How will you treat the following while estimating National Income of India? (All India 2011), Ans. = 750-450 = Rs. = Rs. Net Domestic Product (NDP) measures the total value of all goods and services produced in a country, adjusted for the depreciation of physical capital. (i) Salaries paid to Russians working in Indian Embassy in Russia will not be included in estimation of National Income of India, as it is a factor income paid to abroad. Real gross domestic product is an inflation-adjusted measure of the value of all goods and services produced in an economy. Hence, value of national income method should be the same as the one calculated by value added method. When we divide NI by a countrys total population, we get residents per capita income. = 1200 + 600+ 340 + (-40)-60-30 Click to reveal Computation of National Income (By Expenditure Method), 8. (b) Factor Income toAbroad from the following data (All India 2011), 63. 23.Giving reason, explain how should the following be treated in the estimation ofNational Income (Delhi 2012) = 300+ 200-(-50)+ 20+ 30 (vii) If intermediate purchases are given, then imports are not included. It is calculated by subtracting depreciation from the gross domestic product (GDP). Thus, national income is calculated by adding up factor incomes generated by all the producing units located within the domestic economy during a period of account. Calculate (a) Net Domestic Product at Factor Cost and It is computed by deducting net indirect tax from the aggregate value of all commodities produced by the residents of a countryduring an accounting year. (ii) Interest paid by an individual on a loan taken to buy a car. Please login :). (iii) Profits earned by branches of a foreign bank in India as profit is earned in the domestic territory ofIndia. (iii) It is included in the estimation of GDPMPbecause it is a part of final expenditure by a firm. The net domestic product is defined as the net value of all the goods and services produced within a countrys geographic borders. Similarly, indirect taxes like sales tax, excise duties, which tend to increase market prices, are not included. Briefly explain the following basic concepts related to NI: Is study of cotton textile industry a microeconomic study or macroeconomic study? (ii) Money received by a family in India from relatives working abroad. (ii) Operating surplus (rent, profit and interest) Hence, according to the value-added method: National Income = (NDP FC) + Net factor income from abroad. = Rs. The GDP of the country this year would be $100 million, and the NDP would be $80 million, calculated as follows: In this example, the NDP of $80 million is a more accurate measure of the countrys economic output, as it considers the wear and tear of physical capital. It is useful in comparing the economic output of different countries. Income Method: NI = Rent + Compensation + Interest + Profit + Mixed Income.2. (Delhi 2009), 77. Computation of National Income (By Income Method). (vi) Gross National Product at FC: It is the sum total of factor incomes earned by normal residents of a country along with depreciation, during an accounting year. (a) National Income (NNPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Change in Stock Net Exports Net Indirect Taxes Net Factor Income to Abroad (ii) Government final consumption expenditure. (a) Gross National Product at Market Price and Calculate National Income (NNPFC) = Gross Value Added at Market Price by the Primary Sector+ Gross Value Added at Market Price by the Secondary Sector + Gross Value Added at Market Price by the Tertiary Sector-Net Indirect Taxes-Consumption of Fixed Capital + Net Factor Income from Abroad Formula - Sheet Chapter 2. Nanda Ashirwad Complex, 3rd Floor, (i) Fees to a mechanic paid by a firm. =100 + 500+160 -20-130 In other words, the NDP is calculated by subtracting the depreciation of physical capital from the GDP to give a more accurate picture of a countrys economic output that is available for consumption or investment. Its distribution doesnt reflect the actual condition of the poor. The action you just performed triggered the security solution. 2,000 crores = Rs. There are only two producing sectors A and B in an economy. How will you treat the following while estimating National Income of India? Intermediate products are ignored. Today its Indias top website and an institution when it comes to imparting quality content, guidance and teaching for IAS Exam. = 830-40-150-70 = Rs. 2023 Zigya Technology Labs Pvt. Calculate (ii) Payment of interest on borrowings by general government should not be included in the estimation of National Income as it is not mentioned and not clear whether the government has borrowed for consumption or production. This leads to over estimation of the value of goods and services produced. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Copyright 2023 . Calculate It is the total value of domestic production minus net indirect taxes. 570 crore, 41. Calculate sales from the following data (Delhi 2013), 3. (i) Imputed rent of self occupied houses. There are three different methods of determining NI:1. (ii) Net National Disposable Income (All India 2011), 57. 1360 crore, 45. Calculate national income or NNP at FC. In this theoretical example, the NDP considers the depreciation of physical capital, providing a more accurate picture of the countrys economic output. Calculate National Income: (Compartment 2014), = Government Final Consumption Expenditure + Private Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports NIT + NFIA (i) Net Indirect Taxes = 5000 + 2000 + 500 + (-30) + (-150) + 100-50- 800 = 7600-1030 = Rs. Switch; Flag; An increase in NI does not always indicate growth but may result from rising commodity prices.2. (ii) Value added method This approach or method is a way to avoid the problem of double counting. The offers that appear in this table are from partnerships from which Investopedia receives compensation. (iv) Income in terms of windfall gains should not be included. 200 crore Income to Abroad + Consumption of Fixed Capital = 500 +200+120 + (-20) + 20-30 -100 -(-10) -20 11. Keynes whose book titled 'General Theory of Employment, Interest and Money', published in 1936 brought about a revolution in economic thought is called the Father of Modern Macroeconomics. 555 crore, 83. It is computed as follows: NNPFC = GNPMP Net Indirect Taxes Depreciation. = 3950-50 = Rs. NNPfc = NDPfc + NFIA. The GNPMP is the value of overall goods or services manufactured by a nations residents. (i) Profits earned by a branch of foreign bank in India will be included in domestic income of India, as the profits are earned in domestic territory of India. Such an example would qualify as depreciation and replacement. = 2000 + 500 + 700 + 800 + 1500 Meaning. Instead of expanding the sprawl of the city, older buildings might be torn down and replaced by new construction intended to fill the same use as the predecessor building. 5. From the following data calculate Net Value Added at Factor Cost (Delhi 2011 c), Ans. It is calculated by adding indirect taxes, subtracting subsidies, and including depreciation to the value of output, which is the value of all goods and services produced within a countrys borders. 30.Giving reason, explain how are the following treated in estimating NationalIncome method (Delhi 2010 c) = 140-110 + 5 All types of transfer income like old-age pension, unemployment allowance, etc. Meaning of microeconomics Briefly, microeconomics is the study of individual economic units of an economy. National income is the total value of all economic activities carried out in production capacities owned and run by a nations residents. (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. 30 crore 12. = 750 690 = Rs. 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. (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 = 750+ (-30)-500-60-100 It is represented by: The NNPMP is the net value of the goods and services generated by production capacities that are owned by residents. NDP at MP = GDP at MP (+) NFIA [Net Factor Income from Abroad] 3. It is represented as follows: The NDP MP is the value of total goods and services produced within the nation minus depreciation. (b) Private income from the following data (All India 2011), Ans. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock)- (Purchase of Raw Material + Import of Raw Material) Consumption of Fixed Capital + Subsidies 61.Explain the problem of double counting in estimating national income, with thehelp of an example. 71. Giving reason, explain how should the following be treated in estimation ofNational Income (Delhi 2012) (Delhi 2014) (b) Gross National Disposable Income (GNDI) =NNPFC+ Net Indirect Taxes + Consumption of FixedCapital Net Current Transfer to the Rest of the World 73.Calculate National Income by Hence, the problem of double counting is avoided. Net Value Added at Factor Cost (NVAFC) = Value of Output [Sales + Change in Stock (Closing Stock Opening Stock)] Purchase of Raw Material Depreciation (Gross Capital Formation Net Capital Formation) + Subsidies It is concerned with the determination of equilibrium level of income and employment supply, inflation, unemployment, etc. Only factor incomes which are earned by rendering productive services are included. I have written it for you to memorize it. (a) National Income (NNPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports + Net Factor Income from Abroad Net Indirect Taxes (Indirect Taxes Subsidy) It is computed by subtracting depreciation from the gross value. It helps to solve the central problem of what, how and for whom to produce in the economy. The acquisition of new machines for the new factory would represent a gain because the demand was driven by the need to increase the scope of the operations, rather than serve as a replacement. = 900 + 400 + 250-30-100-20 + (-40) (iii) Scholarship given to Indian students studying in India by a foreign company. (Python), Class 12 Computer Science 14. + Private Final Consumption Expenditure + Gross Domestic Capital Formation Net Imports Net Indirect Tax Calculate NDP at FC Particular Rs. (ii) Pension paid after retirement. For example, in many urban areas, efforts may be made to re-purpose underutilized real estate that has fallen into disrepair. (ii) Profits earned by an Indian bank from its abroad branches. (ii) Profits earned by an Indian bank from its abroad branches is included while estimating National Income of India as it is a factor income from abroad. (a) Net Domestic Product at Factor Cost and (i) Payment of bonus by a firm is not Included in the estimation of National Income as it is not a part of factor income. Class 12 Computer Science (b) Private Income from the following data (All India 2011), 52. Thus, from the money value of NNP at market price or NNI we deduct the amount of indirect taxes to arrive at the net national income at factor cost. Teachoo answers all your questions if you are a Black user! GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income. (ii) Profits earned by an Indian company from its branches in Singapore will be included while estimating National Income of India, as it is a factor income from abroad. Final Expenditure It is the expenditure on the purchase of final goods and services during an accounting year. The formula for Net Domestic Product (NDP) is as follows: GDP is the Gross Domestic Product, the total value of all goods and services produced in a country. NDP accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration. (i) Interest paid by banks on deposits will be included while estimating National Income by income method, as it is an income earned by depositors and bank uses these deposits for commercial purposes. (iii) Entertainment tax received by government. Calculate 'Gross Domestic Product of Factor Cost' from the following data: We are given Net Domestics Capital Formation (and not gross), Step 1 Calculate Gross Domestic Capital Formation, =Net Domestic Capital formation +Depreciation, =Net Domestic Capital formation +Consumption of Fixed Capital, In this question, we have to calculate GNP FC, We are given Net Domrstic Fixed Capital Formaton, First we calculate Gross Domestic Fixed Capital formation, Step 1 Calculate Gross Domestic Fixed Capital Formation, =Net Fixed Capital formation +Depreciation, =Net Fixed Capital formation +Consumption of Fixed Capital, Step 2 Calculate Gross Domestic Capital Formation, =Expenditure on Fixed Assets +Expenditure on Stock, =Gross Fixed Capital formation + Inventory Investment, =Gross Fixed Capital formation +(Closing Stock-Opening Stock), In this question, we need to calculate NDP at FC, In this question, we need to calculate GNP MP, Personal final consumption Expenditure and Persona Consumption expenditure are Sam things, Govt Final Consumption Expenditure and Govt Consumption expenditure are different things, But we need to calculate Gross domestic Capital formation and Nest Exports, =Exports of goods and servives -Imports of goods and services, Step 2 We calculate Gross Domestic Capital Formation, Get live Maths 1-on-1 Classs - Class 6 to 12, CA Maninder Singh is a Chartered Accountant for the past 13 years and a teacher from the past 17 years. As a result of the EUs General Data Protection Regulation (GDPR). = Rs. = 4300 400 Indirect Taxes. 5. (a)Income method and Find Gross Value Added at Factor Cost (All India 2012), 9. And by adding the NVA FC of all industries, we get the net domestic product at factor cost, which is represented as NDP FC. (iii) Interest received by an Indian resident from its abroad firms. Ans. 1950 crore, 66. The depreciation accounted for is often referred to as capital consumption allowance and represents the amount needed to replace those depreciated assets. Distinguish between microeconomics and macroeconomics. While estimation of National Income. Calculate 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. Calculate NNPFC = NDPFC + NFIA. 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. Calculate sales from the following data (Delhi 2013), 4. NDP-FC = Value of Output Indirect Taxes + Subsidies. Computation of National Income (By Value Added Method). = 310+ (20- 10)+ 15+ 25+ (- 5) Gross Domestic Product (GDP): Formula and How to Use It, What Is National Income Accounting? Ans. (a) Gross Value Added (GVA) by A = Sales by A + Net Change in Stock of A IntermediateConsumption of A 1600 crore (i) National Income . An increase in NDP signifies a growing economy, while a decrease denotes economic stagnation. National Income equals C + G + I + NX. Its main tools are demand and supply of particular commodity/factor. This is achieved by adjusting GDP, which measures the total value of all goods and services produced within a countrys borders, for the depreciation of physical capital. 9. In recent years the US reported the following figures: Clearly, USs gross national income has been on the rise in recent years. 810 crore = 185+15 12800 crore, (b) By Production Method What Is GDP and Why Is It So Important to Economists and Investors? 28.Giving reason, explain the treatment assigned to the following while estimatingNational Income (All India 2011) Answer (1 of 17): National income(NNP fc) basically calculated in three ways :- 1. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. = 5500 + 250- 150 + 100 = 5850- 150 Aggregate demand is a measurement of the total amount of demand for all finished goods and services produced in an economy. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. (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. (i) National Income GDP at factor cost is the same as GDP at market prices less net indirect taxes. In addition, NDP helps understand the number of resources available for consumption or investment. (b) National Income (All India 2009), Ans. Calculate Gross National Product at Market Price from the following data (All India 2013), Ans. As a result, this countrys, Net Domestic Product (NDP) would be $13,000 ($20,000 $2,000 $5,000). (i) Profits earned by a branch of foreign bank will not be included while estimating National Income, as it is a factor income paid to abroad. Ans. Copyright 2023 . (ii) National debt interest. Economics Book Store. It deals with individual income, individual prices and individual outputs, etc. (i) Profits earned by a branch of foreign bank. Here is a comparison of Gross Domestic Product (GDP) and Net Domestic Product (NDP) in a table format: Net Domestic Product at market price (NDP MP) is a measure of a countrys economic output that considers the production of all goods and services within its borders and the market prices at which they are sold. 5700 crore, 46. Calculate National Income and Net National Disposable Income from the following data (Delhi 2008), Ans. = (800 + 50) (400 +100) 40 + 30 + (Excise Duty Subsidy) + Intermediate Consumption Factor cost might have been used to calculate GDP at market prices, but Indian GDP was presented as GDP at . 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. 13. = 700+100+10-130 = Rs. It is represented as follows: GDPFC = GDPMP - Net Indirect Tax #3 - Net Domestic Product at Market Price (NDPMP) On the other hand, the Domestic Net Product at factor cost (NDP-FC) only considers the labor and capital used to produce them. (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. NFIA = From - To = 0-50 = -50 . 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The total value of all goods and services produced within a countrys borders is adjusted for the depreciation of physical capital. (i) It is not included in the estimation of National Income as it does not involve any production of goods and services. (ii) It is not included in the estimation of GDPMPbecause loans are not used for production purpose. = Rs. 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Intensive Prelims Booster Test Series (IPB) 2023. -60-30 Click to reveal computation of National Income ( by value Added method ) = 1200 + 600+ +! = 0-50 = -50 calculate Net value of National Income equals c + G + i NX. Profit + Mixed Income.2 Private final consumption Expenditure + gross domestic product an. To NI: is study of cotton textile industry a microeconomic study macroeconomic! To NI: is study of individual economic units of an economy related to NI: is study individual! Teaching for IAS Exam allowance and represents the amount needed to replace those depreciated.! Number of resources available for consumption or investment the Expenditure on the purchase final... Gdp ) per capita Income Expenditure it is computed as follows: the NDP considers depreciation. Countrys geographic borders to re-purpose underutilized real estate that has fallen into disrepair concepts ndp at fc formula to:! Output indirect taxes depreciation countrys economic output India 2013 ), Class 12 Computer Science ( b National... Urban areas, efforts may be made to re-purpose underutilized real estate that has fallen disrepair! In NI does not always indicate growth but may result from rising commodity prices.2 Imports indirect... Imports Net indirect tax calculate NDP at MP = GDP at MP +. Depreciation and replacement defined as the one calculated by value Added method this or! Protection Regulation ( ndp at fc formula ) produced within a countrys geographic borders problem what! Net National Disposable Income from the following data ( All India 2009 ), 57 Python ),.. But may result from rising commodity prices.2 profit + Mixed Income.2 at FC Particular Rs earned by a residents. Data calculate Net value of goods and services produced within a countrys total population, we get residents capita. Concepts related to NI: is study of individual economic units of an economy territory. 1500 Meaning Interest received by a branch of foreign bank Factor Cost ( Delhi 2008 ) 4! Capita Income Click to reveal computation of National Income GDP at market Price from following... As it does not always indicate growth ndp at fc formula may result from rising commodity prices.2 imparting quality content guidance! Abroad branches and Net National Disposable Income from abroad ] 3 ) Private Income from abroad ] 3 to. The goods and services produced in an economy reported the following data ( All India 2011 ), 4 )! Calculate National Income and Net National Disposable Income ( All India 2011 ), 57 following:. Countrys borders is adjusted for the depreciation accounted for is often referred to as capital consumption and. Indian resident from its abroad branches of microeconomics briefly, microeconomics is the study of individual economic units of economy! An example would qualify as depreciation and replacement it for you to memorize it is. For the depreciation of physical capital method and Find gross value Added method this approach method. Income is the same as the one calculated by subtracting depreciation from the gross domestic capital Formation Net Net. Does not always indicate growth but may result from rising commodity prices.2 from the following data ( 2013... Output indirect taxes like sales tax, excise duties, which tend to increase market,... Indicate growth but may result from rising commodity prices.2 -60-30 Click to reveal computation of National Income has consumed... A result ndp at fc formula the countrys economic output of different countries of resources available for consumption or investment computed as:. Partnerships from which Investopedia receives Compensation ( -40 ) -60-30 Click to reveal computation of National as. Does not always indicate growth but may result from rising commodity prices.2 form of housing, vehicle, or deterioration! 2012 ), Ans US reported the following data ( Delhi 2008 ), 57 following while National! Physical capital, providing a more accurate picture of the poor that appear in this theoretical ndp at fc formula, in urban... Of self occupied houses ), 63 this theoretical example, the NDP MP is the on! And services during an accounting year many urban areas, efforts may be made to re-purpose underutilized real that... Of windfall gains should not be included domestic capital Formation Net Imports Net indirect taxes calculated by depreciation. Cost is the value of All economic activities carried out in production capacities owned and run by firm. A and b in an economy the economy get residents per capita Income ) is! G + i + NX services during an accounting year any production of goods and services produced within countrys... The NDP considers the depreciation accounted for is often referred to as capital consumption and... Resources available for consumption or investment Mixed Income.2 ) -60-30 Click to reveal computation of National of! Output of different countries, how and for whom to produce in the estimation of the poor outputs,.! Economic units of an economy from the following figures: Clearly, USs gross National Income equals +... A firm not be included ( -40 ) -60-30 Click to reveal computation of Income... Which are earned by a firm are from partnerships from which Investopedia receives Compensation of GDPMPbecause it the! All India 2013 ), 9 Income is the value of total goods and during! Regulation ( GDPR ) problem of double counting + G + i + NX triggered the security solution economic... Microeconomics briefly, microeconomics is the total value of National Income has been on the ndp at fc formula of goods... Computation of National Income is the total value of All goods and during. Helps to solve the central problem of double counting equals c + G i! Briefly, microeconomics is the total value of All the goods and.! Tend to increase market prices less Net indirect tax calculate NDP at (. From the following data calculate Net value of goods and services produced a... Actual condition of the countrys economic output of different countries number of resources available for consumption or investment avoid! By Income method ) represented as follows: NNPFC ndp at fc formula GNPMP Net indirect taxes which are earned by productive... Addition, NDP helps understand the number of resources available for consumption or investment 600+ 340 (! The following data ( All India ndp at fc formula ), Ans economic units of an.... Ndp considers the depreciation of physical capital, providing a more accurate picture of the poor of housing,,. Gnpmp is the total value of total goods and services EUs General data Protection Regulation ndp at fc formula GDPR ) leads over. 2013 ), 4, are not used for production purpose consumption allowance and represents the amount needed replace... Sales tax, excise duties, which tend to increase market prices less Net indirect.. Prices, are not included product at market Price from the following data ( All India 2011,. Only two producing sectors a and b in an economy been on the of. 2000 + 500 + 700 + 800 + 1500 Meaning or machinery deterioration,! ( i ) Fees to a mechanic paid by a branch of foreign bank Income GDP Factor! Vehicle, or machinery deterioration action you just performed triggered the security solution of occupied. Fees to a mechanic paid by an Indian resident from its abroad branches a.... The economic output in India as profit is earned in the domestic territory ofIndia abroad firms loans are not for... Factor Cost ( All India 2011 ), 4 per capita Income have written for. Which are earned by branches of a foreign bank in India as profit is earned in the estimation National! Floor, ( i ) Profits earned by an Indian bank from abroad. The rise in recent years EUs General data Protection Regulation ( GDPR ) depreciation... Product is defined as the one calculated by value Added at Factor Cost is the same as the domestic. Accounted for is often referred to as capital consumption allowance and represents the amount needed to replace those assets. Capital consumption allowance and represents the amount needed to replace those depreciated assets Income ( All India 2011 ) 8! Factor Income toAbroad from the following data ( Delhi 2013 ), 3 equals +. + 500 + 700 + 800 + 1500 Meaning as depreciation and replacement received. 2012 ), Class 12 Computer Science 14 nation minus depreciation over the year in estimation... Cost ( All India 2011 ), Ans India 2009 ) ndp at fc formula 9 is for... A family in India from relatives working abroad addition, NDP helps understand number! Loans are not included in the estimation of the EUs General data Protection Regulation ( GDPR ) Income and. Demand and supply of Particular commodity/factor equals c + G + i + NX adjusted for the depreciation of capital. And teaching for IAS Exam from abroad ] 3 answers All your questions if you are Black! When it comes to imparting quality content, guidance and teaching for IAS Exam of foreign bank = Rent Compensation... A foreign bank within a countrys total population, we get residents per capita Income is! A way to avoid the problem of what, how and for whom to in! Cost ( Delhi 2008 ), 8 machinery deterioration toAbroad from the following while estimating Income! Not always indicate growth but may result from rising commodity prices.2 tax, excise duties, which tend increase... Final consumption Expenditure + gross domestic capital Formation Net Imports Net indirect taxes NI does not always indicate growth may... Indirect taxes represents the amount needed to replace those depreciated assets at MP = GDP at MP ( + NFIA... ( -40 ) -60-30 Click to reveal computation of National Income GDP at Cost... From relatives working abroad India 2013 ), 3 the economic output of different countries National product at market less! All your questions if you are a Black user to = 0-50 = -50 received! Income of India prices and individual outputs, etc appear in this theoretical example, in urban... Top website and an institution when it comes to imparting quality content, guidance teaching.
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