Unit - National Income

1. When does Net Factor Income from Abroad (NFIA) shows Negative Value? [2]

OR

State the meaning of retained earnings.

Ans. NFIA shows negative value when factor income from abroad exceeds factor income to abroad. NFIA
= Factor income from abroad - Factor income to abroad

Suppose, Factor Income from abroad = ₹ 40

Factor Income to abroad = ₹ 60

Then,

NFIA (40 - 60) = ₹ (-20)

OR

Retained Earnings: It refers to that part of corporate profits which is not distributed among
shareholders. It is also known as Savings of Companies or Undistributed Profits.

2. Giving valid reasons, explain how the following would be treated while estimating National income:
[3]

(a) Payment of indirect taxes by a firm.

(b) Purchase of goods by foreign tourists.

Ans. (a) Payment of Indirect taxes by a firm: It is not included in national income because it is paid to
government and national income includes factor income accrue to factors of production.

(b) Purchase of goods by foreign tourists: It is included in national income because it represents demand
of domestically produced goods and national income includes domestic income.

3. Using the following information, calculate and analyse the value of Gross Domestic Product (GDP)
deflator:

Year 2014-15 2016-17

Nominal GDP 6.5 9
Real GDP 6.5 7.2

Ans.

Nominal GDP
GDP Deflator (2014-15) = × 100
Real GDP
6.5
= x 100=100
6.5

1
 Nominal GDP
GDP Deflator (2016-17) = × 100
Real GDP
9
= x 100=125
7 .2
Analysis:

In 2016-17, GDP deflator of 125 shows that prices have increased 25% as compared to the base year
(2014-15)

It is a warning for the economy to take necessary steps to control inflation.

4. (i) Discuss briefly the concept of 'Externalities', with suitable example. [3]

(ii) Export are not a part of 'Net Factor Income from abroad'. Elaborate the reason behind the given
statement. [2]

Ans. (i) Externalities: It refers to the good or bad impact of an activity without paying any price or
penalty for that.

1. Positive Externality: Good impact on third party without paying price is positive externality. For E.g.
Construction of a flyover reduces journey time, beautiful park in front of your house, etc.

2. Negative Externality: Bad impact on third party without his/her own fault. For E.g. Contaminated
water factories, Smoke emission from chimneys of factories, etc.

(ii) Exports are not a part of NFIA.

Reasons:

1. NFIA represents the difference between factor income from abroad and factor income to
abroad. And Factor income is the reward for rendering factor services i.e. Rent, wages and
salaries, interest and profit.
2. Exports represent the demand (or Expenditure on) of domestically produced goods and services
by foreigners. So, it is a part of GDP.

5. State any two precautions that are taken while estimating National Income by Expenditure Method.
[2]

OR

Distinguish between Gross Domestic Product at Market Price and Net Domestic Product at Market Price.
[2]

Ans.

 The expenditure on only final goods and services is to be taken into account to avoid the error of
double counting.
 The imputed value of goods used for self- consumption must be taken into consideration.

OR

2
The difference between Gross Domestic Product at Market Price and Net Domestic Product at Market
Price is the depreciation. Hence, NDPMP GDPMP - Depreciation

6. State any two precautions that are taken while estimating National income by value added method.
[2]

OR

Distinguish between depreciation and capital loss.

Ans. Two precautions that are taken while estimating National Income by value added method are the
following:

1. The Value of buying and selling second hand goods is not taken into consideration while calculating
national income by the value-added method.

2. The imputed value of goods produced for self-consumption must be taken into consideration.

OR

Depreciation refers to the normal wear and tear of the capital assets which take place during the
production of goods and services. The Normal rate of accidental damage which can be repaired non
easily and expected technological obsolescence are also included in depreciation. Capital loss includes
unexpected technological obsolescence and capital damage beyond economical repair.

7. (a) Distinguish between Factor Income and Transfer Income. [2]

OR

(b) Distinguish between Domestic Income and National Income.

Ans. (a) A factor income refers to income earned by a person as a reward for rendering his factor service
such as rent, wages, interest etc. whereas transfer income refers to unearned income such as old age
pension, gifts, scholarship etc.

OR

(b) The sum total of factor incomes generated by all the producing units located within the domestic
territory of a country during an accounting period is called domestic income whereas national income is
the sum total of factor incomes earned by normal residents of a country during an accounting year. The
difference between the two is net factor income from abroad which is added to domestic income to get
national income.

National Income Domestic Income + NFIA

8. Giving valid reasons, explain how the following would be treated while estimating domestic income?
[3]

(i) Payment made by a Japanese tourist for goods purchased in India.

(ii) Broker's commission on the sale of second hand goods.

OR

3
"Gross Domestic Product (GDP) as an indicator of welfare loses its significance if the distribution of
income turns unequal." Justify the given statement with valid reason.

Ans. (i) Goods purchased by foreign tourists are produced in the domestic territory. So, it will be
included in domestic income.

(ii) It would be included in domestic income as he earned the commission by giving service and it was a
productive service.

OR

Yes, this statement is absolutely true. A mere rise in GDP may not lead to a rise in economic welfare. It is
significant only when distribution is equal. If it is not equally distributed, it will make the rich richer and
the poor poorer. So, this indicator does not fit in the case when distribution is unequal.

9. (a) Distinguish between Factor Cost and Market Price. [2]

OR

(b) Distinguish between Factor Income and Transfer Income. [2]

Ans. (a) MP is the price paid by the buyer of a commodity in the market whereas FC is the cost paid by
the producer to the factor of production for their services rendered in the production of the commodity.

MP = FC + NIT (IT - Subsidies)

FC = MP – NIT

(NIT→ Net Indirect taxes)

OR

(b) A factor income refers to income earned by a person as a reward for rendering his factor service
whereas transfer income refers to unearned income.

10. Define inventory (stock).

Ans. Inventory (Stock): It refers to the amount of unsold stock at a particular point of time. It is a static
concept and not time dimensional. Example, stock of goods at godown on 31st July.

11. Define unplanned inventories (stock).

Ans. Unplanned inventories (stock): It refers to change in stock which has incurred unexpectedly due to
unexpected fall in sales. Firm have unsold goods. For example, if a firm has opening stock of 200 unit
and it wants to raise its stock from 200 to 400 units and expects sales to be 1000 units it will produce
1200 if the end of the year it is found actual sales were 900 units then closing stock will be:

Opening Stock + Production - Sale =200+ 1200 – 900

= 500 units

This was not unexpected that is called unplanned inventory.

12. State, whether the following statement is true or false: [1]

4
'Inventory is a stock variable.'

Ans. True

13. Which of the following is not a 'factor payment’? [1]

(Choose the correct alternative).

(a) Free uniform to defence personnel.

(b) Salaries to the Members of Parliament.

(c) Rent paid to the owner of a building.

(d) Scholarship given to the students.

Ans. (d) Scholarship given to the students.

14. Combined factor income, which can’t be separated into various factor income components is known
as …………………………. [1]

(Fill up the blank with correct alternative).

Ans. Mixed income of self-employed.

15. 'Subsidies to the producers, should be treated as transfer payments'. Defend or refute the given
statement with valid reason. [3]

OR

Explain Circular Flow of Income in a two-sector economy.

Ans. Subsidy is a support to economic sector or institution, business organisation etc. "Subsidies to the
producers, should be treated as transfer payments." This statement is correct because subsidies are the
economic assistance given by the government to the farmers and household with the motive of general
welfare.

OR

Circular flow of income in a two-sector economy:

In a two-sector economy, households are owners of factors of production. They provide factor services
(in the form of labour, capital, land and entrepreneurship) to the firms. Firms produce goods and
services and make factor payments (in the form of wages and salaries, interest, rent and profit) to the
households. So, factor payments flow from firms to households.

The factor income earned by the households will be used to buy the goods and services produced by the
firms, for which they make payment to the firms. So, consumption expenditure (i.e., spending on goods
and services) flows from households to the firms. Thus, aggregate final consumption expenditure by the
households in the economy is equal to the aggregate factor income received by the households.

5
16. (a) Distinguish between Consumption goods and Capital goods. [2]

OR

(b) Distinguish between net export and net factor income from abroad.

Ans. (a) Consumption of goods leads to direct satisfaction of human wants, whereas capital goods do
not lead to direct satisfaction of human wants.

Expenditure on consumption goods is called consumption expenditure, whereas expenditure on capital

goods is called investment expenditure.

OR

(b) Net exports refer to the difference between exports and imports during an accounting year whereas
Net factor income from abroad refers to the difference between factor income to abroad.

Net exports = X-M

Net factor Income from abroad Factor Income from abroad and Factor Income to abroad.

17. State, whether the given statement is true or false:

'Unexpected obsolescence is a component of depreciation.' [1]

Ans. False

18. ₹ 2,000 note lying in wallet of Rohini, a student is an example of _____________ (stock/flow)
variable. (Fill up the blank with correct alternative.) [1]

Ans. Stock

19. Define intermediate consumption. [1]

Ans. Intermediate consumption refers to value of non- factor inputs. It primarily includes the value of
Ans raw material used in the process of production.

20. The sum of factor payments is equal to …………………………. (Choose the correct alternative)

(a) Domestic Income

6
(b) National Income

(c) Per Capita Real Income

(d) Per Capita Nominal Income

Ans. (b) National Income.

21. Give one example of negative externalities. [1]

Ans. If you produce chemicals and cause pollution as a side effect, then local fishermen will not
be able to catch fish. This loss of income will be the negative externality.

22. Distinguish between stock and flow variable with suitable examples.

` OR

What are capital goods? How are they different from consumption goods?

Ans. Difference between stock and flow variables is:

Stock Flow
(i) Stock relates to a point of time, e.g. your Flow relates to the period of time, e.g. your
saving as on January 1, 2014 are 10,000. pocket expenses of 20 per day.
(ii) Stock is not time- dimensional. Flow is time dimensional as per hour, per
month, per year.
(iii) Stock influences the flow, greater the Flow influences the stock. For example,
stock of capital, greater is the flow of goods monthly increase in the supply of money
and services. leads to an increase in the quantity of money.
(iv) Example - Population of a country, Bank Expenditure of money, interest on capital etc.
deposit etc.

OR

Difference between consumption goods and Capital goods is:

Consumption Goods Capital Goods

(i) Goods which are consumed for their own Capital goods are fixed assets of producers
sake to satisfy current needs of the consumers which are repeatedly used in production of
directly are consumption goods. other goods and services.
(ii) These are used for achieving satisfaction. These are used for generating income by
production goods.
(iii) Consumption goods meet the basic Capital goods are producer's goods which are
objective of an economy i.e. to sustain the repeatedly used in production process for
consumption of entire population of the generating income.
economy.
(iv) For example, Food, shoes, retailers, For example, Machine, tools, technology etc.

7
 barbers etc.

23. State, whether the following statement is true or false:

'Purchase of machinery by a producer is an intermediate good'.

Ans. False

24. Which of the following statement is incorrect?

(a) Gross Domestic Product (GDP) at Market price = GDP at factor cost plus Net Indirect taxes.

(b) Net National product (NNP) at Market price = NNP at factor cost.

(c) Gross National Product (GNP) at Market price = GDP at Market price Plus Net factor income from
abroad.

(d) Net National Product (NNP) at factor cost = National Income.

Ans. (b) Net National product (NNP) at Market price = NNP at factor cost.

25. Rent + Interest + profit = ……………………….

(Fill up the blank with correct answer)

Ans. Operating surplus

26. Define the following: [4]

(a) Value Addition

(b) Gross Domestic Product

(c) Flow Variables

(d) Income property and entrepreneurship

Ans. (a) Value addition refers to the difference between the value of an output and the intermediate
consumption.

(b) Gross domestic product refers to the money value of all the final goods and services produced within
the domestic territory of a country during an accounting year.

(c) Flow variables are the measurable variables that are measured over a period of time. e.g., National
income.

(d) Income from property and entrepreneurship is also called the operating surplus which is the sum up
of rent, royalty, interest and profits.

27. Define Stocks. [1]

Ans. A stock are the variables whose magnitude is measured at a point of time, e.g. population.

8
28. Depreciation of fixed capital assets refers to: (choose the correct alternative) [1]

(a) Normal wear and tear

(b) Foreseen obsolescence

(c) Normal wear and tear and foreseen obsolescence

(d) Unforeseen obsolescence

Ans. (c) Normal wear and tear foreseen obsolescence.

29. Give any two examples of flow concept.

Ans. Two examples of flow concept are national income, Investment.

30. Define the problem of double counting in the computation of national income. State any two
approaches to correct the problem of double counting. [3]

Or

“Gross Domestic Product (GDP) does not give us a clear indication of economic welfare of a country.”
Defend or refute the given statement with valid reason.

Ans. Double Counting - Double counting means counting of the value of the same product more than
once in calculating the national income. Two ways of avoiding double counting:

(i) Take the value of final goods only: According to this method, the value of intermediate goods is not
considered. Only the value of final goods should be added to determine the national income.

(ii) Adopt value added method: According to this method, sum total of the value added by each
production unit should be taken in the computation of national income.

OR

The given statement is completely true that GDP does not give us a clear indication of economic welfare
of a country. GDP is a measure of economy's production or it can be considered a component of
welfare. A higher GDP means more production of goods and services in an economy during a given year.
Therefore, a higher GDP also means that more goods and services were available to the people of the
country during the year. But it does not indicate that the people were better off during the year. In other
words, a higher GDP may not necessarily mean higher welfare of the people.

30. 'Domestic services (Household services) performed by a woman are not considered as an economic
activity.' Defend or refute the given statement with valid reason. [3]

Ans. Domestic services performed by a woman are not considered as economic activity because:

(i) Because these activities are performed out of love and affection so their valuation is not possible.

(ii) These activities do not add to the flow of goods and services in the economy.

9
(iii) These are self-services which are done for one's own purpose not for economy.

31. Which of the following affects national income?

(choose the correct alternative) [1]

(a) Goods and Services tax

(b) Corporation tax

(c) Subsidies

(d) None of the above

Ans. (c) Subsidies

32. Given nominal income, how can we find real income? Explain.

Or

Which among the following are final good sand which are intermediate goods? Give reasons.

(a) Milk purchased by a tea stall

(b) Bus purchased by a school

(c) Juice purchased by a student from the school canteen

Ans. Real income can be calculated by applying the following formula:

Nominal Income
Real income = x Price Index of base year
Price Index of current year

Consider price index of base year as 100

When nominal income is given, we can convert it into real income with the help of GDP
deflator.

Nominal Income
Real Income = × 100
GDP Deflator

OR

10
(a) It is an intermediate good because it is used by producer during production process of making
tea and not for final consumption.

(b) It is a final good as, it is purchased by school for final consumption.

(c) It is a final good as, it is purchased by a student for final consumption.

33. What is meant by depreciation of domestic currency? [1]

Ans. Depreciation of domestic currency means fall in the value of domestic currency in relation
to foreign currency i.e., a situation where exchange rate is determined by the market forces of
supply and demand for foreign exchange in the international money market.

34. Explain with the help of an example, the basis of classifying goods into final goods and
intermediate goods. [3]

Ans. The basis of classifying goods into final goods and intermediate goods is that whether the
good is purchased for final use or for the use in further production.

(i) Final goods: All goods which are meant either for consumption by consumers or for
investment by firms are called final goods. They are meant for final use and the final use of a
product is only for consumption or investment. In other words, final goods are acquired for own
use i.e. by consumers for satisfaction of their wants and by producers for capital formation. For
examples, biscuits, flour, clothes are final goods when purchased by a consumer for their
personal use or for satisfaction of their wants. Machine bought by a household is final good but
machine bought by a firm for its use in production is not a final good.

(ii) Intermediate goods: All goods which are used as raw material for further production of other
goods, or for re-sale in the same year are known as intermediate goods. For example, flour, milk,
sugar, salt, fuel, etc., when purchased by a firm in order to prepare biscuits are intermediate
goods. The cloth if purchased by a dress maker is also an intermediate good. Machine if
purchased by a firm for resale in the same year is an intermediate good.

35. Explain the circular flow of income.

Ans. Circular flow of income refers to continuous circular flow of goods, services and income
among different sectors of an economy. Flow of money is the aggregate value of goods and
services either as factor payments or as expenditure on goods and services. It is circular since it
has neither any beginning nor an end. It can be explained as household sector supply factor
services and spend their income on consumption. The firms use these services in producing
goods and other services. The households as owner of factors for production receive the
payments in terms of money or reward for rendering productive services. The recipients of these
incomes (i.e. households) in turn, spend their incomes on purchase of goods and services to
satisfy their wants. In short, income is first generated by production units, then distributed among
households for rendering productive services and ultimately comes back to production units by
way of expenditure by the households. Circular flow works on two principles:

11
(i) In an exchange process, the seller (producer) receives the same amount which the buyer (or
consumer) spends.

(ii) Goods and services flow in one direction and the money paid to acquire them, flow in the
reverse direction giving rise to a circular flow.

36. Explain the precautions that are taken while estimating national income by value added
method

OR

Will the following be included in the national income of India? Give reasons for your answer.

(a) Financial assistance to flood victims

(b) Profits earned by the branches of a foreign bank in India

(c) Salaries of Indians working in the American Embassy in India.

Ans. Precautions that are taken while estimating national income by value added method are:

(i) Imputed rent of owner-occupied houses be included because all houses have rental value
irrespective of its use by self or tenant.

(ii) Imputed value of goods and services produced for self-consumption or for free distribution
should be included.

(iii) Only value added and not value of output by production units should be included.

(iv) Value of own-account production of fixed assets by enterprises, government and the
households should be included.

(v) The value of sale and purchase of second- hand goods should be excluded.

(vi) Sale of bonds by a company should also be excluded since it is merely a financial transaction
which does not contribute directly to the flow of goods and services.

OR

(a) Financial assistance to flood victims: This will not be included in the national income since it
is a part of transfer payment.

(b) Profits earned by the branches of a foreign bank in India: This is not to be included in the
national income of India since it is earned by a foreign bank.

12
(c) Salaries of Indians working in the American Embassy in India: It is included in national
income of India since Indian employees of American embassy are the normal residents of India.

37. Government incurs expenditure to popularize yoga among the masses. Analyse its impact on
gross domestic product and welfare of the people. [4]

Ans. Impact on GDP: With the help of yoga, people will be in good state of health as well as in a
good state of mind and it is rightly said that healthy mind stays in a healthy body. When a person
has healthy mind and healthy body, he/she will work hard towards producing good and increased
quantity of goods which will help in increasing the GDP of the economy. People with healthy
mind will provide their efficient services to the economy which will have a positive impact on
the GDP of the country and will help in increasing the standards of the economy.

Impact on the welfare of people: Yoga keeps the body, mind and soul healthy and happy. With
healthy body, mind and soul people are able to work in an efficient manner and help the others in
society, rooting up the welfare of all the people in the society.

38. Giving reason explain how the following should be treated in estimation of national income:
[6]

(i) Payment of interest by a firm to a bank

(ii) Payment of interest by a bank to an individual

(iii) Payment of interest by an individual to a bank

Ans. (i) Payment of interest by a firm to bank will be included in the national income. This is
because the firm would have taken loan for productive purposes.

(ii) Payment of interest by a bank to an individual will be included in the national income. This is
because the bank would have used the savings of the individuals (on which the loan is paid) for
productive purposes.

(iii) Payment of interest by an individual to a bank will not be included in the national income.
This is because the individual is expected to have taken a loan for consumption purposes rather
than for productive purposes.

39. Giving reason explain how should the following be treated in estimation of national income:
[6]

(i) Expenditure by a firm on payment of fees to a chartered accountant

(ii) Payment of corporate tax by a firm (iii) Purchase of refrigerator by a firm for own use

13
Ans. (i) The services of chartered accountant hired by the firm should not be included in the
estimation of national income. This is because it forms a part of the firm's intermediate
consumption.

(ii) Payment of corporate tax is not included in the national income as it is a mere transfer
payment from the firm to the government. It is a part of corporate profits which already form part
of national income; therefore, it should not be separately included in national income (in addition
to corporate profits).

(iii) Purchase of refrigerator by a firm for own use will be included in the national income as it is
regarded as final consumption expenditure.

40. Distinguish between stocks and flows. Give an example of each.

Ans.

Stock Flow
(i) Stock refers to the value of a variable at a Flow refers to the value of a variable during a
point of time. period of time.
(ii) It is measured at a specific point of time. It is measured per hour, per month or per
year.
(iii) Stock impacts the flow. Greater the stock Flow impacts the stock, greater the flow of
of capital, greater is the flow of goods and income, greater is the stock of wealth with the
services. people.
(iv) Example: Capital and quantity of money. Example: Export and imports.

41. Distinguish between final goods and intermediate goods. Give an example of each. [3]

Ans. Final Goods

(i) These are those goods which are either used for consumption or for investment purpose.

(ii) They are included in both national and domestic income.

(iii) For e.g., milk purchased by households.

Intermediate Goods

(i) These goods are those goods which are used either for resale or for further production in the
same year.

(ii) They are neither included in national income nor in domestic income.

(iii) For milk used in dairy for resale.

14
42. Explain 'non-monetary exchanges' as a limitation of using gross domestic product as an index
of welfare of a country. [6]

OR

How will you treat the following while estimating domestic product of a country? Give reasons
for your answer:

(a) Profits earned by branches of country's bank in other countries

(b) Gifts given by an employer to his employees on Independence Day

(c) Purchase of goods by foreign tourists

Ans. Many activities in an economy are not evaluated in monetary terms, for e.g., Non-market
transactions like services of house wife, kitchen gardening, etc. are not included in GDP due to
non-availability of data. It is difficult to ascertain their market value as they are not rendered for
the purpose of earning income. Though these services are rendered for the development of a
child and welfare of the family, it is not included in the gross national product. Thus, non-
monetary exchanges are a limitation of using gross domestic product as an index of welfare of a
country.

OR

(a) Not included in domestic income as it is earned outside the domestic territory of the country.

(b) Not included as it is a transfer payment.

(c) Included as the expenditure is done within the domestic territory.

43. Define flows. [1]

Ans. A flow is a variable whose magnitude which is measured over a period of time. e.g.
National Income.

44. National income is the sum of factor incomes accruing to: [1]

(Choose the correct alternative)

(a) Nationals

(b) Economic territory

(c) Residents

15
(d) Both residents and non-residents

Ans. (c) Residents.

45. Sale of petrol and diesel cars is rising A particularly in big cities. Analyse its impact on gross
domestic product and welfare. [4]

Ans. Impact of rising sale of petrol and diesel cars pm gross domestic product- GDP will
increase because there is increasing demand of petrol and diesel cars in the big cities and to
fulfill this increasing demand, the companies have to produce more and have to increase their
level of production which will lead to increase in GDP.

Impact of rising sale of petrol and cars on the welfare - The increased sale of petrol and diesel
car in big cities is continuously increasing the level of pollution in big cities and is turning out to
be a life threat for the people living there. This high level of pollution is making people suffer
with many vulnerable diseases like asthma, heart diseases, lung problems, cancer, respiratory
diseases, etc. Thus, reducing the welfare of the people.

46. Explain the precautions that should be taken while estimating national income by expenditure
method. [6]

OR

Will the following be included in the domestic product of India? Give reasons for your answer.

(a) Profits earned by foreign companies in India.

(b) Salaries of Indians working in the Russian Embassy in India.

(c) Profits earned by a branch of State Bank of India in Japan.

Ans. The following precautions need to be taken for correct estimation of national income by
expenditure method:

(i) To avoid double counting, expenditure on all intermediate goods and services is excluded. For
example, purchase of vegetables by a restaurant, expenses on electricity by a factory.

(ii) Government expenditure on all transfer payments such as scholarship, unemployment

allowance, pension, etc.

(iii) Expenditure on purchase of second-hand goods is excluded from national income because
this type of expenditure is not on currently produced goods.

(iv) Expenditure on purchase of old shares/ bonds or new shares/bonds, etc., is excluded because
it is not the payment done for goods and services currently produced. It shows mere transfer of
property from one person to another.

16
(v) Imputed expenditure on own account output (e.g.-owner occupying his house, self- consumed
output by a farmer) should not be included.

OR

(a) Profit earned by foreign companies in India: Yes, it is included in domestic income of India
because profits are earned by the company within India's domestic territory irrespective of
ownership of the company.

(b) Salaries of Indians working in Russian embassy in India: No, it is not included in domestic
product of India because Russian embassy in India is not a part of domestic territory of India (but
a part of domestic territory of Russia).

(c) Profits earned by a branch of State Bank of India in Japan: No, it is not included in domestic
income of India because it is not earned in Indian domestic territory.

47. (a) (i) From the following data, calculate Net Value Added at Factor Cost (NVA FC): [3]

S. No. Particulars Amount in (₹ Crores)

(i) Price per unit of output 20
(ii) Output sold (units) 1250 units
(iii) Excise duty 5,000
(iv) Consumption of fixed capital 1,000
(v) Change in stock (-) 500
(vi) Single use producer goods 6,000
(ii) Why there is a need to make distinction between final and intermediate goods? [2]

Ans. (a) (i) GDP at MP = Value of Production - Intermediate Consumption

= (24,500-6,000) crores = (18,500) crores

NDP at FC = GDPMP-Consumption of fixed capital - Net Indirect taxes

= (18,500 -1,000 - 5,000) crores

= 12, 500 crores

Working Notes:

Single use producer goods = Intermediate consumption

Net Indirect Taxes = Indirect taxes - subsidy

= 5,000 – 0 = 5,000 crores

Excise duty is an indirect tax.

Value of Production = (price x quantity) + change in stock

= (20x1250) +(-500) = (25,000-500) crores = (24,500) crores

17
(ii) There is a need to make a distinction between final and intermediate goods because of following:

1. Final goods are those goods which are meant for final use by consumers or producers. And
National income includes the value of final goods only.
2. Intermediate goods are those goods which are used as raw material or for resale purpose. And
National Income does not include the value of intermediate goods.
3. If value of intermediate goods is included in national income, it will cause double counting.

48. (a) (I) From the following data, calculate the value of operating surplus: [3]

[Link]. Items Amount in (Rs crore)

(i) Royalty 5
(ii) Rent 75
(iii) Interest 30
(iv) Net domestic product at factor cost 400
(v) Profit 45
(vi) Dividends 20
(II) Distinguish between 'Fixed Investment' and 'Inventory Investment'.

OR

(b) (1) From the following data, calculate the value of compensation of employees (COE):

[Link]. Items Amount in (Rs crore)

(i) Old age pension 2,000
(ii) Wages and salaries in cash 60,000
(iii) Rent free accommodation to employees 30,000
(iv) Employer's contribution to provident fund 7,500
(v) Payment of life insurance premium by the 2,500
employees
(vi) Contribution to provident fund by employees 35,000

(II) Distinguish between stock and flow variables.

Ans. (a) (I) OS = Rent + Royalty + Interest + Profit

= 75 + 5 + 30 + 45 = 155 crores

(II) Fixed investment refers to expenditure by the producers on the purchase of fixed assets whereas
inventory investment refers to change in stock during the year. It is the difference between closing stock
and opening stock of the year.

OR

(b) (I) COE = Wages and salaries in cash + Rent free accommodation to employees + Employees
contribution to provident fund

= (60,000 + 30,000 + 7,500) crore

= 97,500 crores

18
 (II) Stock Flow
(i) It refers to the value of a variable at a It refers to the value of a variable during a
point of time. period of time.
(ii) It is not time dimensional It is time dimensional.

49. (a) (1) From the following data, calculate the value of operating surplus: [3]

[Link]. Items Amount in (Rs crore)

(i) Royalty 10
(ii) Rent 70
(iii) Interest 25
(iv) Net domestic product at factor cost 500
(v) Profit 50
(vi) Dividends 20

OR

(b) (1) From the following data, calculate the value of compensation of employees (COE):

[Link]. Items Amount in (Rs crore)

(i) Old age pension 1,250
(ii) Wages and salaries in cash 49,500
(iii) Rent free accommodation to employees 13,500
(iv) Employer's contribution to provident fund 8,900
(v) Payment of life insurance premium by the 3,000
employees
(vi) Contribution to provident fund by employees 35,600
(II) Distinguish between Real Gross Domestic Product (GDP) and Nominal Gross Domestic Product (GDP)
Ans. (a) (I) OS = Rent + Royalty + Interest + Profit

= 75 + 10 + 25 + 50 = 155 crores

OR

(b) (I) COE= Wages & salaries in cash + Employer's contribution to provident fund

= 49,500 + 8,900 = 58,400 crores

(II) Real GDP is the market value of goods and services produced within the domestic territory of country
during an accounting year, as estimated using the base year prices whereas Nominal GDP uses the
current year's prices.

Nominal GDP
Real GDP = × 100
Price Index
50. (a) (I) From the following, calculate the value of net domestic product at factor cost: [3]

19
 [Link]. Items Amount in (Rs crore)
(i) Royalty 5
(ii) Rent 75
(iii) Interest 30
(iv) Compensation of Employees 600
(v) Profit 45
(vi) Dividends 20
(vii) Mixed Income of self employed 100
(II) Distinguish between final goods and intermediate goods. [2]

Ans. (a) (I) NDPFC = COE + OS + MI

= 600 + 155 + 100

= 855 crores

Working Notes:

OS = Rent + Royalty + Interest + Profit = 75 + 5 + 30 + 45 = 155 crores

(II) Final goods are those goods which have crossed the boundary line of production and are ready for
use by their final users. On the other hand, Intermediate goods are those goods which are purchased by
one firm from the other for resale or for use as raw material in the production of other goods.

51. Calculate Net Value Added at Factor Cost (NVAFC) from the following data: [3]

[Link]. Particulars Amount in (Rs crore)

(i) Value of Output 800
(ii) Intermediate Consumption 200
(iii) Indirect taxes 30
(iv) Depreciation 20
(v) Subsidies 50
(vi) Purchase of machinery 50

OR

State the three components of Income from Property and Entrepreneurship.

Ans. Value of output = 800

Intermediate Consumption = 200

GVAMP = Value of output – Intermediate Consumption

= 800 – 200 = 600

NVAFC = GVAMP - Depreciation - NIT (Indirect tax - Subsidies)

NVAFC = 600 – 20 - (30 - 50)

= 580 + 20 = 600

20
 OR

Three components of income from property and entrepreneurship are:

(i) Rent: It is the return received for providing land and building.

(ii) Profit: It is the return received for providing capital as loan.

(iii) Interest: It is the return received for providing capital as ownership.

52. Net Domestic Fixed Capital Formation + Change in Stock …………………. [1]

OR

When Nominal Gross Domestic Product (GDP) is ₹ 840 crores and price index is ₹ 120, then the Real
Gross Domestic Product (GDP) will be …………….

(Fill up the blank with correct alternative).

(a) 700 crores

(b) 900 crores

(c) 800 crores

(d) 500 crores

Ans. Net Domestic Capital formation.

OR

Nominal Gross Domestic Product = 840 crores

Price index = 120

Real Gross Domestic product =?

Nominal Gross Domestic Product

Price index = x 100
Real Gross Domestic Product
840
120 = x 100
Real Gross Domestic Product

840
Real Gross Domestic Product = x 100
120
Real Gross Domestic Product = 700 crores

(a) 700 crores

53. Calculate Gross Value Added at Market Price: [3]

[Link]. Particulars Amount in (Rs lakh)

21
 (i) Depreciation 20
(ii) Domestic Sales 200
(iii) Change in Stocks (-) 10
(iv) Exports 10
(v) Single use producer goods 120

Ans. Gross value added at market price (GDPmp) = Domestic sales + Export + ∆ in Stock - Single use
producer goods

= 200 + 10- 10 - 120 = 210 – 130

= ₹ 80 lakh

54. If the Real Gross Domestic Product (GDP) in an economy is 520 crores and Nominal Gross Domestic
Product (GDP) is 650 crores, calculate the price Index.

Nominal GDP
Ans. Price Index = x 100
Real GDP
650
Price Index = x 100 = 125
520
55. Calculate Net Value Added at factor cost from the following data:

[Link]. Particulars Amount in (Rs lakh)

(i) Durable producer goods (with a life span of 10 10
years)
(ii) Single use producer goods 5
(iii) Sales 20
(iv) Unsold Goods (Stock) 2
(v) Goods and Services Tax (GST) 1

Ans. GDPMP = Sales + Unsold Goods (Stock) - Single

Use Producer Goods.

GDPMP =20 + 2 - 5

GDPMP = 17 lakh

Value of durable producer goods 10

Depreciation = = =1
Life span of producer goods 10
Net value added at factor cost/Net Domestic Product at Factor Cost

= GDPmp = Depreciation - NIT

= GDPmp - Depreciation - IT +Subsidy

= 17 – 1 – 1 + 0

22
NDPFC = 15 lakh

56. When Nominal Gross Domestic Product (GDP) is ₹ 850 crores and Price Index is ₹ 170, Real Gross
Domestic Product (GDP) will be ……………………. (Fill up the blank with correct answer)

Ans. 500 crores

57. Calculate Net Domestic Product at factor cost.

[Link]. Particulars Amount in (Rs crores)

(i) Interest 700
(ii) Compensation of Employees 3,000
(iii) Net Indirect Taxes 500
(iv) Rent and Profit 700
(v) Transfer Payments by Government 10

Ans. Compensation of Employees 3,000

(+) Operating Surplus 1,400

(+) Mixed Income --

NDPFC 4400 Crore

58. Given the Following data, find the value of "Gross Domestic Capital Formation" and "Operating
Surplus".

[Link]. Particulars Amount (Rs in Crores)

(i) National Income 22,100
(ii) Wages and Salaries 12,000
(iii) Private Final Consumption Expenditure 7,200
(iv) Net Indirect Taxes 700
(v) Gross Domestic Capital Formation ?
(vi) Depreciation 500
(vii) Government Final Consumption Expenditure 6,100
(viii) Mixed Income of Self- Employed 4,800
(ix) Operating Surplus ?
(x) Net Exports 3,400
(xi) Rent 1,200
(xii) Net Factor Income from Abroad (-) 150
Ans. Gross Domestic capital formation = (i) — {(iii) + vii + x} + vi - xii + iv

GDCF = 22,100 - (7,200 + 6,100 + 3,400) + 500 (-150) + 700

GDCF = 6750 crores

operating surplus = National income - wages and salaries - mixed income of self-employed - net factor
income from Abroad = 22,100 - 12,000 - 4,800 - (-150) = 5,450 crores

23
59. Given the Following data, find the value of "Government Final Consumption Expenditure" and "
Mixed Income of Self- Employed ".

[Link]. Particulars Amount (Rs in Crores)

(i) National Income 71,000
(ii) Gross Domestic Capital Formation 10,000
(iii) Government Final Consumption Expenditure ?
(iv) Mixed Income of Self- Employed ?
(v) Net Factor Income from Abroad 1,000
(vi) Net Indirect Taxes 2,000
(vii) Profits 1,200
(viii) Wages and Salaries 15,000
(ix) Net Exports 5,000
(x) Private Final Consumption Expenditure 40,00
(xi) Consumption of fixed capital 1,200
(xii) Operating Surplus (-) 150

Ans. Mixed Income of Self- Employed = (i) — [(viii) + xii + v]

= 71,000 - (15,000 + 30,000 + 1,000) = 25,000 crores

Government Final Consumption Expenditure = (i) + [(x) + (ii) + (v) + (ix)] + (vi) + (xi)

= 71,000 - (40,000 + 10,000 + 1,000 + 5,000) + 2,000 + 3,000

= 20,000 crores

60. Given the Following data, find the value of " Private Final Consumption Expenditure" and "Operating
Surplus".

[Link]. Particulars Amount (Rs in Crores)

(i) National Income 50,000
(ii) Net Indirect Taxes 1,000
(iii) Private Final Consumption Expenditure ?
(iv) Gross Domestic Capital Formation 17,000
(v) Profits 1,000
(vi) Government Final Consumption Expenditure 12,500
(vii) Wages and Salaries 20,000
(viii) Consumption of Fixed Capital 700
(ix) Mixed Income of Self- Employed 13,000
(x) Operating Surplus ?
(xi) Net Factor Income from Abroad 500
(xii) Net Exports 2,000

operating surplus = (i) – [(vii) + (ix) + (xi)]

24
 = 50,000 – (20,000 + 13,000 + 500)

= 16,500 crores.

Private Final Consumption Expenditure = (i) – [(iv) + (vi) + (xi) + (xii)] + (viii) + (ii)

= 50,000 – (17,000 + 12,500 + 2,000 + 500) + 700 + 1,000

= 19,700 crores

61. Given the Following data, find the value of " Gross Domestic Capital Formation" and " Wages and
Salaries ".

[Link]. Particulars Amount (Rs in Crores)

(i) Mixed Income of Self- Employed 3,500
(ii) Net Indirect Taxes 300
(iii) Wages and Salaries ?
(iv) Government Final Consumption Expenditure 14,000
(v) Net Exports 3,000
(vi) Consumption of Fixed Capital 300
(vii) Net Factor Income from Abroad 700
(viii) Operating Surplus 12,000
(ix) National Income 30,000
(x) Profits 500
(xi) Gross Domestic Capital Formation ?
(xii) Private Final Consumption Expenditure 11,000

Wages and Salaries = (ix) – [(i) + (viii) + (vii)]

= 30,000 – (3,500 + 12,000 + 700) = 13,800 crores

Gross Domestic Capital Formation = (ix) – [(iv) + (v) + (vii) +(xii)] + (ii) + (vi)

= 30,000 – (14,000 + 3,000 + 700 + 11,000) + 300 + 300 = 1900 crores

62. Calculate (a) Operating Surplus, and (b) Domestic Income: [6]

(Rs in crores)

(i) Compensation of employees 2,000

(ii) Rent and interest 800

(iii) Indirect taxes 120

(iv) Corporation tax 460

25
(v) Consumption of fixed capital 100

(vi) Subsidies 20

(vii) Dividend 940

(viii) Undistributed profits 300

(ix) Net factor income to abroad 150

(x) Mixed income 200

Ans. (a) Operating Surplus:

OS = Corporation tax + Rent and Interest + Dividend + Undistributed profits.

OS = (iv) + (ii) + (vii) + (viii)

= 460 + 800 + 940 + 300 = 2,500 crores

(b) Domestic Income:

NDPFC = Compensation of employees + Operating surplus + Mixed income

= 2000 + 2500 + 200 = 4,700 crores

Ans. OS = 2,500 crores

DI = 4,700 crores

63. Calculate (a) Net National Product at market price, and (b) Gross Domestic Product at factor
cost: [4+2=6]

(Rs in crores)

(i) Rent and interest 6,000

(ii) Wages and salaries 1,800

(iii) Undistributed profit 400

(iv) Net indirect taxes 100

(v) Subsidies 20

26
(vi) Corporation tax 120

(vii) Net factor income to abroad -70

(viii) Dividends 80

(ix) Consumption of fixed capital 50

(x) Social security contribution by employers 200

(xi) Mixed income 1,000

Ans. NDPFC = Wages and salaries + SSC by employers + Rent and interest + Dividend +
Corporation tax + Undistributed profit + Mixed income

NDPFC = 1800+200+ 6000+80+ 120 + 400+1000

NDPFC = 9600 Crores

(a) NNPMP = NDPFC+NFIA+NIT

NNPMP=9600+ (-70) +100 = 9630 Crores

(b) GDPFC = NDPFC + Consumption of fixed capital

GDPFC = 9600 + 50 GDPFC

= 9650 Crores

64. Calculate (a) National Income, and (b) Net National Disposable Income: [6]

(Rs) in crores

(i) Compensation of employees 2,000

(ii) Rent 400

(iii) Profit 900

(iv) Dividend 100

(v) Interest 500

(vi) Mixed income of self-employed 7,000

(vii) Net factor income to abroad 50

27
(viii) Net exports 60

(ix) Net indirect taxes 300

(x) Depreciation 150

(xi) Net current transfers to abroad 30

Ans. (a)

NY=NDPfc + NFIA (Net factor income from abroad)

NDPfc = COE+ Mixed income + operating surplus

= COE + MI + (Rent + Royalty + Interest + Profit)

= 2000 + 7000 + 400 + 500 + 900

= 10,800 crores

NNPfc or NY =NDP fc -Net factor income to abroad

= 10,800 – 50 = 10,750 crore.

65. Calculate the (a) Net National Product at market price, and (b) Gross National Disposable
Income:

(Rs in crores)

(i) Mixed income of self-employed 8,000

(ii) Depreciation 200

(iii) Profit 1,000

(iv) Rent 600

(v) Interest 700

(vi) Compensation of employees 3,000

(vii) Net indirect taxes 500

(viii) Net factor income to abroad 60

(ix) Net exports (-) 50

28
(x) Net current transfers to abroad 20

(a) NNPmp = Net national product at market price

NDPfc = COE+ MI + OS (Rent + interest + profit)

= (vi) + (i) + (iv) + (v) + (iii)

= 3,000 + 8,000 + 600 + 700 + 1,000 = 13,300 crores

NNPmp = NDPfc - (viii) + (vii)

= 13,300 – 60 + 500 =13,740 crores

66. Calculate the (a) Gross National Product at market price, and (b) Net National Disposable
Income:

(Rs in crores)

(i) Compensation of employees 2,500

(ii) Profit 700

(iii) Mixed income of self-employed 7,500

(iv) Government final consumption expenditure 3,000

(v) Rent 400

(vi) Interest 350

(vii) Net factor income from abroad 50

(viii) Net current transfers to abroad 100

(ix) Net indirect taxes 150

(x) Depreciation 70

(xi) Net exports 40

Ans. (a) GNPmp =?

NDPfc = COE+MI+OS (Rent + Profit + interest)

(i) + (iii) + (v) + (ii) + (vi) =2500+7500+400+ 700 +350 = 11,450 crores

29
NNPmp = NDPFC+NFIA + Net indirect tax.

= NDPFC + (vii) + (ix) = 11,450 + 50 + 150 = 11,650 crores

GNPmp = NNPmp + Depreciation

= NNPmp + (x)

= 11,650 + 70

= 11,720 crores.

67. Calculate (a) net domestic product at factor cost and (b) gross national disposable income: [6]

[Link]. Particular Amount (Rs)

(i) Private final Consumption Expenditure 8000
(ii) Government final Consumption Expenditure 1000
(iii) Exports 70
(iv) Imports 120
(v) Consumption of fixed capital 60
(vi) Gross domestic fixed capital formation 500
(vii) Change in stock 100
(viii) Factor income to abroad 40
(ix) Factor income from abroad 90
(x) Indirect taxes 700
(xi) Subsidies 50
(xii) Net current transfer to abroad (-) 30

Ans. (a) NDPfc = (i) + (ii) + (vi + vii) + (iii - iv) - (v) - (x) + (xi)

= 8000 + 1000+ (500+ 100) + (70-120)-60 -700+50

= 9000+600+ (-50)-60-650

= 9600-50-710

= 9600-760

= 8840 Crores

68. Calculate (a) national income (b) net national disposable income:

[Link]. Particular Amount (Rs)

(i) Net abroad factor income to abroad (-) 50
(ii) Net indirect taxes 800
(iii) Net current transfers from rest of the world 100
30
 (iv) Net imports 200
(v) Private final consumption expenditure 5000
(vi) Government final consumption expenditure 3000
(vii) Gross domestic capital formation 1000
(viii) Consumption of fixed capital 150
(ix) Change in stock (-)50
(x) Mixed income 4000
(xi) Scholarship to students 80

Ans. (a) National Income = (v) +(vi) + (vii) - (iv) - (viii)-(ii)-(i)

= 5000+3000+1000-200-150-800-(-50)

= 9000-200-950+50

= 9000-200-900 =9000-1100 =7900 Crores.

69. Calculate (a) net national product at market price and (b) gross national disposable income:

[Link]. Particular Amount (Rs)

(i) Gross domestic fixed capital formation 400
(ii) Private final consumption expenditure 8000
(iii) Government final consumption expenditure 300
(iv) Change in stock 50
(v) Consumption of fixed capital 40
(vi) Net indirect taxes 100
(vii) Net exports (-) 60
(viii) Net factor income to abroad (-) 80
(ix) Net current transfers from abroad 100
(x) Dividend 100

NNPMP = Private final consumption expenditure + Government final consumption expenditure

+ Gross domestic fixed capital formation + change in stock + Net exports - Consumption of
fixed capital-Net factor income to abroad.

= 8,000+3,000+400+50-60-40 (-80)

=11,430 crore

70. Assuming real income to be 200 crore and price index to be 135, calculate nominal income.
[3]

Ans.

Real income = 200 crores; Price index = 135

31
Let the base year's price index be 100

Nominal Income=?

Real income = (Nominal income/Price index of current year)

X Price index of base year.

200 = (Nominal income/135) × 100

Nominal Income (200 x 135)/100

= 27000/100

= 270 crores.

71. Find Gross National Product at Market Price and (Private Income):

(Rs Crores)

(i) Private final consumption expenditure 800

(ii) Net current transfers to abroad 20

(iii) Net factor income to abroad (-)10

(iv) Government final consumption expenditure 300

(v) Net indirect tax 150

(vi) Net domestic capital formation 200

(vii) Current transfers from government 40

(viii) Depreciation 100

(ix) Net imports 30

(x) Income accruing to government 90

(xi) National debt interest 50

Ans. GDPmp = Private Final Consumption Expenditure + Government Final Consumption

Expenditure + (net domestic capital formation+ depreciation) -net imports

GDPmp = 800+300+(200+100)-30

32
 = 1100+(300)-30 = 1400-30= 1370 crores.

GNPmp = GDPmp-net factor income to abroad =1370-(-10) = 1380 crores

72. If nominal income is 500 and price index is 125, calculate real income.

Ans. Real Income = (Nominal income/ Price index of current year) × Price Index of base year.

Let the base year 's price index be 100.

Real Income = (500/125) × 100

= 4 × 100 = 400

73. Calculate Net National Product at Market Price and (Private income:

(Rs crores)

(i) Net current transfers to abroad 10

(ii) Private final consumption expenditure 500

(iii) Current transfers from government 30

(iv) Net exports (-) 20

(v) Net indirect tax 120

(vi) National debt interest 70

(vii) Net domestic capital formation 80

(viii) Income accruing to government 60

(ix) Income accruing to government 60

(x) Government final consumption expenditure 100

Ans. GDPMP Private Final Consumption Expenditure + Government Final Consumption

Expenditure + (Net Domestic Capital Formation+ Depreciation) + Net Exports

= 500 + 100 + (80 + 0) + (-20)

= 600 + 80 – 20

= 680 – 20

33
= 660 crores.

NNPMP = GDPMP – Depreciation - Net Factor Income to abroad

= 660 – 0 - 20 = 660 - 20 = 640 crores.

74. If real income is 400 and price index is 105, calculate nominal income.

Ans. Real Income = (Nominal income/Price index of current year) X price index of base year.

Let base year 's price index be 100

400 = (nominal income/105) × 100

Nominal Income = (400 × 105)/100 = 420

75. Calculate National Income and (Personal Disposable Income**):

(Rs Crores)

(i) Corporation tax 100

(ii) Private final consumption expenditure 900

(iii) Personal Income tax 120

(iv) Government final consumption expenditure 200

(v) Undistributed profits 50

(vi) Change in stocks (-) 20

(vii) Net domestic fixed capital formation 120

(viii) Net imports 10

(ix) Net indirect tax 150

(x) Net factor income from abroad (-) 10

(xi) Private income 1000

Ans. GDPmp Private final consumption expenditure + Government final consumption

expenditure + (net domestic fixed capital formation + depreciation + change in stock)-net
imports

34
= 900 + 200 + (120 + 0 + (-) 20 -10)

= 1100 + (120 - 20) – 10

= 1190.

NNPFC = GDPMP+ Net factor income from = abroad - net indirect tax – depreciation

= 1190 + (-10) – 150 - 0

= 1190 + (-160) = 1030

National income = 1030 crores.

76. Find net value added at factor cost: [3]

(Rs Lakh)

(i) Durable use producer goods with a life span of 10 years 10

(ii) Single use producer goods 5

(iii) Sales 20

(iv) Unsold output produced during the year 2

(v) Taxes on production 1

Ans. Value of output = sales + change in stock

= 20 + 2 = 22 lakh.

Gross value added at market price = value of output-intermediate consumption (single use
producer goods)

= 22 – 5 = 17 lakh.

Depreciation (Cost of producers good/ no. of life in years)

= (10/10) = 1

Net Indirect taxes = Taxes on production – subsidy

=1–0=1

Net value added at FC = GVAmp - Depreciation -Net indirect taxes

35
 = 17 – 1 – 1 = 15 lakhs.

77. Find national income and (private income**): [6]

(Rs Crores)

(i) Wages and salaries 1000

(ii) Net current transfers to abroad 20

(iii) Net factor income paid to abroad 10

(iv) Profit 400

(v) National debt interest 120

(vi) Social security contributions by employers 100

(vii) Current transfers from government 60

(viii) National income accruing to government 150

(ix) Rent 200

(x) Interest 300

(xi) Royalty 50

Ans. NNPfc = Wages and salaries + Social security contributions by employers + Rent + interest
+ profit + royalty - Net factor income paid to abroad.

NNPfc = 1000 + 100 + 200 + 300 + 400 + 50 – 10

= 2050 – 10 = 2040 crores.

78. Find net domestic product at factor cost and personal income:

(Rs crores)

(i) Rent 200

(ii) Net current transfers to abroad 10

(iii) National debt interest 60

(iv) Corporate tax 100

36
(v) Compensation of employees 900

(vi) Current transfers by government 150

(vii) Interest 400

(viii) Undistributed profits 50

(ix) Dividend 250

(x) Net factor income to abroad (-) 10

(xi) Income accruing to government 120

Ans. NDPfc = rent + corporate tax + compensation of employees + interest + undistributed

profits + dividend.

= 200 + 100 + 900 + 400+ 50 + 250

= 1900 crore.

79. Find gross value added at market price:

(Rs lacs)

(i) Depreciation 20

(ii) Domestic sales 200

(iii) Net change in stocks (-) 10

(iv) Exports 10

(v) Single use producer goods 120

Ans. Value of output = Sales - Net Change in stock = (Domestic Sales + Exports) + Net change
in Stock

= (200 + 10) + (-10) = 200 lakh

Gross value added at market price = Value of output - Intermediate Consumption

=200 - 120 = 80 lakh.

80. Find net national product at market price and (personal disposable income :)**

37
 (Rs crores)

(i) Personal taxes 200

(ii) Wage and salaries 1,200

(iii) Undistributed profit 50

(iv) Rent 300

(v) Corporation tax 200

(vi) Private income 2,000

(vii) Interest 400

(viii) Net indirect tax 300

(ix) Net factor income to abroad 20

(x) Profit 500

(xi) Social security contributions by employers 250

Ans. NDPfc = Wages and salaries + Social security contribution by employers + Rent + Interest
+ Profit

= 1,200 + 250 + 300 + 400 + 500 = 2,650 crores.

NNPmp = NDP fc - Net factor income to abroad + Net indirect tax

= 2,650-20+300

=2,930 crores.

81. If the Real GDP is 400 and Nominal GDP is 450, calculate the Price Index (base = 100). [3]

Ans. We know,

Nominal GDP
Real GDP = x 100
Price Index

400 = 450/Price Index x 100

Price Index = 450/450 = 100 = 112.50

38
82. Calculate the 'National Income' and 'Private Income"**: [6]

(Rs crores)

(i) Rent 200

(ii) Net factor income to abroad 10

(iii) National debt interest 15

(iv) Wages and salaries 700

(v) Current transfers from government 10

(vi) Undistributed profits 20

(vii) Corporation tax 30

(viii) Interest 150

(ix) Social security contributions by employers 400

(x) Net domestic product accruing to government 250

(xi) Net current transfers to rest of the world 5

(xii) Dividends 50

Ans. National Income = Wages and salaries + Social security contributions by employers + Rent
+ Interest + Dividends + Corporation tax + Undistributed profits Net factor income to abroad

NNPFC=700+100+200+ 150+ 50+30 +20-10 =1240 crore

83. If the Real GDP is 500 and Price Index (base= 100) is 125, calculate the Nominal GDP.

Nominal GDP
Ans. Real GDP = x 100
Price Index

500 = Nominal GDP/125 x 100

Nominal GDP = 625

84. Calculate 'Net National Product at Market Price' and 'Personal Income"**:

(Rs crores)

39
(i) Transfer payments by government 7

(ii) Government final consumption expenditure 50

(iii) Net imports (-) 10

(iv) Net domestic fixed capital formation 60

(v) Private final consumption expenditure 300

(vi) Private income 280

(vii) Net factor income to abroad (-) 5

(viii) Closing stock 8

(ix) Opening stock 8

(x) Depreciation 12

(xi) Corporate tax 60

(xii) Retained earnings of corporations 20

Ans. NNPMP Private final consumption expenditure = + Government final consumption

expenditure + (Net domestic fixed capital formation + depreciation) + Change in stock - Net
imports - depreciation - Net factor income to abroad NNPMP

=300+ 50+60 +12+ (8-8) -(-10) - 12-(-5)

NNPmp = 425 crores

85. Calculate 'Net Domestic Product at Market Price' and 'Gross National Disposable Income"**:

(Rs crores)

(i) Private final consumption expenditure 400

(ii) Opening stock 10

(iii) Consumption of fixed capital 25

(iv) Imports 15

(v) Government final consumption expenditure 90

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(vi) Net current transfers to rest of the word 5

(vii) Gross domestic fixed capital formation 80

(viii) Closing stock 20

(ix) Exports 10

(x) Net factor income to abroad (-) 5

Ans. Net Domestic Product at Market Price = Private final consumption expenditure +
Government final consumption expenditure + Gross domestic fixed capital formation + change
in stock + Net exports – depreciation

Net Domestic Product at Market Price = 400 +90+80+(20-10) +(10-15)-25

Net Domestic Product at Market Price = Rs 550

86. If Real GDP is 200 and Price Index (with base = 100) is 110, calculate Nominal GDP. [3]

Ans. We know,

Nominal GDP
Real GDP = x 100
Price Index

200 = Nominal GDP/110 x 100

Nominal GDP = 220

87. Calculate National Income and (Personal Disposable Income**). [6]

[Link]. Particular Amount (Rs)

(i) Personal Tax 80
(ii) Private final Consumption Expenditure 600
(iii) Undistributed profits 30
(iv) Private Income 650
(v) Government final Consumption Expenditure 100
(vi) Corporate tax 50
(vii) Net domestic fixed capital formation 70
(viii) Net indirect tax 60
(ix) Depreciation 14
(x) Change in stocks (-) 10
(xi) Net imports 20
(xii) Net factor income to abroad 10

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Ans. National Income = Private final consumption expenditure + Government final consumption
expenditure + (Net domestic fixed capital formation + Depreciation + Change in stock) -Net
imports - Depreciation - Net indirect taxes - Net factor income to abroad National income:

= 600+100+ (70+14-10) - 20-14-60-10=670 or, National income = 670 crore

88. If the Nominal GDP is 1,200 and Price Index (with base = 100) is 120, calculate Real GDP.

Nominal GDP
Ans. Real GDP = x100
Price Index

substituting the given values in the question

Real GDP = 1200/120 x 100

Real GDP = 1000

89. Calculate 'Gross National Product at Market Price' and 'Net National Disposable Income:

(Rs crores)

(i) Rent 100

(ii) Net current transfers to rest of the world 30

(iii) Social security contributions by employers 47

(iv) Mixed income 600

(v) Gross domestic capital formation 140

(vi) Royalty 20

(vii) Interest 110

(viii) Compensation of employees 500

(ix) Net domestic capital formation 120

(x) Net factor income from abroad (-)10

(xi) Net indirect tax 150

(xii) Profit 200

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Ans. GNPMP = Compensation of employees + Rent + Interest + Royalty + Profit + Mixed
income + NFIA + Net indirect taxes + Gross domestic capital formation-Net domestic capital
formation

GNPMP = 500 + 100 + 110 + 20 + 200 + 600 – 10 + 150 + 140 – 120

GNPMP = 1690 crore

90. Calculate "Sales" from the following data: [4]

(₹ in lakhs)

(i) Net value added at factor cost 560

(ii) Depreciation 60

(iii) Change in stock (-) 30

(iv) Intermediate cost 1000

(v) Exports 200

(vi) Indirect taxes 60

Ans. Sales = Net value added at factor cost + Depreciation + Intermediate cost + Indirect taxes -
Changes in stock

= (i) + (ii) + (iv) + (vi) - (iii)

= 560 + 60 + 1000 + 60 - (-30) = ₹ 1710 lakhs

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