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Question
Distinguish between:
Output method of measuring national income and Income method of measuring national income.
Solution
| Basis of comparison | Output method | Income method |
| 1. Definition | This method measures the national income by estimating the contribution made by each of the producing units in the economy to the total production within the domestic territory during an accounting year. | This method measures the national income by aggregating all the factor incomes (in the form of wages, rent, interest and profits) paid to the owners of the factors of production (land, labour, capital and enterprise) within the domestic territory in an accounting year. |
| 2. Result | It gives the gross domestic product at market price (GDPMP). | It gives the net domestic product at factor cost (NDPFC). |
| 3. Accuracy | It is the least accurate. | It is the most accurate. |
| 4. Users | This method is used by underdeveloped and developing countries. | This method is used by developed countries. |
RELATED QUESTIONS
National income
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(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
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(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
Calculate National Income from the following data:
| S.No. | Particulars | Rs.in crores |
| (i) | Private final consumption expenditure | 900 |
| (ii) | Profit | 100 |
| (iii) | Government final consumption expenditure | 400 |
| (iv) | Net indirect taxes | 100 |
| (v) | Gross domestic capital formation | 250 |
| (vi) | Change in stock | 50 |
| (vii) | Net factor income from abroad | (-)40 |
| (viii) | Consumption of fixed capital | 20 |
| (ix) | Net imports | 30 |
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Autonomous consumption = Rs100
Marginal propensity to consume = 0.80
Investment = Rs 50
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
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.
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| (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 |
A government of India has recently launched 'Jan-Dhan Yojana' aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect the national income of the country.
Giving reason explain how should the following be treated in the estimation of national income:
Purchase of refrigerator by a firm for own use
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| (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 |
Calculation National Income and Personal Disposable Income:
| (Rs crores) | ||
| 1 | Rent | 100 |
| 2 | Net current transfers to rest of the world | 30 |
| 3 | Social security contributions by employers | 47 |
| 4 | Mixed income | 600 |
| 5 | Gross domestic capital formation | 140 |
| 6 | Royalty | 20 |
| 7 | Interest | 110 |
| 8 | Compensation of employees | 500 |
| 9 | Net domestic capital formation | 120 |
| 10 | Net factor income from abroad | (-)10 |
| 11 | Net indirect tax | 150 |
| 12 | Profit | 200 |
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Payment of interest by an individual to a bank
Calculate the 'National Income' and 'Private Income' :
| (Rs in crores) | ||
| 1 | Rent | 200 |
| 2 | Net factor income to abroad | 10 |
| 3 | National debt interest | 15 |
| 4 | Wages and salaries | 700 |
| 5 | Current transfers from government | 10 |
| 6 | Undistributed profit | 20 |
| 7 | Corporation tax | 30 |
| 8 | Interest | 150 |
| 9 | Social security contributions by employers | 100 |
| 10 | Net domestic product accruing to government | 250 |
| 11 | Net current transfers to rest of the world | 5 |
| 12 | Dividends | 50 |
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Taking care of aged parents
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 |
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
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Give reasons or explain the following
The propensity to save depends upon the level of income.
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Output method and Income method of measuring national income.
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Total Revenue = Total quantity x Price.
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.
(b) decreases
(c) becomes equal
(d) becomes zero
State whether the following statements are TRUE or FALSE:
Saving increases with increase in income.
Define of Explain the following concept.
Net earnings from foreign trade
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:
Many precautions are to be taken while estimating national income by income method.
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.
Answer in detail:
Explain the 'Final Good Approach' to avoid double counting of goods and services in the estimation of national income.
Distinguish between:
Gross National Product and Net National Product
Write short note on:
Value added approach
Write short note on:
Expenditure method of measuring national income.
Write short note on:
Personal disposable income
Define or explain the following concept:
Final goods
Define or explain the following concept:
Personal income
Define or explain the following concept:
Depreciation
Give reason or explain the following statement:
National income at factor cost includes subsidy.
Give reason or explain the following statement:
National income estimates are accurate in India.
Give reason or explain the following statement:
Old age pension is transfer 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.
Financial year in India is leap year.
State whether the following statement is true or false.
Services of housewives are included in national 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
National income is __________ concept.
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)
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GNP =______ + Net factor income from abroad.
The value of NNP at production point is called______.
The average income of the country is______.
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Trace the relationship between GNP and NNP.
Explain briefly NNP at factor cost.
What is the solution to the problem of double counting in the estimation of national income?
Real GNP is same as ______.
GDPFC = ____________.
NNPFC =
Which of the following is correct?
If economic subsidies are added to and Indirect taxes are substracted from the national income at market prices, then it will be equal to ______.
If for a country net factor income from abroad is negative then:
Total national income divided by total population is known as:
Which of the following is not a component of domestic income?
If factor cost is greater than marker price, it means that:
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.
How should the following be treated in estimating National Income of a Country? Give valid reasons.
Profit earned by Foreign Banks in India.
What is ‘National Income’?
Explain the meaning of national income.
