It may arise due to technological advancement. It facilitates standard of living comparisons between different nations. It is measured by aggregating monetary values of final goods and services produced during that financial year. Gross Value Added at Factor Cost (GVAFC) = Value of Output (Sales + Change in Stock)- Purchase of Raw Materials Indirect Tax (Sales Tax + Excise Duty) = 300+200 + 700-120-150 + 20 , , Precautions While Using Income Method If the gap between the GDP and NDP is narrower or smaller, then it is considered good for an economy. (iii) Expenditure on providing police services by the government (i) Salaries received by Indian residents working in Russian Embassy in India will be included whileestimating National Income in India, as it is a factor income from abroad. What Is GDP and Why Is It So Important to Economists and Investors? Precautions While Using Expenditure Method. (a) National Income (NNPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Change in Stock Net Exports Net Indirect Taxes Net Factor Income to Abroad = 700+100+10-130 = Rs. Question 3. In this theoretical example, the NDP considers the depreciation of physical capital, providing a more accurate picture of the countrys economic output. 720 arab, 35. Though GDP is frequently cited when assessing the economic health of a country, NDP puts into perspective the pace at which capital assets degrade and must be replaced. How will you treat the following while estimating National Income of India? = 700+ (-20)+ 80+ 60+ 10 The total value of all goods and services produced within a countrys borders. 700 crore, 11. (b) Gross National Disposable Income (GNDI) =NNPFC + Consumption of Fixed Capital + Net IndirectTaxes Net Current Transfers to Abroad The result provides a more accurate picture of a countrys economic output. (b) By Expenditure Method Hence, value of national income method should be the same as the one calculated by value added method. 25.Giving reason, explain how should the following be treated while estimatingNational Income (All India 2012) No tracking or performance measurement cookies were served with this page. GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income. (a) National Income (NNPFC)= Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation Net Imports Net Indirect Tax- Net Factor Income to Abroad National Income (NNPFC) = Gross Value Added at Market Price by the Primary Sector+ Gross Value Added at Market Price by the Secondary Sector + Gross Value Added at Market Price by the Tertiary Sector-Net Indirect Taxes-Consumption of Fixed Capital + Net Factor Income from Abroad Click to reveal Introductory Macroeconomics Subject Chosen. 730 crore, (b) Private Income = NNPFC Net Domestic Product at Factor Cost Accruing to Government+ Transfer Payments + National Debt Interest = 860 230 This concept is about NDP or net domestic product that serves as an important factor for determining the economic health of a country. Ans. 68.Calculate Gross National Product at Factor Cost from the following data by 735 crore, 84. The $80 million is the amount available for consumption or investment in the economy after accounting for the depreciation of physical capital. (ii) Payment of interest on borrowings by general government. = Rs. (a) Gross National Product at Market Price and Giving reason, explain how should the following be treated in estimation ofNational Income (Delhi 2012) = Rs. As a result of the EUs General Data Protection Regulation (GDPR). 7300 crore (a) Gross National Product at Factor Cost (GNPFC) In addition, it excludes the taxes and subsidies that distort the market price. Give reasons for your answer. (ii) Interest on a car loan paid by a government owned company should included while estimating National Income as it is a part of government final consumption expenditure. Calculate It discusses how equilibrium of a consumer, a producer or an industry is attained. Likewise, sale proceeds of shares and bonds are not included. Factor cost might have been used to calculate GDP at market prices, but Indian GDP was presented as GDP at . (ii) Rent paid by the embassy of Japan is not included in the domestic factor income as the embassy is a part of Japans domestic operation territory. Step 4: Now, we will calculate net factor income from abroad (NFIA) to get national income. What do you understand by domestic income (NDP FC)? Calculate National Income from the following data (Delhi 2013), = 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 (iii) Purchase by foreign tourists. 26.How should the following be treated while estimating National Income? Ans. (i) Compensation of employees Profit = Undistributed profit + dividends + corporate tax (corporate profit tax) This formula is not used in this question. Governments consider NI crucial for the following reasons: NI is the sum of the monetary value of all the goods and services produced during a financial yearan aggregation of production units belonging to a countrys residents. It is included in National Income. Giving reason, explain whether the following are included in domestic product of India. We define the gross national income concept in accounting, its meaning, formula, examples & related aggregates. (i) Payment of bonus by a firm. It is represented by the following formula: F denotes Foreign Production by Nations Residents. Give reasonsfor your answer. (iii) Expenditure by government on providing free education. (iii) Entertainment tax received by government is not included while estimating the National Income ofIndia as it is a indirect tax and not included at factor cost. Nanda Ashirwad Complex, 3rd Floor, (b) Net National Disposable Income from the following data (Delhi 2008), 82. 340 lakh, 20. Formula value of output= Sales + change in stock Change in st. For calculating domestic income, we will subtract the amount of depreciation and net indirect tax from the Gross Domestic Product at Market Price (GDPMP). (i) Wheat grown by farmer but used entirely for familys consumption will be included while estimating National Income, as the production is done for self-consumption purpose and relate to current production. = Rs. To view the purposes they believe they have legitimate interest for, or to object to this data processing use the vendor list link below. Some of our partners may process your data as a part of their legitimate business interest without asking for consent. Calculate Calculate National Income: (Compartment 2014), = Government Final Consumption Expenditure + Private Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports NIT + NFIA (ii) Profits earned by an Indian company from its branches in Singapore. = Rs. (d) GDP at factor cost = NDP at factor cost - depreciation Answer: (c) See The Explanation 2010 crore Net domestic product (NDP) is an annual measure of the economic output of a nation that is adjusted to account for depreciation. Calculation of Natinal Domestic Prodeuct (NDP) at Factor Cost (FC) 1. 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 Ans. The value-added at factor cost is equivalent to the NDP at factor cost. 50: Solution: GNP at MP = NDP at FC + Depreciation - Net Factor income from abroad + Indirect tax =3,200 + 400-50 + 70 = 3,620 crores. 2010 crore, 74. (i) Gross National Product at Market Price (b) Net National Disposable Income from the following data (Delhi 2008 c), Ans. Net Domestic Product at Factor Cost(NDPFC) = Compensation of Employees + Interest + Rent+ Profits + Mixed Income of Self Employed (iii) Capital gains to Indian residents from sale of shares of a foreign company. = 600+100 +70+(-20)+ 10-30 = 780-50 Giving reasons, explain whether the following are included in National Income. Calculate (i) Profits earned by a branch of foreign bank will not be included while estimating National Income, as it is a factor income paid to abroad. Value Added Method/Product Method/Output Method By this method, the total value of all the final goods and services produced in an economy during a given time period are estimated to obtain the value of domestic income. This method is also known as 'Income Disposal Method'. For example, in many urban areas, efforts may be made to re-purpose underutilized real estate that has fallen into disrepair. 62.Calculate(a) Gross Domestic Product at Market Price and The sum of Value added by all the firms gives us the GDP of the country. Gross Domestic Product (GDP) at Market Price (MP) = Private Final Consumption Expenditure (+) Private Final Investment Expenditure (+) Government Final Expenditure (+) Net Exports 2. National Income equals Rent + Wages + Interest + Profit + Mixed-Income. Total National Income - the sum of all wages, rent, interest, and profits. It does not matter whether the producer is the normal resident or foreigner. (Python), Class 12 Computer Science National Income equals C + G + I + NX. 76. (Delhi 2010). (i) Dividend received by a foreigner from investment in share of an Indian company. = 1000+ 500 + 200 + 60 + (- 20) 80 + (-10) (i) it is included in the GDPMP,as it is a part of government final consumption expenditure. This measure is useful for policymakers and investors. (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. Study of problem of unemployment in India or general price level is a macroeconomic study because they relate to Indian economy as a whole.Let it be known that an English economist J.M. = Rs. Thus, it provides a clearer picture of a countrys economic performance. You are free to use this image on your website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Net Domestic Product (wallstreetmojo.com). difference between exports and imports during an accounting year. 61.Explain the problem of double counting in estimating national income, with thehelp of an example. 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