VERY SHORT ANSWER TYPE
QUESTIONS: - (1 Mark Each)
Q.1. When is the
national income less than domestic income?
Ans. When NFIA is
negative.
Q.2. When is the
national income larger than domestic factor income?
Ans. When NFIA is
positive.
Q.3. What is the effect
of an indirect tax and a subsidy, on the price of the commodity?
Ans. The effect of an
indirect tax on a commodity is to increase the price and the effect
of subsidy is to reduce the price in the market.
Q.4. Are the wages and
salaries received by Indians working in American Embassy in India a part
of Domestic Product of India?
Ans. No, because
American embassy is not a part of domestic territory of India.
Q.5. Why is the study of
the problem of unemployment in India considered a macro economic study?
Ans. The problem of
unemployment in India is an economic issue at level of economy as a whole,
hence considered as macroeconomic study.
Q.6. When is gross
domestic product of an economy equal to gross national product?
Ans. When NFIA is zero.
SHORT ANSWER TYPE
QUESTIONS: (3/4 Marks Each)
Q.1. Will the following
be included in gross domestic product / Domestic Income of India? Give
reasons for each answer.
(i) Consultation fee
received by a doctor.
(ii) Purchase of new
shares of a domestic firm.
(iii) Profits earned by
a foreign bank from its branches in India.
(iv) Services charges
paid to a dealer (broker) in exchange of second hand goods.
Ans. (i) Yes, It is a
factor income. It is his salary.
(ii) No, It is not included in GDP, because it is a merely financial
transaction which does not help directly in production.
(iii) Yes, It is a factor income in domestic territory.
(iv) It is included because it is his factor income (salary).
Q.2. How will you treat
the following while estimating domestic product of India? Give reasons.
(i) Rent received by a
resident Indian from his property in Singapore.
(ii) Profits earned by a
branch of an American Bank in India.
iii) Salaries paid to
Koreans working in Indian embassy in Korea.
Ans. (i) It will not be
included in domestic product of India as this income is earned outside
the domestic (economic) territory of India.
(ii) It will be included in domestic product of India as the branch of
American bank is located within the domestic territory of India.
(iii) It will be a part of domestic product of India because this income
is earned within the domestic territory of India. Indian embassy in Korea
is treated as located within the domestic territory of India.
Q.3. State whether the
following is a stock or flow:
(a) Wealth, (b) Cement
production, (c) Saving of a household, and (d) Income of household.
Ans. Stock – (a) &
(b), since these are variables measurable at a point of time. Flow – (c)
& (d), since these are variables measurable over period of time.
Q.4. State whether the
following is a stock or flow:
(a) National capital,
(b) Exports, (c) Capital formation, and (d) Expenditure on food by
households.
Ans. Stock – (a), since
national capital is a variable measurable at a point of time. Flow – (b),
(c) & (d), since these are variables measurable over period of time.
Q.5. Are the following
included in the estimation of National Income a country? Give reasons.
(i) Bonus received by
employees.
(ii) Government
expenditure on defence.
(iii) Money sent by a
worker working abroad to his family.
(iv) Profit earned by a
branch of Indian Bank in London.
ANS. (i) It should be
included in NI because it is a part of the compensation of employees
(salary in cash).
(ii) It should be included in NI because defence service is
considered final service so far as it provides peaceful and secure
environment to the citizens.
(iii) It is included in NI because it is a part of NFIA.
(iv) It is included in NI of India because it is a part of NFIA.
Numerical Example
1. Calculate national income from the following data:-
(Rs. Crores)
(i) Consumption of fixed capital= 50
(ii) Employers contribution to social security= 75
(iii) Interest =160
(iv) Net Indirect Taxes= 55
(v) Rent =130
(vi) Dividends =45
(vii) Corporate Tax= 15
(viii) Undistributed profit =10
(ix) Net factor income from abroad= -10
(x) Wages and salaries =450
Solution
NDP fc = (X) + (ii) + (iii) + (v) + (vi) + (Vii) + (Viii)
= 450 + 75*+ 160
+130+45+15+10 = 885 Cr.
NNP at fc = NDP fc + (ix)
= 885 + (-10) = 875 Cr.
Check your progress
Q. 1 Find out “Net value added at FC by an enterprise from
the following data:
Rs. In crores
(i) Consumption of Fixed Capital =10
(ii) Subsidies= 5
(iii) Indirect Taxes =25
(iv) Purchase of material and =75
Services from other production units
(v) Value of output= 125
(Ans. = 70 Corers)
Q 2. Calculate value added by Firm A & B from the
following data:-
Rs. (Lakh)
(i) Purchase by Firms B from Firm A =40
(ii) Sales by Firm B= 80
(iii) Imports by Firm B =10
(iv) Rent Paid by Firm B =05
(v) Opening stock of Firm B= 15
(vi) Closing stock of Firm B= 20
(vii) Purchases by Firm A from Firm B= 20
(viii) Closing stock of Firm A= 20
(ix) Opening stock of Firm A =10
Solution
Value of output of Firm A
= Sales + stock
= 40 + (20-10)
= 50 Lakhs
Value added By Firm A
Value of output – Intermediate Consumption
= 50-20
= 30 Lakhs
Value of output of Firm B
= Sales + change in stock
= 20 + 80 + (20-15)
= 105 Lakhs
Value added By Firm B
Value of output – Purchase-Imports –Rent
=105-40-10-5
= 50 Lakhs
