It is computed as follows: The net domestic product at factor cost is the value acquired by deducting the net indirect tax and depreciation from the gross market value of domestic goods and services. = 700+100+10-130 = Rs. Net Domestic Product at factor cost measures a countrys economic output considering the production of goods and services. From the following data calculate Net Value Added at Factor Cost (Delhi 2011 c) 71. Income Method: NI = Rent + Compensation + Interest + Profit + Mixed Income.2. = 860 230 (i) Payment of bonus by a firm is not Included in the estimation of National Income as it is not a part of factor income. Calculate Net Value Added at Factor Cost (Delhi 2012), 6. Ans. Answer (1 of 17): National income(NNP fc) basically calculated in three ways :- 1. As a result, this countrys, Net Domestic Product (NDP) would be $13,000 ($20,000 $2,000 $5,000). Computation of National Income (By Value Added Method). It doesnt account for non-marketed goods or services. Its main tools are aggregate demand and aggregate supply of the economy as a whole. Calculate sales from the following data (All India 2013), 2. When we divide NI by a countrys total population, we get residents per capita 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 = 185+15 Gross Value Added at Factor Cost (GVAFC) = Value of Output (Sales + Change in Stock)- Purchase of Raw Materials Indirect Tax (Sales Tax + Excise Duty) (a) Gross National Product at Factor Cost (GNPFC) 13. (iii) Scholarship given to Indian students studying in India by a foreign company. NDP is a more accurate measure of a countrys economic output, as it considers the wear and tear of physical capital, which is a key factor in long-term economic growth. The resulting total is called Domestic Income or Net Domestic Product at FC (NDPFC)- By adding net factor income from abroad to domestic income, we get National Income (NNPFC)- Mind, in income method national income is measured at the stage when factor incomes are paid out by enterprises to owners of factors of productionland, labour, capital and enterprise. This compensation may impact how and where listings appear. From the following data calculate Net Value Added at Factor Cost (Delhi 2011 c), Ans. Above Village Hyper Market, Chandralyout Main Road, Profit = Undistributed profit + dividends + corporate tax (corporate profit tax) This formula is not used in this question. 7. = Net Value Added by Primary Sector + Net Value Added by Secondary Sector (i) Gross National Product at Market Price (a) Net National Product at Market Price and 94 Views. The acquisition of new machines for the new factory would represent a gain because the demand was driven by the need to increase the scope of the operations, rather than serve as a replacement. (All India 2009). = Rs. are excluded. = 2600 + 1100 + 500+100 + (-100) + (-50) -250 Switch; Flag; (b) Net National Disposable income from the following data The total value of all goods and services produced within a countrys borders. = 1000 + 250+150 + 640 -30=Rs. Here, final products are only those products which are ready for end use or consumption by their final users (consumers or producers). 735 crore, 84. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. = Rs. Calculate Gross Value Added at Factor Cost from the following data, Ans. Using this, they can better understand the resources available for consumption or investment in the country. Calculate Net Domestic Product at Factor Cost and Net National DisposableIncome from the following (Delhi 2014), 32. Domestic Income or NDP at FC. The acquisition of the replacement machinery would be factored into the depreciation aspect of the NPI. (a) Gross National Product at Factor Cost and 70. Calculate National Income: (Compartment 2014), = Government Final Consumption Expenditure + Private Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports NIT + NFIA (a) Income method and GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income. = Rs. You are free to use this image on your website, templates, etc., Please provide us with an attribution link, Net Domestic Product at factor cost (NDP-FC), Gross Domestic Product vs Net Domestic Product. (a) National Income (NNPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports + Net Factor Income from Abroad Net Indirect Taxes (Indirect Taxes Subsidy) There are three different methods of determining NI:1. = Rs. In other words, the NDP is calculated by subtracting the depreciation of physical capital from the GDP to give a more accurate picture of a countrys economic output that is available for consumption or investment. Likewise, sale proceeds of shares and bonds are not included. Click to reveal Net Domestic Product at Factor Cost(NDPFC) = Private Final Consumption Expenditure+ Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Net Change in Stocks Net Imports Indirect Taxes (ii) Net National Disposable Income (All India 2011), 57. = 810 + 60 + 80-(-10) Calculate Ans. = [140+ (-10)]-90-20-(-5) The national income (NI) is an aggregate value of the total production of goods and services by a nations residents pertaining to a particular accounting year. (iii) Expenditure by government on providing free education. It is calculated by adding indirect taxes, subtracting subsidies, and including depreciation to the value of output, which is the value of all goods and services produced within a countrys borders. Ans. Its main tools are demand and supply of particular commodity/factor. Only factor incomes which are earned by rendering productive services are included. It is broadly classified into four categories: (v) Commission earned on account of sale and purchase of second hand goods is included. (i) Only final expenditure is to be taken into account to avoid error of double counting. = 500 + (-20) 250 -40 + 30 It is study of individual economic units of an economy. (i) Payment of fees to a lawyer engaged by a firm will not be included while estimating National Income, as it is a kind of intermediate expenditure for the firm. = Rs. (iii) Expenditure on machines for installation in a factory will be included while estimating NationalIncome, as it is a final consumption expenditure by factory management. But wealth tax and gift tax are excluded since they are deemed to be paid from past savings and wealth. Call us @ 08069405205, Want to work at Insights IAS? Calculate Net National Product at Market Price and Gross National Disposable Income from the following: ( All India 2014). In other words, problem of double counting arise when the value of intermediate goods is also added in total output, e.g. Aggregate demand is a measurement of the total amount of demand for all finished goods and services produced in an economy. (ii) Interest paid by an individual on loan taken to buy a car will not be included while estimating Ntional Income, as loan is taken for consumption purpose. This method measures national income as sum total of final expenditures incurred by households, business firms, government and foreigners. Net Factor income to abroad: 3,200. (Python), Different Sectors of Economy and Their Expenditures, Expenditure Method of calculating National Income, Expenditure Method - Calculating GDP FC,GNP FC, GNP MP, Expenditure Method - Calculating Missing Figures, Chapter 2 National Income - Part 6 Summary of Different Methods, Chapter 2 National Income Accounting - Basic Concepts, Chapter 2 National Income - Part 2 Concept of GDP and GNP, Chapter 2 National Income - Part 3 Value Added Method, Chapter 2 National Income - Part 4 Income Method, Chapter 2 National Income - Part 6 Summary of Different Methods, Chapter 4 Part 1 - AD,AS and Related Concepts, Chapter 4 Part 2 - Income Determination and Multiplier, Chapter 4 Part 3 - Excess Demand and Excess Supply, Chapter 6 Part 1 - Foreign Exchange Rates. For calculating domestic income, we will subtract the amount of depreciation and net indirect tax from the Gross Domestic Product at Market Price (GDPMP). NDP is a useful tool for long-term economic analysis, as it considers the decline in the value of physical capital over time, which is an important factor for sustained economic growth. (iii) Profits earned by branches of foreign bank in India. (i) Remittances from non-resident Indians to a resident in India should not be included in the estimation of domestic factor income as it is not a part of domestic income and the income is not generated in domestic territory of India. It is that part of economic theory which deals with the individual parts of the economic system like individual households, individual firms, individual industries, etc. Calculate 30 crore, 12. Calculate = Rs. (b) Production method from the following data (All India 2011), Net Domestic Product at Factor Cost (NDPFC) = Wages and Salaries + Social Security Contribution byEmployers + Corporation Tax + Retained Earnings of Private Corporations + Dividend + Rent + Interest = Rs. = [400+ (-40)]-250-(20+ 30) 660 crore, 54. We explain NDP at factor cost, its formula, examples, and comparison with gross domestic product. (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. 555 crore, 83. (ii) Net Current Transfers from Abroad (All India 2012), 49.Find out 90 lakh, 15. 610 crore It is represented as follows: The NDP MP is the value of total goods and services produced within the nation minus depreciation. (ii) Payment of corporate tax (i) Dividend received by an Indian firm from its investment in shares of a foreign company will be included in the estimation of National Income, as dividend is a part of profit and treated as factor income from abroad which is added to domestic income. = 7370 70 = Rs. It is net money value of Goods and Services Produced in domestic territory after Depreciation It is also called Net Domestic Product at Factor Price (NDP FC ) Formula NDP FC = GDP FC - Depreciation Example Suppose total value of goods and services produced in DOMESTIC TERRITORY is 100 Depreciation on Maintaining Fixed assets is 20
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