(a) Why are pensions included in national income but not old age pensions ?
(b) Calculate gross domestic product at market price using production method and income method:
(a) Why are pensions included in national income but not old age pensions ?
(b) Calculate gross domestic product at market price using production method and income method:
(a) Pensions are included in national income because it is a part of compensation of employees but old age pensions are not included because it is not out of any thing productive in return. So, it is a transfer payment.
(b) By product method
Value of output = 2000 + 1400 + 1800 = 5200
GDPmp= Value of output-Intermediate consumption
= 5200 - 2400 = 2800 crores
NDPfc By income method
NDPfc = Compensation of employees + Operating Surplus + Mixed income of the people using family inputs
= 800 + 600 + 1300 = 2700
GDPmp=NDPfc + Dep. + NIT = 2700 + 80 + (20) = 2800 crores
OR
(a) Expenditure on fertilizer by a farmer-Not included because it is an intermediate expenditure.
(b) Dividends received by an Indian from his investment in the shares of a foreign company. Included because it is a factor income/payment.
(c ) Prize won in a lottery-Not included because it is a transfer income. Nothing new is produced.
(d) Payment of interest on a loan taken by an employee from an employer – Not included because employee is a part of household and loan is not taken for productive purpose.
(a) Pensions are included in national income because it is a part of compensation of employees but old age pensions are not included because it is not out of any thing productive in return. So, it is a transfer payment.
(b) By product method
Value of output = 2000 + 1400 + 1800 = 5200
GDPmp= Value of output-Intermediate consumption
= 5200 - 2400 = 2800 crores
NDPfc By income method
NDPfc = Compensation of employees + Operating Surplus + Mixed income of the people using family inputs
= 800 + 600 + 1300 = 2700
GDPmp=NDPfc + Dep. + NIT = 2700 + 80 + (20) = 2800 crores
OR
(a) Expenditure on fertilizer by a farmer-Not included because it is an intermediate expenditure.
(b) Dividends received by an Indian from his investment in the shares of a foreign company. Included because it is a factor income/payment.
(c ) Prize won in a lottery-Not included because it is a transfer income. Nothing new is produced.
(d) Payment of interest on a loan taken by an employee from an employer – Not included because employee is a part of household and loan is not taken for productive purpose.
