Gr xii-eco-macro-ch-2-s5
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The document discusses calculating national income using the factor income method. This involves: 1. Summing factor incomes including wages, rent, interest, profits and self-employment earnings to get National Domestic Product at Factor Cost (NDPFC). 2. Adding Net Factor Income from Abroad (NFIA) to NDPFC to get Net National Product at Factor Cost (NNPFC). 3. Calculating domestic income, national income, net national product at market price, and gross national product at factor cost using various components of factor incomes and net factor incomes from abroad.
![Solution
• Net National Product at Market Price
• = (i)+(ii)+(iii)+(iv)+(v)+(vi)+(vii)- (viii)+ [(ix)-(x)]
• = 1400+200+100+120+80+80+200-20+(40-20)
• = ₹ 2180 crores](https://image.slidesharecdn.com/gr-xii-eco-macro-ch-2-s5-200724164738/85/Gr-xii-eco-macro-ch-2-s5-12-320.jpg)
Gr xii-eco-macro-ch-2-s5
- 2. Factor Income Method Grade XII Economics
- 3. Learning Objective • To apply the formula for calculating national income according to income method
- 4. Factor Income Method National income is computed by summing up the rent of land, salaries of employees and wages, interest on capital, surplus profits of entrepreneurs and earnings of self-employed people.
- 5. Computation of National Income by Income Method
- 6. Components of Domestic Income
- 7. Steps •I Calculate Factor Income •II Take the sum of all factor incomes to get NDPFC •III Add NFIA to NDPFC to get NNPFC
- 8. National Income Aggregates •National Income = Compensation + Operating Surplus+ Mixed income of the Self-employed + NFIA •Domestic Income= COE+OS+MI
- 9. Calculate Domestic Income and National Income Sl No Items (₹ in crores) (i) Wages 10000 (ii) Rent 5000 (iii) Interest 400 (iv) Dividend 3000 (v) Mixed Income 400 (vi) Undistributed Profit 200 (vii) Social Security Contribution 400 (viii) Corporate Profit Tax 400 (ix) Net Factor Income from Abroad 1000
- 10. Solution • (a) Domestic Income= (i) +(ii) +(iii) +(iv) +(v)+(vi)+(vii)+(viii) =₹10000+₹5000+₹400+₹3000+₹400+₹200+₹400+₹400 = ₹ 19800 crore (b) National Income= Domestic Income + NFIA = ₹ 19800+1000 = ₹20800 crore
- 11. Calculate NNP at MP Sl No Items ₹ in crores (i) Wages and salaries 1400 (ii) Employer’s contribution to social security 200 (iii) Rent 100 (iv) Dividend and corporate profit tax 120 (v) Corporate saving 80 (vi) Interest 80 (vii) Mixed income of the self-employed 200 (viii) Net factor income to abroad 20 (ix) Indirect taxes 40 (x) Subsidies 20
- 12. Solution • Net National Product at Market Price • = (i)+(ii)+(iii)+(iv)+(v)+(vi)+(vii)- (viii)+ [(ix)-(x)] • = 1400+200+100+120+80+80+200-20+(40-20) • = ₹ 2180 crores
- 14. Solution
- 15. Calculate GNP at factor cost Sl No Items ₹ in crores (i) Factor income from abroad 10 (ii) Compensation of employees 150 (iii) Factor income to abroad 15 (iv) Consumption of fixed capital 15 (v) Interest 40 (vi) Rent 40 (vii) Profit 100
- 16. Solution GNP at factor cost= (i)+(ii) –(iii)+ (iv) +(v) +(vi) + (vii) =10+150-15+15+40+40+100 =₹ 340 crore
- 17. Review • What are the steps to calculate national income using income method?
- 18. Recapitulation NI can be calculated in three steps: • Calculate Factor Income • Take the sum of all factor incomes to get NDPFC • Add NFIA to NDPFC to get NNPFC