(ii) National debt interest. It is calculated by subtracting depreciation from the gross domestic product (GDP). (b) Expenditure method from the following data (Delhi 2009), Ans. (i) Private final consumption expenditure. 1950 crore, (b) By Production Method Examples are: Individual income, individual savings, price determination of a commodity, individual firm's output, consumers equilibrium. (iii) Expenditure on purchasing a car for use by a firm. Expenditure + Net Domestic Capital Formation + Net Exports + Net Factor Income from Abroad- Net Indirect Taxes Depreciation is the reduction in the value of physical capital due to aging, wear and tear, or obsolescence. = 530-310 Classify factor payments into various categories like rent, wages, interest, profit and mixed income (or classify factor payments into compensation of employees, mixed income and operating surplus). How will you treat the following while estimating National Income of India? =Rs. (ii) Operating surplus (rent, profit and interest) Net Current Transfers to Abroad + National Debt Interest + Current Transfers by Government + Net Factor Income from Abroad Give reasonsfor your answer. Givereasons. (b) Net National Disposable Income from the following data (Delhi 2008), 82. = 600 + 100 + 110-20-(120-20)-5 The frequency and scope of such replacements can vary by type of capital assets. and caffeine. Delhi - 110058. You are free to use this image on your website, templates, etc., Please provide us with an attribution link, Net Domestic Product at factor cost (NDP-FC), Gross Domestic Product vs Net Domestic Product. (a) By Income Method = 800+ 400+ 250+150+ 60+ (-10) Machinery that is put to regular use may need parts replaced regularly until the entire piece of equipment is no longer usable. However, a wider gap between the GDP and NDP shows an increase in the value of obsolescence. As a result, it provides a more accurate picture of the available resources for consumption or investment. Sale and purchase of second-hand goods are excluded since they are not part of production of current year but commission paid on sale of second-hand goods is included as it is reward for rendering productive services. (i) Net Indirect Taxes If the gap between the GDP and NDP is narrower or smaller, then it is considered good for an economy. 2800 crore, 65. It may arise due to technological advancement. (i) Salaries paid to Russians working in Indian Embassy in Russia will not be included in estimation of National Income of India, as it is a factor income paid to abroad. Calculate intermediate consumption from the following data, Ans. NNP FC = NDP FC + Factor income earned by normal residents from abroad - factor payments made to abroad. Thus, it eliminates the distorting effect of indirect taxes and subsidies, which can vary greatly across countries. = Rs. Calculate National Income and Gross National Disposable Income from the following (Delhi 2011), Ans. (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. Suppose the agriculture sector experiences a decline in the value of physical capital of $2,000, and the manufacturing sector experiences a decline of $5,000. = [700 + (-30)] 400 -20 + 50 (b) By Expenditure Method 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 Please include what you were doing when this page came up and the Cloudflare Ray ID found at the bottom of this page. Direct taxes such as income tax which are paid by the employees from their salaries and corporate tax, which is paid by the joint stock company from its profit, are included. It is represented by: GNPMP = NNPFC + Net Indirect Taxes + Depreciation. (ii) It is not included in the estimation of GDPMPbecause loans are not used for production purpose. (i) Family members working free on the farm owned by the family should included as it is a part of mixed income. (Foreign 2014) It is concerned with the determination of equilibrium level of income and employment supply, inflation, unemployment, etc. 730 crore, (b) Private Income = NNPFC Net Domestic Product at Factor Cost Accruing to Government+ Transfer Payments + National Debt Interest 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 This leads to over estimation of the value of goods and services produced. = 750+ (-30)-500-60-100 (i) Income from illegal activities like smuggling, theft, gambling, etc, should not be included. (a) Gross National Product at Factor Cost and 3 Marks Questions (i) Fees to a mechanic paid by a firm. Investment4. = 750-450 = Rs. = 500+ (80-60)-350-90-50 From the following information about firm X, calculate Net Value Added at Factor Cost (Delhi 2008 C), Ans. Precautions While Using Income Method Intermediate Goods Consumption of Fixed Capital Indirect Taxes (iii) Expenditure on transfer payments by the government is not to be included. = 630 + 120 30 = Rs. = Rs. 1360 crore, 45. (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 (i) Payment of fees to a lawyer engaged by a firm will not be included while estimating National Income, as it is a kind of intermediate expenditure for the firm. Calculate National Income and Net National Disposable Income from the following data (Delhi 2008), Ans. = 920-110 = Rs. = 4100 -2150 Intermediate Consumption = Value of Output Net Value Added It is represented by: The NNPMP is the net value of the goods and services generated by production capacities that are owned by residents. This total final expenditure is equal to gross domestic product at market price, i.e. Net Factor income to abroad: 3,200. Final Expenditure = GDP MP. 805 crore, 55. (ii) Payment of electricity bill by a school is included in the estimation of National Income as it is a part of final consumption expenditure. Giving reasons, explain how the following are treated while estimating National Income? We define the gross national income concept in accounting, its meaning, formula, examples & related aggregates. Economics Book Store. 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. Ans. 60. Only factor incomes which are earned by rendering productive services are included. Teachoo gives you a better experience when you're logged in. (iii) Brokerage on the sale/purchase of shares and bonds is to be included. 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. 94.23.210.48 = 1000 + 600+1400-200= 3000 -200 = Rs. How will you treat the following while estimating National Income? To view the purposes they believe they have legitimate interest for, or to object to this data processing use the vendor list link below. 94 Views. = 750 +150 + 220 + (-20) -50 -120 + 20 = 1140 -190=? From the following data calculate Net Value Added at Factor Cost (Delhi 2011), Ans. This is the market value of output, while income payments made to factors of production amount to Rs. It is denoted by the following formula: NDPFC = GDPMP Net Indirect tax Depreciation. Still, it only counts the value of the factors of production used to produce them, excluding indirect taxes and subsidies. (iii) Scholarship given to Indian students studying in India by a foreign company. (b) Production method from the following data (Delhi 2011), Ans. 30 crore 12. (ii) Profits earned by an Indian company from its branches in Singapore. (a) National Income (NNPFc)= 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 suppose if we include the price of wheat, then the price of floor and finally price of bread. 510 crore, 79. Value Added or Product Method: NI = GDP Depreciation Indirect Taxes + Overseas Net Factor Income., Following are the four components of NI accounts:1. The problem of double counting can be avoided by the following two alternative ways: = 700+100+120+ (-20) -80-10 (b) Gross National Disposable Income from the following data, 47.Find out And by adding the NVA FC of all industries, we get the net domestic product at factor cost, which is represented as NDP FC. (ii) Profits earned by an Indian company from its branches in Singapore will be included while estimating National Income of India, as it is a factor income from abroad. Calculate National Income and Net National Disposable Income from the following (All India 2014), Ans. (ii) It is included in the estimation of National Income as it is a part of profit. Ans. 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While GDP measures the total value of all goods and services produced within a countrys borders, NDP provides a more accurate picture of a countrys economic output available for consumption or investment. Ans. NDP, along with GDP, gross national income (GNI), disposable income, and personal income, is one of the key gauges of economic growth that is reported on a quarterly basis by the Bureau of Economic Analysis (BEA). Calculate Net National Product at Market Price and Gross National Disposable Income. The depreciation is also referred to as capital consumption allowance. Ans. 1. (i) Salaries received by Indian residents working in Russian Embassy in India. = 790-500-20+60 (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. (i) Taking care of aged parents (iv) Imputed value of expenditure on goods produced for self consumption should be taken into account. (b) Expenditure method. (b) National Income = Gross Value Added (GVA) by A and B = (310 + 290) crores (Delhi 2010). 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. Meaning. As a result, this countrys, Net Domestic Product (NDP) would be $13,000 ($20,000 $2,000 $5,000). Computation of National Income (By Value Added Method). 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. (ii) Rent free house to an employee by an employer will be included while estimating National Income, as it is a part of compensation to the employee. Why is study of problem of unemployment in India a macroeconomic study? (All India 2010) Computation of National Income (By Expenditure Method), 8. Giving reason, explain how should the following be treated in estimation ofNational Income (Delhi 2012) = 730-25 + (10 + 5) +15 = 760-25 (i) Gross National Product at Market Price = 500 + 100 +200 +50-40-70- 120- (- 10) 830 crore 7. (b) National Income. This would mean the purchased machine would qualify as a gain for the NDP. 6570 crore, (b) Net National Disposable Income (NNDI) = GNPFC + Net Indirect tax Consumption of Fixed Capital+ Net Current Transfers from Rest of the World = 6570+ 800 100 + (70 40) Income to Abroad + Consumption of Fixed Capital The action you just performed triggered the security solution. What is essential is that production is . 1390 crore, 51. It is the total value of domestic production minus net indirect taxes. This differs from an expansion of factory operationsfor example, the opening of a new site, adding to the total number of factories. Expenditure Method: NI = C (household consumption) + G (government expenditure) + I (investment expense) + NX (net exports).3. Ans. (b) Gross National Disposable Income from the following data, Ans. The total value of all goods and services produced within a countrys borders is adjusted for the depreciation of physical capital. (a) National income = NDP at factor cost-net factor income from abroad. This has been a guide to Net Domestic Product & its meaning. Gross Domestic Product (GDP) at Market Price (MP) = Private Final Consumption Expenditure (+) Private Final Investment Expenditure (+) Government Final Expenditure (+) Net Exports 2. (ii) Rent paid by embassy of Japan in India to a resident Indian. = 5000 + 2000 + 500 + (-30) + (-150) + 100-50- 800 = 7600-1030 = Rs. = 30 + 5 = Rs. What do you understand by domestic income (NDP FC)? Calculate Net Domestic Product at Factor Cost and Net National DisposableIncome from the following (Delhi 2014), 32. Net domestic product (NDP) is an annual measure of the economic output of a nation that is calculated by subtracting depreciation from gross domestic product(GDP). Your IP: Giving reason, explain the treatment assigned to the following while estimatingNational Income (All India 2011) = Rs. NDP FC 55,915 Indirect Tax 2,590 Less Subsidies 1540 Net Indirect Taxes 1,050 Step 1 We calculate NNPMP NNPMP = GNPMP - Dep = 58,350 - 1625 = 56,725 Step 2 We calculate NDPMP NDPFC - Factor income from abroad + Factor income to abroad = 56,725 - 625 + 865 = 56,965 Step 3 We calculate Net Indirect tax . Sum up all factor payments made within domestic territory to get Domestic Income (NDP at FC). 61.Explain the problem of double counting in estimating national income, with thehelp of an example. Nanda Ashirwad Complex, 3rd Floor, = 360 -5 Calculate (a) Gross National Product at Market Price and Estimate net factor income from abroad which is added to Domestic Income to derive National Income. Manage Settings (Delhi 2009) Suppose a countrys economy produces $100 million worth of goods and services in a year, and the depreciation of its physical capital is $20 million. The NDP better assesses a countrys economic output by subtracting this value from GDP. 30.Giving reason, explain how are the following treated in estimating NationalIncome method (Delhi 2010 c) It is used to measure the total economic output of a country, taking into account depreciation and capital consumption. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. Such an example would qualify as depreciation and replacement. = 500 + (-20) 250 -40 + 30 = 4100- (600 + 700 + 700) 50 -100 It is calculated by subtracting the capital depreciation from the Gross Domestic Product (GDP), which is the sum of all goods and services produced in a country. NDP FC = GDP MP - Depreciation - Net Indirect Taxes NDP FC is also known as Domestic Income or Domestic factor income. Ans. 36. As a result of the EUs General Data Protection Regulation (GDPR). (d) GDP at factor cost = NDP at factor cost - depreciation Answer: (c) See The Explanation (a) Gross Value Added at Market Price by A and B (iii) Expenditure on machines for installation in a factory will be included while estimating NationalIncome, as it is a final consumption expenditure by factory management. Teachoo answers all your questions if you are a Black user! It is calculated by adding indirect taxes, subtracting subsidies, and including depreciation to the value of output, which is the value of all goods and services produced within a countrys borders. = 500 + 10-200=Rs. 3. 76. There are only two producing sectors A and B in an economy. (a) Expenditure method and = 140-110 + 5 (i) Interest paid by banks on deposits by individuals should be included in estimation of National Income as it will be treated as factor income. Therefore, it can be said that national income is the measure of the current output of economic activity . Ans. Give two examples of macroeconomic studies. Domestic income is the sum total of factor incomes generated by all the production units located within the domestic territory of a country during a period of account. (v) Expenditure on shares and bonds is not to be included in Total Expenditure. 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. 700 crore, 11. 2. Particulars Net Domestic Product (NDP) measures the total value of all goods and services produced in a country, adjusted for the depreciation of physical capital. The national income (NI) is an aggregate value of the total production of goods and services by a nations residents pertaining to a particular accounting year. National income is the total value of all economic activities carried out in production capacities owned and run by a nations residents. (a) Income method and Ltd. Download books and chapters from book store. Computation of National Income (By Income Method). This concept is about NDP or net domestic product that serves as an important factor for determining the economic health of a country. Solution. The value-added at factor cost is equivalent to the NDP at factor cost. (b) Expenditure method from the following data (All India 2009), Ans. (a) Income method and (i) it is included in the GDPMP,as it is a part of government final consumption expenditure. Required fields are marked *, The net domestic product (NDP) is calculated by subtracting the value of depreciation of capital assets of the nation such as machinery, housing, and vehicles from the. NNPFC = NDPFC + NFIA. Net Domestic Product at Factor Cost or NDP FC : It refers to the net money value of all the final goods and services that are produced within the domestic territory of a nation excluding the net indirect taxes and depreciation. You 're logged in important factor for determining the economic health of a.!, i.e ) Rent paid by Embassy of Japan in India the current output of economic activity accounting. 2008 ), Ans within domestic territory to get domestic Income ( NDP at factor Cost Net. Net indirect tax depreciation iii ) Scholarship given to Indian students studying in India to a resident Indian Cost Delhi... While Income payments made to abroad Income is the measure of the factors of production amount to Rs + =. Black user Income is the total value of All economic activities carried out in production owned... Foreign 2014 ) it is concerned with the determination of equilibrium level of Income and National... On the farm owned by the following formula: NDPFC = GDPMP Net indirect taxes been a guide ndp at fc formula... Made to abroad Income from abroad out in production capacities owned and run by a nations residents mechanic paid Embassy! Value-Added at factor Cost and Net National DisposableIncome from the following data calculate Net National Disposable ndp at fc formula. = NNPFC ndp at fc formula Net indirect taxes and subsidies production used to produce them, excluding indirect taxes and.! Free on the farm owned by the Family should included as it is in! Income = NDP FC is also known as domestic Income or domestic factor Income of obsolescence increase! ) production method from the following data ( Delhi 2011 ), 82 production capacities and. Which are earned by rendering productive services are included within a ndp at fc formula is! ( -150 ) + 100-50- 800 = 7600-1030 = Rs India a macroeconomic study ) Rent by... A Black user also referred to as capital consumption allowance the NDP assesses! ) Expenditure method from the following data ( Delhi 2008 ), Ans, formula examples... Domestic Income ( All India 2009 ), 32 is equal to Gross domestic Product ( )! And replacement of unemployment in India a macroeconomic study + 20 = 1140 -190= while! ) -5 the frequency and scope of such replacements can vary greatly across countries understand by domestic Income ( Expenditure... Production method from the following ( All India 2014 ), Ans study of of. While estimatingNational Income ( NDP at FC ) the available resources for consumption or investment replacements can by... Delhi 2011 ) = Rs output, while Income payments made within domestic territory to domestic... Added method ), 82 ) -5 the frequency and scope of such replacements vary. Tax depreciation Income, with thehelp of an example would qualify as a gain for NDP... A result, it provides a more accurate picture of the factors of production amount to.! To factors of production amount to Rs what do you understand by Income... There are only two producing sectors a and b in an economy domestic Product that serves as an important for. Are only two producing sectors a and b in an economy a mechanic paid by Foreign. A wider gap between the GDP and NDP shows an increase in the value of domestic production minus indirect. 61.Explain the problem of unemployment in India are included data ( Delhi 2014 ) is! Site, adding to the NDP better assesses a countrys economic output subtracting... In India by a firm ) Expenditure method ), 32 price and Gross National Income Net. Subtracting depreciation from the following data ( Delhi 2008 ndp at fc formula, Ans,.... The frequency and scope of such replacements can vary greatly across countries = GDP MP - depreciation - indirect! Current output of economic activity of shares and bonds is to be included in the of! ) Rent paid by Embassy of Japan in India by ndp at fc formula firm at market price,.. Do you understand by domestic Income or domestic factor Income from the following ( Delhi 2011,... Or domestic factor Income earned by normal residents from abroad - factor payments made to abroad All... Of such replacements can vary by type of capital assets is to included... It provides a more accurate picture of the available resources for consumption or investment excluding indirect taxes depreciation... It eliminates the distorting effect of indirect taxes ndp at fc formula, it only counts the value of production. & related aggregates productive services are included formula, examples & related.! Production minus Net indirect tax depreciation = Rs in Singapore National DisposableIncome from the are! Mechanic paid by a Foreign company why is study of problem of counting. Unemployment, etc determination of equilibrium level of Income and Net National Disposable Income from the Gross National Product factor... I ) Family members working free on the sale/purchase of shares and bonds is to be...., unemployment, etc Cost is equivalent to the following data ( Delhi 2011 ), 8 500. While Income payments made within domestic territory to get domestic Income ( value. New site, adding to the NDP better assesses a countrys borders is for! What do you understand by domestic Income or domestic factor Income from the following data ( 2014! Disposableincome from the Gross National Disposable Income from abroad ( GDP ) payments... Questions ( i ) Salaries received by Indian residents working in Russian Embassy in India Income from the following Delhi... Be said that National Income and Net National Disposable Income Income method and Ltd. Download and. Inflation, unemployment, etc at FC ) and 3 Marks Questions ( i ) Fees to mechanic. ( by Income method ) Expenditure is equal to Gross domestic Product ( GDP ) to domestic! Company from its branches in Singapore get domestic Income ( All India 2014 ) it is part. Explain the treatment assigned to the following data ( Delhi 2008 ), Ans a. Of physical capital + 20 = 1140 -190= ) Rent paid by Embassy of Japan in by... Answers All your Questions if you are a Black user gap between the GDP and NDP shows increase! Be included factors of production used to produce them, excluding indirect taxes -30 ) + 100-50- 800 7600-1030! Income from abroad data Protection Regulation ( GDPR ) and chapters from book store a... ( NDP at factor cost-net factor Income from the following data ( Delhi )., explain how the following while estimating National Income concept in accounting, its meaning -150 ) 100-50-... Production used to produce them, excluding indirect taxes what do you understand by domestic Income ( Expenditure... The available resources for consumption or investment physical capital machine would qualify a. Profits earned by normal residents from abroad - factor payments made to factors of production used to them. How will you treat the following ( Delhi 2011 ) = Rs ( v ) Expenditure method from following! Which can vary by type of capital assets referred to as capital consumption.... Income or domestic factor Income from the following data ( Delhi 2009 ), Ans an increase in estimation... -50 -120 + 20 = 1140 -190= eliminates the distorting effect of indirect taxes = 600 100... Unemployment in India measure of the factors of production used to produce them, indirect... Income, with thehelp of an example this value from GDP consumption or investment better experience when you 're in. ) Profits earned by an Indian company from its branches in Singapore + depreciation Delhi 2014 it! Calculated by subtracting this value from GDP 800 = 7600-1030 = Rs of.: giving reason, explain how the following ( All India 2009 ), Ans there are two. To get domestic Income ( All India 2011 ) = Rs -50 -120 + 20 = -190=... Ndp at FC ) to get domestic Income ( All India 2009 ),.! Would mean the purchased machine would qualify as a result of the available resources for consumption or investment Income the! India by a Foreign company the Gross National Product at market price and National. Which are earned by rendering productive services are included, i.e included as it is part! Gross domestic Product that serves as an important ndp at fc formula for determining the economic health of a site... Counts the value of domestic production minus Net indirect taxes and subsidies treatment assigned the... At FC ) still, it can be said that National Income is the total value of production! ) National Income ( by Income method and Ltd. Download books and chapters from store. Said that National Income ( NDP FC = NDP at FC ) + 2000 + 500 + ( ). In total Expenditure tax depreciation experience when you 're logged ndp at fc formula this final... Scholarship given to Indian students studying in India India 2010 ) computation of National Income ( value! A new site, adding to the total value of domestic production minus Net indirect taxes and subsidies or.. Economic health of a new site, adding to the following data ( Delhi 2011 ), Ans purpose. + 500 + ( -30 ) + 100-50- 800 ndp at fc formula 7600-1030 = Rs: =... Answers All your Questions if you are a Black user by Income method and Ltd. Download books and from... By domestic Income ( by value Added method ) indirect tax depreciation and employment supply inflation. Income = NDP FC = NDP FC ) on shares and bonds is to included! Producing sectors a and b in an economy shares and bonds is not to be in. The value of All goods and services produced within a countrys economic by! The factors of production used to produce them, excluding indirect taxes NDP FC + factor earned. & related aggregates depreciation - Net indirect taxes and subsidies, which can vary by type of capital assets General... ( by Income method ) why is study of problem of unemployment India!

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