -60
viii. Net Factor income from abroad 80
ix. Dividend 120
Solution 5
Gross Domestic Capital Formation = Gross Domestic fixed capital formation + change in stock
Gross Domestic Capital Formation = 400 + 50 = ₹450
GDP at MP = Private Final consumption expenditure + Government Final Consumption
Expenditure + Gross domestic capital formation + Net Exports
GDP at MP = 8000 + 3000 + 450 – 60
GDP at MP = ₹11390
NNP at MP = GDP at MP – consumption of fixed capital + NFIA
NNP at MP = 11390 – 40 + 80 = ₹11430
Question 6: Calculate Net Domestic Product at Factor Cost from the following
information
Items ($ in Crore)
i. Gross domestic fixed capital formation 500
ii. Private final consumption expenditure 8000
iii. Government final consumption expenditure 1000
iv. Change in stock 100
v. Consumption of fixed capital 60
vi. Indirect taxes 700
vii. Subsidies 50
viii. Imports 120
ix. Exports 70
x. Net Factor income from abroad 80
Solution 6
Gross Domestic Capital Formation = Gross Domestic Fixed capital formation + Change in stock
Gross Domestic Capital Formation = 500 + 100 = ₹600
GDP at MP = Private Final consumption expenditure + Government Final Consumption
Expenditure + Gross domestic capital formation + Net Exports (Exports – Imports)
GDP at MP = 8000 + 1000 + 600 + (70 – 120) = ₹9550
NDP at FC = GDP at MP – consumption of fixed capital – Net indirect tax (Indirect tax –
subsidies)
NDP at FC = 9550 – 60 – (700 – 50) = ₹8840 crores
Question 7 Calculate National Income from the following information
Items ($ in Crore)
i. Net domestic fixed capital formation 120
ii. Personal income tax 30
iii. Private final consumption expenditure 900
iv. Government final consumption expenditure 200
v. Corporate tax 100
vi. Change in stocks -20
vii. Net Indirect taxes 150
viii. Imports 10
ix. Net Factor income from abroad -10
x. Private income 1000
xi. Undistributed profit 50
Solution 7
Gross Domestic Fixed capital formation = Net domestic fixed capital formation +
consumption of fixed capital formation
Gross Domestic Fixed Capital Formation = 120 + 0 = 120
Gross Domestic Capital Formation = Gross Domestic Fixed capital formation + Change in
stock
Gross Domestic Capital Formation = 120 + (– 20) = ₹100
GDP at MP = Private Final consumption expenditure + Government Final Consumption
Expenditure + Gross domestic capital formation + Net Exports (Exports – Imports)
GDP at MP = 900 + 200 + 100 + (– 10) = ₹1190
National Income = NNP at FC = GDP at MP – Consumption of fixed capital + NFIA – Net
Indirect tax
National Income =$1190 – 0 + (- 10) – 150 = ₹1030 crore
Question 8-
Question 9- Calculate Net National Product at Factor cost from the following information
Question 10- Calculate Depreciation cost and National income from the
following information
Items ($ in Crore)
i. GNP 4527
ii. NNP 4047
iii. Indirect tax 366
iv. Net income -2
Solution 10-
We know,
Depreciation cost= GNP-NNP
=4527-4047
=$ 480
National income = NNP- Indirect tax+ Net income
= 4047- 366-2
= $ 3679
N.B Why we subtract indirect tax from NNP to get NI?
Answer: Since indirect taxes are included in NNP as they are included in market
price. But after the firms are paid indirect tax to the government, what is left is
distributed as factor income. So, to get national income, you have to deduct
indirect tax from NNP.