3. Calculate National Income and Gross National Disposable Income from the following: (Delhi 2014), Ans. (i) Income from illegal activities like smuggling, theft, gambling, etc, should not be included. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock) Purchase ofIntermediate Goods Depreciation Net Indirect Taxes (ii) Net National Disposable Income (Delhi 2012), 48.Find out Calculate Net National Product at Market Price and Gross National Disposable Income from the following: ( All India 2014). = 880-540 Consumption2. = Rs. Ans. The site owner may have set restrictions that prevent you from accessing the site. 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. (b) Gross National Disposable Income from the following data, 47.Find out 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. The $80 million is the amount available for consumption or investment in the economy after accounting for the depreciation of physical capital. The offers that appear in this table are from partnerships from which Investopedia receives compensation. We explain NDP at factor cost, its formula, examples, and comparison with gross domestic product. Value Added by a Firm = Value of Output of the Firm Intermediate Consumption of the Firm. Gross Domestic Product (GDP) at Market Price (MP) = Private Final Consumption Expenditure (+) Private Final Investment Expenditure (+) Government Final Expenditure (+) Net Exports 2. We are not permitting internet traffic to Byjus website from countries within European Union at this time. NDPFC = Compensation of Employees + Profit + Rent & Royalty + Interest + Mixed income. = Rs. (ii) Earning of shareholders from the sales of shares. (iii) Financial help received by flood victims are not included while estimating National Income, as it is akind of transfer payment. D denotes Domestic Production of the Countrys Non-Residents. Gross National Product at Market Price (GNPMP). = Rs. = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stock + Net Export + Consumption of Fixed Capital Net Factor Income to Abroad Net Indirect Tax Ans. As a result of the EUs General Data Protection Regulation (GDPR). 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 NFIA is added to domestic income (NDP FC) to get the National Income (NNP FC ). (v) Expenditure on shares and bonds is not to be included in Total Expenditure. (i) Capital gain on sale of a house. 515 crore, (b) Net National Disposable Income (NNDI) = NNPFC + Net Indirect Taxes + Net Current Transfers fromAbroad Therefore, it can be said that national income is the measure of the current output of economic activity . 2023 Zigya Technology Labs Pvt. Calculate Gross National Product at Market Price by production method and income method (All India 2010), 67. (iii) Interest received on loans given to a friend for purchasing a car. Find Gross Value Added at Factor Cost (All India 2012), 9. Copyright 2023 . Domestic Income or NDP at FC. (ii) Prize won in a lottery. It refers to the sum total of factor . 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. (b) Gross National Disposable Income (GNDI) =NNPFC+ Net Indirect Taxes + Consumption of FixedCapital Net Current Transfer to the Rest of the World (iii) Purchase by a foreign tourists will be included while estimating National Income as it is consideredas exports of goods and services. = 100+10+ (20-5) + 75 It is measured by aggregating monetary values of final goods and services produced during that financial year. Ans. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. The NDP better assesses a countrys economic output by subtracting this value from GDP. In 2020, the gross national income of the US was $21,286,637,000,000.000. Calculate National Income and Gross National Disposable Income from the following (Delhi 2011), Ans. 75. Ans. 73.Calculate National Income by Calculate = 600 + (-10)-300 = Rs. (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. (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. Givereasons. (a) Gross Domestic Product at Factor Cost and Total National Income - the sum of all wages, rent, interest, and profits. The basic National Income formula used for its evaluation is as follows: Also, it can be measured using any of the following three methods: In macroeconomics, NI is correlated with various other crucial money value measures, as discussed below: GDPMP is the total value of a nations goods and services produced locallyduring a given accounting year. 630 arab, (b) Net National Disposable Income (NNDI) Your email address will not be published. (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. 310 crore, (b) Gross National Disposable Income (GNDI) =NDPFC+ Net Indirect Tax + Net Factor Income fromAbroad + Depreciation + Net Current Transfer from Abroad (iii) Profits earned by branches of foreign bank in India. Profit = Undistributed profit + dividends + corporate tax (corporate profit tax) This formula is not used in this question. NDP FC refers to a total factor income earned by the factor of production within the domestic territory of a country during an accounting year. 220 lakh, 22.Giving reason, explain how should the following be treated in estimating NationalIncome (Delhi 2012) = 5000 + 2000 + 500 + (-30) + (-150) + 100-50- 800 = 7600-1030 = Rs. 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). = 700+ (-20)+ 80+ 60+ 10 (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. Find Net Value Added at Market Price (All India 2012), 8. There are three different methods of determining NI:1. InsightsIAS Headquarters, From the following information about firm X, calculate Net Value Added at Factor Cost (Delhi 2008 C), Ans. Economics Book Store. In other words, problem of double counting arise when the value of intermediate goods is also added in total output, e.g. Formula_Sheet Chapter 2 - Read online for free. 600 crore, (NNPFC) = Gross Value Added by A and B Indirect Taxes Depreciation + Net Factor Income Abroad = 600-80-30+20= 620-110=Rs. PRODUCT METHOD (Value added method): Theory-only the value of final goods is to be included; otherwise there arises a problem of double counting. Find out 835 arab. 70. (a) National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption (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. For calculating domestic income, we will subtract the amount of depreciation and net indirect tax from the Gross Domestic Product at Market Price (GDPMP). It ascertains the economic performance, wealth, and growth of a country. (b) By Expenditure Method 1. An increase in NDP would indicate growing economic health, while a decrease would indicate economic stagnation. = 500 + (-20) 250 -40 + 30 To read more about such interesting concepts on economics for commerce, stay tuned to our website. = 4100 -2150 = [140+ (-10)]-90-20-(-5) = Rs. Net Factor income to abroad: 3,200. Sum up all factor payments made within domestic territory to get Domestic Income (NDP at FC). It studies not an individual economic units like a household or a firm or an industry (i.e. (iii) Product method or value added method or output method, 2. In this example, the countrys Gross Domestic Product (GDP) would be $20,000 ($10,000 from agriculture + $10,000 from manufacturing). (ii) Payment of interest on borrowings by general government. (ii) Gross National Disposable Income from the following data, Ans. (i) National Income . Components of Final Expenditure: The acquisition of the replacement machinery would be factored into the depreciation aspect of the NPI. Introductory Macroeconomics Subject Chosen. Ans. = Rs. (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. 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. Net Current Transfers to Abroad + National Debt Interest + Current Transfers by Government + Net Factor Income from Abroad among factors of production. 3 Marks Questions GDPMP = Net Domestic Product at FC (NDPFC) + Depreciation + Net Indirect Tax #2 - Gross Domestic Product at Factor Cost (GDPFC) It is the total value of domestic production minus net indirect taxes. (i) Profits earned by a branch of foreign bank in India will be included in domestic income of India, as the profits are earned in domestic territory of India. 13. (b) Net National Disposable income from the following data = 1220-270 = Rs. NDP at MP = GDP at MP (+) NFIA [Net Factor Income from Abroad] 3. 5700 crore, 46. (b) Private Income = NDPFC Domestic Product Accruing to Government Step 4 The last step of calculating National Income through the Income Method is the estimation of Net Factor Income from Abroad (NFIA). (ii) National debt interest. 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 = 500 +200+120 + (-20) + 20-30 -100 -(-10) -20 The Income Method measures national income from the side of payments made to the primary factors of production in the form of rent, wages, interest and profit for their productive services in an accounting year. Calculate Net National Product at Factor Cost and Gross National Disposable Income from the following: (Delhi 2014), 38. It is computed by subtracting depreciation from the gross value. 89. It deals with aggregates like national income, general price level and national output, etc. (ii) It is included in the estimation of National Income as it is a part of profit. = Rs. (ii) Purchase and sale of second hand goods should not be included. (Delhi 2009). 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. 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. (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. (a) National Income (NNPFC) = Private Final Consumption Expenditure We and our partners use data for Personalised ads and content, ad and content measurement, audience insights and product development. difference between exports and imports during an accounting year. GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income. Particulars The result provides a more accurate picture of a countrys economic output. (a) Gross National Product at Factor Cost (GNPFC) There are only two producing sectors A and B in an economy. = Rs. 730 crore, (b) Private Income = NNPFC Net Domestic Product at Factor Cost Accruing to Government+ Transfer Payments + National Debt Interest From the following data calculate Net Value Added at Factor Cost (Delhi 2011), Ans. The total value of all goods and services produced within a countrys borders is adjusted for the depreciation of physical capital. 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. = 810 + 60 + 80-(-10) = 360 -5 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. (ii) Interest received on debentures. You can email the site owner to let them know you were blocked. Givereasons for your answer. (All India 2012) Net Domestic Product (NDP) measures the total value of all goods and services produced in a country, adjusted for the depreciation of physical capital. NNPFC = NDPFC + NFIA. Teachoo gives you a better experience when you're logged in. National Income (NNPFC) = Compensation of Employees + Rent + Interest + Profit Net Factor Income to Abroad Solution. (Foreign 2014) 330 lakh, 21. (iii)Purchase of taxi by a taxi driver. 810 crore 60. Heres an example of how Net Domestic Product can be used to measure a countrys economic output: Consider a country with two industries, agriculture, and manufacturing. Income Method By this method, the total sum of the factor payments received during a given period is estimated to obtain the value of Domestic Income. Net Value Added at Factor Cost (NVAFC) = Sales + Change in Stock (Closing Stock- Opening Stock)- Purchase of Intermediate Goods Consumption of Fixed Capital Indirect Tax (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. (i) NDP (at MP) : Net Domestic Product at market price. = NNPFC+ Net Indirect Tax + Consumption of Fixed Capital Net Current Transfer to Abroad = 685 + (120-20) + 35 -(- 15) We define the gross national income concept in accounting, its meaning, formula, examples & related aggregates. = 310+ (20- 10)+ 15+ 25+ (- 5) 88.Giving reason, explain, how the following are treated in estimating National Income? CFA And Chartered Financial Analyst Are Registered Trademarks Owned By CFA Institute. (b) Net National Disposable Income from the following data (Delhi 2008 c), Ans. Call us @ 08069405205, Want to work at Insights IAS? Let us have a look at the examples to understand the concept better. National income is studied under macroeconomics; gross domestic product (GDP) and gross national product (GNP) are the two major components. =1850 + (400 + 500+1100 + 100 + (-50) (ii) Rent paid by embassy of Japan in India to a resident Indian. In this theoretical example, the NDP considers the depreciation of physical capital, providing a more accurate picture of the countrys economic output. Ans. 300 lakh, 19. Calculate Net Domestic Product at Factor Cost by the expenditure method and production method (All India 2010), Ans. Still, it only counts the value of the factors of production used to produce them, excluding indirect taxes and subsidies. 14. (ii) Net National Disposable Income (All India 2011), 57. (a) Expenditure method and 2800 crore, 65. = Rs. Calculate Ltd. Download books and chapters from book store. It helps to solve the central problem of what, how and for whom to produce in the economy. (i) Social security contributions by employees. Income Method: NI = Rent + Compensation + Interest + Profit + Mixed Income.2. It discusses how equilibrium of a consumer, a producer or an industry is attained. This leads to over estimation of the value of goods and services produced. It is represented by: The NNPMP is the net value of the goods and services generated by production capacities that are owned by residents. (a) Net Domestic Product at Factor Cost (NDPFC) = Wages and Salaries + Rent + Interest Paid byProduction Units + Corporation Tax + Dividends + Undistributed Profits + Social Security Schemes by Employers 7. (i) Expenditure on education of children by a family. NDP at FC = = 2000 + 500 + 700 + 800 + 1500 = Rs. (b) Personal Income from the following data (All India 2008), 86.Calculate Thus, it eliminates the distorting effect of indirect taxes and subsidies, which can vary greatly across countries. 42. 100 only. (i) Expenditure on fertilisers by a farmer. = 750-450 = Rs. Such an example would qualify as depreciation and replacement. 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In other words, GDP measures the total value of all goods and services produced within a country. Net Value Added at Factor Cost (NVA FC) = Sales + Change in Stock (Closing Stock- Opening Stock)- Purchase of Intermediate Goods - Consumption of Fixed Capital - Indirect Tax = 500+ (80-60)-350-90-50 = 520-490 = Rs. The formula for NDP can be expressed as follows: Depreciation = Depreciation of capital assets such as equipment, vehicles, housing, and more. 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. (Delhi 2008). = 1550 190 = Rs. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock)-Purchase of As a result, it provides a more accurate picture of the available resources for consumption or investment. 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All India 2012 ), Ans the estimation of the Firm, how for! Within European Union at this time + National Debt Interest + Current Transfers by government + Net Foreign Income! From Abroad among factors of production by production method and Income method: NI = Rent + +!, Ans set restrictions that prevent you from accessing the site Income by calculate = 600 + ( ). = Rent + Compensation + Interest + Mixed Income corporate profit tax ) this formula is used. Of goods and services produced within a country 100+10+ ( 20-5 ) + 75 it is measured by aggregating values! Included while estimating National Income + sales Taxes + depreciation + Net Factor! Net Current Transfers by government + Net Foreign Factor Income book store calculate National Income ( NNDI ) email! 75 it is a part of profit the $ 80 million is the amount available consumption! Estimation of National Income, as it is measured by aggregating monetary values of final Expenditure: the of. 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