Investopedia does not include all offers available in the marketplace. 100 only. An increase in NDP would indicate growing economic health, while a decrease would indicate economic stagnation. = 3950-50 = Rs. (a) Net Domestic Product at Factor Cost (NDPFC) = Wages and Salaries + Rent + Interest Paid byProduction Units + Corporation Tax + Dividends + Undistributed Profits + Social Security Schemes by Employers 810 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. (ii) Purchase and sale of second hand goods should not be included. = 1220-270 = Rs. = 800+ 400+ 250+150+ 60+ (-10) But wealth tax and gift tax are excluded since they are deemed to be paid from past savings and wealth. Teachoo gives you a better experience when you're logged in. (i) Interest paid by banks on deposits. 3900 crore, Gross National Product at Factor Cost(GNPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Consumption of Fixed Capital + Net Exports + Net Factor Income from Abroad Net Indirect Taxes = 400 340 = Rs. =100 + 500+160 -20-130 Also explain, two alternative ways of avoiding the problem. Its central problem is price determination and allocation of resources. (i) Salaries received by Indian residents working in Russian Embassy in India. It helps to solve the central problem of full employment of resources in the economy.. Calculate Net Domestic Product at Factor Cost by the expenditure method and production method (All India 2010), Ans. Gross National Product at Factor Cost (GNPFC) = Compensation of Employees + Profits + Rent+ Interest + Consumption of Fixed Capital + Net Factor Income from Abroad Giving reasons, explain how the following are treated while estimating National Income? 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 Net Factor income to abroad: 3,200. Displaying ads are our only source of revenue. (i) Social security contributions by employees. (ii) Payment of interest on borrowings by general government. (ii) Expenditure method Ans. Calculate National Income and Net National Disposable Income from the following data (Delhi 2008), Ans. Depreciation - cost allocated to a tangible asset over its useful life. =1850 + (400 + 500+1100 + 100 + (-50) Gross National Product at Market Price (GNPMP). Private Income = Net Domestic Product at Factor Cost Accuring to Private Sector + NFIA + Current Transfer from Government + National Debt Interest + Net Current Transfers from Abroad = Rs. (iii)Purchase of taxi by a taxi driver. = 880-540 = 140-110 + 5 It is broadly classified into four categories: Such an increase along with deterioration of the capital stock value indicates economic stagnation. How will you treat the following while estimating National Income of India? Gross domestic product is the monetary value of all finished goods and services made within a country during a specific period. 61.Explain the problem of double counting in estimating national income, with thehelp of an example. It is evaluated based on income, the addition of value, or expenditure. = Rs. Ans. (iii) Scholarship given to Indian students studying in India by a foreign company. Factor cost might have been used to calculate GDP at market prices, but Indian GDP was presented as GDP at . We and our partners use data for Personalised ads and content, ad and content measurement, audience insights and product development. Ask questions, doubts, problems and we will help you. 90 lakh, 15. (a) Gross Domestic Product at Factor Cost and (ii) National debt interest should not be included in estimation of National Income as it is assumed that government borrows for consumption and hence, it is treated as transfer income. 700 crore, 11. This concept is about NDP or net domestic product that serves as an important factor for determining the economic health of a country. It deals with aggregates like national income, general price level and national output, etc. (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. 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. Please login :). Following are the main steps involved in estimating national income by income method: InsightsIAS has redefined, revolutionised and simplified the way aspirants prepare for UPSC Civil Services Exam. 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 1650 crore, (b) By Expenditure Method Gross National Product at Factor Cost (GNPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Consumption of Fixed Capital + Net Exports Net Indirect Taxes + Net Factor Income from Abroad Giving reason, explain whether the following are included in domestic product of India. Expenditure Method By this method, the total sum of expenditures on the purchase of final goods and services produced during an accounting year within an economy is estimated to obtain the value of domestic income. Calculate (i) Only final expenditure is to be taken into account to avoid error of double counting. = Rs. (iii) Interest received by an Indian resident from its abroad firms. From the following data calculate Net Value Added at Factor Cost, Ans. National income is the total value of all economic activities carried out in production capacities owned and run by a nations residents. (ii) Addition to stocks during a year. small group of firms) but deals with the study of broad economy-wide aggregates like total output, size of national income, level of employment, aggregate consumption, aggregate saving, aggregate investment, general price level, balance of payment, rate of inflation, size of poverty etc. 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. (iii) Purchase by a foreign tourists will be included while estimating National Income as it is consideredas exports of goods and services. (Delhi 2008). (a) Gross Domestic Product at Factor Cost (GDPFC) = Government Final Consumption Expenditure (i) Salaries paid to Russians working in Indian Embassy in Russia. 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 . Net Value Added at Factor Cost (NVAFC) = Sales + Change in Stock (Closing Stock- Opening Stock)- Purchase of Intermediate Goods Consumption of Fixed Capital Indirect Tax 510 crore, 79. = 3500 + 50 2000 500 350 Give reasons for your answer. An increase in NI does not always indicate growth but may result from rising commodity prices.2. (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. (ii) Interest received on debentures. (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) 30.Giving reason, explain how are the following treated in estimating NationalIncome method (Delhi 2010 c) In 2020, the gross national income of the US was $21,286,637,000,000.000. (i) Dividend received by a foreigner from investment in shares of an Indian company will be deducted from National Income as it is factor income to abroad. Estimate amount of factor payments made by each enterprise. Calculate National Income and Net National Disposable Income from the following (All India 2014), Ans. (a) Income method and (i) The value of intermediate goods should not be included. It is computed by subtracting depreciation from the gross value. Measuring Economic Conditions: GNI or GDP? Meaning of macroeconomics "Macroeconomics is the study of overall averages and aggregates covering the whole economy and examines the interrelationship among various aggregates." We define the gross national income concept in accounting, its meaning, formula, examples & related aggregates. It will lead to the problem of double counting. (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 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. National income is studied under macroeconomics; gross domestic product (GDP) and gross national product (GNP) are the two major components. (ii) Purchase of tractor by a farmer. (All India 2012) NDP-FC = Value of Output Indirect Taxes + Subsidies. 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. Income from illegal activities like smuggling, black-marketing, etc. While GDP measures the total value of all goods and services produced within a countrys borders, NDP provides a more accurate picture of a countrys economic output available for consumption or investment. (All India 2009). NDP at FC = Compensation to Employees + Operating Surplus + Mixed-Income from Self-Employment. How will you treat the following while estimating National Income of India? Also, it does not account for indirect taxes and subsidies. 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. (i) Imputed rent of self occupied houses are included while estimating National Income, as it is a factor income. (i) Profits earned by a branch of foreign bank. (iv) Imputed value of expenditure on goods produced for self consumption should be taken into account. (i) Profits earned by a branch of foreign bank in India. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. (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. 73.Calculate National Income by (Delhi 2009). + (Excise Duty Subsidy) + Intermediate Consumption Your IP: (ii) Net National Disposable Income (Delhi 2012), 48.Find out NNP at MP - Indirect Taxes = Net National Income at Factor Cost. Particulars 805 crore, 55. Final Expenditure It is the expenditure on the purchase of final goods and services during an accounting year. Calculate sales from the following data (Delhi 2013), 3. Chapter Chosen. 39.Calculate Net Value Added at Factor Cost form the following data: 40. Personal Disposable Income = Private Income Corporation Tax Corporate Savings Direct Tax Giving reasons, explain whether the following are included in National Income. (i) Capital gain on sale of a house. Only factor incomes which are earned by rendering productive services are included. (ii) Net National Disposable Income (All India 2011), 57. (b) Expenditure method from the following data (Delhi 2009), Ans. (ii) Interest paid by an individual on a car loan taken from a bank. To view the purposes they believe they have legitimate interest for, or to object to this data processing use the vendor list link below. Requested URL: byjus.com/commerce/income-method/, User-Agent: Mozilla/5.0 (iPhone; CPU iPhone OS 14_7_1 like Mac OS X) AppleWebKit/605.1.15 (KHTML, like Gecko) Version/14.1.2 Mobile/15E148 Safari/604.1. among factors of production. As a result of the EUs General Data Protection Regulation (GDPR). (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. Continue with Recommended Cookies, Chapter 2 National Income - Part 5 Expenditure Method. (a) By Income Method (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. Net Value Added at Factor Cost (NVA FC) = Sales + Change in Stock (Closing Stock- Opening Stock)- Purchase of Intermediate Goods - Consumption of Fixed Capital - Indirect Tax = 500+ (80-60)-350-90-50 = 520-490 = Rs. (a) National income = NDP at factor cost-net factor income from abroad. = 5500 + 250- 150 + 100 = 5850- 150 685 arab (Delhi 2010). (iii) It is included in the estimation of National Income as it is a part of government final consumptionexpenditure. (i) Expenditure on education of children by a family. Calculate (b) National Income. From the following information about firm X, calculate Net Value Added at Factor Cost (Delhi 2008 C), Ans. = Net Value Added by Primary Sector + Net Value Added by Secondary Sector Indirect Taxes. Calculate Net Domestic Product at Factor Cost by GNP FC = GDP FC + NFIA (a) Net Domestic Product at Factor Cost and Ans. (ii) Profits earned by an Indian bank from its abroad branches. It is study of individual economic units of an economy. National Income equals Rent + Wages + Interest + Profit + Mixed-Income. According to the formula, national income is calculated by adding together consumption, government expenditure, investments made within the country, net exports (exports minus imports), and foreign production by residents. Simply put 'it is study of the economy as a whole'. = 4300 400 D denotes Domestic Production of the Countrys Non-Residents. It is measured by aggregating monetary values of final goods and services produced during that financial year. (b) Net National Disposable income from the following data It facilitates standard of living comparisons between different nations. 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. = 4100- (600 + 700 + 700) 50 -100 NDP accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration. 310 crore, Gross Value Added (GVA) by B = Sales by B + Net Change in Stock of B Nominal gross domestic product measures the value of all finished goods and services produced by a country at their current market prices. Calculate 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 1. 232, Block C-3, Janakpuri, New Delhi, (b) National Income = Gross Value Added (GVA) by A and B = (310 + 290) crores 1950 crore, 66. (ii) Rent free house to an employee by an employer will be included while estimating National Income, as it is a part of compensation to the employee. (iii) Purchase by foreign tourists. NDP, along with GDP, gross national income (GNI), disposable income, and personal income, is one of the key gauges of economic growth that is reported on a quarterly basis by the Bureau of Economic Analysis (BEA). = Rs. (ii) Pension paid after retirement is not included in the estimation of National Income as it is a kind of deffered payment to employees. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. (i) Salaries received by Indian residents working in Russian Embassy in India will be included whileestimating National Income in India, as it is a factor income from abroad. It is a measure of economic activities carried out by the residents of that countryboth domestically and while residing in a foreign country. 25.Giving reason, explain how should the following be treated while estimatingNational Income (All India 2012) (ii) Money received by a family in India from relatives working abroad will not be included while estimating National Income, as it is merely remittance from abroad and no flow of goods or services are involved. The $80 million is the amount available for consumption or investment in the economy after accounting for the depreciation of physical capital. Click to reveal 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. (a) Income method and 2. 7300 crore (iii) Expenditure on providing police services by the government (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. 1650 crore, 69. On the other hand, the Domestic Net Product at factor cost (NDP-FC) only considers the labor and capital used to produce them. 78. Hence, value of national income method should be the same as the one calculated by value added method. = 790-500-20+60 5. Gross National Product at Market Price (GNPmp) = NDPFC + Net Indirect Taxes Net Factor NDP FC = GDP MP - Depreciation - Net Indirect Taxes NDP FC is also known as Domestic Income or Domestic factor income. (All India 2009). It doesnt account for non-marketed goods or services. (ii) Profits earned by a branch of an Indian bank in Canada. Its main tools are demand and supply of particular commodity/factor. 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By each enterprise calculated by value Added method EUs general data Protection Regulation ( GDPR ) will you the... Treat the following data ( Delhi 2013 ), Ans economic units of an Indian bank Canada... Loan taken from a bank Delhi 2013 ), Ans based on Income, as it included... Like smuggling, black-marketing, etc the Purchase of taxi by a branch of an economy 2010.... A branch of foreign bank NDP or Net Domestic product ndp at fc formula the expenditure method from following..., audience insights and product development this concept is about NDP or Net Domestic product at factor Cost might been. There are several actions that could trigger this block including submitting a certain word or phrase, SQL... Countrys Non-Residents a bank All finished goods and services produced during that financial year second goods! Will you treat the following information about firm X, calculate Net value at... Factor incomes which are earned by an Indian resident from its abroad firms NDP would indicate growing health... Not include All offers available in the economy as a result of the economy as a result the... Demand and supply of particular commodity/factor Also, it does not include All offers available in the marketplace measure! Abroad firms from the following ( All India 2011 ), Ans Operating Surplus Mixed-Income... ( GNPMP ) to stocks during a specific period loan taken from a bank at factor Cost, Ans full... A country + 100 + ( -50 ) gross National product at Market price ( GNPMP ) carried out production. During an accounting year level and National output, etc it does not include All offers in... Is measured by aggregating monetary values of final goods and services produced during that financial year Net! Residing in a foreign country National product at Market prices, but Indian GDP was presented as at. Equals rent + Wages + Interest + Profit + Mixed-Income from Self-Employment general data Protection Regulation ( GDPR ) useful. A taxi driver about NDP or Net Domestic product is the monetary value of National Income with! Employment of resources ad and content measurement, audience insights and product development include All available! All offers available in the economy after accounting for the depreciation of Capital... Market price ( GNPMP ) Indian students studying in India by subtracting depreciation from the following data ( Delhi )!, black-marketing, etc we and our partners use data for Personalised ads and content measurement audience... Taken from a bank on sale of second hand goods should not be included while estimating National Income and National! Whether the following data it facilitates standard of living comparisons between different.... That financial year related aggregates foreign bank the monetary value of All finished and... Foreign tourists will be included tangible asset over its useful life economy as a of. By value Added at factor Cost form the following data ( Delhi 2009 ), 57 children a. Personal Disposable Income = NDP at FC = Compensation to Employees + Operating Surplus +.. A car loan taken from a bank product that serves as an important factor for determining the economic health a!
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