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    Problem Set 1:: (National Income Accounting)

    Uploaded by

    Sneha Giji Saji
    This document provides information and formulas for calculating various national income accounting measures: - It defines key terms like net factor income from abroad and net indirect taxes. - It outlines the value added, income, and expenditure methods for calculating measures like gross domestic product, net domestic product, national income, private income, and personal income using various components. - It provides examples of problems calculating specific national income measures and walking through the steps to solve them.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Problem Set 1:: (National Income Accounting)

    Uploaded by

    Sneha Giji Saji
    32 views12 pages
    This document provides information and formulas for calculating various national income accounting measures: - It defines key terms like net factor income from abroad and net indirect taxes. - It outlines the value added, income, and expenditure methods for calculating measures like gross domestic product, net domestic product, national income, private income, and personal income using various components. - It provides examples of problems calculating specific national income measures and walking through the steps to solve them.

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    NI Accounting

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    This document provides information and formulas for calculating various national income accounting measures: - It defines key terms like net factor income from abroad and net indirect taxes. - It outlines the value added, income, and expenditure methods for calculating measures like gross domestic product, net domestic product, national income, private income, and personal income using various components. - It provides examples of problems calculating specific national income measures and walking through the steps to solve them.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    32 views12 pages

    Problem Set 1:: (National Income Accounting)

    Uploaded by

    Sneha Giji Saji
    This document provides information and formulas for calculating various national income accounting measures: - It defines key terms like net factor income from abroad and net indirect taxes. - It outlines the value added, income, and expenditure methods for calculating measures like gross domestic product, net domestic product, national income, private income, and personal income using various components. - It provides examples of problems calculating specific national income measures and walking through the steps to solve them.

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    © All Rights Reserved
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    Problem Set 1:

    (National Income Accounting)


    Formulas
    • Net = Gross - (Consumption of Fixed Capital) Depreciation
    • National = Domestic + Net factor income from abroad
    • Market Prices = Factor Cost + Net Indirect Taxes
    • Net factor income from abroad = Factor Income received from
    Abroad - Factor Income paid to Abroad
    • Net Indirect Taxes = Indirect Taxes - Subsidies
    Formulas
    • National Income = NNPFC
    • Domestic Income = NDPFC
    • Private Income = National Income – Income from domestic
    Product accruing to government sector + All current transfer
    payments
    • Personal Income = Private Income – Corporation Tax –
    Undistributed Profits
    • Personal Disposable Income = Personal Income – Personal
    direct tax – miscellaneous receipt from the government
    Value Added Method
    • Step 1- Classification of enterprises into primary,
    secondary and tertiary sectors
    • Step 2- Calculation of NVAFC (Domestic Income)
    • GVAMP = Gross value of output – Intermediate Consumption
    • NVAFC = GVAMP – Depreciation – NIT
    • Step 3- Calculation of NFIA
    • Step 4- Calculation of National Income
    • NI = DI + NFIA
    Income Method
    • Step 1- Classification of enterprises into primary, secondary and tertiary
    sectors
    • Step 2- Classification of Factor Income
    • 1. Compensation of Employees
    • 2. Operating Surplus = (Rent + Interest + Profit + Royalty)
    • Profit = Dividend + Corporation Tax + Undistributed Profits/Savings of Private
    corporate sector/ Retained earnings
    • 3. Mixed Income
    • Step 3- Classification of Domestic Income
    • Domestic Income = Compensation of Employees + Operating Surplus + Mixed Income
    • Step 4- Calculation of National Income
    • NI = DI + NFIA
    Expenditure Method
    • Step 1-
    • GDPMP = Private final consumption expenditure + Government final
    consumption expenditure + Gross domestic capital formation + Net exports
    • Gross domestic capital formation = Gross domestic fixed capital formation +
    Change in stock
    • Net export = Exports - Imports
    • Step 2- Classification of Domestic Income
    • NDPFC = GDPMP – Depreciation - NIT
    • Step 3- Calculation of National Income
    • NI = DI + NFIA
    Problem 1:
    Investment expenditure 250
    Wages and salaries 320
    Consumption expenditure 560
    Interest and investment Income 110
    Business profits 125
    Depreciation 175
    Indirect taxes less subsidies 100
    Net exports -50
    Government Purchases 200
    •Estimate GDP at market prices
    •Calculate Net Domestic Product at factor cost
    Solution
    • (a) GDP at market Prices = C + I + G + NX
    = 560 + 250 + 200 -50
    = 960
    • (b) NDP at factor cost = GDP at market Prices- Depreciation -
    NIT
    = 960 – 175 - 100
    = 685
    Problem 2:
    Net national product at market price 1500

    Net factor income from abroad -30

    Gross national product at factor cost 1400

    Consumption of fixed capital 150

    National debt interest 20

    •Net Indirect taxes


    •Net domestic product at factor cost
    Solution
    • (a) NNPMP = GNPFC + NIT – Consumption of fixed capital
    • 1500= 1400 + NIT – 150
    • 1500 – 1400 + 150 = NIT
    • 250 = NIT
    • (b) NDPFC = NNPMP – NIT – NFIA
    • = 1500 – 250 – (-30)
    • = 1280
    Problem 3:
    Contents Rs. (in Crores)
    Net current transfers from rest of the world 10
    Private final consumption expenditure 600
    National Debt Interest 15
    Net Exports (-) 20
    Current Transfers from government 5
    Net domestic product at factor cost accruing to govt. 25
    Government final consumption expenditure 100
    Net Indirect tax 30
    Net Domestic Capital Formation 70
    Net Factor Income from Abroad 10
    (a) National Income
    (b) Private Income
    Solution
    •(a) National Income (NNPFC) = (Private final consumption expenditure + Government final
    consumption expenditure + Net Domestic Capital Formation + Net Factor Income from Abroad - Net
    Indirect tax
    = 600 + 100 + 70 + (-20) + 10 – 30
    = 780 – (50)
    = 730
    •(b) Private Income = NNPFC - Net domestic product at factor cost accruing to govt + Transfer
    Payments + National Debt Interest
    = 730 - 25 + (10 + 5) + 15
    = 760 – 25
    = 735

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