How will you treat the following while estimating National Income of India? = Rs. NDP is a more accurate measure of a countrys economic output, as it considers the wear and tear of physical capital, which is a key factor in long-term economic growth. National Income Accounting Book Chosen. 570 crore, 41. (Delhi 2009). Such an example would qualify as depreciation and replacement. The GNPMP is the value of overall goods or services manufactured by a nations residents. How should the following be treated while estimating National Income? = 1200 + 600+ 340 + (-40)-60-30 85. While estimation of National Income. In this theoretical example, the NDP considers the depreciation of physical capital, providing a more accurate picture of the countrys economic output. You are free to use this image on your website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Net Domestic Product (wallstreetmojo.com). Study of problem of unemployment in India or general price level is a macroeconomic study because they relate to Indian economy as a whole.Let it be known that an English economist J.M. (b) Production method from the following data (Delhi 2011), Ans. (iii) Imputed value of self-consumed goods should be included, but self-consumed services should not be included. Ans. How It Works and Examples, Nominal Gross Domestic Product: Definition and How to Calculate, What Real Gross Domestic Product (Real GDP) Is, How to Calculate It, vs Nominal, Aggregate Demand: Formula, Components, and Limitations. As a result, it provides a more accurate picture of the available resources for consumption or investment. Give reasonsfor your answer. 75. (a) Gross Domestic Product at Factor Cost and Calculate Gross National Product at Market Price by production method and income method (All India 2010), 67. (ii) Rent paid by embassy of Japan in India to a resident Indian. Cloudflare Ray ID: 7a11ea707ae6d2cd Estimate amount of factor payments made by each enterprise. Performance & security by Cloudflare. = 500 + (-20) 250 -40 + 30 Calculate CFA And Chartered Financial Analyst Are Registered Trademarks Owned By CFA Institute. (iv) Imputed value of expenditure on goods produced for self consumption should be taken into account. This information is crucial for policymakers and investors. 14. (i) Only final expenditure is to be taken into account to avoid error of double counting. Calculate Gross National Product at Factor Cost by (iii) Expenditure on machine for installation in a factory. (iii) Purchase by foreign tourists. The acquisition of the replacement machinery would be factored into the depreciation aspect of the NPI. Calculate NDP at FC Particular Rs. = NNPFc+ Net Indirect Tax Net Current transfer to Abroad (i) Expenditure on fertilisers by a farmer. Net Domestic Product at Factor Cost(NDPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Net Change in Stocks Net Imports Indirect Taxes (iii) It is included in the estimation of National Income as it is a part of government final consumptionexpenditure. (i) No, it is not included while estimation of National Income as it is not a factor income. 62.Calculate(a) Gross Domestic Product at Market Price and Attiguppe , Bengaluru - 560040, Now reach all our Branches with ease!!!! CFA And Chartered Financial Analyst Are Registered Trademarks Owned By CFA Institute. (b) Production method from the following data (All India 2011), Net Domestic Product at Factor Cost (NDPFC) = Wages and Salaries + Social Security Contribution byEmployers + Corporation Tax + Retained Earnings of Private Corporations + Dividend + Rent + Interest (i) Wheat grown by farmer but used entirely for familys consumption. (iii) Scholarship given to Indian students studying in India by a foreign company. Investopedia does not include all offers available in the marketplace. Value Added or Product Method: NI = GDP Depreciation Indirect Taxes + Overseas Net Factor Income., Following are the four components of NI accounts:1. = 860 230 Net domestic product (NDP) is an annual measure of the economic output of a nation that is calculated by subtracting depreciation from gross domestic product(GDP). (vii) If intermediate purchases are given, then imports are not included. 42. 735 crore, 84. The construction of new homes on previously unused real estate can also represent a gain for the NDP if the residences are not intended to replace defunct or demolished property. It is calculated by subtracting the capital depreciation from the Gross Domestic Product (GDP), which is the sum of all goods and services produced in a country. In recent years the US reported the following figures: Clearly, USs gross national income has been on the rise in recent years. 630 arab, (b) Net National Disposable Income (NNDI) (iii) Entertainment tax received by government is not included while estimating the National Income ofIndia as it is a indirect tax and not included at factor cost. Estimate net factor income from abroad which is added to Domestic Income to derive National Income. (iii) Interest on public debt will not be included while estimating National Income, as it is the loan takenfor consumption purpose. 30 crore, 12. Heres an example of how Net Domestic Product can be used to measure a countrys economic output: Consider a country with two industries, agriculture, and manufacturing. = 2000 + 500 + 700 + 800 + 1500 In 2020, the gross national income of the US was $21,286,637,000,000.000. (i)Interest on a car loan paid by an individual. (ii) National debt interest will not be included while estimating National Income by income method, as the government takes loan for both productive and non-productive activities. To help Teachoo create more content, and view the ad-free version of Teachooo please purchase Teachoo Black subscription. Only factor incomes which are earned by rendering productive services are included. = Rs. (i) Compensation of employees (ii) It is not included in the estimation of GDPMPbecause loans are not used for production purpose. For calculating domestic income, we will subtract the amount of depreciation and net indirect tax from the Gross Domestic Product at Market Price (GDPMP). (iii) Expenditure on purchasing a car for use by a firm. (ii)Earning of shareholders from the sale of shares will not be included while National Income, as it will be considered as transfer payment. (a) Income method and (All India 2009). Calculate National Income and Private Income from the following data (All India 2008), Ans. = Rs. This method measures national income as sum total of final expenditures incurred by households, business firms, government and foreigners. Uploaded by . Similarly, indirect taxes like sales tax, excise duties, which tend to increase market prices, are not included. Calculate (b) Net National Disposable Income from the following data (Delhi 2008 c), Ans. (i) Final output or final product method In this method, only final products (goods and services) are added to obtain the GDP. Depreciation. 31. 1950 crore, 66. (iii) Net Factor Income from Abroad (iii) Yes, it is included while estimation of National Income as it is an investment expenditure by the producer. Chapter Chosen. Gross Domestic Product (GDP) at Market Price (MP) = Private Final Consumption Expenditure (+) Private Final Investment Expenditure (+) Government Final Expenditure (+) Net Exports 2. Net Domestic Product (NDP) measures the total value of all goods and services produced in a country, adjusted for the depreciation of physical capital. (b) National Income (All India 2009), Ans. Aggregate demand is a measurement of the total amount of demand for all finished goods and services produced in an economy. 400. (ii) Pension paid after retirement is not included in the estimation of National Income as it is a kind of deffered payment to employees. The manufacturing sector produces 50 units of goods with a value of $200 per unit for a total GDP of $10,000. The depreciation is also referred to as capital consumption allowance. Machinery that is put to regular use may need parts replaced regularly until the entire piece of equipment is no longer usable. (Delhi 2009), Ans. = 140-110 + 5 From the following data calculate Net Value Added at Factor Cost (Delhi 2011 c) (iii) Interest received on loans given to a friend for purchasing a car. (ii) Net exports = 515+(30-5) +15 = 515+25+15 You are free to use this image on your website, templates, etc., Please provide us with an attribution link. (i) National Income Switch; Flag; Difference Between Monetary Policy and Fiscal Policy, Your Mobile number and Email id will not be published. (iii) Expenditure on transfer payments by the government is not to be included. Value Added Method/Product Method/Output Method By this method, the total value of all the final goods and services produced in an economy during a given time period are estimated to obtain the value of domestic income. https://www.zigya.com/share/RUNFTjEyMDUxNjU5. 5500 crore Calculate Gross Value Added at Factor Cost from the following data, Ans. (ii) Payment of interest by a government firm should not be included in the estimation of National Income, as it is a transfer payment. (a) By Income Method (a) By Income Method = 630 + 120 30 = Rs. Giving reason, explain whether the following are included in domestic product of India. (ii) Corresponding to production for self consumption, the generation of income of economy to be taken into account. This method is also known as 'Income Disposal Method'. Final Expenditure It is the expenditure on the purchase of final goods and services during an accounting year. Personal Disposable Income = Private Income Corporation Tax Corporate Savings Direct Tax 3 Marks Questions The sum of Value added by all the firms gives us the GDP of the country. This has been a guide to Net Domestic Product & its meaning. Final Expenditure = GDP MP. It is considered a key indicator of economic growth of a country. Please include what you were doing when this page came up and the Cloudflare Ray ID found at the bottom of this page. (iii) Scholarship given to Indian students studying in India by a foreign firm will not be included while estimating National Income, as it is a transfer payment. = 920-110 = Rs. Part of the machinery in a factorys production line may need to be replaced while another set of similar machines continues to function within the same factory. (ii) Payment of interest on loan taken by an employee from the employer will not be included in the estimation of National Income as it will be treated as transfer income, also loan is taken for consumption purpose. Find out Formula value of output= Sales + change in stock Change in st. Components of Final Expenditure: In this example, the countrys Gross Domestic Product (GDP) would be $20,000 ($10,000 from agriculture + $10,000 from manufacturing). Meaning of microeconomics Briefly, microeconomics is the study of individual economic units of an economy. (iii) Purchase by a foreign tourists will be included while estimating National Income as it is consideredas exports of goods and services. Solved Example for You 1. (iii) Interest received on loans given to a friend for purchasing a car will not be included in the estimationof National Income as loan is given for consumption purpose. (iii) Brokerage on the sale/purchase of shares and bonds is to be included. Consumption2. (ii) Profits earned by a branch of an Indian bank in Canada. (iii) Interest received by an Indian resident from its abroad firms will not be included in domestic income of India as it is factor income from abroad. (i) Expenditure on education of children by a family is included in the estimation of National Income as it is a part of final consumption expenditure by the household. = [140+ (-10)]-90-20-(-5) (iii) It is included in the estimation of GDPMPbecause it is a part of final expenditure by a firm. = Rs. + (Excise Duty Subsidy) + Intermediate Consumption 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). CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. = 200-[80+ 20+ (15 -5)] = [700 + (-30)] 400 -20 + 50 = Rs. Find Net Value Added at Market Price (All India 2012), 8. 71. 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. Ans. Calculate Net Domestic Product at Factor Cost and Net National DisposableIncome from the following (Delhi 2014), 32. How will you treat the following while estimating National Income of India? (ii) Profits earned by an Indian company from its branches in Singapore. 30 crore 12. Nominal gross domestic product measures the value of all finished goods and services produced by a country at their current market prices. (iii) Expenditure on machines for installation in a factory will be included while estimating NationalIncome, as it is a final consumption expenditure by factory management. (i) Taking care of aged parents Ans. Computation of National Income (By Value Added Method). 810 crore National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports Net Indirect Taxes Net Factor Income to Abroad (ii) Net National Disposable Income (Delhi 2012), 48.Find out 290 crore Gross National Product: Gross National Product (GNP) is defined as the total market value of all final goods and services produced in a country during a specific period of time, usually one year. It refers to the market value of final goods aand servicess produced within the domestic territory of a country during the period of an accounting year, exclusiive of depreciation. (b) Personal Disposable Income from the following data (All India 2011), 53.Calculate It measures the output generated by a country's organizations located domestically or abroad. = [400+ (-40)]-250-(20+ 30) as well as windfall gains (e.g., from lotteries) are excluded. 830 crore It is study of individual economic units of an economy. Governments consider NI crucial for the following reasons: NI is the sum of the monetary value of all the goods and services produced during a financial yearan aggregation of production units belonging to a countrys residents. Value of Output = Net Value Added at Factor Cost (NVAFC) + Depreciation Sale and purchase of second-hand goods are excluded since they are not part of production of current year but commission paid on sale of second-hand goods is included as it is reward for rendering productive services. =Rs. = 810 + 60 + 80-(-10) (iii) Expenditure by government on providing free education will be included while estimating NationalIncome, as it is a part of governments final consumption expenditure. This is the market value of output, while income payments made to factors of production amount to Rs. We are not permitting internet traffic to Byjus website from countries within European Union at this time. = 800+ 400+ 250+150+ 60+ (-10) Ans. Net Domestic Product at Factor Cost or NDP FC : It refers to the net money value of all the final goods and services that are produced within the domestic territory of a nation excluding the net indirect taxes and depreciation. 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