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Question
Answer the following question:
What are the features of national income?
Solution
National income is the sum of the values of all the final goods and services produced during an accounting period by the normal residents of a country. It can be calculated by three different methods, namely:
a) Output method
b) Income method
c) Expenditure method
Some of the important features of national income are as follows: -
i. Macroeconomic concept: Macroeconomics studies how an economy operates as a whole and focuses on the aggregate measures. Since national income is an aggregate term, it can be regarded as a macroeconomic concept.
ii. Flow concept: National income is measured over (during) a period of time. In other words, it can be said that the national income has an element of time attached to it. Thus, it is a flow concept.
iii. Money valuation of goods: Since national income is the total market value of all the final goods and services in terms of money produced within the domestic territory during an accounting year, it can be concluded that national income is the money valuation of goods.
iv. Includes the value of final goods and services: National income includes only the value of final goods. The value of intermediate goods is not included in the estimation of national income. This is to avoid the problem of double counting.
v. Net aggregate value: National income is the net aggregate value. In the sense, it includes goods and services produced by the firms during an accounting year. It does not include depreciation or consumption of the fixed capital.
vi. Inclusion of Net factor Income from Abroad (NFIA): National income includes the net factor income from abroad. That is, it includes the net export value and net receipts.
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RELATED QUESTIONS
National income
With the increase in income, both consumption and savings increase.
Total Cost and Total Revenue.
Explain the various methods of measuring national income.
Unpaid services are not included in national income.
Find national income and private income:
(Rs crore)
(i) Wages and salaries 1,000
(ii) Net current transfer to abroad 20
(iii) Net factor income paid to abroad 10
(iv) Profit 400
(v) National debt interest 120
(vi) Social security contributions by employers 100
(vii) Current transfers from government 60
(viii) National income accruing to government 150
(ix) Rent 200
(x) Interest 300
(xi) Royalty 50
C = 100 + 0.4 Y is the Consumption Function of an economy where C is Consumption Expenditure and Y is National Income. Investment expenditure is 1.100. Calculate
(i) Equilibrium level of National Income.
(ii) Consumption expenditure at equilibrium level of national income.
Find national income from the following:
Autonomous consumption = Rs100
Marginal propensity to consume = 0.80
Investment = Rs 50
Giving reason explain how should the following be treated in estimating national income:
i. Expenditure on fertilizers by a farmer.
ii. Purchase of tractor by a farmer.
National income is the sum of factor incomes accruing to : (Choose the correct alternative)
(a) Nationals
(b) Economic territory
(c) Residents
(d) Both residents and non-residents
Unforseen obsolescence of fixed capital assets during production is: (Choose the correct alternative)
a. Consumption of fixed capital
b. Capital loss
c. Income loss
d. None of the above
Which of the following affects national income? (Choose the correct alternative)
(a) Goods and Service tax
(b) Corporation tax
(c) Subsidies
(d) None of the above
Explain the precautions that should be taken while estimating national income by expenditure method.
Calculate (a) National Income, and (b) Net National Disposable Income:
| (Rs In crores) | |
| (i) Compensation of employees | 2,000 |
| (ii) Rent | 400 |
| (iii) Profit | 900 |
| (iv) Dividend | 100 |
| (v) Interest | 500 |
| (vi) Mixed income of self- employed | 7,000 |
| (vii) Net factor income to abroad | 50 |
| (viii) Net export | 60 |
| (ix) Net indirect taxes | 300 |
| (x) Depreciation | 150 |
| (xi) Net current transfers to aboard | 30 |
Calculate the (a) Net National product as markets price. and (b) Gross National Disposable Income:
| (Rs In crores) | |
| (i) Mixed income of self – employed | 8,000 |
| (ii) Rent | 400 |
| (iii) Profit | 900 |
| (iv) Dividend | 100 |
| (v) Interest | 500 |
| (vi) Mixed income of self- employed | 7,000 |
| (vii) Net factor income to abroad | 50 |
| (viii) Net export | 60 |
| (ix) Net indirect taxes | 300 |
| (x) Depreciation | 150 |
Giving reason explain how should the following be treated in the estimation of national income:
Expenditure by a firm on payment of fees to a chartered accountant
Giving reason explain how should the following be treated in the estimation of national income:
Payment of corporate tax by a firm
Calculation National Income and Personal Disposable Income:
| (Rs crores) | ||
| 1 | Personal tax | 80 |
| 2 | Private final consumption expenditure | 600 |
| 3 | Undistributed profits | 30 |
| 4 | Private income | 650 |
| 5 | Government final consumption expenditure | 100 |
| 6 | Corporate tax | 50 |
| 7 | Net domestic fixed capital formation | 70 |
| 8 | Net indirect tax | 60 |
| 9 | Depreciation | 14 |
| 10 | Change in stocks | (-)10 |
| 11 | Net imports | 20 |
| 12 | Net factor income to abroad | 10 |
Giving reason explain how the following should be treated in the estimation of national income:
Payment of interest by an individual to a bank
Giving reasons explain how should the following be treated in the estimation of national income:
Purchase of machinery by a factory for own use
Calculate investment expenditure from the following data about an economy which is in equilibrium:
National income = 1500
Autonomous consumption expenditure = 300
Investment expenditure = 300
Calculate 'National Income' and 'Net National Disposable Income' from the following
| (Rs in Arab) | ||
| 1 | Net change in stock | 50 |
| 2 | Government final consumption expenditure | 100 |
| 3 | Net current transfers to abroad | 30 |
| 4 | Gross domestic fixed capital formation | 200 |
| 5 | Private final consumption expenditure | 500 |
| 6 | Net imports | 40 |
| 7 | Depreciation | 70 |
| 8 | Net factor income to abroad | (-)10 |
| 9 | Net indirect tax | 120 |
| 10 | Net capital transfers to abroad | 25 |
Calculate 'Marginal Propensity to Consume' from the following data about an economy which is in equilibrium:
National income = 800
Autonomous consumption expenditure = 100
Investment expenditure = 100
How should the following be treated while estimating national income? You must give the reason in support of your answer.
Bonus paid to employees
How should the following be treated while estimating national income? You must give the reason in support of your answer.
Addition to stocks during a year
Investment made by the government is _____________ investment.(unplanned/gross/autonomous/induced)
Give reasons or explain the following
The propensity to save depends upon the level of income.
Give reasons or Explain the following statements
Services of housewives are excluded from national income.
In an economy, S = −100 + 0.6 Y is the saving function, where S is Saving and Y is National Income. If investment expenditure is 1,100, calculate:
(1) Equilibrium level of National Income
(2) Consumption expenditure at equilibrium level of National Income.
C = 50 + 0.5 Y is the Consumption Function where C is consumption expenditure and Y is National Income and Investment expenditure is 2000 is an economy. Calculate
(i) Equilibrium level of National Income.
(ii) Consumption expenditure at equilibrium level of national income.
Write explanatory answer:
Explain the output method of measuring national income.
Fill in the blank using proper alternative given in the bracket:
National income is ........ concept.
State whether the following statement is True or False
Total Revenue = Total quantity x Price.
Distinguish between.
Personal income and National Income.
State whether the following statement is true or false.
Investment made by the government is autonomous investment.
Define or explain the following concept.
Induced Consumption expenditure.
Write Explanatory answer. (Any Two )
What is national income. Explain how national income is mesured by output method
Define of Explain the following concept.
Net earnings from foreign trade
State whether the following statements are TRUE or FALSE with reason.
National income is a flow concept.
Answer in brief.
Give different definitions of National Income.
State whether the following statements are True or False with reason:
Ten years period is considered for measuring National Income.
Answer the following question:
Explain the concept of Gross domestic product at market prices.
Answer the following question:
State the precautions while using expenditure method to measure national income.
Answer the following question:
Explain the income method of measuring national income.
State with reason whether you agree or disagree with the following statement:
Gross National product and Gross Domestic product are same concepts.
State with reason whether you agree or disagree with the following statement:
The money value of intermediate goods is not included in the estimation of national income.
Answer in detail:
Explain the Output method of measuring National income.
Distinguish between:
Gross National Product and Net National Product
Write short note on:
Expenditure method of measuring national income.
Write short note on:
Circular flow of national income
Write short note on:
Personal disposable income
Define or explain the following concept:
National income
Define or explain the following concept:
Depreciation
Give reason or explain the following statement:
Income from second hand sale of goods is excluded from national income.
Give reason or explain the following statement:
Paid services are included in national income.
State whether the following statement is true or false.
National income is computed every year.
State whether the following statement is true or false.
Inclusion of value of intermediate goods leads to double counting.
State whether the following statement is true or false.
GDP includes net income from abroad.
State whether the following statement is true or false.
Services of housewives are included in national income.
Match the following groups:
| Group A | Group B | ||
| 1) | Income method | a) | Personal income – direct taxes |
| 2) | Unemployment allowance | b) | Money value of goods and services |
| 3) | Disposable Income | c) | Factor cost method |
| 4) | National Income | d) | Personal income subsidy |
| 5) | NNP(MP) | e) | Transfer payment |
| f) | GNP(MP) - Depreciation | ||
| g) | Output method | ||
| h) | Transfer income | ||
Fill in the blank with appropriate alternatives given below
National income is the subject matter of _________ Economics.
Fill in the blank with appropriate alternatives given below
GDP (FC) = GDP (MP) – __________
Fill in the blank with appropriate alternatives given below
In India, the responsibility for the calculation of national income rests with _________.
Distinguish between the following.
Personal income and Disposable income
Answer the following question.
Define the problem of double counting in the computation of national income. State any two approaches to correct the problem of double counting.
Complete the following statement.
NNP is obtained by ______.
- Explain the concept of product (real flow) with the help of above diagram. (2m)
- Explain the concept of Money flow with the help of above diagram. (2m)
PASSAGE
Corona has slowed down the economy Lockdown imposed to contain the spread of Corona virus had resulted in closure of manufacturing and business activities. During this financial year, the economy is expected to move towards a contractionary phase rather than expansionary phase. This has been stated in the budget. This is the first paperless budget in the history of India. At the same time, it is the third post-independence budget to be presented at a time when the economy is shrinking. The budget shows a fiscal deficit of more than 5%.
The Union Finance Minister has presented a budget that seeks to accelerate the economy by balancing the impact of Corona on the economy on one hand and growing expectations of all sectors on the other. A significant increase in the allocation for Healthcare by 137% is a feature of this budget. In this budget, the expected revenue for the year 212-2022 is Rs. 34,35, 000crore and the expected expenditure is Rs. 35,83, 000 crore.
Attempts have been made to boost infrastructure, education, agricultural production, employment generation and industry, but the Income tax status quo has remained the same. The budget provides Rs.16.5 lakh crore for agricultural credit, Rs. 223,000 crore for health facilities, Rs. 3 lakh crore for Power Distribution Scheme, Rs. 15,700 crore for Small and Medium Enterprises and Rs. 20,000 crore for Government Bank Capital.
- What is the percentage increase in the provision for Healthcare? (1 mark)
- Mention the sectors that have been promoted in this budget. (1 mark)
- Express your personal opinion based on the above information regarding the budget ( 2 marks)
Net National product at factor cost is also known as
GNP =______ + Net factor income from abroad.
NNP stands for______.
When net factor income from abroad is deducted from NNP, the net value is______.
Write the formula for calculating GNP.
What is the difference between NNP and NDP?
Write a short note on per capita income.
What is the solution to the problem of double counting in the estimation of national income?
Consider the following statements and identify the right ones.
- Personal income refers to the income of individuals of a country.
- The income at their disposal after paying direct taxes is called disposable income.
Accounting of National Income at constant prices is known as ____________.
Which of the following items are excluded from GNP measurement?
The market price of all final goods of a country in a year is known as:
GNPMP =?
NNPMP =?
Which of the following is correct?
If for a country net factor income from abroad is negative then:
Which of the following is not a component of domestic income?
Identify and explain the following concept.
Shobha collected data regarding the money value of all final goods and services produced in the country for the financial year 2019-20.
Give economic term:
The volume of commodities and services turned out during a given period counted without duplication.
What is ‘National Income’?
