(i) Expenditure on education of children by a family. Intermediate Consumption of B The formula for Net Domestic Product (NDP) is as follows: GDP is the Gross Domestic Product, the total value of all goods and services produced in a country. You are free to use this image on your website, templates, etc., Please provide us with an attribution link. = 530-310 Teachoo gives you a better experience when you're logged in. This has been a guide to Net Domestic Product & its meaning. Its central problem is price determination and allocation of resources. Also, it indicates economic balance. 4. = 400 +100 + 50 + (-20) + 10- (30 5) = 300+ 200-(-50)+ 20+ 30 Calculation of Natinal Domestic Prodeuct (NDP) at Factor Cost (FC) 1. (ii) Addition to stocks during a year. 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. (ii) National debt interest. (ii) Payment of electricity bill by a school. 100 only. Particulars It is evaluated as follows: GDPMP = Net Domestic Product at FC (NDPFC) + Depreciation + Net Indirect Tax. = 30 + 5 = Rs. In recent years the US reported the following figures: Clearly, USs gross national income has been on the rise in recent years. (i)Interest on a car loan paid by an individual. GDP at factor cost is the same as GDP at market prices less net indirect taxes. (iii) It is included in the estimation of GDPMPbecause it is a part of final expenditure by a firm. 630 arab, (b) Net National Disposable Income (NNDI) (i) Fees to a mechanic paid by a firm. From the following information about firm X, calculate Net Value Added at Factor Cost (Delhi 2008 C), Ans. 200 crore (ii) National debt interest. Its distribution doesnt reflect the actual condition of the poor. (ii) Net National Disposable Income (All India 2012), 50. (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. Income Method NDP (FC) = F I F I = COE + OS + MISE COE = W SC + W SK + SS OS = Rent + Interest + Royalty + P rofit Rent = PO + IR NI = ITR IP. 2. 59.
(iii)Purchase of taxi by a taxi driver. = Rs. NDP accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration. Keynes whose book titled 'General Theory of Employment, Interest and Money', published in 1936 brought about a revolution in economic thought is called the Father of Modern Macroeconomics. (ii) Profits earned by an Indian bank from its abroad branches is included while estimating National Income of India as it is a factor income from abroad. = 1220-270 = Rs. 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. (a) Expenditure method and (i) Wheat grown by farmer but used entirely for familys consumption. Formula value of output= Sales + change in stock Change in st. 28.Giving reason, explain the treatment assigned to the following while estimatingNational Income (All India 2011) =100 + 500+160 -20-130 (ii) Payment of interest by a government firm should not be included in the estimation of National Income, as it is a transfer payment. (i) Family members working free on the farm owned by the family. It is the total value of domestic production minus net indirect taxes. A common equation used to calculate NDP is as follows: NDP = Gross domestic product (GDP) - Depreciation Similarly, NDP = Consumption + Government Expenditures + Investment +Exports - Imports - Depreciation NDP = GDP - Depreciation N DP = GDP. An example of data being processed may be a unique identifier stored in a cookie. (a) National Income (NNPFC) = Private Final Consumption Expenditure Estimate net factor income from abroad which is added to Domestic Income to derive National Income. (ii) Rent free house to an employee by an employer. Calculate Gross National Product at Market Price and Net National DisposableIncome from the following: (Foreign 2014), 44. 68.Calculate Gross National Product at Factor Cost from the following data by Ans. (ii) Prize won in a lottery. NDP is an important economic indicator because it provides a more accurate picture of a countrys economic output that is available for consumption or investment. NNPfc = NDPfc + NFIA. (b) Net National Disposable Income = GDPFC+ Net Indirect Tax Net Factor Income to Abroad Net Current Transfers to Abroad Depreciation (a) Gross National Product at Market Price and (ii) Net exports Calculate (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. NDP AT FACTOR COST = NDP AT MARKET PRICE - Indirect Cases + Subsidies Net Domestic Factor Income: Wages, rent, interest, and profit received by the factors of production are the components of net domestic factor income. 2010 crore, 74. PRODUCT METHOD (Value added method): Theory-only the value of final goods is to be included; otherwise there arises a problem of double counting. Also explain, two alternative ways of avoiding the problem. = 600 + 100 + 110-20-(120-20)-5 (a) Gross National Product at Factor Cost and = 1000 + 600+1400-200= 3000 -200 = Rs. Calculate Gross Value Added at Factor Cost from the following data, Ans. = [140+ (-10)]-90-20-(-5) It is represented by: GNPMP = NNPFC + Net Indirect Taxes + Depreciation. (i) Remittances from non-resident Indians to their families in India. 570 crore, 41. Answer (1 of 17): National income(NNP fc) basically calculated in three ways :- 1. While that may take many years, barring unexpected damage or defects, there is a cycle of equipment failure and replacement. (ii) Purchase of tractor by a farmer. 400. 75. Your Mobile number and Email id will not be published. Depending on the way, the income is earned. In other words, GDP measures the total value of all goods and services produced within a country. Investopedia does not include all offers available in the marketplace. (Interest paid by banks on deposits by individuals. This is because it only counts the value of the factors of production used to produce the goods and services. = 4100 -2150 Calculate sales from the following data (Delhi 2013), 4. All types of transfer income like old-age pension, unemployment allowance, etc. suppose if we include the price of wheat, then the price of floor and finally price of bread. 43. Give an example of showing the difference between microeconomics and. (iii) Expenditure on machine for installation in a factory. (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 (iii) Expenditure on transfer payments by the government is not to be included. It is calculated by subtracting depreciation from the gross domestic product (GDP). (a) Net Domestic Product at Factor Cost and There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. Thus, national income is calculated by adding up factor incomes generated by all the producing units located within the domestic economy during a period of account. (i) Family members working free on the farm owned by the family should included as it is a part of mixed income. It is computed as follows: The net national product at factor cost is the value of overall goods or services manufactured by a nations residents, excluding indirect taxes and depreciation. = 500 + 100 +200 +50-40-70- 120- (- 10) It deals with individual income, individual prices and individual outputs, etc. 35 lakh, 17. (Delhi 2009), 77. (ii) Gross National Disposable Income from the following data, Ans. (Delhi 2010). 13. = Rs. (ii) Expenditure method Home Economy National Income accounting Methods of estimating National Income Income method. Giving reason, explain whether the following are included in domestic product of India. = Rs. Cloudflare Ray ID: 7a11ea707ae6d2cd (i) Final output or final product method In this method, only final products (goods and services) are added to obtain the GDP. 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. (a) By Income Method 94.23.210.48 = 600 + (-10)-300 = Rs. (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. By contrast, if a new housing community is developed, the construction of residences would be contributory to NDP. (i) Dividend received by an Indian firm from its investment in shares of a foreign company. (ii) Interest on a car loan paid by a government owned company. I have written it for you to memorize it. Meaning of microeconomics Briefly, microeconomics is the study of individual economic units of an economy. = 4100- (600 + 700 + 700) 50 -100 Calculate NDP at FC Particular Rs. 7. 1. NFIA is added to domestic income (NDP FC) to get the National Income (NNP FC ). = 3950-50 = Rs. 60. 6,000 Crores Solution: NDP at FC = Compensation of employees + Operating surplus + Mixed income of self-employed + Income from domestic products accruing to public sector Calculate sales from the following data (Delhi 2008), Ans. Class 12 Computer Science It is study of individual economic units of an economy. Sales Taxes - consumer taxes imposed by the government on the sales of goods and services. (iii) Profits earned by branches of foreign bank in India. NDP does not consider the effects of indirect taxes and subsidies, which can distort market prices. Net Value Added at Factor Cost (NVAFC) = Value of Output [Sales + Change in Stock (Closing Stock Opening Stock)] Purchase of Raw Material Depreciation (Gross Capital Formation Net Capital Formation) + Subsidies 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. Simply put 'it is study of the economy as a whole'. 70. What is essential is that production is . In this theoretical example, the NDP considers the depreciation of physical capital, providing a more accurate picture of the countrys economic output. 42. Giving reason, explain the treatment assigned to the following while estimatingNational Income (All India 2011) Hence, the problem of double counting is avoided. (i) No, it is not included while estimation of National Income as it is not a factor income. Givereasons for your answer. 730 crore, (b) Private Income = NNPFC Net Domestic Product at Factor Cost Accruing to Government+ Transfer Payments + National Debt Interest An increase in NDP signifies a growing economy, while a decrease denotes economic stagnation. (i) Capital gain on sale of a house. (ii) National debt interest should not be included in estimation of National Income as it is assumed that government borrows for consumption and hence, it is treated as transfer income. Income from illegal activities like smuggling, black-marketing, etc. 2023 Zigya Technology Labs Pvt. 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. The depreciation accounted for is often referred to as capital consumption allowance and represents the amount needed to replace those depreciated assets. 805 crore, 55. 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. (a) By Income Method 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. It is computed as follows: NNPFC = GNPMP Net Indirect Taxes Depreciation. National Income (NNPFC) = Private Final Consumption Expenditure + Government FinalConsumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stocks Net Imports Net Indirect Taxes + Net Factor Income from Abroad (i) Interest on a car loan paid by an individual should not be included while estimating National Income as the loan is taken for consumption purpose. 735 crore, 84. The NDP also takes into account the other factors such as obsolescence and complete destruction of the asset. In 2020, the gross national income of the US was $21,286,637,000,000.000. (ii) National debt interest will not be included while estimating National Income by income method, as the government takes loan for both productive and non-productive activities. 70. 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 CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. (i) Remittances from non-resident Indians to a resident in India should not be included in the estimation of domestic factor income as it is not a part of domestic income and the income is not generated in domestic territory of India. (v) Expenditure on shares and bonds is not to be included in Total Expenditure. National Income equals Rent + Wages + Interest + Profit + Mixed-Income. 600 lakh, 16.Calculate Net Value Added at Factor Cost from the following data, Ans. = 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. (i) Expenditure on free services provided by government. (a) Income method and The resulting total is called Domestic Income or Net Domestic Product at FC (NDPFC)- By adding net factor income from abroad to domestic income, we get National Income (NNPFC)- Mind, in income method national income is measured at the stage when factor incomes are paid out by enterprises to owners of factors of productionland, labour, capital and enterprise. (i) National Income Hence, according to the value-added method: National Income = (NDP FC) + Net factor income from abroad. (All India 2012) The sum of Value added by all the firms gives us the GDP of the country. This measure is useful for policymakers and investors. It is measured by aggregating monetary values of final goods and services produced during that financial year. Thus, it provides a clearer picture of a countrys economic performance. The value-added at factor cost is equivalent to the NDP at factor cost. 1650 crore, 69. 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. NDP is a measure of a countrys economic performance that considers the depreciation of physical capital, unlike GDP, which only reflects the sum of all goods and services produced within a countrys borders. Calculate (All India 2010) (a) National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption (iii) Yes, it is included while estimation of National Income as it is an investment expenditure by the producer. (ii) Profits earned by an Indian company from its branches in Singapore. Above Village Hyper Market, Chandralyout Main Road, You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. Gross Domestic Product (GDP): Formula and How to Use It, What Is National Income Accounting? In lakhs GNP at MP 16,000 Subsidies 1,200 . (b) Net National Disposable income from the following data Ans. 14. So, NNPfc = 2100 +(-50) = 2050 (in Arabs) In the question, they asked us to calculate NNPfc, but with income method we get . 26.How should the following be treated while estimating National Income? Ans. 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. How should the following be treated while estimating National Income? 810 crore (b) Private Income from the following data (All India 2008), 87. (iii) Interest on public debt will not be included while estimating National Income, as it is the loan takenfor consumption purpose. (ii) Payment of interest on loan taken by an employee from the employer. (a) Gross Value Added at Market Price by A and B GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income. Net Exports. 30 crore, 12. = Rs. Download the PDF Question Papers Free for off line practice and view the Solutions online. It doesnt account for non-marketed goods or services. (iii) Capital gains to Indian residents from sale of shares of a foreign company will not be included whileestimating National Income in India, as it is a kind of transfer income. How will you treat the following while estimating National Income? = 185+15 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 gross domestic product (GDP). 71. = 880-540 Required fields are marked *. This method is also known as 'Income Disposal Method'. (i) National Income . Your IP: According to the formula, national income is calculated by adding together consumption, government expenditure, investments made within the country, net exports (exports minus imports), and foreign production by residents. 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 . = 140-110 + 5 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 countrys borders. (ii) Net Current Transfers from Abroad (All India 2012), 49.Find out (ii) Corresponding to production for self consumption, the generation of income of economy to be taken into account. An example of data being processed may be a unique identifier stored in a factory within a.... Factors of production used to produce the goods and services of microeconomics,... Nfia is Added to domestic Income ( all India 2008 ), 50 on education of children by a driver... 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