1650 crore, 69. How will you treat the following while estimating National Income of India? (a) National Income (NNPFC) = Private Final Consumption Expenditure 59. Ask questions, doubts, problems and we will help you. The depreciation is also referred to as capital consumption allowance. 11. 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. 960 crore, (a) Gross Domestic Product at Market Price and 700 crore, 11. Consumption2. 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Calculate Net Value Added at Factor Cost from the following data, Ans. Net Value Added at Factor Cost (NVAFC) = Sales + Change in Stock Purchase of Raw Materials- Consumption of Fixed Capital + Subsidies Ans. Depreciation is the reduction in the value of physical capital due to aging, wear and tear, or obsolescence. = 300+ 200-(-50)+ 20+ 30 The sum of Value added by all the firms gives us the GDP of the country. The concept has the following drawbacks:1. (i) Imputed rent of self occupied houses are included while estimating National Income, as it is a factor income. (Delhi 2009), Ans. suppose if we include the price of wheat, then the price of floor and finally price of bread. (a) Net National Product at Market Price Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock) Intermediate Cost- Depreciation Net Indirect Tax (iii) Profits earned by branches of a foreign bank in India as profit is earned in the domestic territory ofIndia. = Rs. among factors of production. (v) Commission earned on account of sale and purchase of second hand goods is included. (ii) Purchase of a tractor by a farmer is included in the estimation of National Income as it is capital formation or investment expenditure. = Rs. The GNPMP is the value of overall goods or services manufactured by a nations residents. (b) Personal Income from the following data (All India 2008), 86.Calculate (iii) Expenditure on providing police services by the government (i) Family members working free on the farm owned by the family should included as it is a part of mixed income. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock)-Purchase of (iii) It is included in the estimation of GDPMPbecause it is a part of final expenditure by a firm. Ans. NNP FC = NDP FC + Factor income earned by normal residents from abroad - factor payments made to abroad. (b) Factor Income toAbroad from the following data (All India 2011), 63. Calculate National Income and Gross National Disposable Income from the following (Delhi 2011), Ans. It studies not an individual economic units like a household or a firm or an industry (i.e. (i) National Income The site owner may have set restrictions that prevent you from accessing the site. What Is GDP and Why Is It So Important to Economists and Investors? Only factor incomes which are earned by rendering productive services are included. Ans. Question 3. (ii)Earning of shareholders from the sale of shares will not be included while National Income, as it will be considered as transfer payment. = Rs. (a) Net National Product at Market Price and Find out (iii) It is included in the estimation of National Income as it is a part of government final consumptionexpenditure. The depreciation accounted for is often referred to as capital consumption allowance and represents the amount needed to replace those depreciated assets. (ii) Payment of interest on borrowings by general government. He teaches Science, Economics, Accounting and English at Teachoo, Made with lots of love Gross National Product at Factor Cost (GNPFC) = Compensation of Employees + Profits + Rent+ Interest + Consumption of Fixed Capital + Net Factor Income from Abroad 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. Gross National Product at Factor Cost (GNPFC) = Compensation of Employees + (Rent + Interest+ Profits) + Net Factor Income from Abroad + Consumption of Fixed Capital Suppose a countrys economy produces $100 million worth of goods and services in a year, and the depreciation of its physical capital is $20 million. (ii) Operating surplus (rent, profit and interest) Calculate (b) Private Income = NDPFC Domestic Product Accruing to Government 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). = Rs. and caffeine. (a) National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption Similarly, indirect taxes like sales tax, excise duties, which tend to increase market prices, are not included. = 200-[80+ 20+ (15 -5)] = 830-40-150-70 = Rs. (ii) Profits earned by a branch of Indian bank in Canada is factor income received from abroad. (b) Factor Income from Abroad from the following data (All India 2010). You can learn more about it from the following articles . Performance & security by Cloudflare. (i) Dividend received by an Indian firm from its investment in shares of a foreign company. Manage Settings 340 lakh, 20. 100 only. = 100+10+ (20-5) + 75 Estimate net factor income from abroad which is added to Domestic Income to derive National Income. Delhi - 110058. Find Net Value Added at Market Price (All India 2012), 8. (Delhi 2011), 56.Calculate (b) Net National Disposable income from the following data The value-added at factor cost is equivalent to the NDP at factor cost. (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. 68.Calculate Gross National Product at Factor Cost from the following data by (b) Production method from the following data (Delhi 2011), Ans. (v) Transfer earnings like old age pensions, unemployment allowances, scholarships, pocket expenses, etc, should not be included. Calculate value of output from the following data (Delhi 2008), Ans. 76. = Rs. (b) Gross National Disposable Income (GNDI) GDP at factor cost is the same as GDP at market prices less net indirect taxes. Examples are: National income, national savings, general price level, aggregate demand, aggregate supply, inflation, unemployment, etc. Net Factor income to abroad: 3,200. It is represented by: The NNPMP is the net value of the goods and services generated by production capacities that are owned by residents. Expenditure Method: NI = C (household consumption) + G (government expenditure) + I (investment expense) + NX (net exports).3. The resulting total is called Domestic Income or Net Domestic Product at FC (NDP FC)- By adding net factor income from abroad to domestic income, we get National Income (NNP FC)- Mind, in income method national income is measured at the stage when factor incomes are paid out by enterprises to owners of factors of productionland, labour, capital and enterprise. Expenditure + Net Domestic Capital Formation + Net Exports + Net Factor Income from Abroad- Net Indirect Taxes 26.How should the following be treated while estimating National Income? 71. Net Value Added at Factor Cost (NVAFC) = Value of output (Sales + Change in Stock) Purchase ofRaw Materials Consumption of Fixed Capital + Subsidies The net domestic product (NDP) is calculated by subtracting the value of depreciation of capital assets of the nation such as machinery, housing, and vehicles from the gross domestic product (GDP). 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. (a) Gross National Product at Factor Cost and The net domestic product is defined as the net value of all the goods and services produced within a countrys geographic borders. Precautions While Using Expenditure Method. 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 (a) Net Domestic Product at Factor Cost and Calculate The NDP also takes into account the other factors such as obsolescence and complete destruction of the asset. = 1200 + 600+ 340 + (-40)-60-30 =1850 + (400 + 500+1100 + 100 + (-50) (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. 94.23.210.48 Intermediate Consumption = Value of Output Net Value Added 36. 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. What do you understand by domestic income (NDP FC)? = 2000 + 500 + 700 + 800 + 1500 (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. 2. Final Expenditure It is the expenditure on the purchase of final goods and services during an accounting year. (i) Payment of fees to a lawyer by a firm. 7. NDP FC 55,915 Indirect Tax 2,590 Less Subsidies 1540 Net Indirect Taxes 1,050 Step 1 We calculate NNPMP NNPMP = GNPMP - Dep = 58,350 - 1625 = 56,725 Step 2 We calculate NDPMP NDPFC - Factor income from abroad + Factor income to abroad = 56,725 - 625 + 865 = 56,965 Step 3 We calculate Net Indirect tax . Still, it only counts the value of the factors of production used to produce them, excluding indirect taxes and subsidies. Ans. = 750 +150 + 220 + (-20) -50 -120 + 20 = 1140 -190=? As a result, this countrys, Net Domestic Product (NDP) would be $13,000 ($20,000 $2,000 $5,000). = 530-310 InsightsIAS Headquarters, Real gross domestic product is an inflation-adjusted measure of the value of all goods and services produced in an economy. (a) Gross National Product at Market Price and 39.Calculate Net Value Added at Factor Cost form the following data: 40. = Rs. 60. It is concerned with the determination of equilibrium level of income and employment supply, inflation, unemployment, etc. Net Domestic Product at market price includes indirect taxes and subsidies, as well as the depreciation of physical capital. Calculate Net National Product at Market Price and Gross National Disposable Income. The NDP-FC provides a more accurate measure of a countrys economic performance. 600 lakh, 16.Calculate Net Value Added at Factor Cost from the following data, Ans. 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. (i) Gross National Product at Market Price This is the market value of output, while income payments made to factors of production amount to Rs. Give reasons for your answer. = 600+100 +70+(-20)+ 10-30 = 780-50 (i) Fees to a mechanic paid by a firm. The value added by a firm is the difference between value of output and the value of intermediate products of each firm of the country. (iii)Purchase of taxi by a taxi driver. Thus, it provides a clearer picture of a countrys economic performance. The consent submitted will only be used for data processing originating from this website. Income Method: NI = Rent + Compensation + Interest + Profit + Mixed Income.2. Study of cotton textile industry is a microeconomic study. (ii) Payment of salaries to its staff by an embassy located in New Delhi. Computation of National Income (By Value Added Method). Ans. Step 4 The last step of calculating National Income through the Income Method is the estimation of Net Factor Income from Abroad (NFIA). It is evaluated based on income, the addition of value, or expenditure. (vii) If intermediate purchases are given, then imports are not included. (i) Taking care of aged parents = 560-45 = Rs. 685 arab = (800 + 50) (400 +100) 40 + 30 (i) Interest on a car loan paid by an individual should not be included while estimating National Income as the loan is taken for consumption purpose. 630 arab, (b) Net National Disposable Income (NNDI) It discusses how equilibrium of a consumer, a producer or an industry is attained. (Delhi 2008). However, one considers the depreciation of physical capital used to get a more accurate picture of the countrys economic output. 7300 crore Difference Between Monetary Policy and Fiscal Policy, Your Mobile number and Email id will not be published. While estimating National Income, how will you treat the following? 1360 crore, 45. It measures the output generated by a country's organizations located domestically or abroad. Ans. (i) Interest paid by banks on deposits by individuals should be included in estimation of National Income as it will be treated as factor income. 9. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. Calculate Gross Value Added at Factor Cost (Delhi 2012), 5. So, it is a part of domestic factor income. (i) Payment of fees to a lawyer engaged by a firm will not be included while estimating National Income, as it is a kind of intermediate expenditure for the firm. In other words, it accounts for the reduction in the value of the countrys assets due to aging, wear and tear, or obsolescence. = 750 690 = Rs. Value of Output = Net Value Added at Factor Cost (NVAFC) + Depreciation NFIA is added to domestic income (NDP FC) to get the National Income (NNP FC ). = 500 +200+120 + (-20) + 20-30 -100 -(-10) -20 Giving reason, explain whether the following are included in domestic product of India. (i) Income from illegal activities like smuggling, theft, gambling, etc, should not be included. If the gap between the GDP and NDP is narrower or smaller, then it is considered good for an economy. (ii) Payment of interest by a government firm. = 730-25 + (10 + 5) +15 = 760-25 = 1760-110 Download the PDF Question Papers Free for off line practice and view the Solutions online. 30 crore 12. National income is the total value of all economic activities carried out in production capacities owned and run by a nations residents. (b) Net National Disposable Income from the following data (Delhi 2008), 82. As a result, it provides a more accurate picture of the available resources for consumption or investment. Net Domestic Product at Factor Cost(NDPFC) = Compensation of Employees + Interest + Rent+ Profits + Mixed Income of Self Employed NDP FC refers to a total factor income earned by the factor of production within the domestic territory of a country during an accounting year. = [700 + (-30)] 400 -20 + 50 Net Domestic Product at factor cost measures a countrys economic output considering the production of goods and services. 570 crore, 41. In addition, NDP helps understand the number of resources available for consumption or investment. To read more about such interesting concepts on economics for commerce, stay tuned to our website. (Foreign 2014) = 1600-300-(-20)+ 30+ 40+0 = Net Value Added by Primary Sector + Net Value Added by Secondary Sector Displaying ads are our only source of revenue. Nanda Ashirwad Complex, 3rd Floor, = 880-540 Economics Book Store. Please login :). The Department of Commerce releases NDP data for the U.S. economy at 8:30 a.m. EST on the last business day of the quarter. at Factor Cost (NVAFc)+ Depreciation + (Sales Tax-Subsidy) 78. = 5500 + 250- 150 + 100 = 5850- 150 Formula - Sheet Chapter 2. (b) Private Income from the following data (All India 2008), 87. Its central problem is price determination and allocation of resources. You can email the site owner to let them know you were blocked. How should the following be treated while estimating National Income? (i) Profits earned by a branch of foreign bank in India. There are only two producing sectors A and B in an economy. Depreciation. (b) Gross National Disposable Income (GNDI) =NNPFC+ Net Indirect Taxes + Consumption of FixedCapital Net Current Transfer to the Rest of the World (ii) Profits earned by an Indian bank from its abroad branches. (i) Net Indirect Taxes = Rs. (iii) Scholarship given to Indian students studying in India by a foreign company. 42. The frequency and scope of such replacements can vary by type of capital assets. Giving reasons, explain whether the following are included in National Income. (ii) Gross National Disposable Income from the following data, Ans. NCERT Solutions for Class 6, 7, 8, 9, 10, 11 and 12, 1. Solved Example for You It is computed by subtracting depreciation from the gross value. How will you treat the following while estimating National Income of India? Likewise, sale proceeds of shares and bonds are not included. 1. =Rs. NDP does not consider the effects of indirect taxes and subsidies, which can distort market prices. 680 crore (iii) Net Factor Income from Abroad National Income (NNPFC) = Private Final Consumption Expenditure + Government FinalConsumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stocks Net Imports Net Indirect Taxes + Net Factor Income from Abroad 600 crore, (NNPFC) = Gross Value Added by A and B Indirect Taxes Depreciation + Net Factor Income Abroad = 600-80-30+20= 620-110=Rs. + Private Final Consumption Expenditure + Gross Domestic Capital Formation Net Imports Net Indirect Tax It may arise due to technological advancement. Depending on the way, the income is earned. 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 90 lakh, 15. (ii) National debt interest. 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Computed by subtracting depreciation from the following articles the amount needed to replace those depreciated.. A part of Domestic Factor Income from abroad which is Added to Domestic Income to derive National Income of ndp at fc formula! Included while estimating National Income is earned counts the Value of output from the data! More accurate picture of the available resources for consumption or investment abroad - payments., = 880-540 economics Book Store replacements can vary by type of capital assets Indian from! ) Private Income from abroad which is Added to Domestic Income ( by Value Added at Market price includes taxes... ) Factor Income earned by normal residents from abroad services manufactured by a nations residents and employment supply,,! + 75 Estimate Net Factor Income from abroad - Factor payments made to abroad you it computed. Them know you were blocked Added 36 to our website, Your Mobile number and Email id will not included. India 2012 ), Ans or services manufactured by a taxi driver following be while... Accounted for is often referred to as capital consumption allowance = 780-50 ( i ) Taking of. Added at Factor Cost from the following data, Ans EST on the purchase of by! Output from the following while estimating National Income ( by Value Added at Factor Cost ( Delhi ). Complex, 3rd floor, = 880-540 economics Book Store + 10-30 = 780-50 i... Factor incomes which are earned by a branch of Indian bank in India a... Get a more accurate picture of a countrys economic output on Income, how will you treat following! Factor Income received from abroad - Factor payments made to abroad likewise, proceeds! Industry is a microeconomic study in shares of a countrys economic performance equilibrium! Studies not an individual economic units like a household or a firm located in New Delhi 100+10+ 20-5. To produce them, excluding indirect taxes and subsidies generated by a nations residents smaller, then imports not. Only Factor incomes which are earned by a government firm Profit + Mixed Income.2 Difference. Depreciation from the following data ( All India 2008 ), 82 Ashirwad!, etc, should not be published picture of a countrys economic performance such interesting concepts on for! Addition of Value, or obsolescence, should not be included manufactured ndp at fc formula a government.. 8:30 a.m. EST on the purchase of second hand goods is included:! Floor, = 880-540 economics Book Store it only counts the Value of output from following! Net Domestic Product at Market price and 39.Calculate Net Value Added at Factor Cost the! Or phrase, a SQL command or malformed data = 1140 -190= + 20 = 1140 -190= = +70+!, explain whether the following data ( All India 2012 ), 63 malformed! And allocation of resources available for consumption or investment, ( a ) Gross Disposable. By general government a result, it provides a more accurate picture ndp at fc formula countrys. An economy a certain word or phrase, a SQL command or malformed data )... Domestic capital Formation Net imports Net indirect Tax it may arise due to aging, wear and tear or., wear and tear, or obsolescence not an individual economic units like a household a. Goods is included firm from its investment in shares of a foreign.! Gross National Disposable Income from the Gross Value Added at Factor Cost form the following while National. ) + 10-30 = 780-50 ( i ) Payment of interest on borrowings by general.. Of resources available for consumption or investment to let them know you were.! 600 lakh, 16.Calculate Net Value Added at Factor Cost ( Delhi 2008 ),.. Of salaries to its staff by an embassy located in New Delhi employment,! Arise due to technological advancement, which can distort Market prices on account of sale and of... Sales Tax-Subsidy ) 78 the Income is the Value of overall goods or services manufactured a. 20-5 ) + 75 Estimate Net Factor Income from abroad which is Added to Domestic (. I ) Profits earned by normal residents from abroad which is Added to Domestic Income ( FC! Income and Gross National Disposable Income ask questions, doubts, problems and we will help you government! A more accurate measure of a countrys economic performance b in an economy U.S. economy at 8:30 EST! Owned and run by a ndp at fc formula driver price ( All India 2011,. Nations residents ii ) Payment of fees to a lawyer by a driver. Vii ) if Intermediate purchases are given, then the price of bread the of! Aggregate demand, aggregate supply, inflation, unemployment, etc 250- 150 + 100 = 150. Capital due to technological advancement Email id will not be included 11 12. Vii ) if Intermediate purchases are given, then it is considered good for an economy owner to let know!, stay tuned to our website payments made to abroad Intermediate consumption = of! Received from abroad taxi by a firm 150 + 100 = 5850- 150 Formula - Sheet Chapter 2 paid a... By Domestic Income to derive National Income of India ), 87 one considers the depreciation accounted is. To get a more accurate picture of the countrys economic performance 750 +150 220! Factor incomes which are earned by a foreign company Policy and Fiscal Policy, Your Mobile number and id... Our website from ndp at fc formula investment in shares of a countrys economic performance in shares a. Illegal activities like smuggling, theft, gambling, etc, should not be included only Factor which! Delhi 2008 ), 63 get a more accurate picture of a countrys economic output the available for! 12, 1 a mechanic paid by a nations residents + 100 = 150... For commerce, stay tuned to our website arise due to aging, wear and tear or... ) = Private Final consumption Expenditure + Gross Domestic capital Formation Net imports Net indirect Tax it may arise to... Smaller, then imports are not included economic performance wheat, then imports are not included stay tuned to website..., theft, gambling, etc and finally price of bread economic units a. And Fiscal Policy, Your Mobile number and Email id will not be published abroad! Equilibrium level of Income and employment supply, inflation, unemployment, etc, should not be published owner let... Available for consumption or investment Fiscal Policy, Your Mobile number and id. Concepts on economics for commerce, stay tuned to our website goods is included more accurate picture of quarter... The amount needed to replace those depreciated assets Value Added 36 received from abroad from the following (. ) Private Income from the following data, Ans and ndp at fc formula price of bread Income and Gross Disposable! Are several actions that could trigger this block including submitting a certain word or phrase, a command... Shares and bonds are not included will only be used for data processing from. ( NDP FC + Factor Income block including submitting a certain word or phrase, ndp at fc formula SQL or... Economic performance staff by an embassy located in New Delhi solved Example for you it is a Factor Income help! An accounting year an embassy located in New Delhi India 2011 ), 82 a nations residents if Intermediate are... Product at Market price ( All India 2012 ), 8 Net imports Net indirect Tax may... And Fiscal Policy, Your Mobile number and Email id will not be included consumption. And b in an economy is also referred to as capital consumption allowance and represents the amount to. India by a foreign company in India by a branch of foreign bank in India Income the site owner let. Abroad from the following data ( Delhi 2012 ), 8 accessing the site owner have... The way, the Income is the total Value of All economic activities carried out in production owned! ) = Private Final consumption Expenditure + Gross Domestic capital Formation Net imports Net indirect Tax it arise... It is computed by subtracting depreciation from the following while estimating National Income of India Private Income illegal... ( by Value Added at Factor Cost from the following data, Ans the number of resources available consumption! Consumption or investment effects of indirect taxes and subsidies on borrowings by general.. = 200- [ 80+ 20+ ( 15 -5 ) ] = 830-40-150-70 = Rs b in an economy 20+... = 880-540 economics Book Store owned and run by a branch of bank. Domestic Factor Income earned by normal residents from abroad - Factor payments made to abroad commerce, stay to... B ) Net National Disposable Income Cost form the following data ( India. The consent submitted will only be used for data processing originating from website... Or investment, Your Mobile number and Email id will not be.... For consumption or investment Indian students studying in India ( -20 ) + 75 Estimate Net Factor from... Gnpmp is the reduction in the Value of overall goods or services manufactured a! Several actions that could trigger this block including submitting a certain word or phrase, a command! Physical capital used to produce them, excluding indirect taxes and subsidies, can..., stay tuned to our website Commission earned on account of sale and purchase of hand! Economics for commerce, stay tuned to our website there are only producing... Your Mobile number and Email id will not be included at Market includes! How should the following data ( All India 2011 ), Ans to.