Question

From the following data, calculate Gross National Product at Market Price by:
(a) Income method
(b) Expenditure method

$\underset{–}{\begin{array}{ccc}1.& \text{Mixed income of self employed}& 400\\ 2.& \text{Compensation of employeees}& 500\\ 3.& \text{Private final conosumption expenditure}& 900\\ 4.& \text{Net factor income from abroad}& -20\\ 5.& \text{Net indirect taxes}& 100\\ 6.& \text{Consumption of fixed capital}& 120\\ 7.& \text{Net domestic capital formation}& 280\\ 8.& \text{Net exports}& -30\\ 9.& \text{Profits}& 350\\ 10.& \text{Rent}& \\ 11.& \text{Interest}& 150\\ 12.& \text{Government final consumption expenditure}& 450\end{array}}$

OR


Categorise the following as final and intermediate good. Give reasons:
(a) Machine purchased by a household
(b) Machine purchased by a firm
(c) Machine purchased for resale purpose

Answer 1

(a) Income method:
NDP at factor cost = Mixed Income of self-employed + Compensation of employees + Profit + Rent + Interest or (1 + 2 + 9 10 + 11)
= 400 + 500 + 350 + 100 + 150
= 1500
GNP at market price= NDP at factor cost + NFIA + NIT + Depreciation
= 1500 + (-20) + 100 + 120
= 1700
(b) Expenditure method:
GDP at market price = Private Final consumption Expenditure (C) + Gross Domestic Capital Formation (I) + Government Final consumption Expenditure (G) + Net Exports or {3 + (6 + 7) + 12 + 8}
= {900 + (120 + 280) + 450 + (-30)}
= 1720
GNP at market price = GDP at market price+ NFIA = 1720 + (-20) = 1700

OR

(a) Machine purchased for household work is a final consumption good because now it will be used finally and no further process of production or resale will occur.
(b) Machine purchased by a business firm is a final capital good as it is used as an investment in a firm and it will help in the production process. Now, it will be used finally and no further process of production or resale will occur.
(c) Machine purchased for resale purpose is an intermediate good as it will be further sold in the market.