National Income Accounting Class 12 Important Questions and Answers Macroeconomics Chapter 2

We have given these Economics Class 12 Important Questions Macroeconomics Chapter 2 National Income Accounting to solve different types of questions in the exam. Go through these National Income Accounting Class 12 Important Questions and Answers Solutions & Previous Year Questions to score good marks in the board examination.

Important Questions of National Income Accounting Class 12 Macroeconomics Chapter 2

Question 1.
Give one example of negative externality. (April re-exam 2018)
Answer:
“Environmental pollution caused by industrial plants” is an example of negative externalities.

Question 2.
Give the meaning of depreciation. (All India (C) 2014)
Or
Define ‘depreciation’. (All India 2011)
Answer:
Depreciation can be defined as a fall in the value of fixed assets due to normal wear and tear due to usage, passage of time or obsolesence.

Question 3.
Define national income. (Delhi 2014)
Answer:
National income can be defined as the sum total of factor incomes accruing to normal residents of a country within the domestic territory and from the rest of the world, in a period of one financial year.

Question 4.
Define national product. (Delhi 2014)
Answer:
National product can be defined as the money value of all goods and services produced by the normal residents of a country during a period of one financial year.

Question 5.
Define domestic product. (All India (C) 2014, 2011, 2010)
Answer:
The value of all factor incomes generated during an accounting year within the domestic territory of a country is termed as domestic product or domestic income of a country.

Question 6.
What is Nominal Gross Domestic Product? (Delhi 2011)
Answer:
Nominal Gross Domestic Product (GDP) refers to market value of the final goods and services produced within the domestic territory of a country during a financial year, as estimated using the current year prices. It is also called GDP at current price.

Question 7.
What is meant by Real Gross Domestic Product? (Delhi (C) 2011)
Answer:
Real Gross Domestic Product (GDP) refers to market value of the final goods and services produced within the domestic territory of a country during a financial year, as estimated using the base year prices. It is also called GDP at constant price.

Question 8.
What is transfer payment? (All India 2011)
Answer:
Transfer payments are all those unilateral payments corresponding to which there is no value addition in the economy, e.g. gifts, donations etc.

Question 9.
Define the problem of double counting in the computation of national income. State any two approaches to correct the problem of double counting. (Delhi 2019)
Answer:
Problem of double counting means including the value of some goods and services more than once in estimation of national income. In other words, the counting of the value of commodity more than once is called double counting. This leads to over estimation of the value of goods and services produced.

To avoid the problem of double counting, following two methods are used

Final output method According to this method, the value of intermediate goods is not considered. Only the value of final goods and services is considered.
Value added method Another method to avoid the problem of double counting is to estimafe the total value added at each stage of production.

Question 10.
“Gross Domestic Product (GDP) does not give us a clear indication of economic welfare of a country.” Defend or refute the given statement with valid reason. (Delhi 2019)
Answer:
I defend the above statement. GDP does not give us a clear indication of economic welfare of a country because it does not take into account the following

GDP does not throw light on equitable distribution of income.
It does not take into account non-monetary exchanges.
It does not consider the effect of positive and negative externalities.

Question 11.
Given nominal income, how can we find real income? Explain. (March 2018)
Answer:
Nominal income measures income at current year prices with no adjustment for the effect of inflation while real income is measured on base year prices which show real growth of economy. We can explain it with the help of numeric example given below
Assume,
Nominal Income = 270 crore
Price Index = 135
Real Income = \(\frac { Nominal Income }{ Price Index }\) × 100
= \(\frac { 270 }{ 135 }\) × 100 = ₹ 200 crore

Question 12.
If the Real GDP is ₹ 400 and Nominal GDP is ₹ 450, calculate the Price Index (base = 100). (All India 2015)
Answer:
Real GDP = ₹ 400
Nominal GDP = ₹ 450
Price index = \(\frac { Nominal. GDP }{ Real. GDP }\) × 100
= \(\frac { 450 }{ 400 }\) × 100 = ₹ 112.5

Question 13.
If the Real GDP is ₹ 500 and Price Index (base = 100) is 125, calculate the Nominal GDP. (All India 2015)
Answer:
Real GDP = ₹ 500 Price Index = 125
Nominal GDP = ?
Price index = \(\frac { Nominal. GDP }{ Real. GDP }\) × 100
125 = \(\frac { Nominal. GDP }{ 500 }\) × 100
∴ Nominal GDP = 125 × 5 = ₹ 625

Question 14.
If the Nominal GDP is ₹ 600 and Price Index (base = 100) is 120, calculate the Real GDP. (All India 2015)
Answer:
Nominal GDP = ₹ 600 Price Index = 120
Real GDP = ?
Price Index = \(\frac { Nominal. GDP }{ Real. GDP }\) × 100
120 = \(\frac { 600 }{ Real. GDP }\) × 100
Real GDP = \(\frac { 600 }{ 120 }\) × 100
= ₹ 500

Question 15.
If Real GDP is ₹ 200 and Price Index (with base = 100) is 110, calculate Nominal GDP. (Delhi 2015)
Answer:
Solve as Q. No. 5 on page 17.
Nominal GDP = ₹ 220

Question 16.
If the Nominal GDP is ₹ 1,200 and Price Index (with base = 100) is 120, calculate Real GDP. (Delhi 2015)
Answer:
Solve as Q. No. 6 on page 17.
Real GDP = ₹ 1,000

Question 17.
If the Real GDP is ₹ 300 and Nominal GDP is ₹ 330, calculate Price Index (base = 100). (Delhi 2015)
Answer:
Solve as Q. No. 4 on page 17.
Price Index = 110

Question 18.
If the Nominal Gross Domestic Product = ₹ 4,400 and the Price Index (base = 100) = 110, calculate the Real Gross Domestic Product. (Foreign 2015)
Answer:
Solve as Q. No. 6 on page 17.
Real GDP = ₹ 4,000

Question 19.
Distinguish between real and nominal gross domestic product. (All India (C) 2014, All India 2010)
Answer:
Differences between real and nominal gross domestic product are:

Basis	Real GDP	Nominal GDP
Definition	It refers to the total market value of the output at the base year prices.	It refers to the total market value of the output at the current year prices.
Changes	Its value can change only when the volume or quantity of output changes overtime.	Its value can change only with change in the prices overtime.
Indication	It can be treated as an index of economic growth i.e. higher real GDP indicates higher economic growth.	It can not be treated as an index of economic growth. Infact, it indicate inflation.

Question 20.
“Higher Gross Domestic Product (GDP) means greater per capita availability of goods in the economy.” Do you agree with the given statement? Give valid reason in support of your answer. (All India 2019)
Answer:
GDP is the sum total of value of goods and services created by a country in a particular year. So, we may be tempted to treat higher level of GDP of country as an index of greater well being of the people of that country. But, these are the reasons why this may not be correct

Distribution of GDP – how uniform is it
Non-monetary exchanges
Externalities
Composition of GDP

Question 21.
Explain the meaning of Real Gross Domestic Product and Nominal Gross Domestic Product, using a numerical example. (All India 2019)
Answer:
Real gross domestic product:
Real Gross Domestic Product (GDP) refers to market value of the final goods and services produced within the domestic territory of a country during a financial year, as estimated using the base year prices. It is also called GDP at constant price.

Nominal gross domestic product:
Nominal Gross Domestic Product (GDP) refers to market value of the final goods and services produced within the domestic territory of a country during a financial year, as estimated using the current year prices. It is also called GDP at current price.

The following numerical example will help in understanding this concept:
Real GDP = Nominal GDP/Deflator
e.g. If Real GDP was 11.84 trillion in 2017 and the nominal GDP was 19.39 trillion, then the deflator was 1.13, i.e. 11.84 trillion = 19.39 trillion/1.13

Question 22.
How is Real Gross Domestic Product different from Nominal Gross Domestic Product? Explain using a numerical example. (All India 2019)
Or
Distinguish between Real Gross Domestic Product and Nominal Gross Domestic Product. Which of these is a better index of welfare of the people and why? (All India 2013)
Or
Distinguish between Real and Nominal Gross Domestic Product. (Delhi 2010)
Answer:
Differences between real and nominal gross domestic product:

Basis	Real GDP	Nominal GDP
Definition	It refers to the total market value of the output at the base year prices.	It refers to the total market value of the output at the current year prices.
Changes	Its value can change only when the volume or quantity of output changes overtime.	Its value can change only with change in the prices overtime.
Indication	It can be treated as an index of economic growth i.e. higher real GDP indicates higher economic growth.	It can not be treated as an index of economic growth. Infact, it indicate inflation.

Numerical Example:
The following numerical example will help in understanding this concept:
Real GDP = Nominal GDP/Deflator
e.g. If Real GDP was 11.84 trillion in 2017 and the nominal GDP was 19.39 trillion, then the deflator was 1.13, i.e. 11.84 trillion = 19.39 trillion/1.13

Real GDP is a better index of welfare of the people. When Real GDP rises, flow of goods and services tends to rise, other things remaining constant. This means greater availability of goods per person, implying higher level of welfare.

Question 23.
What is real GDP? State three limitations of GDP as an index of economic welfare. (Delhi (C) 2016)
Answer:
Real GDP:
Real Gross Domestic Product (GDP) refers to market value of the final goods and services produced within the domestic territory of a country during a financial year, as estimated using the base year prices. It is also called GDP at constant price.

The three limitations of using GDP as an index of welfare are:

It fails to indicate the distribution of income among the residents of the country.
Non-monetary transactions are ignored.
Externalities are not considered.

Question 24.
Explain why subsidies are added to and indirect taxes are deducted from domestic product at market price to arrive at domestic product at factor cost? (Delhi (C) 2010)
Answer:
Subsidies by government are grants that decrease the price of a commodity, whereas indirect taxes are paid by a firm and households that increase the final price of a commodity. So, subsidies basically reduce the market price and indirect taxes increase the market price. Hence, to derive Gross Domestic Product at Factor Cost from Gross Domestic Product at Market Price, we deduct indirect taxes and add subsidies.

It may be expressed as
GDP_FC = GDP_MP – Indirect Tax + Subsidies

Question 25.
Giving reasons, state whether the following statements are true or false,
(i) Real gross domestic product can be equal to nominal gross domestic product.
(ii) Savings are a stock.
(iii) Butter is only a final product. (Delhi (C) 2012)
Answer:
(i) The statement is true. Real gross domestic product and nominal gross domestic product will be equal if price level remains constant. However, this holds true only theoretically.
(ii) The statement is false. Savings are always with reference to a time period. In other words, savings are a flow concept.
(iii) The statement is false. Butter is only a final product when purchased by households for consumption. Butter purchased by bakeries for making cakes and pastries is not a final product. Butter for them is an intermediate good as it is used as raw material for further production.

Question 26.
Find Net Value Added at Factor Cost. (Delhi 2016)
Answer:

Items	₹ (in lakh)
(i) Durable Use Producer Goods with a Life Span of 10 Years	10
(ii) Single Use Producer Goods	5
(iii) Sales	20
(iv) Unsold Output Produced During the Year	2
(v) Taxes on Production	1

Answer:
Net Value Added at Factor Cost (NVA_FC)
= Sales + Unsold Output Produced During the Year – Single use Producer Goods – Depreciation on Durable use Producer Goods – Taxes on Production
= 20 + 2 – 5 – 1 – 1 = ₹ 15 lakh

Question 27.
Find Net Value added at Market Price. (Delhi 2016)

Items	₹ (in lakh)
(i) Fixed Capital Good with a Life Span of 5 Years	10
(ii) Raw Materials	5
(iii) Sales	20
(iv) Net Change in Stock	2
(v) Taxes on Production	1

Answer:
Net Value Added at Market Price (NVA_MP)
= Sales + Net Change in Stock – Raw Materials – Depreciation on Fixed Capital Good
= 25 + (-2) – 6 – 3 = ₹ 14 lakh

Question 28.
Find Gross Value Added at Market Price. (Delhi 2016)

Items	₹ (in lakh)
(i) Depreciation	20
(ii) Domestic Sales	200
(iii) Net Change in Stocks	(-)10
(iv) Exports	10
(v) Single Use Producer Goods	120

Answer:
Gross Value Added at Market Price (GVA_MP)
(Domestic Sales + Exports) + Net Change in Stocks – Single use Producer Goods
= (200 +10) + (-10) – 120 = ₹ 80 lakh

Question 29.
Calculate Gross Value Added at Factor Cost. (Delhi 2012)

Contents	₹ (in crore)
(i) Units of Output Sold (units)	1000
(ii) Price Per Unit of Output	30
(iii) Depreciation	1000
(iv) Intermediate Cost	12000
(v) Closing Stock	3000
(vi) Opening Stock	2000
(vii) Excise Duty	2500
(viii) Sales Tax	3500

Answer:
Sales = Units of Output x Price Per Unit of Output
= 1,000 × 30
= ₹ 30,000 crore
Value of Output
= Sales + Change in Stock = 30000 + (1000)
= ₹ 31,000 crore, Where
Change in Stock = Closing Stock – Opening Stock
= 3000 – 2,000 = ₹ 1000 crore
Hence, Gross Value Added at Factor Cost
(GVA_FC) = Value of Output – Intermediate Cost – Net Indirect Taxes (Excise Duty + Sales Tax)
= 31,000 – 12,000 – (2,500 + 3,500)
Gross Value Added at Factor Cost (GVA_FC)
= ₹ 13,000 crore

Question 30.
Calculate Net Value Added at Factor Cost. (Delhi 2012)

Contents	₹ (in crore)
(i) Consumption of Fixed Capital	600
(ii) Import Duty	400
(iii) Output Sold (units)	2000
(iv) Price Per Unit of Output	10
(v) Net Change in Stocks	(-)50
(vi) Intermediate Cost	10000
(vii) Subsidy	500

Answer:
Sales = Output Sold × Price Per Unit of Output
= ₹ 2000 × 10 = ₹ 20,000 crore
Now, Value of Output = Sales + Change in Stock
= ₹ 20000 + (-50)
= ₹ 19,950 crore
Gross Value Added at Market Price (GVA_MP)
= Value of Output – Intermediate Cost
= ₹ 19,950 – 10,000
= ₹ 9,950 crore
Hence,
Net Value Added at Factor Cost (NVA_FC)
= GVA_MP – Consumption of Fixed Capital – Net Indirect Tax
= 9,950 – 600 – (400 – 500) = ₹ 9,450 crore
[Where, Net Indirect Tax = Import Duty – Subsidy] [As import duty is an indirect tax]

Question 31.
Find Net Value Added at Market Price. (Delhi 2012)

Contents	₹ (in crore)
(i) Output Sold (units)	800
(ii) Price Per Unit of Output	20
(iii) Excise	1600
(iv) Import Duty	400
(v) Net Change in Stock	(-)500
(vi) Depreciation	1000
(vii) Intermediate Cost	8000

Answer:
Sales = Output Sold × Price Per Unit of Output = 800 × 20 = ₹ 16,000 crore
Now, Value of Output = Sales + Net Change in Stock
= 16000 + (-500)
= ₹ 15,500 crore
Now, Gross Value Added at Market Price (GVA_MP) = Value of Output – Intermediate Cost
= 15,500 – 8,000 = ₹ 7,500 crore
Hence, Net Value Added at Market Price
(NVA_MP) = GVA_MP – Depreciation
= 7,500 – 1,000 crore = ₹ 6,500 crore

Question 32.
Find Net Value Added at Market Price. (All India 2012)

Contents	₹ (in crore)
(i) Depreciation	700
(ii) Output Sold (units)	900
(iii) Price Per Unit of Output	40
(iv) Closing Stock	1000
(v) Opening Stock	800
(vi) Sales Tax	3000
(vii) Intermediate Cost	20000

Answer:
Net Value Added at Market Price = (Output Sold × Price Per Unit of Output) + (Closing Stock – Opening Stock) – Intermediate Cost – Depreciation
= (900 × 40) + (1,000 – 800) – 20,000 – 700
= 36,000 + 200 – 20,000 – 700 = 36,200 – 20,700
= ₹ 15,500 crore

Question 33.
Find Gross Value Added at Factor Cost. (All India 2012)

Contents	₹ (in crore)
(i) Units of Output Sold	2000
(ii) Price Per Unit of Output	20
(iii) Depreciation	2000
(iv) Change in Stock	(-)500
(v) Intermediate Cost	15000
(vi) Subsidy	3000

Answer:
Gross Value Added at Factor Cost
(GVA_PC) = (Output Sold × Price Per Unit) + Change in Stock – Intermediate Cost + Subsidy
= 2000 × 20 + (-500) – 15000 + 3000
= ₹ 40,000 – 15,500 + 3,000
= ₹ 27,500 crore

Question 34.
Find out Net Value Added at Factor Cost. (All India 2012)

Contents	₹ (in crore)
(i) Price Per Unit of Output	25
(ii) Output Sold (units)	1000
(iii) Excise Duty	5000
(iv) Depreciation	1000
(v) Change in Stock	(-)500
(vi) Intermediate Cost	7000

Answer:
Net Value Added at Factor Cost
(NVA_PC) = (Price Per Unit of Output x Output Sold) + Change in Stock – Intermediate Cost – Depreciation – Excise Duty
= (25 × 1,000) – 500 – 7,000 – 1,000 – 5000
= 25,000 – 13,500 = ₹ 11,500 crore

Question 35.
From the following data, calculate Net Value Added at Factor Cost. (Delhi 2011)

Contents	₹ (in crore)
(i) Purchase of Intermediate Goods	500
(ii) Sales	750
(iii) Import of Raw Materials	50
(iv) Depreciation	60
(v) Net Indirect Taxes	100
(vi) Change in Stock	(-)30
(vii) Exports	20

Answer:
Net Value Added at Factor Cost
(NVA_FC) = Value of Output (Sales + Change in Stock) – Purchase of Intermediate Goods – Depreciation – Net Indirect Taxes
= 750 + (-30) – 500 – 60 – 100
= 750 – 690 = ₹ 60 crore

Question 36.
Why are net exports included in national income? Explain. (Delhi 2012)
Answer:
Net exports represent the excess of exports over imports. The goods exported are a part of domestic product of India. National income is the sum total of all goods and services i.e. the domestic product, produced by the residents. Tharefore, net exports are included in national income.

Question 37.
Classify the following statements as revenue receipts or capital receipts. Give valid reasons in support of your answer. (All India 2019)
(a) Financial help from a multinational corporation for victims in a flood affected area.
(b) Sale of shares of a Public Sector Undertaking (PSU) to a private company, Y Ltd
(c) Dividends paid to the Government by the State Bank of India.
(d) Borrowings from International Monetary Fund (IMF).
Answer:
(a) Revenue receipt as neither impacts assets nor liabilities of the government.
(b) Capital receipt as it reduces assets of the government.
(c) Revenue receipt as if was no impact on assets or liabilities.
(d) Capital receipt as it increases liabilities.

Question 38.
State any four precautions that are taken while calculating national income by expenditure method. (Delhi (C) 2016)
Or
What precautions (any four) should he taken while estimating national income by expenditure method? (All India (C) 2015)
Answer:
While using expenditure method, the following precautions are required to be taken, related to the calculation of National Income

Only final expenditure is to be taken into account to avoid error of double counting.
Expenditure on second hand goods is not to be included, because value of second hand goods has already been accounted for during the year of their production.
Expenditure on shares and bonds is not to be included in total expenditure, as these are mere paper claims and are not related to the production of final goods and services.
Expenditure on transfer payments by the government is not to be included.
Imputed value/estimated value of expenditure on goods produced for self-consumption should be taken into account, as these goods are reflected in the estimation of Gross Domestic Product (GDP).

Question 39.
How are the following treated while calculating national income? Give reasons for your answer. (All India (C) 2016)
(i) Receipts from sale of land.
(ii) Profits earned by the branch of an Indian bank in France.
Answer:
(i) Receipts from sale of land Land is a free gift of nature and hence its sale would not be included while calculating national income.
(ii) Profits earned by the branch of an Indian bank in France Since profit is being earned by a normal resident of India, therefore it will be included as factor income earned from abroad.

Question 40.
How should the following be treated while calculating national income? Give reasons for your answer. (All India (C) 2016)
(a) Profits earned by a branch of foreign bank in India.
(b) Salary received by Indian employees working in American embassy in India.
Answer:
(a) Profits earned by a branch of foreign bank in India Since the profit is being earned by a branch of foreign bank, it will be considered as factor income to abroad and hence will not be included.
(b) Salary received by Indian employees working in American embassy in India As this salary is being received by an Indian employee (normal resident of India) from a foreign country in India, therefore it will be included as factor income from abroad.

Question 41.
How should the following be treated while calculating national income? Give reasons for your answer. (All India (C) 2016)
(i) Interest received by households from banks.
(ii) Dividend received by shareholders.
Answer:
(i) Interest received by households from banks Money deposited with banks is used for productive purposes. Bank is a production unit. Therefore, interest received is a factor income and hence should be included.
(ii) Dividend received by shareholders is a part of the profits of production units which is distributed to the owners or shareholders. Therefore, it is included as it is a component of national income.

Question 42.
How should the following be treated in the calculation of national income? Give reasons for your answer. (Delhi (C) 2016)
(i) Government expenditure on street lighting.
(ii) Sale of an old house.
Answer:
(i) Government expenditure on street lighting It is government’s final consumption expenditure and is included while calculating national income as a component of expenditure method.
(ii) Sale of an old house It does not add to the current flow of goods and services. Its value was included in the national income during the year when it was newly constructed.

Question 43.
How should the following be treated while calculating national income? Give reasons for your answer.
(i) Purchases by foreign tourists.
(ii) Purchase of shares by a domestic firm. (Delhi (C) 2016)
Answer:
(i) Purchases by foreign tourists Such expenditure by foreign tourists on domestic product is treated as export of goods and services. Therefore, it is included while calculating national income.
(ii) Purchase of shares by a domestic firm Purchase of shares is merely a financial transaction not resulting in any production of goods and services, therefore, it is not included while calculating national income.

Question 44.
How should the following be treated in the calculation of national income? Give reasons for your answer. (Delhi (C) 2016)
(i) Interest on public debt
(ii) Bonus given to railway employees
Answer:
(i) Interest on public debt It is not included in the calculation of national income because interest on public debt is interest on loan taken by the government for consumption purpose and not for investment.
(iii) Bonus given to railway employees It is included in the estimation of national income because bonus given to employees is a part of compensation of employees which is a component of income method of calculating National Income.

Question 45.
From the following data, calculate Net Value Added at Factor Cost. (Delhi (C) 2015)

Contents	₹ (in lakhs)
(i) Sales	300
(ii) Opening Stock	10
(iii) Depreciation	30
(iv) Intermediate Consumption	120
(v) Exports	50
(vi) Change in Stock	20
(vii) Net Indirect Taxes	15
(viii) Net Factor Income to Abroad	10

Answer:
Net Value Added at Factor Cost (NVA_FC)
= Sales + Change in Stock – Intermediate Consumption – Depreciation – Net Indirect Taxes
= 300 + 20 – 120 – 30 – 15 = ₹ 155 lakh

Question 46.
Describe the expenditure method of calculating Gross Domestic Product at Market Price. (All India (C) 2015)
Answer:
For calculating Gross Domestic Product at Market Price (GDP_MP) by this method, following steps should be taken-
Step I Estimation of final expenditure
It is the expenditure on the purchase of final goods and services during an accounting year. It is broadly classified into four categories

Estimation of private final consumption expenditure The total expenditure on final goods and services by individuals, households and non-profit private institution which are serving society are termed as private final consumption expenditure.
Estimation of government final consumption expenditure The expenditure on final goods and services by the government and government organisations are termed as government final consumption expenditure.
Estimation of investment expenditure The expenditure incurred by the firms (producers) on capital goods are termed as investment expenditure. It is also referred to as gross domestic capital formation.
Estimation of net export It is the difference between exports and imports during an accounting year.

Step II Summation of above expenditures
The sum of all the above expenditure on final products of all the sectors of the economy gives us Gross Domestic Product at Market Price (GDP_MP).

Question 47.
Calculate Gross Value Added at Factor Cost. (All India (C) 2015)

Contents	₹ (in lakhs)
(i) Domestic Sales	3000
(ii) Change in Stock	(-)100
(iii) Depreciation	300
(iv) Intermediate Consumption	2000
(v) Exports	500
(vi) Indirect Taxes	250
(vii) Net Factor Income from Abroad	(-)50

Answer:
Gross Value Added at Factor Cost (GVA_PC)
= (Domestic Sales + Exports) + Change in Stock – Intermediate Consumption – Indirect Taxes
= (3,000 + 500) + (-100) – 2,000 – 250
= ₹ 1150 lakh

Question 48.
What precautions should be taken while estimating national income by income method? (All India (C) 2015)
Answer:
While using income method for computing National Income, the following precautions should be taken (any 4)

Income from illegal activities like smuggling, theft, gambling etc, should not be included.
Corresponding to production for self consumption, the generation of income should be taken into account.
Brokerage on the sale/purchase of shares and bonds is to be included.
Income in terms of windfall gains should not be included.
Transfer earnings like old age pensions, unemployment allowances, scholarships, pocket expenses etc, should not be included.

Question 49.
Calculate Net Value Added at Market Price. (All India (C) 2015)

Contents	₹ (in lakhs)
(i) Intermediate Consumption	1000
(ii) Consumption of Fixed Capital	50
(iii) Net Indirect Taxes	150
(iv) Sales	2000
(v) Exports	200
(vi) Net Factor Income to	(-)100
(vii) Change in Stock	(-)50

Answer:
GVA_MP = Sales + Change in Stock – Intermediate Consumption
= 2,000+ (-50) – 1,000 = ₹ 950 lakh
NVA_MP = GVA_MP – Consumption of Fixed Capital
= 950 – 50 = ₹ 900 lakh

Question 50.
What (any four) precautions should be taken while estimating national income by production method? (All India (C) 2015)
Or
Explain the precautions that are taken while estimating national income by value added method. (All India 2017)
Answer:
While using value added/production method for computing national income, the following precautions should be taken (any 4)

The value of intermediate goods should not be included.
Purchase and sale of second hand goods should be excluded.
Imputed value of self-consumed goods should be included.
Value of own account production should be included.
Value of self-consumed services should not be included in the estimation of National Income.
Commission earned on account of sale and purchase of second hand goods is included.
Imputed rent on the owner occupied house is also taken into the account.
The value added in the government sector is equal to compensation of employees only.

Question 51.
From the following data, calculate “Net Value Added at Factor Cost”. (All India (C) 2014)

Contents	₹ (in lakhs)
(i) Sales	400
(ii) Change in Stock	-20
(iii) Intermediate Consumption	200
(iv) N&t Indirect Taxes	40
(v) Exports	50
(vi) Depreciation	30

Answer:
Value of Output = Sales + Change in Stock
= 400 – 20 = ₹ 380 lakh
GVA_MP = Value of Output – Intermediate Consumption
= 380 – 200 = ₹ 180 lakh
NVA_FC = GVA_MP – Depreciation – Net Indirect Taxes
= 180 – 30 – 40 = ₹ 110 lakh

Question 52.
Calculate Net Value Added at Factor Cost from the following data. (Delhi 2014)

Contents	₹ (in lakhs)
(i) Intermediate Consumption	300
(ii) Change in Stock	50
(iii) Net Indirect Taxes	70
(iv) Sales	500
(v) Consumption of Fixed Capital	20
(vi) Imports	40

Answer:
Value of Output = Sales + Change in Stock
= 500 + 50 = ₹ 550
Gross Value Added at Market Price (GVA_MP)
= Value of output – intermediate Consumption
= 550 – 300 = ₹ 250 lakh
Net Value Added at Factor Cost (NVA_FC) = GVA_MP – Consumption of Fixed Capital – Net Indirect Taxes (NIT)
NVA_FC = 250 – 20 – 70 = ₹ 160 lakh

Question 53.
Calculate sales from the following data. (All India 2013)

Contents	₹ (in lakhs)
(i) Subsidies	200
(ii) Opening Stock	100
(iii) Closing Stock	600
(iv) Intermediate Consumption	3000
(v) Consumption of Fixed Capital	700
(vi) Profit	750
(vii) Net Value Added at Factor Cost	2000

Answer:
Gross Value Added at Market Price (GVA_MP)
= Net Value Added at Factor Cost (NVA_FC) – Subsidies + Consumption of Fixed Capital
GVA_MP = 2,000 – 200 + 700 = ₹ 2,500 lakh
Also, (GVA_MP) = Value of Output (Sales + Change in Stock) – Intermediate Consumption
2,500 = Sales + (600 – 100) – 3,000 Sales
= 2,500 + 3,000 – 500
= 5,500 – 500
Sales = ₹ 5,000 lakh

Question 54.
Calculate sales from the following data. (Delhi 2013)

Contents	₹ (in lakhs)
(i) Intermediate Cost	700
(ii) Consumption of Fixed Capital	80
(iii) Change in Stock	(-)50
(iv) Subsidy	60
(v) Net Value Added at Factor Cost	1300
(vi) Exports	50

Answer:
Gross Value Added at Market Price (GVA_MP)
= Net Value Added at Factor Cost (NVA_FC) – Subsidies + Consumption of Fixed Capital
GVA_MP = ₹ 1,300 -60 + 80 = ₹ 1,320 lakh
Also, GVA_MP = Value of Output (Sales + Change in Stock) – Intermediate Cost
1,320 = Sales + (-50) – 700
Sales = 1,320 + 50 + 700
Sales = ₹ 2,070 lakh

Question 55.
Calculate sales from the following data. (Delhi 2013)

Contents	₹ (in lakhs)
(i) Net Value Added at Factor Cost	560
(ii) Depreciation	60
(iii) Change in Stock	(-)30
(iv) Intermediate Cost	100
(v) Exports	200
(vi) Indirect Taxes	60

Answer:
Gross Value Added at Market Price (GVA_MP)
= Net Value Added at Factor Cost (NVA_FC) + Net Indirect Taxes (NIT) + Depreciation
= 560 + 60 + 60 = ₹ 680 lakh, Where
NIT = Indirect Tax – Subsidies = 60 – 0 = ₹ 60 lakh
Also, GVA_MP = Value of Output (Sales + Change in Stock) – Intermediate Cost
680 = Sales + (- 30) – 1,000
Sales = 680 + 1,000 + 30 = ₹ 1,710 lakh

Question 56.
Giving reason, explain how should the following be treated in estimating National Income. (Delhi 2012)
(i) Expenditure on fertilisers by a farmer.
(ii) Purchase of tractor by a farmer.
Answer:
(i) Expenditure on fertilisers by a farmer It is ‘not included’ in the estimation of National Income as it is an intermediate consumption, as fertilisers are used for furthei; production.
(ii) Purchase of a tractor by a farmer It is included’ in the estimation of National Income as it is capital formation or investment expenditure.

Question 57.
Giving reason, explain how should the following be treated in the estimation of National Income. (Delhi 2012)
(i) Payment of bonus by a firm.
(ii) Payment of interest on loan taken by an employee from the employer.
Answer:
(i) Payment of bonus by a firm: It is ‘included’ in the estimation of National Income as it is a part of compensation of employee.
(ii) Payment of interest on loan taken by an employee from the employer It will ‘not included’ in the estimation of National Income as it will be treated as transfer income and also loan is taken for consumption purpose.

Question 58.
Giving reason, explain how should the following be treated in estimation of National Income. (Delhi 2012)
(i) Interest paid by banks on deposits by individuals.
(ii) National debt interest.
Answer:
(i) Interest paid by banks on deposits by individuals It should be ‘included’ in estimation of National Income as it will be treated as factor income.
(ii) National debt interest It 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.

Question 59.
Giving reason, explain how should the following be treated while estimating National Income. (All India 2012)
(i) Expenditure on free services provided by government.
(ii) Payment of interest by a government firm.
Answer:
(i) Expenditure on free services provided by government It should be ‘included’ in the estimation of National Income, as it is a final expenditure of the government.
(ii) Payment of interest by a government firm It should ‘not be included’ in the estimation of National Income, as it is a transfer payment.

Question 60.
How should the following be treated while estimating National Income? Give reasons. (All India 2012)
(i) Expenditure on education of children by a family.
(ii) Payment of electricity bill by a school.
Answer:
(i) Expenditure on education of children by a family It is ‘included’ in the estimation of National Income as it is a part of final consumption expenditure by the household,
(ii) Payment of electricity bill by a school It is ‘not included’ in the estimation of National Income as it is a part of intermediate consumption.

Question 61.
Giving reason, explain the treatment assigned to the following while estimating National Income. (All India 2011)
(i) Family members working free on the farm owned by the family.
(ii) Payment of interest on borrowings by general government.
Answer:
(i) Family members working free on the farm owned by the family It should be ‘included’ as it is a part of mixed income of self employed.
(ii) Payment of interest on borrowings by general government It should ‘not be included’ in the estimation of National Income as it is not mentioned and not clear 1 whether the government has borrowed for consumption purpose or for production purpose.

Question 62.
Giving reason, explain the treatment assigned to the following while estimating National Income. (All India 2011)
(i) Social security contributions by employees.
(ii) Pension paid after retirement.
Answer:
(i) Social security contributions by employees It is ‘included’ in the estimation of National Income, as it is a part of compensation of employees and it is an earned income.
(ii) Pension paid after retirement It is ‘included’ in the estimation of National Income as it is a kind of deffered payment to employees.

Question 63.
Giving reasons, explain the treatment assigned to the following while estimating National Income
(i) Expenditure on maintenance of a building.
(ii) Expenditure on adding a floor to the building. (All India 2011)
Answer:
(i) Expenditure on maintenance of a building It will ‘not be included’ in national income because it is an intermediate expenditure.
(ii) Expenditure on adding a floor to the building It will be included because it is a part of domestic capital formation.

Question 64.
Giving reason, explain how are the following be treated in estimation of National Income by income method. (All India 2010)
(i) Interest paid by banks on deposits.
(ii) National debt interest.
Answer:
(i) Interest paid by banks on deposits It will be ‘included’ while estimating National Income by income method, as it is an income earned by depositors and bank use these deposits for commercial purposes.
(ii) National debt interest It will ‘not be included’ while estimating National Income by income method, as the government takes loan for both productive and non-productive activities.

Question 65.
Giving reason, explain how are the following treated in estimating National Income method. (Delhi (C) 2010)
(i) Interest on a car loan paid by an individual.
(ii) Interest on a car loan paid by a government owned company.
Answer:
(i) Interest on a car loan paid by an individual It should ‘not be included’ while estimating National Income as the loan is taken for consumption purpose.
(ii) Interest on a car loan paid by a government owned company It should be ‘included’ while estimating National Income as it is a part of government final consumption expenditure.

Question 66.
Define the following.
(a) Value addition
(b) Gross domestic product
(c) Flow variables
(d) Income from property and entrepreneurship (All India 2019)
Answer:
(a) Value addition: It refers to difference in the value of output and intermediate expenses in the production. We arrive at this by using product method of national income measurement.
Value Added = Value of Output- Intermediate Cost
Value of Output = Sales + Change in Stock Change in Stock = Closing Stock – Opening Stock
(b) Gross Domestic Product (GDP) It refers to total value of final goods and services produced within the domestic territory of an economy in a fiscal year. It only includes the value of final goods.

(c) Flow variable It refers to a variable which is measured over a period of time, it is dynamic in nature, e.g. Savings.

(d) Income from property and entrepreneurship It refers to income received in the form of factor income from labour services on capital invested abroad, e.g. Rent received by an indian from its property abroad.

Question 67.
Given the following data, find the values of “Gross Domestic Capital Formation” and “Operating Surplus”. (All India 2019)

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

Answer:
Let Gross Domestic Capital Formation = x
Operating Surplus = y
We know,
(a) GDP_MP = Private Final Consumption Expenditure (PFCE) + Government Final Consumption Expenditure (GFCF) + Net Exports (NX) …….(i)
Also,
GDP_MP = NNP_FC + Depreciation – Net Factor Income from Abroad (NFIA) + Net Indirect Taxes (NIT)
= 22,100 + 500 – (-150) + 700 = ₹ 23,450 crore
Now, putting values in eq. (i)
23,450 = 7,200 + 26,100 + x + 3,400
x = 6,750 crore

(b) NDP_FC = Compensation of Employees (CoE) + Operating Surplus + Mixed Income ……(i)
Also,
NDP_FC = NNP_FC – NFIA ⇒ 22,100 – (-150) = ₹ 22,250 crore
Now, putting value in eq. (i)
22,250 = 12,000 + y + 4800
∴ y = ₹ 5,450 crore

Question 68.
(a) Define ‘Net Factor Income from Abroad’. How is it different from ‘Net Exports’?
(b) Calculate the value of “Rent” from the following data (All India 2019)

Particulars	₹ (in Crore)
(i) Gross Domestic Product at Market Price	18,000
(ii) Mixed Income of Self-employed	7,000
(iii) Subsidies	250
(iv) Interest	800
(v) Rent	?
(vi) Profit	975
(vii) Compensation of Employees	6,000
(viii) Consumption of Fixed Capital	1,000
(ix) Indirect Tax	2,000

Answer:
(a) Net Factor Income from Abroad (NFIA) is the difference between the factor income earned by domestic residents from abroad, i.e. factor income received and factor income paid to non-residents for their services in the domestic country.
On the other hand. Net Exports refers to the difference between the value of exports and value of imports of goods, i.e. visible trade.

(b) By Income method
NDP_FC = Compensation of Employees (CoE) + Operating Surplus + Mixed Income … (i)
‘Operating Surplus = Rent + Interest + Profits
And NDP_FC = GDP_MP – Depreciation – Net Indirect Taxes (NIT)
= 18,000 – 1,000 – (2,000 – 250)
= ₹ 15,250 crore
Now, putting values in eq. (i)
15,250 = 6,000 + Rent + 800 + 975 + 7000
15,250 = 14,775 + Rent
∴ Rent = ₹ 475 crore

Question 69.
(a) Define Net Exports. How is it different from Net Factor Income from Abroad?
(b) Calculate value of “Interest” from the following data (All India 2019)

Particulars	₹ (in Crore)
(i) Indirect tax	1,500
(ii) Subsidies	700
(iii) Profits	1,100
(iv) Consumption of Fixed Capital	700
(v) Gross Domestic Product at Market Price	17,500
(vi) Compensation of Employees	9,300
(vii) Interest	?
(viii) Mixed Income of Self-employed	3,500
(ix) Rent	800

(b) Let interest be x
We know,
NDP_FC = Compensation of Employees (COE) + Rent + Interest + Profits + Mixed Income … (i)
Also, NDP_FC = GDP_MP – Depreciation – Net Indirect Taxes (NIT)
= 17,500 + 1,100 – (1,500 – 700)
= ₹ 15,600 crore
Now, putting values in eq. (i)
15600 = 9300 + 800 + x + 1,100 + 3,500
∴ x = ₹ 900 crore

Question 70.
(a) Define “Value of Output’. How is it different from “Value Addition’?
(b) Calculate the value of “Mixed Income of Self-employed” from the following data (All India 2019)

Particulars	₹ (in Crore)
(i) Compensation of Employees	17,300
(ii) Interest	1,200
(iii) Consumption of Fixed Capital	1,100
(v) Mixed Income of Self-employed	?
(v) Subsidies	750
(vi) Gross Domestic Product at Market	27,500
(vii) Indirect Taxes	2,100
(viii) Profit	1,800
(ix) Rent	2,000

Answer:
(a) Value of Output refers to the total value of production, which is equal to
Value of Output = Sales + Change in Stock + Production for Self-consumption Value Added refers actual value of production i.e. net of intermediate expenses Value added = Value of Output – Intermediate Cost (b) Let Mixed Income = x We know,
NDP_FC = Compensation of Employees (CoE) + Rent + Operating Surplus + Mixed Income …….(i)
Also,
NDP_FC = GDP_MP – Depreciation – Net Indirect Taxes (NIT)
= 27,500 – 1,100 – (2200 – 750)
= ₹ 25050 crore
Now, putting values in eq. (i)
25050 = 17300 + (200 + 1200 + 1300) + x
∴ x = ₹ 4350 crore

Question 71.
Given the following data, find the missing value of ‘Government final Consumption Expenditure’ and ‘Mixed Income of Self Employed’. (Delhi 2019)

Particulars	₹ (in Crore)
(i) National Income	71,000
(ii) Gross Domestic Capital Formation	10,000
(iii) Government Final Consumption Expenditure	?
(iv) Mixed Income of Self-employed	?
(v) Net Factor Income from Abroad	1,000
(vi) Net Indirect Taxes	2,000
(vii) Profits	1,200
(viii) Wages and Salaries	15,000
(ix) Net Exports	5,000
(x) Private Final Consumption Expenditure	40,000
(xi) Consumption of Fixed Capital	3,000
(xii) Operating Surplus	30,000

Answer:
NNP_FC = 71,000 (given)
GDP_MP = NNP_FC – Net Factor Income from Abroad + Depreciation + Net Indirect Taxes
= 71,000 – 1000 + 3000 + 2000 = ₹ 75000
Now, Let Government Final Consumption Expenditure = x
GDP_MP = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation + Net Exports
75000 = 40000 + x + 10000 + 5000
x = 20000
Also, Let Mixed Income = y
NDP_FC = Wages and Salaries + Operating Surplus + Mixed Income
70000 = 15000 + 30000 + y
So, y = 25000

Question 72.
Given the following data, find the missing values of ‘Private Final Consumption Expenditure’ and ‘Operating Surplus’. (Delhi 2019)

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

Answer:
Private Final Consumption Expenditure = y, Operating Surplus = x
We know,
NDP_FC = Compensation of Employees (CoE) + Operating Surplus + Mixed Income
Also, NDP_FC = NNP_FC – Net Factor Income from Abroad (NFIA)
= 50000 – 500 = ₹ 49,500 crore
9,500 = Wages and Salaries + x + 13000
49,500 = 20O00 + 13000 + x
49,500 = 33000 + x
x = 49,500 – 33000 = ₹ 16,500 crore
Also, GDP_MP = Private Final Consumption Expenditure (PFCE) + Government Final Consumption Expenditure + (GFCE) + Gross Domestic Capital Formation + Net Exports
GDP_MP = NNP_FC + Depreciation+Net Indirect Taxes (NIT) = 49,500 + 700 + 100 = ₹ 51,200 crore
51,200 = y + 12,500 + 17,00 + 2,000
y = ₹ 19,700 crore

Question 73.
Given the following data, find the missing values of ‘Gross Domestic Capital Formation’ and ‘Wages and Salaries’. (Delhi 2019)

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

Answer:
Let Gross Domestic Capital Formation = x
Wages and Salaries = y
We know, NDP_FC = Compensation of Employees (COE) + Operating Surplus + Mixed Income
NDP_FC = NNP_FC – Net Factor Income from Abroad (NFIA)
= 30,000 – 700 = ₹ 29300 crore
29300 = y + 12,000 + 35,000
y = ₹ 13,800 crore
Also, GDP_MP = Private Final Consumption Expenditure (PFCE) + Govt. Final Consumption Expenditure (GFCE) + Gross Domestic Capital Formation + Net Exports
GDP_MP = NDP_FC + Depreciation + Net Indirect Tax
= 29300 + 300 + 300 = ₹ 29,900 crore
29,900 = 11000 + 14000 + x + 3000
x = ₹ 1,900 crore

Question 74.
Calculate (a) Operating Surplus, and (b) Domestic Income. (April re-exom 2018)

Particulars	₹ (in Crore)
(i) Compensation of Employees	2,000
(ii) Rent and Interest	800
(iii) Indirect Taxes	120
(iv) Corporation Tax	460
(v) Consumption of Fixed Capital	100
(vi) Subsidies	20
(vii) Dividend	940
(viii) Undistributed Profits	300
(ix) Net Factor Income to Abroad	150
(x) Mixed Income	200

Answer:
(a) Operating Surplus = Rent and Interest + Corporation Tax + Dividend + Undistributed Profits
= 800 + 460 + 940 + 300 = ₹ 2,500 crore

(b) Domestic Income (NDP_FC)
= Compensation to Employees + Operating Surplus + Mixed Income
= 2,000 + 2,500 + 200 = ₹ 4,700 crore

Question 75.
Calculate (a) Net National Product at market price, and (b) Gross Domestic Product at factor cost. (March 2018)

Particulars	₹ (in Crore)
(i) Rent and Interest	6,000
(ii) Wages and Salaries	1,800
(iii) Undistributed Profit	400
(iv) Net Indirect Taxes	100
(v) Subsidies	20
(vi) Corporation Tax	120
(vii) Net Factor Income to Abroad	70
(viii) Dividends	80
(ix) Consumption of Fixed Capital	50
(x) Social Security Contribution by Employers	200
(xi) Mixed Income	1,000

Answer:
(a) NNP_MP = Compensation of Employee + Operating Surplus + Mixed Income + NFIA + Net Indirect Taxes
= 1300 +200 + (6,000 +400 + 120 + 80) + (1000) + (-70) + 100
= ₹ 9630 crore

(b) GDP_FC = Compensation of Employees + Operating Surplus + Mixed Income + Consumption of Fixed Capital
= (1300 + 200) + (6000 + 400 + 120 + 80) + (1000) + 50 = ₹ 9650 crore

Question 76.
Explain the precautions that should be taken while estimating national income by expenditure method. (All India 2017)
Answer:
While using expenditure method, the following precautions are required to be taken, related to the calculation of National Income (any 4)

Only final expenditure is to be taken into account Lo avoid error of double counting.
Expenditure on second hand goods is not to be included, because value of second hand goods has already been accounted for during the year of their production.
Expenditure on shares and bonds is not to be included in total expenditure. as these are mere paper claims and are not related to the production of final goods and services.
Expenditure on transfer payments by the government is not to be included.
Imputed value/estimated value of expenditure on goods produced for self-consumption should be taken into account, as these goods are reflected in the estimation of Gross Domestic Product.

Question 77.
Will the following be included in the domestic product of India? Give reasons for your answer. (All India 2017)
(i) Profits earned by foreign companies in India.
(ii) Salaries of Indians working in the Russian Embassy in India.
(iii) Profits earned by a branch of State Bank of India in Japan.
Answer:
(i) Profits earned by foreign companies in India This will be included in the estimation of domestic product, as these companies have earned profit in India, i.e. from the domestic territory of India.
(ii) Salaries of Indians working in Russian Embassy in India This will not be included in the domestic product of India as Russian Embassy in India is not a part of India’s domestic territory.
(iii) Profits earned by a branch of State Bank of India in Japan This will not be included in the domestic income of India as it is not located within the domestic territory of India.

Question 78.
Calculate (i) National Income, and (ii) Net National Disposable income. (All India 2017)

Particulars	₹ (in Crore)
(i) Compensation of Employees	2,000
(ii) Rent	400
(iii) Profit	900
(iv) Dividend	100
(v) Interest	500
(vi) Mixed Income of Self-employed	7,000
(vii) Net Factor Income to Abroad	50
(viii) Net Exports	60
(ix) Net Indirect Taxes	300
(x) Depreciation	150
(xi) Net Current Transfer to Abroad	30

Answer:
Net Domestic Product at Factor Cost (NDP_FC)
= Compensation of Employees + (Rent + Interest + Profit) + Mixed Income of Self-employed
= 2000 + (400 + 500 + 900) + 7000
= ₹ 10,800 crore
(i) National Income = NDP_FC – Net Factor Income to Abroad = 10,800 – 50 = ₹ 10,750 crore
(ii) Net National Disposable Income – Not in Syllabus.

Question 79.
Will the following be included in the national income of India? Give reasons for your answer.
(i) Financial assistance to flood victims.
(ii) Profits earned by the branches of a foreign bank in India.
(iii) Salaries of Indians working in the American Embassy in India. (All India 2017)
Answer:
(i) Financial assistance to flood victims It will ‘not be included’ in the national income of India as it is a form of transfer payment. It does not add to the stock of goods and services in the economy.
(ii) Profits earned by foreign companies in India This will be included in the estimation of domestic product, as these companies have earned profit in India, i.e. from the domestic territory of India.
(iii) Salaries of Indians working in the American Embassy in India It will be ‘included’ in national income because it is a part of net factor income from abroad (NFIA).

Question 80.
Calculate the (i) Net National Product at Market Price, and (ii) Gross National Disposable Income. (All India 2017)

Particulars	₹ (in Crore)
(i) Mixed income of Self-employed	2,000
(ii) Depreciation	400
(iii) Profit	900
(iv) Rent	100
(v) Interest	500
(vi) Compensation of Employees	7,000
(vii) Net Indirect Taxes	50
(viii) Net factor income to Abroad	60
(ix) Net Exports	300
(x) Net Current Transfers to Abroad	150

Answer:
Net Domestic Product at Factor Cost (NDP_FC)
= Compensation of Employees + Rent + Interest + Profit + Mixed Income of Self-employed
= 3,000 + 600 + 700 + 1,000 + 8,000
= ₹ 13,300 crore

(i) Net National Product at Market Price
(NNP_MP) = NDP_FC – Net Factor Income to Abroad + Net Indirect Taxes
= 13,300 – 60 + 500
= ₹ 13,740 crore

(ii) Gross National Disposable Income – Not in Syllabus.

Question 81.
Explain non-monetary exchanges as a limitation of using gross domestic product as an index of welfare of a country. (Delhi 2017)
Answer:
Gross Domestic Product (GDP) is the total value of all the final goods and services produced by all the enterprises (both resident and non-resident) within the domestic territory of a country in a particular year. GDP is considered as one of the best indicators of judging the economic performance of a country. GDP may be a good indicator of economic growth, but not of economic welfare or economic development. One of the reason for this is that non-monetary transactions are ignored, while calculating GDP.

The non-monetary exchanges which take place in the informal sectors are not included in the calculation of Gross Domestic Product (GDP) since money is not being used.
For example, service of a housewife while teaching her children or while cooking food in kitchen. This results in under estimation of GDP. Hence, GDP calculated in the standard manner may not give us a clear indication of the productive activity and actual welfare of the country.

Question 82.
How will you treat the following while estimating domestic product of a country? Give reasons for your answer. (Delhi 2017)
(i) Profits earned by branches of country’s bank in other countries.
(ii) Gifts given by an employer to his employees on Independence Day.
(iii) Purchase of goods by foreign tourists.
Answer:
(i) Profits earned by branches of country’s bank in other countries It is not included while estimating the domestic product of a country as these profits are not earned within the domestic territory of the country.
(ii) Gifts given by an employer to his employees on Independence Day It is not included while estimating the domestic product of a country as it is a transfer payment.
(iii) Purchase of goods by foreign tourists It will be included in the estimation of domestic product of a country as the goods have been produced and sold within the domestic territory of the country.

Question 83.
Calculate (i) Net Domestic Product at Factor Cost and (ii) Gross National Disposable Income. (Delhi 2017)

Particulars	₹ (in Crore)
(i) Private Final Consumption Expenditure	8000
(ii) Government Final Consumption Expenditure	1000
(iii) Exports	70
(iv) Imports	120
(v) Consumption of Fixed Capital	60
(vi) Gross Domestic Fixed Capital Formation	500
(vii) Change in Stock	100
(viii) Net Factor Income to Abroad	40
(ix) Net Factor Income from Abroad	90
(x) Indirect Taxes	700
(xi) Subsidies	50
(xii) Net Current Transfers to Abroad	(-)30

Answer:
Gross Domestic Product at Market Price
(GDP_MP) = Private Final Consumption
Expenditure + Government Final Consumption
Expenditure + Gross Domestic Fixed Capital
Formation + Change in Stock + (Exports – Imports)
= 8,000 + 1,000 + 500 + 100 + (70 – 120)
= ₹ 9,550 crore

(i) Net Domestic Product at Factor Cost
(NDP_FC)
= GDP_MP – Consumption of Fixed Capital – Net Indirect Taxes
= 9,550 – 60 – (700 – 50)
= ₹ 8,840 crore

(ii) Gross National Disposable Income – Not in Syllabus.

Question 84.
Calculate (i) National Income (ii) Net National Disposable Income. (Delhi 2017)

Particulars	₹ (in Crore)
(i) Net Factor Income to Abroad	(-) 50
(ii) Net Indirect Taxes	800
(iii) Net Current Transfers form Rest of the World	100
(iv) Net Imports	200
(v) Private Final Consumption Expenditure	5,000
(Vi) Government Final Consumption Expenditure	3,000
(vii) Gross Domestic Capital Formation	1,000
(viii) Consumption of Fixed Capital	150
(ix) Change in Stock	(-) 50
(x) Mixed Income	4,000
(xi) Scholarship to Students	80

Answer:
Gross Domestic Product at Market Price
(GDP_MP) = Private Final Consumption Expenditure + Government Final Consumption
Expenditure + Gross Domestic Capital Formation – Net Imports
= 5,000 + 3,000 + 1000 – 200
= ₹ 8,800 crore

(i) National Income = GDP_MP – Consumption of Fixed Capital – Net Factor Income to Abroad – Net Indirect Taxes
= 8,800 – 150 – (-50) – 800 = ₹ 7,900 crore

(ii) Net National Disposable Income – Not in Syllabus.

Question 85.
Calculate (i) Net National Product at Market Price and (ii) Gross National Disposable Income. (Delhi 2017)

Particulars	₹ (in Crore)
(i) Gross Domestic Fixed Capital Formation	400
(ii) Private Final Consumption Expenditure	8,000
(iii) Government Final Consumption Expenditure	3,000
(iv) Change in Stock	50
(v) Consumption of Fixed Capital	40
(vi) Net Indirect Taxes	100
(vii) Net Exports	(-) 60
(viii) Net Factor Income to Abroad	(-) 80
(ix) Net Current Transfers from Abroad	100
(x) Dividend	100

(i) Net National Product at Market Price
(NNP_MP) = GDP_MP – Consumption of Fixed Capital – Net Factor Income to Abroad
= 11,390 – 40 – (-80)
= ₹ 11,430 crore

(ii) Gross National Disposable Income – Not in Syllabus.

Question 86.
Find National Income and Private Income. (Delhi 2016)

Particulars	₹ (in Crore)
(i) Wages and Salaries	1,000
(ii) Net Current Transfers to Abroad	20
(iii) Net Factor Income Paid to Abroad	10
(iv) Profit	400
(v) National Debt Interest	120
(vi) Social Security Contributions by Employers	100
(vii) Current Transfers from Government	60
(viii) National Income Accruing to Government	150
(ix) Rent	200
(x) Interest	300
(xi) Royalty	50

Answer:
National Income or Net National Product at Factor Cost (NNP_FC)
= Wages and Salaries + Social Security Contributions by Employers + Rent + Interest + Royalty + Profit – Net Factor Income Paid to Abroad
= 1,000 + 100 + 200 + 300 + 50 + 400 – 10
= ₹ 2,040 crore
Private Income – Not in Syllabus.

Question 87.
Find Net Domestic Product at Factor Cost and Personal Income. (Delhi 2016)

Particulars	₹ (in Crore)
(i) Rent	200
(ii) Net Current Transfers to Abroad	10
(iii) National Debt Interest	60
(iv) Corporate Tax	100
(v) Compensation of Employees	900
(vi) Current Transfers by Government	150
(vii) Interest	400
(viii) Undistributed Profits	50
(ix) Dividend	250
(x) Net Factor Income to Abroad	(-) 10
(xi) Income Accruing to Government	120

Answer:
Net Domestic Product at Factor Cost (NDP_FC) = Compensation of Employees + Rent + Interest + Corporate Tax + Undistributed Profits + Dividend
= 900 + 200 + 400 +100 + 50 + 250
= ₹ 1,900 crore

‘Personal Income – Not in Syllabus.

Question 88.
Find Gross National Product at Market Price and Private Income. (Delhi 2016)

Particulars	₹ (in Crore)
(i) Private Final Consumption Expenditure	800
(ii) Net Current Transfers to Abroad	20
(iii) Net Factor Income to Abroad	(-)10
(iv) Government Final Consumption Expenditure	300
(v) Net Indirect Tax	150
(vi) Net Domestic Capital Formation	200
(vii) Current Transfers from Government	40
(viii) Depreciations	100
(ix) Net Imports	30
(x) Income Accuring to Government	90
(xi) National Debt Interest	50

Answer:
Gross National Product at Market Price
(GNP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation + Depreciation – Net Imports – Net Factor Income to Abroad
= 800 + 300 + 200 + 100 – 30 – (-10)
= ₹ 1,380 crore

Private Income – Not in Syllabus.

Question 89.
Calculate (i) Net Domestic Product at Market Price and (ii) Net National Disposable Income. (All India (C) 2016)

Particulars	₹ (in Crore)
(i) Compensation of Employees	4,000
(ii) Dividend	500
(iii) Mixed Income	8,000
(iv) Social Security Contribution by Employers	400
(v) Net Factor Income to Abroad	600
(vi) Net Indirect Taxes	1,000
(vii) Rent	800
(viii) Consumption of Fixed Capital	1,200
(ix) Profit	1,500
(x) Net Current Transfers to Rest of the World	200
(xi) Interest	70

Answer:
(i) Net Domestic Product at Market Price
(NDP_MP) = Compensation of Employees + Mixed Income + Rent + Profit + Interest + Net Indirect Taxes
= 4,000 + 8,000 + 800 + 1,500 + 70 + 1,000
= ₹ 5,370 crore

(ii) Net National Disposable Income (NNDI) – Not in Syllabus.

Question 90.
Calculate (i) Gross National Product at Factor Cost and (ii) Net National Disposable Income. (Delhi (C) 2016)

Particulars	₹ (in Crore)
(i) Compensation of Employees	3000
(ii) Profit	800
(iii) Opening Stock	200
(iv) Closing Stock	150
(v) Indirect Taxes	700
(vi) Rent	600
(vii) Interest	900
(viii) Subsidies	100
(ix) Consumption of Fixed Capital	850
(x) Net Exports	(-)250
(xi) Net Factor Income to Abroad	300
(xii) Net Current Transfers from Rest of the World	400
(xiii) Mixed Income of Self-employed	5000

Answer:
(i) Gross National Product at Factor Cost
(GNP_MP) = Compensation of Employees + Rent + Interest + Profit + Mixed Income of Self-employed + Consumption on Fixed Capital – Net Factor Income to Abroad
= 3,000 + 600 + 900 + 800 + 5,000 + 850 – 300
= ₹ 10,850 crore

(ii) Net National Disposable Income (NNDI) – Not in Syllabus.

Question 91.
Find Net National Product at Market Price and Personal Disposable Income. (Delhi 2016)

Particulars	₹ (in Crore)
(i) Personal Taxes	200
(ii) Wages and Salaries	1,200
(iii) Undistributed Profit	50
(iv) Rent	300
(v) Corporate Tax	200
(vi) Personal Income	2,000
(vii) Interest	400
(viii) Net Indirect Tax	300
(ix) Net Factor Income from Abroad	20
(x) Profit	500
(xi) Social Security Contribution by Employers	250

Answer:
Net National Product at Market Price
(NNP_MP) = Wages and Salaries + Social Security Contribution by Employers + Rent + Interest + Profit + Net Factor Income from Abroad + Net Indirect Tax
= 1200 + 250 + 300 + 400 + 500 + 20 + 300
= ₹ 2,970 crore

Personal Disposable Income – Not in Syllabus.

Question 92.
Calculate (i) Gross National Product at Factor Cost and (ii) Net National Disposable Income (Delhi 2016)

Particulars	₹ (in Crore)
(i) Rent	400
(ii) Compensation of Employees	3,000
(iii) Dividend	200
(iv) Change in Stock	300
(v) Net Factor Income to Abroad	700
(vi) Net Indirect Taxes	800
(vii) Consumption of Fixed Capital	1,000
(viii) Interest	600
(ix) Profits	800
(x) Mixed Income	6,000
(xi) Net Current Transfers to Rest of the World	(-) 200

Answer:
(i) Gross National Product at Factor Cost (GNP_FC) = Compensation of Employees + Rent + Interest + Profits + Mixed Income + Consumption of Fixed Capital – Net Factor Income to Abroad
= 3,000 + 400 + 600 + 800 + 6,000 + 1,000 – 700
= ₹ 11,100 crore

(ii) Net National Disposable Income (NNDI) – Not in Syllabus.

Question 93.
From the following data calculate
(i) Net Domestic Product at Market Price (ii) Net National Disposable Income (Delhi (C) 2016)

Particulars	₹ (in Crore)
(i) Interest	600
(ii) Net Current Transfers from Rest of the World	200
(iii) Consumption of Fixed Capital	800
(iv) Rent	700
(v) Net Factor Income from Abroad	100
(vi) Net Indirect Taxes	850
(vii) Profit	1,200
(viii) Social Security Contribution by Employers	700
(ix) Mixed Income of Self-employed	8000
(x) Compensation of Employees	5,000
(xi) Dividend	400

Answer:
(i) Net Domestic Product at Market Price (NDP_MP)
= Compensation of Employees + Rent + Interest+Profit + Mixed Income of Self-employed + Net Indirect Taxes
= 5,000 + 700 + 600 + 1,200 + 8,000 + 850
= ₹ 16,350 crore

(ii) Net National Disposable Income (NNDI) – Not in Syllabus.

Question 94.
Giving reason, explain how the following should be treated in the estimation of National Income. (All India 2015)
(i) Payment of interest by a firm to a bank.
(ii) Payment of interest by a bank to an individual.
(iii) Payment of interest by an individual to a bank.
Answer:
(i) It will be ‘included’ in the estimation of National Income, as it is a factor income. Also, firms take loans for investment purposes.
(ii) It will be ‘included’ in the estimation of National Income as it is a factor income.
(iii) It will ‘not be included’ in the estimation of National Income as consumer takes loan for consumption
purposes.

Question 95.
Calculate the ‘National Income’ and ‘Private Income’. (All India 2015)

Particulars	₹ (in Crore)
(i) Rent	600
(ii) Net Factor Income to Abroad	200
(iii) National Debt Interest	800
(iv) Wages and Salaries	700
(v) Current Transfers from Government	100
(vi) Undistributed Profits	850
(vii) Corporation Tax	1,200
(viii) Interest	700
(ix) Social Security Contributions by Employers	8000
(x) Net Domestic Product Accruing to Government	5,000
(xi) Net Current Transfers to Rest of the World	400
(xii) Dividends

Answer:
Net Domestic Product at Factor Cost (NDP_FC) = Rent + Wages and Salaries + Corporation Tax Social Security Contribution by Employers + Dividends + Undistributed Profits NDPpc = 200 +700 +30 +150 +100 + 50 + 20
= ₹ 1,250 crore
National Income (NNP_FC) = NDP_FC + Net Factor Income from Abroad (NFIA)
= 1,250 + (-10) = ₹ 1,240 crore

Private Income – Not in Syllabus.

Question 96.
Calculate Net National Product at Market Price and Personal Income. (All India 2015)

Particulars	₹ (in Crore)
(i) Transfer Payments by Government	7
(ii) Government Final Consumption Expenditure	50
(iii) Net Imports	(-)10
(iv) Net Domestic Fixed Capital Formation	60
(v) Private Final Consumption Expenditure	300
(vi) Private Income	280
(vii) Net Factor Income to Aboad	(-)5
(viii) Closing Stock	8
(ix) Opening Stock	8
(x) Depreciation	12
(xi) Corporate Tax	60
(xii) Retained Earnings of Corporations	20

Answer:
Net Domestic Product at Market Price (NDP_MP) = Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stock + Private Final Consumption Expenditure – Net Imports NDP_MP
= 50 + 60 + (8 – 8) 300 – (-10) = ₹ 420 crore
Net National Product at Market Price (NNP_MP)

= NDP_MP + Net Factor Income from Abroad (NFIA)
= 420 + (-5) = ₹ 415 crore

Personal Income – Not in Syllabus.

Question 97.
Calculate Net Domestic Product at Market Price and Gross National Disposable Income. (All India 2015)

Particulars	₹ (in Crore)
(i) Private Final Consumption Expenditure	400
(ii) Opening Stock	10
(iii) Consumption of Fixed Capital	25
(iv) Imports	15
(v) Government Final Consumption Expenditure	90
(vi) Net Current Transfers to Rest of the World	5
(vii) Gross Domestic Fixed Capital Formation	80
(viii) Closing Stock	20
(ix) Exports	10
(x) Net Factor Income to Abroad	(-) 5

Answer:
Gross Domestic Product at Market Price ( GDP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Fixed Capital Formation + Change in Stock + Net Exports
= 400 + 90 + 80 + (20 – 10) + (10 – 15)
= 490 + 80 + 5
= ₹ 575 crore
Net Domestic Product at Market Price (NDP_MP) = GDP_MP – Depreciation
= 575 – 25
= ₹ 550 crore

Gross National Disposable Income – Not in Syllabus.

Question 98.
Giving reason, explain how should the following be treated in estimation of National Income.
(i) Expenditure by a firm on payment of fees to a Chartered Accountant.
(ii) Payment of corporate tax by a firm.
(iii) Purchase of refrigerator by a firm for own use. (Delhi 2015)
Answer:
(i) Expenditure by a firm on payment of fees to a Chartered Accountant, will ‘not be included’ while estimation of National Income as it is an intermediate cost.
(ii) Corporate profit already forms part of national income. Hence, payment of corporate tax is ‘not included’ in national income as it is a mere transfer payment.
(iii) Purchase of refrigerator by a firm for own use will be ‘included’ while estimation of National Income, as it is a part of Private Final Consumption Expenditure.

Question 99.
Calculate National Income and Personal Disposable Income. (Delhi 2015)

Particulars	₹ (in Crore)
(i) Personal Tax	7
(ii) Private Final Consumption Expenditure	50
(iii) Undistributed Profits	(-)10
(iv) Private Income	60
(v) Government Final Consumption Expenditure	300
(vi) Corporate Tax	280
(vii) Net Domestic Fixed Capital Formation	(-)5
(viii) Net Indirect Tax	8
(ix) Depreciation	8
(x) Change in Stocks	12
(xi) Net Imports	60
(xii) Net Factor Income to Abroad	20

Answer:
Net Domestic Product at Market Price (NDPMP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stocks + Net Exports
= 600 +100 + 70 + (-10) + (-20)
= 700 + 70 – 30 = 700 + 40
= ₹ 740 crore
National Income (NNP_FC)=NDP_MP + Net Factor Income from Abroad – Net Indirect Tax
= 740 + (-10) – 60
= 740 – 70 = ₹ 670 crore
‘Personal Disposable Income – Not in Syllabus.

Question 100.
Calculate ‘Gross National Product at Market Price’ and ‘Net National Disposable Income’. (Delhi 2015)

Particulars	₹ (in Crore)
(i) Rent	100
(ii) Net Current Transfers to Rest of the World	30
(iii) Social Security Contributions by Employers	47
(iv) Mixed Income	600
(v) Gross Domestic Capital Formation	140
(vi) Royalty	20
(vii) Interest	110
(viii) Compensation of Employees	500
(ix) Net Domestic Capital Formation	120
(x) Net Factor Income from Abroad	(-) 10
(xi) Net Indirect Tax	150
(xii) Profit	200

Answer:
Net Domestic Product at Factor Cost (NDP_FC) = Rent + Mixed Income + Royalty + Interest + Compensation of Employees + Profit
= 100 + 600 + 20 + 110 + 500 + 200
= ₹ 1,530 crore
Gross Domestic Product at Market Price (GDP_MP) = NDP_FC + Depreciation + Net Indirect Tax
= 1,530 + 20 + 150 = ₹ 1,700 crore
Gross National Product at Market Price (GNP_MP) =GDP_MP + Net Factor Income from Abroad
= 1,700 + (-10) = ₹ 1,690 crore

Net National Disposable Income – Not in Syllabus.

Question 101.
Calculate ‘Net Domestic Product at Factor Cost’ and ‘Gross National Disposable Income’. (Delhi 2015)

Particulars	₹ (in Crore)
(i) Net Current Transfers to Abroad	15
(ii) Private Final Consumption Expenditure	800
(iii) Net Imports	(-)20
(iv) Net Domestic Capital Formation	100
(v) Net Factor Income to Abroad	10
(vi) Depreciation	50
(vii) Change in Stocks	17
(viii) Net Indirect Tax	120
(ix) Government Final Consumption Expenditure	200
(x) Exports	30

Answer:
Net Domestic Product at Market Price (NDP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation – Net Imports
NDP_MP = 800 + 200 + 100 – (-20) = ₹ 1,120 crore
Net Domestic Product at Factor Cost (NDP_FC) = NDP_MP – Net Indirect Tax
NDP_FC = 1,120 – 120 = ₹ 1,000 crore

Gross National Disposable Income – Not in Syllabus.

Question 102.
Giving reasons explain how should the following be treated in estimation of National Income. (Foreign 2015)
(i) Payment of corporate tax by a firm.
(ii) Purchase of machinery by a factory for own use.
(iii) Purchase of uniforms for nurses by a hospital.
Answer:
(i) Corporate profit already forms part of national income. Hence, payment of corporate tax is ‘not included’ in national income as it is a mere transfer payment.
(ii) Purchase of machinery by a factory for own use is ‘included’ in the estimation of National Income as it is an investment expenditure.
(iii) Purchase of uniforms for nurses by a hospital will ‘not be included’ in the computation of National Income as it is a part of intermediate consumption.

Question 103.
Calculate the Gross National Product at Market Price and Personal Income. (Foreign 2015)

Particulars	₹ (in Crore)
(i) Wages and Salaries	800
(ii) Personal Tax	150
(iii) Operating Surplus	200
(iv) Undistributed Profits	10
(v) Social Security Contributions by Employers	100
(vi) Corporate Tax	50
(vii) Net Factor Income to Abroad	(-) 20
(viii) Personal Disposable Income	1200
(ix) Net Indirect Tax	70
(x) Consumption of Fixed Capital	30
(xi) Mixed Income of Self-employed	500
(xii) Royalty	9

Answer:
Net Domestic Product at Factor Cost (NDP_FC) = Wages and Salaries + Social Security contribution by employers + Operating Surplus + Mixed Income of Self-employed
NDP_FC = 800 + 100 + 200 + 500
= ₹ 1,600 crore
Gross National Product at Market Price
(GNP_MP) = NDP_FC + Consumption of Fixed Capital – Net Factor Income to Abroad + Net Indirect Tax
= 1,600 + 30 – (-20) + 70
= ₹ 1,720 crore

Personal Income – Not in Syllabus.

Question 104.
From the following data calculate (i) Gross National Product at Market Price and (ii) Net National Disposable Income. (All India (C) 2015)

Particulars	₹ (in Crore)
(i) Dividends	300
(ii) Compensation of Employees	3,000
(iii) Rent	500
(iv) Depreciation	200
(v) Interest	800
(vi) Net Factor Income to Abroad	100
(vii) Mixed Income	5,000
(viii) Net Indirect Taxes	400
(ix) Profit	1,500
(x) Net Current Transfers to Abroad	(-) 50

Answer:
Net Domestic Product at Factor Cost (NDP_FC) = Compensation of Employees + Rent + Interest + Profit + Mixed Income
= 3000 + 500 + 800 + 1,500 + 5,000
= ₹ 10,800 crore
(i) Gross National Product at Market Price (GNP_MP) = NDPFC + Depreciation – Net Factor Income to Abroad + Net Indirect Taxes
= 10300 + 200 – 100 + 400
= ₹ 11300 crore

(ii) Net National Disposable Income (NNDI) – Not in Syllabus.

Question 105.
Calculate (i) National Income and (ii) Gross National Disposable Income. (Delhi to 2015)

Particulars	₹ (in Crore)
(i) Private Final Consumption Expenditure	500
(ii) Net Domestic Fixed Capital Formation	100
(iii) Net Factor Income from Abroad	30
(iv) Change in Stock	20
(v) Net Exports	40
(vi) Net Indirect Taxes	50
(vii) Mixed Income	300
(viii) Government Final Consumption Expenditure	200
(ix) Consumption of Fixed Capital	60
(x) Net Current Transfers to Abroad	(-) 10

Answer:
Net Domestic Product at Market Price (NDP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stock + Net Exports
= 500 + 200 + 100 + 20 + 40
= ₹ 860 crore
(i) National Income (NNP_FC) = NDP_MP. + Net Factor Income from Abroad – Net Indirect Taxes
= 860 + 30 – 50
= ₹ 840 crore

(ii) Gross National Disposable Income – Not in Syllabus.

Question 106.
Calculate Net Domestic Product at Factor Cost and Net National Disposable Income from the following. (Delhi 2014)

Particulars	₹ (in Crore)
(i) Net Current Transfers to Abroad	5
(ii) Government Final Consumption Expenditure	100
(iii) Net Indirect Tax	80
(iv) Private Final Consumption Expenditure	300
(v) Consumption of Fixed Capital	20
(vi) Gross Domestic Fixed Capital Formation	50
(vii) Net Imports	10
(viii) Closing Stock	25
(ix) Opening Stock	25
(x) Net Factor Income to Abroad	10

Answer:
Net Domestic Product at Factor Cost (NDP_FC) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Fixed Capital Formation + Change in Stock (Closing Stock – Opening Stock) – Net Imports – Net Indirect Taxes – Consumption of Fixed Capital
= 300 + 100 + 50 + (25 – 25) – (-10) – 80 – 20
=460 – 100 = ₹ 360 arab

Net National Disposable Income (NNDI) – Not in Syllabus.

Question 107.
Giving reason explain how should the following be treated in estimating Gross Domestic Product at Market Price? (Delhi 2014)
(i) Fees to a mechanic paid by a firm.
(ii) Interest paid by an individual on a car loan taken from a bank.
(iii) Expenditure on purchasing a car for use by a firm.
Answer:
(i) It is not included’ in the GDP_MP, as it is an intermediate expenditure incurred by firm.
(ii) It is not included’ in the estimation of GDP_MP because loan is not being used for production purpose.
(iii) It is ‘included’ in the estimation of GDP_MP because it is a part of final expenditure by a firm.

Question 108.
Calculate Net National Product at Factor Cost and Private Income from the following. (Delhi 2014)

Particulars	₹ (in Crore)
(i) National Debt Interest	60
(ii) Wages and Salaries	600
(iii) Net Current Transfers to Abroad	20
(iv) Rent	200
(v) Transfer Payments by Government	70
(vi) Interest	300
(vii) Net Domestic Product at Factor Cost Accruing to Government	400
(viii) Social Security Contributions by Employers	100
(ix) Net Factor Income Paid to Abroad	50
(x) Profits	300

Answer:
Net National Product at Factor Cost (NNP_FC)
= Wages and Salaries + Rent + Interest + Profits + Social Security Contributions by Employers – Net Factor Income Paid to Abroad
= 600 + 200 + 300 + 300 + 100 – 50
= 1,500 – 50 = ₹ 1,450 arab

‘Private Income – Not in Syllabus.

Question 109.
Calculate National Income and Net National Disposable Income from the following. (All India 2014)

Particulars	₹ (in Crore)
(i) Net Change in Stocks	50
(ii) Government Final Consumption Expenditure	100
(iii) Net Current Transfers to Abroad	30
(iv) Gross Domestic Fixed Capital Formation	200
(v) Private Final Consumption Expenditure	500
(vi) Net Imports	40
(vii) Depreciation	70
(viii) Net Factor Income to Abroad	(-)10
(ix) Net Indirect Tax	120
(x) Net Capital Transfers to Abroad	25

Answer:
National Income (NNP_FC)
= Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Fixed Capital Formation + Net Change in Stocks – Net Imports – Depreciation – Net Indirect Tax – Net Factor Income to Abroad
= 500 + 100 + 200 + 50 – 40 – 70 – 120 – (-10)
= 860 – 230
= ₹ 630 arab

Net National Disposable Income (NNDI) – Not in Syllabus.

Question 110.
Calculate Net National Product at Market Price and Gross National Disposable Income from the following. (All India 2014)

Particulars	₹ (in Crore)
(i) Closing Stock	10
(ii) Consumption of Fixed Capital	40
(iii) Private Final Consumption Expenditure	600
(iv) Exports	50
(v) Opening Stock	20
(vi) Government Final Consumption Expenditure	100
(vii) Imports	60
(viii) Net Domestic Fixed Capital Formation	80
(ix) Net Current Transfers to Abroad	(-)10
(x) Net Factor Income to Abroad	30

Answer:
Net National Product at Market Price (NNP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stock (Closing Stock – Opening Stock) + Net Exports (Exports – Imports) – Net Factor Income to Abroad
= 600 + 100 +80 + (10 – 20) + (50 – 60) – 30
= 780 – 50 = ₹ 730 arab

Gross National Disposable Income (GNDI) – Not in Syllabus.

Question 111.
How should the following be treated in estimating National Income of a country? You must give reason for your answer.
(i) Taking care of aged parents.
(ii) Expenditure on providing police services by the government. (All India 2014)
Answer:
(i) It is ‘included’in the estimation of National Income. Component of care that can be monetised is included in national income as payment is being made, so that parents can consume final goods and services.
(ii) It is ‘included’ in the estimation of National Income as it is a part of government final consumption expenditure.

Question 112.
Calculate Net National Product at Factor Cost and Gross National Disposable Income from the following. (All India 2014)

Particulars	₹ (in Crore)
(i) Social Security Contributions by Employees	90
(ii) Wages and Salaries	800
(iii) Net Current Transfers to Abroad	(-)30
(iv) Rent and Royalty	300
(v) Net Factor Income to Abroad	50
(vi) Social Security Contributions by Employers	100
(vii) Profit	500
(viii) Interest	400
(ix) Consumption of Fixed Capital	200
(x) Net Indirect Tax	250

Answer:
Net National Product at Factor Cost (NNP_FC) = Wages and Salaries + Social Security Contribution by Employers + Rent and Royalty + Profit + Interest – Net Factor Income to Abroad
= 800 + 100 + 300 + 500 + 400 – 50
= ₹ 2,050 arab

Gross National Disposable Income (GNDI) – Not in Syllabus.

Question 113.
Calculate National Income and Gross National Disposable Income from the following. (Delhi 2014)

Particulars	₹ (in Crore)
(i) Net Current Transfers to Abroad	(-) 15
(ii) Private Final Consumption Expenditure	600
(iii) Subsidies	20
(iv) Government Final Consumption Expenditure	100
(v) Indirect Tax	120
(vi) Net Imports	20
(vii) Consumption of Fixed Capital	35
(viii) Net Change in Stocks	(-) 10
(ix) Net Factor Income to Abroad	5
(x) Net Domestic Capital Formation	110

Answer:
National Income (NNP_FC)
= Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation – Net Imports – Net Indirect Tax – Net Factor Income to Abroad
= 600 + 100 + 110 – 20 – (120 – 20) – 5
= 810 – 125 = ₹ 685 arab

Gross National Disposable Income (GNDI) – Not in Syllabus.

Question 114.
Calculate National Income: (All India (C) 2014)

Particulars	₹ (in Crore)
(i) Net Current Transfer from Rest of the World	30
(ii) Private Final Consumption Expenditure	400
(iii) Net Domestic Capital Formation	100
(iv) Change in Stock	50
(v) Depreciation	20
(vi) Government Final Consumption Expenditure	200
(vii) Net Exports	40
(viii) Net Indirect Taxes	80
(ix) Net Factor Income Paid to Abroad	10

Answer:
Net Domestic Product at Market Price (NDP_MP) = Private Final Consumption Expenditure
+ Net Domestic Capital Formation + Government Final Consumption Expenditure + Net Exports
= 400 + 100 + 200 + 40 = 1740 crore
Net National Product at Factor Cost (NNP_FC or National Income)
= NDP_MP – Net factor income paid to abroad – Net indirect taxes
= 740 – 10 – 80 = ₹ 650 crore

Question 115.
Calculate National Income. (Delhi (C) 2014)

Particulars	₹ (in Crore)
(i) Net Domestic Capital Formation	150
(ii) Government Final Consumption Expenditure	300
(iii) Net Factor Income from Abroad	(-) 20
(iv) Private Final Consumption Expenditure	600
(v) Depreciation	30
(vi) Net Exports	50
(vii) Net Indirect Taxes	90
(viii) Net Current Transfers from Rest of the World	40

Answer:
National Income (NNP_FC)
= Government Final Consumption Expenditure + Private Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports – Net Indirect Taxes + Net Factor Income from Abroad
= 300 + 600 +150 + 50 – 90 + (-20) = ₹ 990 crore

Question 116.
How should the following be treated while estimating National Income? You must give reason in support of your answer. (Foreign 2014)
(i) Bonus paid to employees.
(ii) Addition to stocks during a year.
(iii) Purchase of taxi by a taxi driver.
Answer:
(i) Yes, it is ‘included’ while estimation of National Income as it is a part of compensation of employees.
(ii) Yes, it is ‘included’ while estimation of National Income as it is considered as a change in stock during the year.
(iii) Yes, it is ‘included’ while estimation of National Income as it is an investment expenditure by the producer.

Question 117.
Calculate Gross National Product at Market Price and Net National Disposable Income from the following. (Foreign 2014)

Particulars	₹ (in Crore)
(i) Net Factor Income to Abroad	(-) 10
(ii) Net Current Transfers to Abroad	20
(iii) Wages and Salaries	400
(iv) Corporation Tax	50
(v) Profit after Corporation Tax	150
(vi) Social Security Contributions by Employers	50
(vii) Rent	100
(viii) Interest	70
(ix) Mixed Income of Self-employed	300
(x) Net Indirect Tax	140
(xi) Consumption of Fixed Capital	80

Answer:
Gross National Product at Market Price (GNP_MP)
= Wages and Salaries + Profit after Corporation Tax + Corporation Tax + Social Security Contributions by Employers + Rent + Interest + Mixed Income Self-employed + Net Indirect Taxes (NIT) + Net Factor Income from Abroad + Consumption of Fixed Capital
= 400 + 150 + 50 + 50 + 100 + 70 + 300 + 140 + (-10) + 80
= ₹ 1,330 arab

Net National Disposable Income (NNDI) – Not in Syllabus.

Question 118.
Calculate National Income from the following data. (Delhi 2013)

Particulars	₹ (in Crore)
(i) Private Final Consumption Expenditure	900
(ii) Profit	100
(iii) Government Final Consumption Expenditure	400
(iv) Net Indirect Taxes	100
(v) Gross Domestic Capital Formation	250
(vi) Change in Stock	50
(vii) Net Factor Income from Abroad	(-) 40
(viii) Consumption of Fixed Capital	20
(ix) Net Imports	30

Answer:
National Income (NNP_FC)
= Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation – Net Imports – Net Indirect Taxes – Consumption of Fixed Capital + Net Factor Income from Abroad
= 900 + 400 + 250 – 30 – 100 – 20 + (-40)
= 1,550 – 190 = ₹ 1,360 crore

Question 119.
Giving reason explain how should the following be treated in estimating national income
(i) Electricity consumed by a firm
(ii) Pension paid to the retired employees
(iii) Free treatment of the poor in hospitals (Delhi (C) 2013)
Answer:
(i) Electricity consumed by a firm It will ‘not be included’ in national income because it is an intermediate product and if included will create the problem of double counting.
(ii) Pension paid to the retired employees It is ‘included’ in national income because it is part of compensation of employees.
(iii) Free treatment of the poor in hospitals It is not included in national income because poor people are provided free treatment not in return of any productive service. This is a transfer payment.

Question 120.
Calculate Gross National Product at Market Price from the following data. (All India 2013)

Particulars	₹ (in Crore)
(i) Compensation of Employees	200
(ii) Interest	500
(iii) Rent	700
(iv) Profits	800
(v) Employers Contribution to Social Security Schemes	200
(vi) Dividends	300
(vii)	100
(viii) Net Indirect Taxes	250
(ix) Net Exports	70
(x) Net Factor Income to Abroad	150
(xi) Mixed Income of Self-employed	1500

Answer:
Net Domestic Product at Factor Cost (NDP_FC) = Compensation of Employees + Interest + Rent + Profits + Mixed Income of Self-employed
= 2,000 + 500 + 700 + 800 + 1,500 = ₹ 5,500 crore
Gross National Product at Market Price (GNP_MP) = NDP_FC + Net Indirect Taxes – Net Factor Income to Abroad + Consumption of Fixed Capital
= 5,500 + 250 – 150 + 100
= 5,850 – 150 = ₹ 5,700 crore

Question 121.
Find out (i) Net National Product at Market Price and (ii) Gross National Disposable Income from the following data. (Delhi 2012)

Particulars	₹ (in Crore)
(i) Net Current Transfers from Abroad	(-) 10
(ii) Wages and Salaries	1,000
(iii) Net Factor Income from Abroad	(-) 20
(iv) Social Security Contributions by Employers	100
(v) Net Indirect Tax	80
(vi) Rent	300
(vii) Consumption of Fixed Capital	120
(viii) Corporation Tax	50
(ix) Undistributed Profits	60
(x) Dividend	200
(xi) Interest	400

Answer:
Net Domestic Product at Factor Cost (NDP_FC) = Wages and Salaries + Social Security Contributions by Employers + Rent + Corporation Tax + Dividend + Undistributed Profit + Interest
= 1,000 + 100 + 300 + 50 + 200 + 60 + 400
= ₹ 2,110 crore

(i) Net National Product at Market Price (NNP_MP) = NDP_FC + Net Indirect Tax + Net Factor Income from Abroad
= 2,110 + 80 + (-20) = ₹ 2,170 crore

(ii) Gross National Disposable Income (GNDI) – Not in Syllabus.

Question 122.
Find out
(i) National Income
(ii) Net National Disposable Income (Delhi 2012)

Particulars	₹ (in Crore)
(i) Factor Income from Abroad	15
(ii) Private Final Consumption Expenditure	600
(iii) Consumption of Fixed Capital	50
(iv) Government Final Consumption Expenditure	200
(v) Net Current Transfer to Abroad	(-) 5
(vi) Net Domestic Fixed Capital Formation	110
(vii) Net Factor Income to Abroad	10
(viii) Net Imports	(-) 20
(ix) Net Indirect Tax	70
(x) Change in Stock	(-) 10

Answer:
Net Domestic Product at Market Price (NDP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stock – Net Imports
NDP_MP = 600 + 200 + 110 + (-10) – (-20)
= ₹ 920 crore

(i) National Income (NNP_FC) = NDP_MP – Net Factor Income to Abroad – Net Indirect Taxes
= 920 – 10 – 70 = ₹ 840 crore

(ii) Net National Disposable Income (NNDI) – Not in Syllabus.

Question 123.
Find out
(i) Gross National Product at Market Price
(ii) Net Current Transfers from Abroad (All India 2012)

Particulars	₹ (in Crore)
(i) Private Final Consumption Expenditure	1,000
(ii) Depreciation	100
(iii) Net National Disposable Income	1,500
(iv) Closing Stock	20
(v) Government Final Consumption Expenditure	300
(vi) Net Indirect Tax	50
(vii) Opening Stock	20
(viii) Net Domestic Fixed Capital Formation	110
(ix) Net Exports	15
(x) Net Factor Income to Abroad	(-) 10

Answer:
(i) Gross National Product at Market Price
(GNP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stock (Closing Stock – Opening Stock) + Depreciation + Net Exports – Net Factor Income to Abroad
= 1,000 + 300 +110 + (20 – 20) +100 + 15 – (-10)
= ₹ 1,535 crore

(ii) Net Current Transfer from Abroad- Not in Syllabus.

Question 124.
Find out
(i) National Income
(ii) Net National Disposable Income (All India 2012)

Particulars	₹ (in Crore)
(i) Net Imports	(-) 10
(ii) Net Domestic Fixed Capital Formation	100
(iii) Private Final Consumption Expenditure	600
(iv) Consumption of Fixed Capital	60
(v) Change in Stock	(-) 50
(vi) Government Final Consumption Expenditure	200
(vii) Net Factor Income to Abroad	20
(viii) Net Current Transfers to Abroad	30
(ix) Net Indirect Tax	70
(x) Factor Income from Abroad	10

Answer:
(i) Gross Domestic Product at Market Price
(GDP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stock + Consumption of Fixed Capital – Net Imports
= 600 + 200 + 100 + (-50)+ 60 – (-10) = 970 – 50 = ₹ 920 crore
Again,
National Income (NNP_FC) = GDP_MP – Net Factor Income to Abroad – Net Indirect Tax – Consumption of Fixed Capital
= ₹ 920 – 20 – 70 – 60
= ₹ 770 crore

(ii) Net National Disposable Income (NNDI) – Not in Syllabus.

Question 125.
How will you treat the following in the calculation of Gross Domestic Product of India? Give reasons for your answer. (AII India (C) 2012)
(i) Profits earned by a branch of foreign bank in India.
(ii) Salaries of Indian employees working in embassy of Japan in India.
(iii) Salary of residents of Japan working in Indian embassy in Japan.
Answer:
(i) Profits earned by a branch of foreign bank in India will be included in the domestic product of India as the foreign bank is located within the domestic territory of India.
(ii) Salaries of Indian employees working in embassy of Japan in India is not a part of domestic product of India because Embassy of Japan in India is not a part of domestic territory of India.
(iii) Indian embassy in Japan is a part of domestic territory of India, therefore salaries paid to the residents of Japan working in Indian embassy is a part of domestic product of India.

Question 126.
From the following data calculate Gross National Product at Factor Cost by (i) Income method, and (ii) Expenditure method. (All India (C) 2012)

Particulars	₹ (in Crore)
(i) Government Final Consumption Expenditure	200
(ii) Private Final Consumption Expenditure	400
(iii) Profits	160
(iv) Net Indirect Taxes	60
(v) Rent	70
(vi) Interest	50
(vii) Compensation of Employees	300
(viii) Exports	65
(ix) Imports	95
(x) Gross Domestic Capital Formation	80
(xi) Consumption of Fixed Capital	10
(xii) Net Factor Income to Abroad	50

Answer:
(i) Gross National Product at Factor Cost (GNP_FC) by Income Method
= Profits + Rent + Interest + Compensation of Employees – Net Factor Income to Abroad + Consumption of Fixed Capital
= 160 + 70 + 50 + 300 – 50 + 10 = ₹ 540 crore

(ii) Gross National Product at Factor Cost (GNP_FC) by Expenditure Method
= Government Final Consumption Expenditure + Private Final Consumption Expenditure + Exports – Imports + Gross Domestic Capital Formation – Net Indirect Taxes – Net Factor Income to Abroad
= 200 + 400 + 65 – 95 + 80 – 60 – 50 = ₹ 540 crore

Question 127.
Calculate National Income by (i) Income method and (ii) Expenditure method from the following data. (All India (C) 2012)

Particulars	₹ (in Crore)
(i) Profits	200
(ii) Private Final Consumption Expenditure	440
(iii) Government Final Consumption Expenditure	250
(iv) Compensation of Employees	350
(v) Gross Domestic Capital Formation	90
(vi) Consumption of Fixed Capital	20
(vii) Net Exports	(-) 20
(viii) Interest	60
(ix) Rent	70
(x) Net Factor Income to Abroad	50
(xi) Net Indirect Taxes	60

Answer:
(i) National Income by Income Method
= Profits + Compensation of Employees + Interest + Rent – Net Factor Income to Abroad
= 200 + 350 + 60 + 70-50 = ₹ 630 crore

(ii) National Income by Expenditure Method
= Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation + Net Exports – Net Indirect Taxes – Consumption of Fixed Capital – Net Factor Income to Abroad
= 440 + 250 + 90 + (-20) – 60 – 20 – 50 = ₹ 630 crore

Question 128.
Calculate National Income by (i) income method and (ii) expenditure method from the following data. (All India (C) 2012)

Particulars	₹ (in Crore)
(i) Government Final Consumption Expenditure	2,000
(ii) Net Domestic Capital Formation	600
(iii) Consumption of Fixed Capital	70
(iv) Net Exports	60
(v) Net Indirect Taxes	200
(vi) Private Final Consumption Expenditure	4,000
(vii) Net Factor Income to Abroad	60
(viii) Compensation of Employees	3,660
(ix) Profits	1,500
(x) Rent	500
(xi) Interest	800
(xii) Dividend	300

Answer:
National Income by Income Method = Compensation of Employees + Profits + Rent + Interest – Net Factor Income to Abroad
= 3,660 + 1,500 + 500 + 800 – 60 = ₹ 6,400 crore
National Income by Expenditure Method = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports – Net Indirect Taxes – Net Factor Income to Abroad
= 4,000 + 2,000 + 600 + 60 – 200 – 60 = ₹ 6,400 crore

Question 129.
Calculate Gross National Product at Factor Cost by (i) Income method, and (ii) expenditure method, from the following data. (Delhi (C) 2012)

Particulars	₹ (in Crore)
(i) Private Final Consumption Expenditure	800
(ii) Government Final Consumption Expenditure	300
(iii) Compensation of Employees	600
(iv) Net Imports	50
(v) Gross Domestic Capital Formation	150
(vi) Consumption of Fixed Capital	20
(vii) Net Indirect Taxes	100
(viii) Net Factor Income from Abroad	(-) 70
(ix) Dividend	150
(x) Rent	120
(xi) Interest	80
(xii) Undistributed Profits	80
(xiii) Social Security Contributions by Employers	60
(xiv) Corporate Tax	50

Answer:
(i) Gross National product at Factor Cost (GNP_FC) by Income method
= Compensation of Employees + Dividend + Undistributed Profits + Corporate Tax + Rent+Interest + Net Factor Income from Abroad + Consumption of Fixed Capital
= 600 + 150 + 80 + 50 + 120 + 80 + (-70) + 20
= ₹ 1,030 crore

(ii) Gross National Product at Factor Cost (GNP_FC) by Expenditure method
= Private Final Consumption Expenditure+Government Final Consumption Expenditure – Net Imports + Gross Domestic Capital Formation – Net Indirect Tax+Net Factor Income from abroad
= 800 + 300 – 50 + 150 – 100 + (-70) = ₹ 1,030 crore

Question 130.
Calculate (i) Net Domestic Product at Factor Cost and (ii) Private Income from the following data. (All India 2011)

Particulars	₹ (in Crore)
(i) Domestic Product Accruing to Government	300
(ii) Wages and Salaries	1,000
(iii) Net Current Transfers to Abroad	(-) 20
(iv) Rent	100
(v) Interest Paid by Production Units	130
(vi) National Debt Interest	30
(vii) Corporation Tax	50
(viii) Current Transfers by Government	40
(ix) Contribution to Social Security Schemes by Employers	200
(x) Dividends	100
(xi) Undistributed Profits	20
(xii) Net Factor Income from Abroad	0

Answer:
(i) Net Domestic Product at Factor Cost (NDP_FC) = Wages and Salaries + Rent + Interest Paid by Production Units + Corporation Tax + Dividends + Undistributed Profits + Contribution to Social Security Schemes by Employers
= 1,000 + 100 + 130 + 50 + 100 + 20 + 200
= ₹ 1,600 crore

(ii) Private income – Not in Syllabus.

Question 131.
Calculate (i) Net National Product at Market Price and (ii) Private Income from the following data. (All India 2011)

Particulars	₹ (in Crore)
(i) Net Current Transfers to Abroad	30
(ii) Mixed Income	600
(iii) Subsidies	20
(iv) Operating Surplus	200
(v) National Debt Interest	70
(vi) Net Factor Income to Abroad	10
(vii) Compensation of Employees	1,400
(viii) Indirect Tax	100
(ix) Domestic Product Accruing to Government	350
(x) Current Transfers by Government	50

Answer:
(i) Net National Product at Market Price (NNP_MP) = Compensation of Employees + Operating Surplus + Mixed Income + (Indirect Tax – Subsidies) – Net Factor Income to Abroad
= 1,400 + 200 + 600 + (100 – 20) – 10
= ₹ 2,270 crore

(ii) Private Income – Not in Syllabus.

Question 132.
Calculate (i) Gross National Product at Market Price and and (ii) Personal Disposable Income from the following data. (All India 2011)

Particulars	₹ (in Crore)
(i) Net Factor Income to Abroad	10
(ii) Private Income	1,700
(iii) Operating Surplus	300
(iv) Corporation Tax	150
(v) Undistribued Profits	30
(vi) Mixed Income	500
(vii) Consumption of Fixed Capital	100
(viii) Personal Taxes	200
(ix) Compensation of Employees	1,200
(x) Net Indirect Tax	250

Answer:
(i) Gross National Product at Market Price (GNP_MP) = Operating Surplus + Mixed Income + Compensation of Employees + Net Indirect Tax – Net Factor Income to Abroad + Consumption of Fixed Capital
= 300 + 500 + 1,200 + 250 – 10 + 100 = ₹ 2340 crore

(ii) Personal Disposable Income – Not in Syllabus.

Question 133.
Calculate National Income and Gross National Disposable Income from the following. (Delhi 2011)

Particulars	₹ (in Crore)
(i) Net Current Transfers to the Rest of the World	(-) 5
(ii) Private Final Consumption Expenditure	500
(iii) Consumption of Fixed Capital	20
(iv) Net Factor Income to Abroad	(-) 10
(v) Government Final Consumption Expenditure	200
(vi) Net Indirect Tax	100
(vii) Net Domestic Fixed Capital Formation	120
(viii) Net Imports	30
(ix) Change in Stock	(-) 20

Answer:
National Income (NNP_FC) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in S took+Consumption of Fixed Capital – Net Imports – Net Indirect Tax – Net Factor Income to Abroad – Consumption of Fixed Capital
= 500 + 200 + 120 + (-20) + 20 – 30 – 100 – (-10) – 20
= 700 + 100 + 10 – 130
= ₹ 680 crore

Gross National Disposable Income (GNDI) – Not in Syllabus

Question 134.
Calculate Net National Product at Market Price and Gross National Disposable Income. (Delhi 2011)

Particulars	₹ (in arab)
(i) Consumption of Fixed Capital	40
(ii) Change in Stocks	(-) 10
(iii) Net Imports	20
(iv) Gross Domestic Fixed Capital Formation	100
(v) Private Final Consumption Expenditure	800
(vi) Net Current Transfer to Rest of the World	5
(vii) Government Final Consumption Expenditure	250
(viii) Net Factor Income to Abroad	40
(ix) Net Indirect Tax	130

Answer:
Net National Product at Market Price (NNP_MP) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Fixed Capital Formation + Change in Stock – Consumption of Fixed Capital – Net Factor Income to Abroad – Net Imports
NNP_MP = 800 + 250 + 100 + (-10) – 40 – 40 – 20
= 1,150 – 110
= ₹ 1,040 arab

Gross National Disposable Income (GNDI) – Not in Syllabus.

Question 135.
Find out Gross National Product at Market price and Net National Disposable Income from the following. (Delhi 2011)

Particulars	₹ (in arab)
(i) Opening Stock	50
(ii) Private Final Consumption Expenditure	1,000
(iii) Net Current Transfers to Abroad	5
(iv) Closing Stock	40
(v) Net Factor Income to Abroad	(-) 10
(vi) Government Final Consumption Expenditure	300
(vii) Consumption of Fixed Capital	30
(viii) Net Imports	20
(ix) Net Domestic Fixed Capital Formation	150

Answer:
Gross National Product at Market Price (GNP_MP)
= Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Closing Stock – Opening Stock – Net Imports – Net Factor Income to Abroad + Consumption of Fixed Capital
= 1,000 + 300 + 150 + 40 – 50 – 20 – (-10) + 30
= 1,530 – 70 = ₹ 1,460 arab

Net National Disposable Income – Not in Syllabus.

Question 136.
Calculate (i) Gross Domestic Product at Market Price and (ii) Factor Income from Abroad, from the following data. (All India 2010)

Particulars	₹ (in Crore)
(i) Profits	500
(ii) Exports	40
(iii) Compensation of Employees	1,500
(iv) Gross National Product at Factor Cost	2,800
(v) Net Current Transfers from Rest of The World	90
(vi) Rent	300
(vii) Interest	400
(viii) Factor Income to Abroad	120
(ix) Net Indirect Taxes	250
(x) Net Domestic Capital Formation	650
(xi) Gross Fixed Capital Formation	700
(xii) Change in Stock	50

Answer:
(i) Gross Domestic Product at Market Price (GDP_MP) = Compensation of Employees + Profits + Rent + Interest + Gross Fixed Capital Formation + Change in Stock – Net Domestic Capital Formation + Net Indirect Taxes
= 1,500 + 500 + 300 + 400 + 700 + 50 – 650 + 250 = ₹ 3,050 crore

(ii) Gross National Product at Factor Cost (GNP_FC) = GDP_MP – Net Indirect Taxes + Factor Income from Abroad – Factor Income to Abroad
2,800 = 3050 – 250 + Factor Income from Abroad – 120
2,800 = 2680 + Factor Income from Abroad
⇒ Factor Income from Abroad = 2,800 – 2,680 = ₹ 120 crore

Question 137.
How will you treat the following while estimating National Income of India?
(i) Dividend received by an Indian firm from its investment in shares of a foreign company.
(ii) Money received by a family in India from relatives working abroad.
(iii) Interest received on loan given to a friend for purchasing a car. (Delhi 2010)
Answer:
(i) Dividend received by an Indian firm from its investment in shares of a foreign company will be ‘included’ in the estimation of National Income, as dividend is a part of profit and treated as factor income from abroad which is added to domestic income.
(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.
(iii) Interest received on loan given to a friend for purchasing a car will ‘not be included’ in the estimation of National Income as loan is given for consumption purpose.

Question 138.
How will you treat the following while estimating National Income of India? Give reasons for your answer. (All India 2010)
(i) Dividend received by a foreigner from investment in share of an Indian company.
(ii) Profits earned by a branch of an Indian bank in Canada.
(iii) Scholarship given to Indian students studying in India by a foreign company.
Answer:
(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.
(ii) Profits earned by a branch of Indian bank in Canada is factor income received from abroad. It is ‘included’ in National Income.
(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.

Question 139.
Explain the problem of double counting in estimating National Income, with the help of an example. Also explain, two alternative ways of avoiding the problem while estimation of National Income. (All India 2010)
Answer:
The counting of the value of a commodity more than once while estimation of National Income is called double counting. This leads to over estimation of the value of goods and services produced. In other words, problem of double counting arises when the value of intermediate goods is also added in total output, e.g. suppose if we include the price of wheat, in the price of flour and also in price of bread, then It will lead to the problem of double counting, as the price of wheat is included three time and that of flour two times.

The problem of double counting can be avoided by the use of following methods of calculating Gross Domestic Product (GDP)
(i) Final output or final product method In this method, only final products (goods and services) are added to obtain the GDP. Intermediate products are ignored. Here, final products are only those products which are ready for end use or consumption by their final users (consumers or producers).

(ii) Value added method 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. The sum of ‘value added’ by all the firms gives us the GDP of the country. Hence, the problem of double counting is avoided.
Value Added by a Firm = Value of Output of the Firm – Intermediate Consumption of the Firm.

Question 140.
Calculate (i) Gross Domestic Product at Market Price and (ii) Factor Income to Abroad from the following data. (All India 2010)

Particulars	₹ (in Crore)
(i) Compensation of Employees	1,000
(ii) Net Exports	(-) 50
(iii) Profits	400
(iv) Interest	250
(v) Rent	150
(vi) Gross National Product at Factor Cost	1,850
(vii) Gross Domestic Capital Formation	220
(viii) Net Fixed Capital Formation	150
(ix) Change in Stock	20
(x) Factor Income from Abroad	30
(xi) Net Indirect Taxes	100

Answer:
Net Domestic Product at Factor Cost (NDP_FC) = Compensation of Employees + Rent + Interest +Profit
= 1,000 + 150 + 250 + 400 = ₹ 1,800 crore
(i) Gross Domestic Product at Market Price (GDP_MP) = NDP_FC + Net Indirect Taxes + Depreciation
= 1,800 + 100 +50 = ₹ 1,950 crore
Depreciation = 220 – (150 + 20) = 220 -170 = ₹ 50 crore

(ii) Gross National Product at Factor Cost (GNP_FC)= GDP_MP – Net Indirect Taxes + (Factor Income from Abroad – Factor Income to Abroad)
1,850 = 1,950 – 100 + (30 – Factor Income to Abroad)
⇒ Factor Income to Abroad = 1,850 – 1,820 = ₹ 30 crore

Question 141.
From the following data calculate (i) Gross Domestic Product at Market Price and (ii) Factor Income from Abroad. (All India 2010)

Particulars	₹ (in Crore)
(i) Gross National Product at Factor Cost	6,150
(ii) Net Exports	(-) 50
(iii) Compensation of Employees	3,000
(iv) Rent	800
(v) Interest	900
(vi) Profit	1,300
(vii) Net Indirect Taxes	300
(viii) Net Domestic Capital Formation	800
(ix) Gross Fixed Capital Formation	850
(x) Change in Stock	50
(xi) Dividend	300
(xii) Factor Income to Abroad	80

Answer:
(i) Gross Domestic Product at Market Price (GDP_MP) = Compensation of Employees + Rent + Interest + Profit + Net Indirect Tax + (Gross Fixed Capital Formation + Change in Stock – Net Domestic Capital formation)
= 3,000 + 800 + 900 + 1,300 + 300 + (850 + 50 – 800)
= 6,300 + 100 = ₹ 6,400 crore

(ii) Factor Income from Abroad
= GNP_FC – GDP_MP + Net Indirect Tax+Factor Income to Abroad
= 6,150 – 6,400 + 300 + 80 = 6,530 – 6,400 = ₹ 130 crore

Question 142.
From the following data, calculate (i) Gross Domestic Product at Factor Cost and (ii) Factor Income to Abroad. (Delhi 2010)

Particulars	₹ (in Crore)
(i) Compensation of Employees	800
(ii) Profits	200
(iii) Dividends	50
(iv) Gross National Product at Market Price	1,400
(v) Rent	150
(vi) Interest	100
(vii) Gross Domestic Capital Formation	300
(viii) Net Fixed Capital Formation	200
(ix) Change in Stock	50
(x) Factor Income from Abroad	60
(xi) Net Indirect Taxes	120

Answer:
(i) Gross Domestic Product at Factor Cost (GDP_FC) = Compensation of Employees + Profits + Rent + Interest + Gross Domestic Capital Formation – Net Fixed Capital Formation – Change in Stock
= 800 + 200 + 150 + 100 + 300 – 200 – 50 = 1,550 – 250 = ₹ 1,300 crore

(ii) Factor Income to Abroad GDP_FC = GNP_MP – Net Factor Income from Abroad – Net Indirect Taxes
1,300 = 1,400 – (Factor Income from Abroad – Factor Income to Abroad) – 120
1,300 = 1,400 – (60 – Factor Income to Abroad) – 120
Factor Income to Abroad = 1,300 – 1,400 + 60 + 120 = ₹ 80 crore

Question 143.
From the following data, calculate (i) Gross Domestic Product at Factor Cost and (ii) Factor Income to Abroad. (Delhi 2010)

Particulars	₹ (in Crore)
(i) Gross Domestic Capital Formation	600
(ii) Interest	200
(iii) Gross National Product at Market Price	2,800
(iv) Rent	300
(v) Compensation of Employees	1,600
(vi) Profits	400
(vii) Dividends	150
(viii) Factor Income from Abroad	50
(ix) Change in Stock	100
(x) Net Indirect Taxes	240
(xi) Net Fixed Capital Formation	400
(xii) Net Exports	(-) 30

Answer:
(i) Gross Domestic Product at Factor Cost (GDP_FC) = Compensation of Employees + Rent + Profits + Interest + (Gross Domestic Capital Formation – Net Fixed Capital Formation – Change in Stock
= 1,600 + 300 + 400 + 200 + (600 – 400 – 100)
= ₹ 2,600 crore

(ii) Net Factor Income to Abroad
GNP_MP = GDP_FC + NFIA + Net Indirect Tax
2,800 = 2,600 + (50 – Factor Income to Abroad) + 240
Factor Income to Abroad = 2,600 – 2,800 + 50 + 240 = ₹ 90 crore

Multiple Choice Questions

Question 1.
Which of the following affects national income? (Choose the correct alternative) (March 2018)
(a) Goods and Services tax
(b) Corporation tax
(c) Subsidies
(d) None of the above
Answer:
(d) None of the above

Question 2.
National Income is the sum of factor incomes securing to (Choose the correct alternative) (All India 2016)
(a) nationals
(b) economic territory
(c) residents
(d) both residents and non-residents
Answer:
(c) residents

Question 3.
Depreciation of fixed capital assets refers to (Choose the correct alternative) (Delhi 2016)
(a) normal wear and tear
(b) foreseen obsolescence
(c) Both (a) and (b)
(d) unforeseen obsolescence
Answer:
(c) Both (a) and (b)

Question 4.
………… is not included in National Income.
(a) Salary of an employee
(b) Interest on capital
(c) Profits of a company
(d) Prize won in a lottery
Answer:
(d) Prize won in a lottery

Question 5.
Under National Income accounting, those foreigners are known as non-residents of a country, who visit that country for
(a) travelling and holidays
(b) studies and sports
(c) medical treatment
(d) All of these
Answer:
(d) All of these

Question 6.
Area of operation generating domestic income refers to as
(a) production territory of a country
(b) operating territory of a country
(c) domestic territory of a country
(d) income territory of a country
Answer:
(c) domestic territory of a country

Question 7.
Under National Income concept, foreign ambassador in India is an example of
(a) resident
(b) non-resident
(c) agents
(d) normal resident
Answer:
(b) non-resident

Question 8.
Net Factor Income from Abroad (NFIA) includes
(a) net compensation of employees
(b) net income from property and entrepreneurship
(c) net retained earnings
(d) All of the above
Answer:
(d) All of the above

Question 9.
If the value of Real GDP is ₹ 1,25,000 crore and nominal GDP is ₹ 1,00,000 crore. Find the value of Current Price Index.
(a) 80
(b) 100
(c) 125
(d) 150
Answer:
(a) 80

Question 10.
From the following data, find Net National Product at Factor Cost (NNP_FC).

Items	GNP_MP	Depreciation	Indirect Taxes	Subsidies
₹ (in crore)	15,000	1,000	500	150

(a) ₹ 1,400 crore
(b) ₹ 13,650 crore
(c) ₹ 1,300 crore
(d) ₹ 14,350 crore
Answer:
(b) ₹ 13,650 crore

Question 11.
If Net National Product at Factor Cost (NNP_FC) is ₹ 25,000 and Net Factor Income from Abroad (NFIA) is ₹ 4,000, then find Net Domestic Product at Factor Cost (NDP_FC)?
(a) ₹ 4,000
(b) ₹ 21,000
(c) ₹ 25,000
(d) ₹ 29,000
Answer:
(b) ₹ 21,000

Question 12.
National Income of a country can be calculated as
(a) sum total of value added by all producing units in the economy
(b) sum total of factor incomes generated in the economy
(c) sum total of expenditure on the final goods and services produced in the economy
(d) All of the above
Answer:
(d) All of the above

Question 13.
Mixed income of self-employed includes
(a) wages
(b) interest and profit
(c) rent
(d) All of these
Answer:
(d) All of these

Question 14.
Under expenditure method, the sum total of private final consumption expenditure government final consumption expenditure, gross domestic capital formation and net exports is equal to
(a) GDP_FC
(b) GDP_MP
(c) NNP_MP
(d) NDP_MP
Answer:
(b) GDP_MP

Question 15.
“National Income = National Product = National Expenditure”. This shows
(a) triplets
(b) equilibrium
(c) triple method
(d) triple identity
Answer:
(d) triple identity

Question 16.
Which of the following items are excluded in calculation of National Income under Value Added method?
i. Imputed rent of owner occupied house
ii. Purchase and sale of second hand goods
iii. Value of intermediate goods
iv. Own account production Codes
(a) (i), (ii), (iii) and (iv)
(b) Both (i) and (iv)
(c) Both (ii) and (iii)
(d) (i), (ii) and (iv)
Answer:
(c) Both (ii) and (iii)

Question 17.
Which among the given would not be included in National Income?
(a) A teacher teaching students under Sarva Shiksha Abhiyan Scheme
(b) A teacher teaching students in his college
(c) A teacher teaching in a coaching centre
(d) A teacher teaching his own daughter at home
Answer:
(d) A teacher teaching his own daughter at home