FORMULAS & NUMERICAL PROBLEMS RELATED TO MEASUREMENT OF NATIONAL INCOMEMEASUREMENT OF NATIONAL INCOME INCOME METHOD 1. EXPENDITURE METHOD PRODUCT METHOD INCOME METHOD : Mixed Income of Self Employed Net Domestic Product At Factor Cost = Compensation Of Employees + Operating Surplus + 1 WAGES & SALARIES CASH AS WELL AS KIND + * COMPENSATION OF EMPLOYEES 2 SOCIAL SECURITY CONTRIBUTION BY THE EMPLOYER + 3 RETIREMENT PENSION 1 RENT + * OPERATING SURPLUS 2 INTEREST + 3 PROFIT Dividend Corporate Profit Ta Undistributed Profit . CONVERSIONS NET ( + )DEPRECIATION ( .)NET INDIRECT TAXES Net Indirect Ta = Indirect Ta – Subsidies Net Factor Income from Abroad = Factor Income from abroad – Factor Income To abroad .)NET FACTOR INCOME FROM ABROAD > NATIONAL FACTOR COST ___( + )NET INDIRECT TAXES > MARKET PRICE ( .) DEPRECIATION > GROSS DOMESTIC ( + )NET FACTOR INCOME FROM ABROAD ( . ) DEPRECIATION > GROSS DOMESTIC ( + )NET FACTOR INCOME FROM ABROAD ( .)NET INDIRECT TAXES > MARKET PRICE . Final Consumption Expenditure + Gross Domestic Capital Formation + Net Exports Gross Domestic Capital Formation = Gross Domestic Fixed Formation + Change in Stock Net Exports = Exports – Imports CONVERSIONS NET ( + )DEPRECIATION ( .2. EXPENDITURE METHOD Gross Domestic Product At Market Price = Private Final Consumption Expenditure + Govt.)NET FACTOR INCOME FROM ABROAD > NATIONAL FACTOR COST ( + )NET INDIRECT TAXES ( . 1 2 3 4 5 6 7 8 9 10 11 12 Items Net Domestic capital formation Compensation of employees Consumption of fi ed capital Govt.Q. in Crore 500 1850 100 1100 2600 400 200 500 (-) 100 1100 (-) 50 250 Sol : Income Method GNP FC = Compensation of employees + ( Rent + Interest + Profits ) + Consumption of fi ed capital + Net Factor Income From Abroad GNP FC = 1850 + (400 +500 +1100) + 100+ (-)50 = 3900 CRORE EXPENDITURE METHOD GNP FC = Private Final consumption E penditure + Govt. Final consumption E penditure Private Final consumption E penditure Rent Dividend Interest Net E ports Profits Net Factor Income From Abroad Net Indirect Ta es Rs.Net Indirect Ta es = 1100 +2600 + (500 +100) + (-) 100 + (-)50 – 250 = 3900 CRORE . No. From the following data calculate GNP at factor cost by Income Method & E penditure Method Sr. Final consumption E penditure + ( Net Domestic capital formation + consumption of fi ed capital) + Net E ports + Net Factor Income From Abroad . 000 crore .000 crore E penditure Method National Income = vi + i + vii + iv – v + ii – ii – = 800 + 100 + 120 + 70 – 60 + 10 – 10 – 30 = Rs 1.From the following data calculate National Income by Income and Expenditure methods: (Rs crore) (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv) Government final consumption expenditure Subsidies Rent Wages and salaries Indirect taxes Private final consumption expenditure Gross domestic capital formation Social security contributions by employers Royalty Net factor income paid to abroad Interest Consumption of fixed capital Profit Net exports Change in stock 100 10 200 600 60 800 120 55 25 30 20 10 130 70 50 Sol : Income Method National Income = iv + viii + (iii + i ) + i + iii – = 600 + 55 + (200 +25) + 20 +130 -30 = Rs 1. 000crore+ Rs 800 crore+ Rs 900 crore+ Rs 1.300 crore+ Rs 0crore+ Rs 300 crore+ (Rs 850 crore+ Rs 50 crore.Q.Rs 800 crore) = Rs 3.300 crore+ Rs 0crore+ Rs 300 crore+ Rs 100 crore = Rs 6.150 ii) Net exports (-)50 iii) Compensation of employees 3.000 iv) Rent 800 v) Interest 900 vi) Profit 1.400crore (b) Factor Income from Abroad Gross national product at Market Price = Gross national product at factor cost+ Net indirect taxes = Rs 6. From the following data calculate (a) Gross Domestic Product at Market Price .000crore+ Rs 800 crore+ Rs 900 crore+ Rs 1.150crore+ Rs 300crore = Rs 6.Net domestic capital formation =Rs 3.450crore . and (b) Factor Income from Abroad: Items Rs in crore i) Gross national product at factor cost 6.300 vii) Net indirect taxes 300 viii) Net domestic capital formation 800 ix) Gross fixed capital formation 850 x) Change in stock 50 xi) Dividend 300 xii) Factor income to abroad 80 Solution: (a) Gross Domestic Product at Market Price = Compensation of employees+ Rent+ Interest+ Profit +Mixed income+ Net indirect taxes+ Consumption of fixed capital Note: Consumption of fi ed capital= Gross fi ed capital formation+ Change in stock. 400crore = Rs 50crore Net Factor Income from Abroad = Factor Income from Abroad .S) .Net Factor Income from Abroad = Gross national product at Market Price.Gross Domestic Product at Market Price = Rs 6.O.Factor income to abroad Or Factor Income from Abroad = Net Factor Income from Abroad+ Factor income to abroad = Rs 50crore+ Rs 80crore = Rs 130crore PRODUCT METHOD OR VALUE ADDED METHOD GDP MP = Value of Output – intermediate consumption Sales * Value of Output Change in Stock (C.Rs 6.450crore.S. )NET INDIRECT TAXES > MARKET PRICE .) DEPRECIATION > GROSS DOMESTIC ( + )NET FACTOR INCOME FROM ABROAD ( .)NET FACTOR INCOME FROM ABROAD > NATIONAL FACTOR COST ( + )NET INDIRECT TAXES ( .CONVERSIONS NET ( + )DEPRECIATION ( . No. Calculate Net Value added at factor cost from the following data : Sr.Q. 1 2 3 4 5 6 7 Items Purchase of machinary Sales Intermediate Cost Indirect ta es Change in stock E cise Duty Stock of raw material Rs. In Lakh 20 50 90 40 30 60 . An Economy has two firms A & B on the basis of following information find out a) Value added by firm A & B b) GDP at Market Price Sr. In Crore 100 200 90 12 10 6 5 Sol: NVAFC = Sales + Change in Stock – Intermediate Cost – Indirect Ta es = 200 + 10 – 90 – 12 = 108 Crore Q. No. 1 2 3 4 5 6 Items E ports by firm A Imports by firm A Sales to house holds by firm A Sales to firm B by firm A Sales to firm A by firm B Sale to house hold by firm B Rs. Sol: a) Value added by firm A = Sale to households +Sales to firm B + Exports – Imports – Purchase from firm B = 90 +40+20-50-30 = 70 Lakh Value added by firm B = Sales to Firm A + Sales to households – purchase from firm A = 30+60-40 = 50 Lakh b) GDP MP = Value added by firm A + value added by Firm B = 70+50 = 120 Lakh . FEES & FINE PAID BY THE HOUSEHOLDS NOTE : PRIVATE. – SAVING OF NONDEPARTMENTAL ENTERPRISES 2. PERSONAL INCOME = PRIVATE INCOME – CORPORATE PROFIT TAX – UNDISTRIBUTED PROFITS 4. PERSONAL & PERSONAL DISPOSABLE INCOME 1. PERSONAL DISPOSABLE INCOME = PERSONAL INCOME – DIRECT PERSONAL TAX – MISC. PERSONAL & PERSOBAL DISPOSABLE INCOME ARE DEPENDANT UPON EACH OTHER . FACTOR INCOME FROM NET DOMESTIC PRODUCT OCCURING TO PRIVATE SECTOR = NDP FC – PROPERTY & ENTREPRENEURIAL INCOME OF THE DEPARTMENTAL ENTERPRISES OF THE GOVT.FORMULAS RELATED TO PRIVATE. + CURENT TRANSFER FROM REST OF THE WORLD + INTEREST ON NATIONAL DEBT 3. PRIVATE INCOME = FACTOR INCOME FROM NET DOMESTIC PRODUCT OCCURING TO PRIVATE SECTOR + NET FACTOR INCOME FROM ABROAD + CURENT TRANSFERS FROM GOVT. PERSONAL DISPOSABLE INCOME Sr. administrative departments – Saving of non-departmental public enterprises + National debt interest + Current transfers from the govt. PRIVATE INCOME c. National Debt Interest Saving of non-departmental public enterprises Current transfers from rest of the world 30 10 5 15 Sol : a. PERSONAL INCOME b. PERSONAL INCOME = National Income – Income from property and entrepreneurship accruing to Govt. 1 2 3 4 5 National Income Corporate Profit Ta Direct Personal Ta Items 15 40 25 35 Rs. administrative departments + Current transfers from rest of the world – saving of private corporate sector – corporate profit ta = 1300 – 35-5+10+30+15-25-15 = 1275 b) PRIVATE INCOME = Personal Income + Corporate Profit ta + Saving of private corporate sector = 1275 + 15 + 25 = 1325 Crore c) Personal Disposable Income = Personal Income – Direct Personal ta es = 1275 – 40 = 1235 Crores . No. in Crore 1300 Saving of Private Corporate Sector Income from Property & Entrepreneurship occurring to Administrative Department 6 7 8 9 Current Transfers from Govt.FROM THE FOLLOWING DATA ESTIMATE : a. From the following data. administrative departments + Current transfers from rest of the world + Net factor income from abroad = 4000+150+50+(-40) = 4160 Crore b) Personal Disposable Income = Private income –Savings of private corporate Sector – corporation tax – Direct personal taxes.Q. administrative departments Savings of private corporate sector Current transfers from rest of the world Net factor income from abroad Corporation tax Direct personal taxes Rs. 1 2 3 4 5 6 7 8 Items Income from domestic product accruing to the private sector Saving of non-departmental public enterprises Current transfers from govt.000 200 150 400 50 (-40) 60 140 Sol: a) Private Income = Income from domestic product accruing to private sector + Current transfers from govt. calculate a) Private Income b) Personal Disposable Income Sr. No. = 4160-400-60-140 = 4160-600 = 3560 Crores .in Crore) 4. Q. = 400 – 50 -70 -40-30+20+(-10) = 400 – 50 -70 -40-30+20-10 = 280 Crores ================================== . Calculate ‘Private Income’ from the following data : Sr.) 10 50 70 SOL : PRIVATE INCOME = Gross National product at market price – Net domestic product at factor cost accruing to govt. – net indirect ta es – Consumption of fi ed capital + National debt interest + Current transfers from govt. In Crore 30 400 20 40 (. 1 2 3 4 5 6 7 Items National debt interest Gross national product at market price Current transfers from govt. Consumption of fi ed capital Rs. 24. Net indirect ta es Net current transfers from the rest of the world Net domestic product at factor cost accruing to govt. No. + Net current transfers from the rest of the world. Gross National Disposable Income = Net National Disposable Income + Current replacement cost (depreciation) Q. In Crores 200 (-) 10 10 600 60 80 120 100 (-) 20 50 70 Sol : NNPFC = Wages & Salaries + Profit + Royalty + Rent + Interest Paid by Production Unit + Social security contribution paid by employers – Net factor income to abroad = 600+200+10+50+120+100-(-20) = 1100 Crores . Calculate Net National Product at factor cost and Gross National Disposable income from the following : Sr. 1 2 3 4 5 6 7 8 9 10 11 Item Profit Net Current transfer to Abroad Royalty Wages & Salaries Consumption of fixed capital National Debt interest Interest paid by Production Unit Social Security contribution by employers Net factor income paid to Abroad Rent Net indirect tax Rs.Net National Disposable Income = Net Domestic Income + Net Indirect Taxes + Net factor income from abroad + net current transfers from rest of the world. No. Find out (a) National Income . In Crores 200 30 (-) 20 120 (-) 10 800 100 300 40 (-) 50 (a) National Income : = Private final consumption expenditure + Govt.Net Indirect tax . & (b) Net National Disposable Income : Sr.(-) 10 = 1170+120+10 =1300 Crores . Final Consumption Expenditure + Net domestic fixed capital formation + Change in stock .Net imports . Final Consumption Expenditure Net factor income to abroad Net imports Rs.Net factor income to abroad = 800 + 300 + 200 + (-) 20 – (-) 50 -120 – 40 = 800 +300+200-20+50-120-40 = 1170 Crores (b) Net National Disposable Income = National Income + Net Indirect tax – Net Current transfer to abroad = 1170 +120. No. 1 2 3 4 5 6 7 8 9 10 Items Net domestic fixed capital formation Factor income from abroad Change in stock Net Indirect tax Net current transfer to abroad Private final consumption expenditure Consumption of fixed capital Govt.Gross National Disposable Income = NNPFC+ Consumption of fixed capital + Net indirect tax – Net current transfers to abroad = 1100 +60+70 –(-10) = 1240 Crores Q.