cono
Meas
3 in crores
100
920
620
(-) 10
100
4.102
34. Calculate National Income by income method and expenditure method.
Particulars
(i) Government final consumption expenditure
(ii) Interest, rent and profits
(iii) Gross Capital formation
(iv) Net exports
(v) Change in stock
(vi) Net Factor income from abroad
(vii) Subsidies
(viii) Private Final Consumption expenditure
(ix) Indirect tax
(x) Consumption of fixed Capital
(xi) Mixed income of the self employed
(xii) Compensation of employees
- 10
20
800
120
60
60
370
National Income = 1,340 cro
ronditure method
Answers
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NCERT Solutions for Class 12 Macro Economics National Income and Related Aggregates
September 29, 2019 by Bhagya
NCERT Solutions for Class 12 Macro Economics Chapter-2 National Income and Related Aggregates
NCERT TEXTBOOK QUESTIONS SOLVED
1. Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain. [3 Marks]
Ans: The sum of final expenditures in an economy must be equal to the income received by all the factors of production taken together (final spending on final goods, it does not include spending on intermediate goods). This follows from the simple idea that the revenues earned by all the firms put together must be distributed among the factors of production as salaries, wages, profits, interests earning and rents.
2. What is the difference between planned and unplanned inventory accumulation? Write down the relation between change in inventories and value added of a firm. [3 Marks]
Ans: Planned Inventory. It refers to changes in the stock inventories that have occurred in a planned way. In a situation of planned inventory accumulation, firm will plan to raise its inventories. Unplanned Inventory. It refers to changes in the stock of inventories that have occurred in an unexpected way. In a situation of unplanned inventory accumulation, due to unexpected fall in sales, the firm will have unsold stock of goods.
Value added of a firm (GVA) = Gross value of output produced by the firm – Value of intermediate goods used by the firm.
OR
GVA = Value of sales by the firm + Value of change in inventories – Value of intermediate goods used by the firm
3. Write down the three identities of calculating the GDP of a country by the three methods. Also, briefly explain why each of these should give us the same value of GDP. [3 Marks]
Ans: National Income = National Product = National Expenditure. Each one will give the same result. The only difference is that with product methods, NI is calculated at production or creation level with income Method NI is measured at distribution level, and with expenditure method NI is measured at disposal level.
4. Define budget deficit and trade deficit. The excess of private investment over saving of a country in a particular year was Rs 2,000 crores. The amount of budget deficit was (-) Rs 1,500 crores. What was the volume of trade deficit of that country? [3-4 Marks]
Ans: Budget deficit. It measures the amount by which the government expenditure exceeds the tax revenue earned by it. Budget Deficit = G – T.
Trade deficit: It measures the amount of excess expenditure over the export revenue earned by the country.
Trade Deficit = M – X
Given G – T = (-) Rs 1500 crore
Investment – Saving = Rs 2000 crore Trade deficit = [I – S] + [G – T]
= [2000]+ [-1500] = Rs 500 crore.
5. Suppose the GDP at market price of a country in a particular year was Rs 1,100 crores. Net Factor Income from Abroad was Rs 100 crores. The value of Indirect taxes – Subsidies was Rs 150 crores and National Income was Rs 850 crores. Calculate the aggregate value of depreciation. [3 Marks]
Ans: National Income (or NNPFC) = GDPmp- Depreciation + Net factor income from abroad – [Indirect Taxes-Subsides] 850 = 1100 – Depreciation +100- 150
Depreciation = 1100+ 100- 150-850 Depreciation = Rs 200 Crore
6. Net National Product at Factor Cost of a particular country in a year is Rs 1,900 crores. There are no interest payments made by the households to the firms / government, or by the firms / government to the households. The Personal Disposable Income of the households is Rs 1,200 crores. The personal income taxes paid by them is Rs 600 crores and the value of retained earnings of the firms and government is valued at Rs 200 crores. What is the value of transfer payments made by the government and firms to the households? [3-4 Marks]
Ans: Personal disposable income = Personal income – Personal tax – miscellaneous receipts of government 1200 = Personal Income – 600 – 0 Personal Income = 1800 Crore Private Income = Personal income + retained earnings + corporate tax = 1800 + 200 + 0 = 2000 Crore Private income = NNPFC (National income) – NDPFC of government sector + Value of transfer payment 2000 = 1900 – 0 + Value of transfer payment
Value of transfer payment =100 Crore
7. From the following data, calculate Personal Income and Personal Disposable Income. [6 Marks]

Ans: Private Income = NDPFC – NDPFC of government sector + NFIA + Transfer Income + net interest receive from household (Interest Received by Households – Interest Paid by Households) = (i) – 0 + (ii) + (vii) + [(v) – (vi)]
= 8000 + 200 + 300 + (1500 – 1200)
= 8800 Crore
Personal Income = Private income – Undistributed profit – Corporation tax = 8800 – (iii) – (ii)
= 8800 – 1000 – 500 = 7300 Crore
Personal Disposable Income =
Personal income – Personal tax = 7300 – (viii)
= 7300 – 500 = 6800 Crore
hopefully this will help you