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National Income Notes

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23 views19 pages

National Income Notes

No

Uploaded by

vipinsingh81717
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF or read online on Scribd
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Mtr Example s- Consume, egulibslim Producers ep FC bebe, MAKO Cconontes ° Op clea oP TRE a wok . 4 an Cronoruy ag 2 oleals orf any Exons wide bd ale Be Maffor ‘income, greet price desk , hlabFomal ouipat ete « At er G& obo Known a Employment Theany , . a cork chard for Maco 0 iP. + Rt blbs Le Sele Ae Central protler Gn fe Cromeny : Sreaumple i- Poverty, Enyployment, nena Qe yl -2 _ 2, / Arcomme * Nlattinah Freame & skis Bot r/earu $f prfemeinta. dial trove te a Paden abide vied ile float GF Hea Cemary- * O70 Bulefe 5 rlasBrat Frame. “a Wie yolet amaunk eannech by a ratfen', PEPle bom Fach. gf auteide of Mi County Romesta i Re [oils frontion of County ahi Means thi from uvbich sapuesnrt the Ce fouidtoy, Adlriiniateecl a Groner uPtiin bic”, persons, ge enel copra chalet, SI" & ship ant abe Sconeel ack ofrsaked by Namal sts YO 90 er Mane Counfn'esr- 4 Cc of os oat 4) frets aS & ips cinch tees Woters oy te & Cosupiy Fn the SafinaHonal wohhen Hane eecluse $ prratiom » 2 Embassts $0, fe e nie oncelts anol Pit fany ecdabiShmente $F = Guntry £ Pjunchenal. Organon Hike - Onto, 1tto ete. class nop Predude. Gn the Domdipfe foottoy, - Nosntol. Restelents ¢ 7 efi Mo an Prdiitdual 9, ytehle Pn a Country. 3) holy Centre that coun * Batic econoui. ASHy Lhe . cand, ’ fn : ony aewe Bueptinel. ares - Db JoMelgn ofountst x Visiden oles nal Cattegl Yobe Pactlale By Oho dell t Ecoronfc Pnfuut % also Lito SK Aannal Residanp- 2 fou Sfp g am bassises free, Alone va Arisy Ptamals. D Anteomatlnal. PsaM ann. 2 Member jarfitaten,. 7 bye Gan Fakenabional D Crema member » Conmeusal fravelles , Gans ay, mel Warke,, Boke for wean hey = _——_—_—_—___&e__ ae kistan for watching the cricket match ‘ing in the UNO office, located in America for less than 1 Yea wee "€5 Working In WHO, located! in india, “10M tourists visiting India for a month to see the Taj Mahal. (9) Indian 8) Indl Musims going forthe Ha plgrmaye Ss ans. ormat esients:(0) (0 (2, (gl (6) Indian emp sem ‘Which of the following are covered under the domestic tertory of India? 1. Anindian ‘Company in London. Indian Embassy in Japan. 2+ Microsoft Office in India. 7. Branch of State Bank of India in China. 3. Company in india owned bya Japanese. 8. Russian Embassy in India. . . 5. - Office of Reliance industries in New York. Tata rentedits building o Google in America. + Branch of Foreign Bankin india, tans. Domestic Terttory:2.3,5.6) Eiisenshtp 2-U% a clegal Concept Borel on » place g Bin & Some proviten: eg — yay Bhalya KP ght frfinl tn Aplin. Come fo fade. 4 She mat Reale 6 yeon Continaiy hr fren. trans che canine Rienship J tnd. ; « Resfelentship 3- GG a Ceanerte Concept Barect on the paske eomanke Aefiirhe! ene sa asectinanity susfdle Pa or Country Por Mare phar 4 8 Ab/ney compre g Cement Parercat Ars uth tak Count : v « cneome eaanecl Pr suaponse G seSvel Withant alg Paster’ Seuutee proud Le He ffm, § product + Snetudecl rabional frame + neluded one Sfdest payments + Facts © Rent C Land) : Restaest oe a hath , chauily, Fateo Coast) (Not frtudecl Pn Oat Rmel * er . . ancome . eye ce) CTY pardon VIE ahd Age pang * from producers pot f vite cs Oe porto. east be Leder pages Ci Jin Hop ra f= Econoniye _ 7 Beat Flee * safes a flows g partir senties from Phowaleld do & pm one the comepemctig loa J goo 2 Sake fre ftom te baumted Ki flow Fe alae Known ab fered 4 semtcee v Phiyfieak plow" * they te * Salen Po § fron payments from fee cat rr fake fosters je Cannes fans Suppench: Grom hawschotl” 5 fm. * Ob Pavoluss M omy blo He +90 Seton. RE Fae Secon Toe f Poul ovement mea F Bali] pal tent which Flow varlable refers to that varlable, asured over a perlod of time. thas a time dimension as Its tnagnitude in be measured! over a period of time. Stock vatlablerefers to that variable, which Is measured at a particular potnt of te. It does not have a time dimension. ‘Meaning ints a dynamic concepts _ 1. Number of births during 2021. 2. Marutl cars manufactured during January, 2022. 3, Expenditure or transactions in money. 4, National Income. 5. Quantity of wheat produced. Examples 1, Population of India as on 31.03.21. 2 Total number of Maruti cars in Delhi. 3, Money supply (money in circulation), 4, National Wealth. 5. Quantity of wheat stored. cal of money frou the circular flose, When households and firms save a part of their incomes, it leads to a leakage from the circular flow of income. Leakage or withdrawal refers to that part of income, which does not pass through the circular flow of income. Asa result, itis not available for spending on currently produced goods and services. Temeans, leaknges reduce the flow of Income. Examples of Leakages in different types of Economies 1. Tworector economy (without Financial Market) »» No Leakage 2. Two-sector economy (with Finaneial Ma 3. Three-sector economy »» Savings + Taxes 4 Foursestarecaiany’ »» Savings + Taxes + Imports »» Savings Injections Injection refers to the introduction of income into the circular flow. When households and firms ‘borrow money from external sources like financial institutions, it adds to their income. Such additional income does not result in immediate expenditure. So, injections increase the flow of income, Examples of Injections in different types of Economies 1, Two-sector economy (without Financial Market) »» No Injection 2, Two-sector economy (with Financial Market) >» Investment 3. Three-sector economy »» Investment + Govt. Exp 4. Four-sector economy »» Investment + Govt. Exp+ Exports eh ral. Lraods PTR jue ane oubiiele Le doundouy dine ne Ma Hone ancl thay ONS Saad ff? ote fer uta + Consumption * Snkeotment- * Dolow rep ree cy York a oe frurchane by Hun bold + fursditone pruchoreal bya choot + Undotdh sdock at year encbel Become the phat goods: Becaum fr woos a Faveotment fr trade. 2g: Gan, tele Gort Mieke a Ctoods one Hossain with, Pay js Producten banda Sine % plo Nearr bo fn Conaump Hor eg, 6 the firal wee ¥& neech some Mou “for eo may be unect i ferrtepotai] + Re-sale perform X value op Pnderniclialt gooce uttin Beame a par f value $ Fat gente a MK prschane oy @ Ten vendor “Aether pach oy GAG tele bor Nakfog. Qenasle. (ure spatag spelen Ras Sem? chunochte. (vere uit fn aflme Gute) NWP. DY G0hyp = — > Nohyp ra wrathte yd CNR, = =—_3 NOEAp 9 NWhp = —+ dlp Nog fe NW % feroude, 5 tusteation 2 Calculate GDP at MP 1) NNPatFC \i)_ Depreciation 1) Subsidies Wv)_ Factor Income from Abroad ¥)_ Indirect Toxes wv) Factor Income to Abroad Wlustration 1. Calculate NDP at FC > Ss Rad 0) GNP at MP 000 _iti) Depreciation se “il Net Factor Income from Abroad 300 iw) Net Indirect vaxes 709 ; Qe Exampie > Calculate Consumption of Fixed Capital. —~ fog “National income orNNPatFC 4,000 (iii) Net indirect Tax . 300 | Gi) Net Factorincome from abroad a : . 4 e Calculate Net Indirect Tax. —~ ens (0 GNPat mp (i) Domestic income or NOP at FC (il) Depreciation (iv) Net Factor income from abroad . (Sa oeeas vee (GNP at FC 6 é (W) Indirect Tax . $4,000, (i) NOP at MP i a s0422” (iv) NNP at MP, e sooo’ * (v)_ GNP at MP ° : : we © * 27.090 ‘ : hitinss thu promod % Cadiule 7 Hh Je Concept of Value Added diate gots) by a firm, by Value added refers to the addition of value to the raw material (interme tribution of an enterprise to the current flow of go virtue of its productive activities. It & services. liscalculated, Value Added ferenc vl Value of Output - Intermeé VALUE ADDED METHOD Gross Domestic Product -) Deore “1 FIA aes National Income (NNP,¢) 4 = ++ present the data in a chart Selis nea Selis Flour Sells Breae Ee ‘for 500 for? 700, for 1,000 $ + s Output Wheat Flour Bread Yalue of Output 500 2700 81,000 - Valve of input Zero Wheat =?.500 700 Value Added 500 2200 300 |] Gar Minato Hauke Contig :- = 82 KUd- p00 Minos 7 DY Velie Addo D tabu x Shrat geval At fond, facie tor Sell Consumption Value of Output od acti is on Value Added Metho? Pea uot ae aleulate the value (0) Domestic Sales by firm A ge 1,000 {i Exports by firm A 200 (0), Purchase by firm A 2.940 Liv). Sates by firm 8 1,300 “ Pecavely rl eee given below, calculate: From the information + Value and fir yt Value added by firm 4 ani i Gfoss Domestic Prodiict at market price Golue + Net Domestic Product at factor co- wolfe ee oo Particulars ond (i) Sales by firm [Link] government # : (i) Sales by firm AL, (ii). Sales by firm Btohouseholds — (iv) Change in stock offirm A A (0) Closing stock of firm 8 (vi) Opening stock af firm 8 wii) Purchases by firm A i will) indirect Taxes paid by both the firms (09_Consumption of fixed capital. = — Oe () Salesbyfiem Ato ae a p43 From the following data about a firm °X’ for the year 2000-01, calculate the net value added at market price during that year: aes ES Gi) Sales — 90 filters fs Snipa ane i Ur canes TE wo ~W) Depreciation _———— E Sree ee eee aerate oe é 0 te x 15 vi) Rent _ a if 5 Calculate Gross Value Addeci at Market Price (GVA\,,) from the following data Eis () Depreciation (i) Domestic Sales a ii) Change in Stock aa (iv). Exports aa v) Single Use Producer Goods a (vi)_Net indirect Taxes _{vi)_ Net in ‘a INCOME METHOD >' ding to this method, National income 1s measured in t+ of payment (compensation of employee ,rent, interest. 2, ¢ an accounting period. Income method (NDPfc ci (compensation of employee) OP(opreting surplus) Mixed income wages and salary in cash Ret Wages and sslary in kind Royalty Employer s8s(social security scheme) interest profit . = eues open at Reta sang rc bati po rend NDPfc to national income (NNPfc) NNPrc =NDPfc+NFIA Tawny Precuation of} metho fer Income like old age pansion , unemployement allowances , schlorship Trai does TOE ToHide fn national Income income from legal activities ike theft , gambling does not Include income from lottary ticket does not Include in national Income WyOevon?: fw £ niplayee } Sothern wooed Practicals on Income Method a Calculate NDP at 1C i) Rent \i) Royalty (ii) Interest (iv) Compensation of Employees Ww) Profit (vi) Mixed income Calculate GNU al ME Hee uy Net Indivect tx uy Depreciation abroad (i) Net Factor Income (101 Gv) Rent (w) Dividend (vi) Mixed Income (vil) Saving of private corporate sector (vit) Interest (ix) Compensation of employees Practicals on Operating Surplus Jaan Calculate the Operating Surplus ( Sales (i) Compensation of employees Gi) Imermediate consumption (iv) Rent (v) Interest (wi) Net indirect taxes (vii). Consumption of fixeci capital (vill) Mixed income Example ¢ Calculate the value of ‘Change in Stock’ trom the following data: 900 400 200 400 200 100 a BT 1) Net Value Added at Factor Cost (NVA, Lin). Subsidies (ivi Change in stock (¥) Depreciation (vi) Intermediate Consumption Ezample 26. Calculate the Operating Surplus. Value of output Purchase of ravi material __ Net indirect tax + Wages and salaries 400 200 10 ? 40 100 L Zincrores | 70,000 18,000 3,000 25.000 Expenditure method | Ss Ccording to this method, National income is measured in tarm< expenditure on purchase of final goods & services produced in the % economy during an accounting period i. Expenditure = C+1+G+(X-M) < Expenditure (G cy } a Private final : consumption Investment expenditure eit Govte eae ficlcooae ae , Export import = Gross fixed capital formation (construction of an house, business fixed investment , fixed investment by the govt) _-« Change in stock (inventory expenditure) a (closing stock - opening sock ) ; GDPmp to national income (NNPfc) : NNPrc =GDPwe-DEP+NFIA-NIT ARE Precuation of expenditure method 3nly final goods and services Is to be taken into account to avold error of double counting :xpenditure on second hand goods Is not to be included becouse, value of second hand gos has already been accounted during tho year of thelr production »xpenditure on share & bonds is not to be included in total expenditure as | {hese are mere paper claims are not related to the productions of final goods & services :xpenditure on tranfer payment not included ; , ’ Eph Crh bug f L £ ; c 4-4 C (topes Pm prs 9 Nek 6 ; oe Aidt fir ae operas i LAN ty oy b 6 wn Corstiupleuy $ chovge batdak | (clei ( Co nue) Practicals on Expenditure Meti7A Ezample 2) Calculate GDP at MP Pryate Final Consumption Expendinure th Governenent Final Consumption Expenditure a Gravs Fized Capital formation Ws. mv) Change in stack “6. # imports a, wee Calculate GNP at £C en rn c iz Wi) Net domestic fved! capital fore i) Closing stock uy) Gavernenen fina! consumption exientdeur (ia) Net indixecs tases 4) Opening stock fai) Consumption of fizeo canital vil) Net exports fan), Private final consumption experditure 2) Ienports (4 Net factor income from abtoad x be 9 folie 1) Private final consumptor (Wy tet domestic capital formations 2 (i) Change in stock os tiv) Net factor Income from abroad 0 (a) Net indirect tax fae pian esgendiiur a (ui) Government final con’ (vil) Net Exports fa (vit) Consumption of fired capi" Real Cbp 2% Moneta Cb ¢ u d Consent COP CW wt Gbf ov ca a i CF con's Consfelr Ch Con sitter Pf (oieue . Pes lorax OM Cunnens green poli OF jatlls abaup Phyeleak a Cb feths Abawk frre | Gutpur Which is better: Nominal GDP or Real GDP? Real GDP js better as compared to \ 3. inal GDP t wing reasons: Real GDP helps in determining the effect of increased production of goods and services 28 is affected by change in physical outpul only. On the other hand, Nominal GDP can increas even without any increase in physical output as it is affected by change in prices also. Keal GDP isa befter measure to make periodic comparison in the physical output of good and services over different years Real GDP facilitates international comparison of economic performance across the countries Therefore, Real GDP 13 better than Nominal GDP as it truly reflects Ue growth of an Economy. Fees Demos aa (©) Depreciation (©) Noy hoet Toxo Doane nome (NOP) (ania ational Income (NP pe) \ pans ' y hitermiedate conswmption + given then imports are nol 1 alent vichated nthe eabve of mntermediaty consumption Howe __ spectheally mentioned, then unports will also be in bdedd Let us unde through following ease Ch olate biter mediate Cane any Tt a Morar Prco@DPuy) | | | | 110 the tally 4 Gi) Intermediate Consunaption = ¥ 1,20 Intormodiata Consumption = ¢ 1,200 As importa are alroady Includod in the valuo of intormodiato conaumption. Case © (i) Purchase of raw material from domestic firm = & 500; (ii) Imports= 2 100 Ans Intermediate Consumption = 7500 + ¥ 100 = £600 Imporss are Included as itis specifically montlonod that purchaso of raw mntoria Is from domontle: turn, (i) tempor = 300 Case 4: (i) Purchase of raw material = % 1,000; (i) Imports= % 200 Ans Intermediate Consumption = % 1,000. Imports are not Included as total purchase of raw material la given. Value of Output Value of output refers to market value of all goods and services produced during a period of one year. How to Measure the Value of Output? : ‘ When the entire output is sold in an accounting year, then: Value of Output = Saled (0) When the entire output is not sold in an accounting year, then thesynsold stock is added to the value of sales. Unsold stock is the excess of closing stock over opening stock and is termed as ‘Change in Stock’. Itmeans, Value of Output = Sales + Change in Stock Where, Change n stack = Closing sock - Opening sock One More way to Calculate Value of Output | Itcan also be calculated as: Value of Output = (Quantity x Price) + Change in Stock For example, i€a firm manufactures 1,000 pairs of shoes annually and sells them @ % 500 per pair (assuming change in stock is nil), then: Value of Output = 1,000 x 500 = % 5,00,000 Exports are not Separately Included Like imports, exports are also not separately included in value ofoutput if ‘Sales’ are given (and domes! sales are not specifically mentioned). In cage of an open economy, sales include both domettcsal and exports, Let us understand this: Calculate Value of Output: Case 1: () Sales = % 2,000; (i) Bxports = % 400 Ans. Value of Output = % 2,000 ‘As exports are already Included In the value of sales, Case 2: (t) Diimestic Sales = € 700; (tl) Exports= 200 Ans. Value of Output = &700 + %200 = %900 Exporte are Included as domestic eales are specitcally mentioned. :

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