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73.Calculate National Income by Factor cost might have been used to calculate GDP at market prices, but Indian GDP was presented as GDP at . It deals with aggregates like national income, general price level and national output, etc. Net Domestic Product at Factor Cost (NDPFC) = Value of Output in Economic Territory-(Intermediate Purchase by Primary Sector+ Intermediate Purchase by Secondary Sector + Intermediate Purchase by Tertiary Sector)-Consumption of Fixed Capital Indirect Taxes = 3950-50 = Rs. 3. However, a wider gap between the GDP and NDP shows an increase in the value of obsolescence. Ans. (Delhi 2014) Following are the main steps involved in estimating national income by income method: InsightsIAS has redefined, revolutionised and simplified the way aspirants prepare for UPSC Civil Services Exam. The formula for NDP can be expressed as follows: Depreciation = Depreciation of capital assets such as equipment, vehicles, housing, and more. 90 lakh, 15. 2. (Python), Class 12 Computer Science Calculate Its distribution doesnt reflect the actual condition of the poor. = 700+100+10-130 = Rs. Precautions While Using Value Added Method (a) Net Domestic Product at Factor Cost (NDPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports Net Indirect Taxes (Indirect Taxes Subsidies), NDPFC= 250+ 50+ 30+ (- 10)- (20- 10) crore = 330 -20 =Rs. = 200-[80+ 20+ (15 -5)] (i)Interest on a car loan paid by an individual. Give an example of showing the difference between microeconomics and. (a) By Expenditure Method (ii) Net National Disposable Income (Delhi 2012), 48.Find out It is a measure of the total value of all goods and services produced within a countrys borders, adjusted for the decline in the value of physical capital over time due to wear and tear, obsolescence, and other factors. 830 crore (ii) Purchase and sale of second hand goods should not be included. We and our partners use data for Personalised ads and content, ad and content measurement, audience insights and product development. If the country is unable to replace the capital stocks that are lost through depreciation, it experiences a fall in the GDP of the country. small group of firms) but deals with the study of broad economy-wide aggregates like total output, size of national income, level of employment, aggregate consumption, aggregate saving, aggregate investment, general price level, balance of payment, rate of inflation, size of poverty etc. National income accounting refers to the bookkeeping system that governments use to measure the level of the economic activity, such as GDP. = Rs. (iii) Mixed income of self-employed, 3. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock)- (Purchase of Raw Material + Import of Raw Material) Consumption of Fixed Capital + Subsidies 340 lakh, 20. (a) Net National Product at Market Price and What do you understand by domestic income (NDP FC)? (ii) Interest paid by an individual on loan taken to buy a car will not be included while estimating Ntional Income, as loan is taken for consumption purpose. = Rs. 1650 crore, (b) By Expenditure Method Gross National Product at Factor Cost (GNPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Consumption of Fixed Capital + Net Exports Net Indirect Taxes + Net Factor Income from Abroad Find Net Value Added at Market Price (Delhi 2012), 7. GDP at factor cost measures the money worth of output produced within a country's domestic constraints in a year as received by the factors of production. = 1000+100 + 130 + 50+100 + 20+200 = Rs. = 750+ (-30)-500-60-100 There are only two producing sectors A and B in an economy. It is represented as follows: The NDP MP is the value of total goods and services produced within the nation minus depreciation. (iii) Investment expenditure or gross domestic capital formation. (d) GDP at factor cost = NDP at factor cost - depreciation Answer: (c) See The Explanation Computation of National Income (By Expenditure Method), 8. Calculate Net Domestic Product at Factor Cost by Aggregate demand is a measurement of the total amount of demand for all finished goods and services produced in an economy. (a) Gross Value Added (GVA) by A = Sales by A + Net Change in Stock of A IntermediateConsumption of A The offers that appear in this table are from partnerships from which Investopedia receives compensation. This has been a guide to Net Domestic Product & its meaning. Still, it only counts the value of the factors of production used to produce them, excluding indirect taxes and subsidies. = 300 + 600 +150 + 50-90 + (-20) Ans. (a) Gross National Product at Market Price and The sum of Value added by all the firms gives us the GDP of the country. (a) Gross National Product at Factor Cost (GNPFC) (iii) Expenditure by government on providing free education. (i) Imputed rent of self occupied houses. This measure is useful for policymakers and investors. This provides a more comprehensive picture of a countrys economic output, as it considers both the production of goods and services and the market prices at which they are sold, including the effect of government interventions. The result provides a more accurate picture of a countrys economic output. (i) Interest paid by banks on deposits. What is essential is that production is . 76. Computation of National Income (By Value Added Method). 1950 crore, 66. Ans. This website is using a security service to protect itself from online attacks. (i) It is not included in the estimation of National Income as it does not involve any production of goods and services. (ii) Expenditure method Calculate Net National Product at Factor Cost and Gross National Disposable Income from the following: (Delhi 2014), 38. (iii) Interest received on loans given to a friend for purchasing a car will not be included in the estimationof National Income as loan is given for consumption purpose. (b) Private income from the following data (All India 2011), Ans. Calculate value of output from the following data (Delhi 2008), Ans. (iii) Interest received on loans given to a friend for purchasing a car. (a) Net National Product at Market Price 1950 crore, (b) By Production Method (Delhi 2009), Ans. 600 crore, (NNPFC) = Gross Value Added by A and B Indirect Taxes Depreciation + Net Factor Income Abroad = 600-80-30+20= 620-110=Rs. 59. among factors of production. (iii) Purchase by a foreign tourists will be included while estimating National Income as it is consideredas exports of goods and services. As the price of wheat is included three time and that of floor two times. How should the following be treated in estimating National Income of a country? An increase in NDP would indicate growing economic health, while a decrease would indicate economic stagnation. Real gross domestic product is an inflation-adjusted measure of the value of all goods and services produced in an economy. What Is GDP and Why Is It So Important to Economists and Investors? Here is a comparison of Gross Domestic Product (GDP) and Net Domestic Product (NDP) in a table format: Net Domestic Product at market price (NDP MP) is a measure of a countrys economic output that considers the production of all goods and services within its borders and the market prices at which they are sold. This information is crucial for policymakers and investors. It is broadly classified into four categories: This concept is about NDP or net domestic product that serves as an important factor for determining the economic health of a country. Scribd is the world's largest social reading and publishing site. = 520-490 = Rs. Likewise, sale proceeds of shares and bonds are not included. National Income equals C + G + I + NX. This leads to over estimation of the value of goods and services produced. Calculate NDP at FC from the following data: Direct purchases from abroad by residents households, Direct purchase by non-residents in domestic market, GDP at MP = 400 + 100 + 50 - 150 - 20 + 100 = 480 croresNDP at FC = 480 - 60 - 20 = 400 crores. GNP FC = NNP FC + Depreciation OR. (ii) Payment of electricity bill by a school. 600 lakh, 16.Calculate Net Value Added at Factor Cost from the following data, Ans. Teachoo answers all your questions if you are a Black user! It is study of the economy as a whole and its aggregates. Gross National Product at Market Price (GNPMP). (Delhi 2008). NDP at FC = (b) Gross National Disposable Income (GNDI) =NNPFC+ Net Indirect Taxes + Consumption of FixedCapital Net Current Transfer to the Rest of the World Givereasons. 3 Marks Questions The formula for NDP-FC is: NDP-FC = Value of Output - Indirect Taxes + Subsidies In other words, the NDP-FC is calculated by subtracting the indirect taxes and adding the subsidies to the value of output, which is the value of all goods and services produced within a country's borders. Ans. (ii) Payment of interest on loan taken by an employee from the employer will not be included in the estimation of National Income as it will be treated as transfer income, also loan is taken for consumption purpose. The $80 million is the amount available for consumption or investment in the economy after accounting for the depreciation of physical capital. Expenditure + Net Domestic Capital Formation + Net Exports + Net Factor Income from Abroad- Net Indirect Taxes 25.Giving reason, explain how should the following be treated while estimatingNational Income (All India 2012) Solution. (i) Family members working free on the farm owned by the family. (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. Ans. Hence, according to the value-added method: National Income = (NDP FC) + Net factor income from abroad. 27. This method is also known as 'Income Disposal Method'. Such an example would qualify as depreciation and replacement. 70. (iii) Yes, it is included while estimation of National Income as it is an investment expenditure by the producer. 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