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प्रश्न
Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP.
उत्तर
GDP can be calculated by the following three methods :-
(a) Income method :-
GDP = Total payments made to the factors of production
`"GDP" equiv sum_(i=1)^MW_i+sum_(i=1)^MP_i+sum_(i=1)^M"In"_i+sum_(i=1)^MR_i...................(1)`
`sum_(i=1)^MW_i` represents total wages and salaries received by i-th households.
`sum_(i=1)^MP_i` represents total profit received by i-th households.
`sum_(i=1)^M"In"_i` represents total Income received by i-th households.
`sum_(i=1)^MR_i` represents total Rent received by i-th households.
Equation (1) can be simplified as
GDP ≡ W + R + In + P
(b) Value added or product method
GDP ≡ Sum of gross value added by all firms in an economy
or GDP ≡ GVA1 + GVA2 + …GVAn
Where,
GVA1 represents gross value added by the 1st firm
GVA2 represents gross value added by the 2nd firm and so on
.
.
.
GVAn represents gross value added by the nth firm
Therefore,
`"GDP" equiv sum_(i=1)^N "GVA"_i`
(c) Expenditure method or final consumption method
GDP ≡ Sum total of revenues that firms earn
Or
GDP ≡ Total consumption + Investment + Government Consumption expenditure + Net exports
`equiv sum_(i=1)^N C_i+sum_(i=1)^NI_i+sum_(i=1)^NG_i+sum_(i=1)^N X_i`
As households spend some part of their income on imports, some portion of consumption expenditure also comprises of imports, which are denoted by CM. Similarly, some part of the investment expenditure and government consumption expenditure is spent on the foreign investment goods and imports. These portions of investment and government consumption expenditure are denoted by IM and GM respectively. Thus, the final household's consumption expenditure, investment expenditure and final government expenditure that are spent on the domestic firms are denoted by C − CM, I − IM and G − GM respectively.
Substituting these values in the above equation
`"GDP" equiv C-C_m+I-I_m+G-G_m+sum_(i=1)^N X_i`
`equiv C+I+G+sum_(i=1)^N-(C_m+I_m+G_m)`
`equiv C+I+G+X-M`
The three methods give the same result for measuring GDP because what is produced in the economy is either consumed or invested. The three methods depict the same picture of an economy from three different angles. While the product method presents the value added or total production, the income method depicts the income earned by all the factors, lastly, the expenditure method presents the expenditure incurred by all the factors. In the economy, the producer employs four factors of production to produce final goods and earns revenue by sale, which is equivalent to the total value addition by the firm. The firms pay remunerations to the factors, which act as the income of all the factors. These remunerations are equivalent to the factors’ contributions to the value addition. These factor incomes are then expended on the goods and services, which verifies the equality between the factor income and expenditure. Hence, the three methods will always give the same value of GDP.
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संबंधित प्रश्न
Calculate Net Domestic Product at Factor Cost and Private Income:
| Rs crore | ||
| 1 | Gross National Disposable Income | 600 |
| 2 | Net current transfers to abroad | (-)20 |
| 3 | Consumption of fixed capital | 60 |
| 4 | Current transfers from government | 30 |
| 5 | Indirect tax | 100 |
| 6 | Income accruing to government | 80 |
| 7 | Subsidies | 10 |
| 8 | Net factor income to abroad | (-)10 |
| 9 | National debt interest | 40 |
| 10 | Personal tax | 150 |
How will you treat the following while estimating domestic product of a country? Give reasons for your answer:
Purchase of goods by foreign tourists
Calculate the (a) Gross National Product at market price, and (b) Net National Disposable Income
| (Rs In crores) | |
| (i) Compensation of employee | 2,500 |
| (ii) Profit | 700 |
| (iii) Mixed income of self- employed | 7,500 |
| (iv) Government final consumption expenditure | 3,00 |
| (v) Rent | 400 |
| (vi) Interest | 350 |
| (vii) Net factor income from abroad | 50 |
| (viii) Net current transfer to abroad | 100 |
| (ix) Net indirect taxes | 150 |
| (x) Depreciation | 70 |
| (xi) Net export | 40 |
If the Real GDP is Rs 300 and Nominal GDP is Rs 330, calculate Price Index (base = 100).
Giving reason explain how should the following be treated in estimating gross domestic product at market price?
Interest paid by an individual on a car loan taken from a bank.
Given the following data, find the values of "Gross Domestic Capital Formation" and "Operating Surplus".
| S. No. | Particulars |
Amount (₹ in crores) |
| (i) | National Income | 22,100 |
| (ii) | Wages and Salaries | 12,000 |
| (iii) | Private Final Consumption Expenditure | 7,200 |
| (iv) | Net Indirect Taxes | 700 |
| (v) | Gross Domestic Capital Formation | ? |
| (vi) | Depreciation | 500 |
| (vii) | Government Final Consumption Expenditure | 6,100 |
| (viii) | Mixed Income of Self-Employed | 4,800 |
| (ix) | Operating Surplus | ? |
| (x) | Net Exports | 3,400 |
| (xi) | Rent | 1,200 |
| (xii) | (-) | |
| Net Factor Income From Abroad | 150 |
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Identify the correctly matched items in Column A to that of Column B:
| Column A | Column B |
| 1. Welfare of the people | (a) Social Welfare |
| 2. Total of economic and non-economic welfare | (b) Economic Welfare |
| 3. Benefits or harms of an activity caused by a firm. | (c) Externalities |
| 4. Material well being of the people | (d) Real GDP |
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Read the below case and answer the question that follows:
|
The country's real gross domestic product (GDP) is likely to expand by 11 percent in the next financial year due to a faster economic recovery and on a low base, says a report. The report by domestic rating agency Brickwork Ratings said economic activities are slowly reaching PRE-COVID levels following the relaxation of the lockdown, except in sectors that remain affected by social distancing norms. "With progress in developing an effective vaccine for COVID-19 and signals of faster-than-expected recovery in the domestic economy, and also supported by a low base, we expect the real GDP to grow at 11 percent in F/Y 22, from the estimated contraction of 7 percent to 7.5 percent in F/Y 21," the agency said. According to the first advance estimates of national income released by the National Statistical Office (NSO), the country's GDP is estimated to contract by a record 7.7 percent during the current financial year. |
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Read the below case and answer the question that follows:
|
The country's real gross domestic product (GDP) is likely to expand by 11 percent in the next financial year due to a faster economic recovery and on a low base, says a report. The report by domestic rating agency Brickwork Ratings said economic activities are slowly reaching PRE-COVID levels following the relaxation of the lockdown, except in sectors that remain affected by social distancing norms. "With progress in developing an effective vaccine for COVID-19 and signals of faster-than-expected recovery in the domestic economy, and also supported by a low base, we expect the real GDP to grow at 11 percent in F/Y 22, from the estimated contraction of 7 percent to 7.5 percent in F/Y 21," the agency said. According to the first advance estimates of national income released by the National Statistical Office (NSO), the country's GDP is estimated to contract by a record 7.7 percent during the current financial year. |
Read the following statements - Assertion (A) and Reason (R).
Assertion (A): Real GDP is the true indicator of the growth of the economy.
Reason (R): Real GDP is nominal GDP adjusted for inflation used to measure the actual growth of production.
Read the below case and answer the questions that follow:
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- Budget 2020: Allocation for Environment Ministry up 5% to ₹3,100 crore - Business Standards, 1st February 2020
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Suppose in a hypothetical economy there are only two Firms A and B, Firm A sold goods for ₹ 2,000 to Firm B and purchased goods for ₹ 1,000. Firm B exported goods for ₹ 2,500 and had domestic sales of ₹ 1,500. Calculate Net Domestic Product at market price, if consumption of fixed capital is ₹ 200.
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