Question

From the following data calculate National income:

(a) Income method

(b) Expenditure method

(a) Compensation of employees 1200

(b) NFIA - 20

(c) NIT 120

(d) Profit 800

(e) Private final consumption expenditure 2000

(f) Net domestic capital formation 770

(g) Consumption of fixed capital 130

(h) Rent 400

(i) Interest 620

(j) Mixed income of self-employed 700

(k) Net exports - 30

(l) Govt. final consumption exp. 1100

OR

Which of the following will be included in National Income?

(a) Seeds purchased by a farmer

(b) Salary given to an Indian working in the Japanese embassy in India

(c) Stationary purchased by a student

(d) Imports by a household

Answer 1

Income method: $ND{P}_{fc}=a+d+h+i+j$

$=1200+800+400+620+700$

$=\text{Rs}3720$

$NN{P}_{fc}=ND{P}_{fc}+NFIA$

$=3720+(-20)$

$=\text{Rs}3700$

Expenditure method:

$GD{P}_{mp}=e+f+g+k+j$

$=2000+770+130+(-30)+1100$

$=\text{Rs}3970$

$NN{P}_{fc}=GD{P}_{mp}-\text{Depreciation + NFIA - NIT}$

$=3970-130+(-20)-120$

$=\text{Rs}3700$

(a) Not included as it is an intermediate good. The value of such goods are already included in the value of final goods.

(b) Included as salary is received by a normal resident of India.

(c) Included as it is a part of private final consumption expenditure.

(d) Not included as the production has taken place outside the domestic territory of India.