Rajasthan Board RBSE Class 12 Economics Chapter 15 National Income and its Related Aggregates
RBSE Class 12 Economics Chapter 15 Practice Questions
RBSE Class 12 Economics Chapter 15 Multiple Choice Questions
Question 1.
Who used the national income estimates for the first time in the world?
(a) William Digby
(c) Fisher
(b) Simon Kuznets
(d) Dr. V.K.R.V. Rao
Answer:
(b)
Question 2.
Who gave the concept of national income as net aggregate of production of material and non-material goods (services) ?
(a) Marshall
(b) Fisher
(c) Simon Kuznets
(d) Pigou
Answer:
(a)
Question 3.
Which of the following is not a transfer payment ?
(a) Pension
(b) Unemployment allowance
(c) Gift
(d) Wages
Answer:
(d)
Question 4.
Which of the following is not a characteristic of National Income?
(a) National income is related to one year
(b) National income is a flow concept
(c) It is calculated as production of final goods and services
(d) Unproductive activities are included in it
Answer:
(d)
Question 5.
Suitable measure of national income is :
(a) GNP
(b) GDP
(c) NNPMC
(d) NNPFC
Answer:
(c)
RBSE Class 12 Economics Chapter 15 Very Short Answer Type Questions
Question 1.
Who publishes the national income estimates in India every year?
Answer:
National income estimates in India is published every year by Central Statistical Organization.
Question 2.
From which year estimates of national income of India are being issued regularly?
Answer:
Estimates of national income of India are being issued regularly from 1956.
Question 3.
Explain in brief the meaning of final goods and services.
Answer:
Those goods or services that do not have to pass through any other phase of production and which are ultimately used by consumers are called final goods and services, such as ready-made clothes, etc.
Question 4.
What is the calculation of national income on domestic basis called?
Answer:
The calculation of known national income on a domestic basis is called gross domestic product (GDP).
Question 5.
What is the calculation of national income on citizenship basis called?
Answer:
Based on country’s citizenship, the calculation of known national income is called gross national product (GNP).
RBSE Class 12 Economics Chapter 15 Short Answer Type Questions
Question 1.
Explain the following:
(a) Net Domestic Product at Market Price
Answer:
Net Domestic Product at Market Price (NDPMP)can be calculated by deducting depreciation from gross domestic product at market price.
NDPMP = GDPMP-D
D = Depreciation
(b) Net Domestic Product at Factor Price.
Answer:
To obtain net domestic product at factor price, indirect tax is deducted from net domestic product at market price and subsidies are added.
NDPFC = NDPMC – IT + S [IT = indirect tax; S = subsidy]
(c) Gross National Product at market price
Answer:
Gross National Product at Market Price is defined as the market value of the final goods and services produced in the domestic territory of a country by normal residents during an accounting year including net factor income from abroad.
GNPMP = GDPMP + NFIA
Here, NFIA = Net Factor income from abroad
X – M = Net export Or
GNPMP = C + I + G + NFIA + (X – M)
(d) Net National Product at MP
Answer:
In the production of products and services, fixed capital is used. During the production process, machines get depreciated or sometimes they get damaged, or because of innovations, old machines become useless. Capital instruments get depreciated due to continuous use during the production process and few of them have to be replaced. This depreciated value and replacement cost has to be deducted from Gross National Product for obtaining Net National Product at Market Price (NNPMP).
NNPMP = GNPMP – D
D = Depreciation
NNPMP = GNPMP – Depreciation.
(e) Net National Product at FC – Net National Product at factor cost refers to expenditure made on the factors of production of goods/services in country. For example, wages, cost and interest on capital investment, cost and rent of land used, cost and benefit of use of entrepreneurship, etc. is collectively known as total cost. Indirect taxes levied by the government are deducted and grants or subsidies provided by the government are added to calculate Net National Product at factor cost.
NNPFC = NNPMP – IT + S
IT = Indirect Taxes
S = Subsidy
Or NNPfc = R + I + W + P
R = Rent
I = Interest
W = Wages
P = Profit
(f) Private Income – It is the total income from all factors (factor income as well as current transfers) that accrues to the private sector during the period of one year.
Private Income = Factor Income from Net Domestic Product Accruing to Private Sector + Net Factor Income from Abroad – (Interest on National Debt + Net Current Transfers from Rest of the World + Current Transfer from Government)
(g) Personal Income – It is the income actually received by the individual households from all factors in the form of current transfer payment and factor incomes.
Personal Income = Private Income – Corporation Tax – Retained Earnings or Corporate Savings
(h) Personal disposable income – It is the amount which is actually available to the household and the non-corporate businesses after the deduction of all tax obligations to the government.
Personal Disposable Income = Personal Income – Direct Personal Taxes
(i) Per Capita National Income – Along with National Income of a country, Per Capita Income of the country is also important. It is obtained by dividing national income of the country by its population :
Question 2.
Explain the significance of national income in brief.
Answer:
National income is the mirror of a country’s economy. The assessment of national income presents a country’s correct financial information. Government makes appropriate economic policies by computing national income. National income figures in the country are used to correct the inequitable distribution of income, increase employment. Inequality in the economic progress of different parts of a country can be addressed by the distribution of national income.
National income figures are very useful in policy making to overcome regional inequality. National income studies are also helpful in comparing the countries of the world. Based on the figures of national income, strategies for proper development of agriculture and animal husbandry are created. Each country evaluates the expansion of its industry, trade and commerce operations, on the basis of national income. National income figures are useful for research. It provides the most useful information for financial planning, calculating per capita income.
Question 3.
Explain in brief the difficulties in the measurement of national income.
Answer:
There are several types of difficulties in measuring the national income:
- Calculating the earnings from self-employment is a difficult task.
- Difficulties to evaluate the old, interim and intermediate goods.
- The market transactions of shares or debentures are not counted in the national income due to paperwork.
- Illegal actions and economic actions of black market also lead to theoretical difficulties.
- It is difficult to calculate the holiday for rest.
RBSE Class 12 Economics Chapter 15 Essay Type Questions
Question 1.
Explain in detail the national income and its characteristics.
Answer:
National Income – National income is the sum total of the values expressed in that country’s currency at the prevailing market price of the final consumption of the final consumed goods and services produced by the inhabitants of the country during a financial year. Here, final consumption items and services are those items and services which are used by a consumer or a producer. National income is being estimated since 1956, every year, by the Central Statistical Organization. After achieving independence, a national income committee was constituted under the chairmanship of Prafulla Chandra Mahalanobis for the estimation of national income. Committee Adviser was Prof. Simon Kuznets.
Following are the characteristics of national income
(a) National Income is concerned with a particular country. For example, national income of India, Pakistan, etc.
(b) National income relates to a fixed time period, normally a financial year. In India, it is from 1st April to 31st March of each year.
(c) National income is concerned with economic activities of residents of a country. But presently, economic activities of residents and non-residents of the geographical area of a country is also included.
(d) National income is related with productive economic activities, i.e. non-productive activities are not included in the calculation of national income.
(e) Production of final goods and services is included in the calculation of national income. It means that production of interim, i.e. semi-finished goods and services, is not included in the calculation of national income.
(f) National Income is calculated at current market prices.
(g) National income is expressed in currency terms of that country.
(h) National income is the money aggregate of goods and services.
(i) National income is a type of flow and not a stock.
(j) National income is calculated in net form, i.e. depreciation is deducted from gross national income/output.
Question 2.
By a hypothetical example, explain the different components of national income.
Answer:
Different Components of National Income –
(i) Net Domestic Product at Market Price (NDPMP)
(ii) Net Domestic Product at Factor Cost (NDPFC)
(iii) Gross National Product at Market Price (GNPMP)
(iv) Net National Product at Market Price (NNPMP)
(v) Net National Product at Factor Cost (NNPFC)
(vi) Private Income
(vii) Personal Income (PI)
(viii) Personal Disposable Income (PDI) and
(ix) Per Capita National Income (PCI)
A numerical example to calculate different components of National Income of India :
Given :
(a) (GDPMP) = ₹ 2,00,000 crores
(b) Net Foreign Income – Income from export(X – M) = ₹ 5,000 crores
(c) Depreciation = ₹ 5,000 crores
(d) Indirect Tax = ₹ 5,000 crores
(e) Subsidy = ₹ 2,500 crores
(f) Population of Country = 50 Crores
(g) Government Departments like Income of railway department = ₹ 5,000 crores
(h) Non-government departments; Like – Profit of State Bank = ₹ 5,000 crores
(i) Paid contribution by government employees for pension, etc = ₹ 2,500 crores
(j) Receipts of current year from the government to the people = ₹ 2,500 crores
(k) Receipts of current year for persons from abroad = ₹ 1,000 crores
(l) Interest receipts on government loans = ₹ 1,500 crores
(m) Saving of private companies = ₹ 5,000 crores
(n) Corporate tax of private company = ₹ 7,500 crores
(o) Income tax of people = ₹ 5,000 crores
(p) Fees of people = ₹ 2,000 crores
(q) Penalties = ₹ 1,000 crores
Solution:
(i) NDPMP = GDPMP – D = ₹ 2,00,000 – ₹ 5,000 = ₹ 1,95,000 crores
(ii) NDPFC = NDPMP – IT + S = ₹ 1,95,000 – ₹ 5,000 – ₹ 2,500 = ₹ 1,92,500 crores
(iii) GNPMP = GDPMP – Net foreign income = ₹ 2,00,000 + ₹ 5,000 = ₹ 2,05,000 crores
(iv) NNPMP = GNPMP – D = ₹ 2,05,000 – ₹ 5,000 = ₹ 2,00,000 crores
(v) NNPFC = NNPMP – IT + S = ₹ 2,00,000 – ₹ 5,000 + ₹ 2,500 = ₹ 1,97,500 crores
(vi) Private Income (PI) = NNPFC – (Income of government departments + public sector profits + payments made by government servants towards pensions, etc.) + (current year receivables from govt. + foreign income in current year + interest received on govt, loans)
= ₹ 1,97,500 – (₹ 5,000 + ₹ 5,000 + ₹ 2, 500) + (₹ 2,500 + ₹ 1,000 + ₹ 1,500)
= Rs. 1,90,000 crores
(vii) Personal Income (Per I) = Private income (PI) – (savings of private company) – (corporation tax of private company)
= ₹ 1,90,000 – (₹ 5,000) – (₹ 7,500)
= ₹ 1,77,500 crores
(viii) Personal Disposable Income (PDI) = Personal income – (income tax of people) – (fee of people + penalties)
= ₹ 1,77,500 – (₹ 5,000) – (₹ 2,000) – (₹ 1,000)
= ₹ 1,69,500 crores
(ix) Per Capital National Income (PCI) = National income/population of country
RBSE Class 12 Economics Chapter 15 Other Important Questions – Answers
RBSE Class 12 Economics Chapter 15 Multiple-Choice Questions
Question 1.
The National Income Committee was formed under whose presidentship :
(a) Dr. V.K.R.V Rao
(b) Prof. Prafful Chandra Mahalanobis
(c) Findlay Shirras
(d) William Digby
Answer:
(b)
Question 2.
The National Income Committee was formed in which year
(a) 1921
(b) 1935
(c) 1948
(d) 1949
Answer:
(d)
Question 3.
In which year the national income estimates were firstly published by the Central Statistical Organization ?
(a) 1930
(b) 1948
(c) 1954
(d) 1956
Answer:
(d)
Question 4.
“National income is that part of the objective income of the community, including, of course, income derived from abroad, which can be measured in money.” Whose definition is this?
(a) Fisher
(b) Pigou
(c) Marshall
(d) Keynes
Answer:
(b)
Question 5.
Which one is true from the following ?
(a) Total National Product = Total Domestic Product + Depreciation expenses
(b) Net Domestic Product = Total National Product + Depreciation Expenses
(c) Net National Product= Total National Product – Depreciation Expenses
(d) Total Domestic Product = Net National Product + Depreciation Expenses
Answer:
(c)
Question 6.
NNPMP is equal to
(a) GNPMP – Depreciation
(b) GNPMP + Indirect tax
(c) NNPMP – Depreciation Expenses
(d) None of these
Answer:
(a)
Question 7.
What is true
(a) GNP = GDP + Depreciation
(b) GNP = NNP + Depreciation
(c) NNP = GNP – Depreciation
(d) NNP = GNP + Depreciation
Answer:
(c)
Question 8.
There are how many bases of calculation of National Income?
(a) Two
(b) Four
(c) Three
(d) Five
Answer:
(a)
Question 9.
Which is the most suitable measure of national income of a country?
(a) NNPFC
(b) NNPMC
(c) GDPFC
(d) GDPMC
Answer:
(a)
Question 10.
Which of the following is a transfer payment?
(a) Pension
(b) Unemployment Allowance
(c) Gift
(d) All of these
Answer:
(d)
RBSE Class 12 Economics Chapter 15 Very Short Answer Type Questions
Question 1.
In India, national income is calculated by which organization?
Answer:
Central Statistical Organization.
Question 2.
What is the remuneration of human labour?
Answer:
Wages.
Question 3.
If indirect tax in a single economy is ₹ 25 crores and gratuity is ₹ 15 crores, then calculate net indirect taxes.
Answer:
Net Indirect Tax = Indirect Tax – Gratuity
= ₹ 25 – ₹ 15 = ₹ 10 crores
Question 4.
Describe the meaning of National Income Accounting System.
Answer:
This is the way to present accounts related to national income in dual entry system.
Question 5.
What are Factors of input?
Answer:
Input factors are – Labour, Capital, Land, Business, etc. which are also called Factors of production.
Question 6.
What do you mean by Input?
Answer:
The goods and services used in the production of a product are called inputs.
Question 7.
Explain the relationship of NDP and NNP through equation.
Answer:
NDP = NNP – Net income received from abroad.
Question 8.
What is the base year of calculation of national income in India?
Answer:
2004-05 is considered as the base year of calculation of national income in India.
Question 9.
When is domestic factor income higher than national income?
Answer:
When the net factor income obtained from foreign countries is negative.
Question 10.
If household income is ₹ 600 crores and the net factor income from abroad is ₹ – (6) crores, then calculate national income.
Answer:
National Income = Domestic Income + Net Factor Income from abroad
= ₹ 600 – ₹ 6 = ₹ 594 crores.
Question 11.
Name any four factors of production.
Answer:
- Capital
- Land
- Industry
- Labour.
Question 12.
State the three sectors of economy.
Answer:
- Primary Sector
- Secondary Sector
- Tertiary or Service Sector.
Question 13.
What do you mean by transfer income?
Answer:
The income that is received without providing any service or goods.
Question 14.
What does the national income mean at current prices ?
Answer:
When national income is calculated at prevailing market prices.
Question 15.
What does the national income mean at fixed prices?
Answer:
When national income is calculated on a base year basis.
Question 16.
Can old age pension be included in national income?
Answer:
This is a transferable income, so it is not included in national income.
Question 17.
Is income of smuggling included in national income or not? .
Answer:
Due to it being an illegal income, it cannot be included in national income.
Question 18.
Is scholarship included in national income or not?
Answer:
This is a transferable income, so it is not included in the national income.
Question 19.
Explain the sectors of bi-sectoral economy.
Answer:
Family sector and Firm sector.
Question 20.
What do you mean by non-durable goods?
Answer:
Those goods which can be used only once.
Question 21.
What do transfer payments mean?
Answer:
Payments that are made without receiving any goods or services, such as old age pension.
Question 22.
What do you mean by savings?
Answer:
The portion of income that is not spent on consumption.
Question 23.
What do you mean by personal income?
Answer:
The income actually received from all the sources of individuals and families.
Question 24.
What do you mean by production?
Answer:
Creating or enhancing utility in objects.
Question 25.
Write down two examples of Indirect Tax.
Answer:
- Goods and services Tax
- Excise duty
Question 26.
What is added to gross domestic product to find gross national product?
Answer:
Net factor income from abroad is added to gross domestic product.
Question 27.
Name any two items that cannot be included to calculate national income.
Answer:
- Transfer income
- Income received by sale of old items.
Question 28.
Mention the bases of the concept of national income.
Answer:
- Geographical basis
- Political basis.
Question 29.
Write the formula for gross domestic product at market price.
Answer:
GDPMC = C + I + G + (X – M)
RBSE Class 12 Economics Chapter 15 Short Answer Type Questions (SA-I)
Question 1.
If the total consumption expenditure of a country is ₹ 1000 crores, the total private investment is ₹ 400 crores and the government investment is ₹ 600 crores, then what will be the value of the gross domestic product?
Answer:
Gross Domestic Product = Gross consumption expenditure + Gross private investment + Government investment
= ₹ 1000 + ₹ 400 + ₹ 600
= ₹ 2000 Crores
Question 2.
What do you mean by Gross National Product ?
Answer:
The sum total of the market value of final goods and services that are produced by an economy in a period of one year, is called Gross National Product (GNP).
Question 3.
What do you mean by Net National Product?
Answer:
The remainder which is left after reducing value depreciation from the gross national product is called Net National Product (NNP).
Question 4.
What do you understand by Net National Income at factor cost (NNIFC) ?
Answer:
At market value, after subtracting the indirect taxes from the net national product, and adding financial support, the amount that remains is called ‘net national income at factor cost’.
Question 5.
What do you understand by Personal Income?
Answer:
The sum total of the income actually received by all the persons or families of a country try is called personal income.
Question 6.
What do you understand by Disposable Income?
Answer:
The sum remaining after deducting direct taxes from personal income and further deducting the payments made to the government, is called disposable income.
Question 7.
What do you mean by subsidy?
Answer:
For the purpose of reducing the price of an item, the grant that the government provides to the producers is called subsidy.
Question 8.
What do you understand by Per Capita Income (PCI)?
Answer:
Per capita income is obtained by dividing total national income by the total population. It is also called the average income of the economy.
According to the Formula:
Question 9.
What is Depreciation?
Answer:
Depreciation is the common wear and tear in the value of capital goods, due to the attrition and lack of anticipated circulation during the production process, during a financial year.
Question 10.
What is Factor Income?
Answer:
In the production process, the owners of the means of production receive the income in lieu of their services. This is are called Factor income.
Question 11.
What do you mean by Transfer Income?
Answer:
The income which is received as a one-sided payment without providing any goods or services in return, is called transfer income.
Question 12.
What impact do indirect taxes have on market price?
Answer:
An increase in indirect taxes increases the price of the item, and decrease in indirect taxes reduces the price of goods.
Question 13.
What do you mean by Capital Loss?
Answer:
Due to unexpected events such as natural calamities, etc., the decrease in the value of fixed assets is called capital loss.
Question 14.
What is the national income on current prices?
Answer:
When national income is measured on market prices, it is called national income at current prices.
Question 15.
What is the national income on fixed prices?
Answer:
When national income is measured at a base year’s price, it is called national base (real national income) on fixed prices.
Question 16.
Define Savings.
Answer:
The portion of the income which is not spent on consumption and kept for the future is, called savings.
Question 17.
What is Royalty?
Answer:
Income earned by the owners in exchange for giving others the right to use mineral mines, copyright, patents, and trademarks, etc. is called royalty.
Question 18.
What is Rent?
Answer:
Rent is the amount that a tenant gives to the owner in exchange for the use of a house, shop, land, machine, etc.
Question 19.
What do you mean by Gross Domestic Product?
Answer:
The sum total of monetary value of the final goods and services produced in 1 year within the domestic borders of a country is called Gross Domestic Product.
Question 20.
What do you mean by Domestic Factor Income?
Answer:
The income received by sources of production within the domestic boundaries of a country is known as domestic factor income.
Question 21.
What is the difference between national income and domestic income?
Answer:
National income includes net factor income from abroad, while domestic income does not include this income.
Question 22.
How is the total disposable income deduced from the national income ?
Answer:
Net income from the rest of the world is added to the national income and indirect tax or fees and fines are removed to obtain the total disposable income.
Question 23.
Write the formula for calculating personal income.
Answer:
Personal income = undistributed profit – net interest paid by families – corporation tax + interim payments that government makes firms to give to families.
Question 24.
What is the difference between personal income and private income?
Answer:
Private income includes corporation tax and undivided profits, while these are not included in personal income.
Question 25.
What is the difference between factor income and transfer income?
Answer:
Factor income is the payment for the firm and income for factor. In this way it is a two-way payment, whereas transfer income is a one-way payment.
Question 26.
Explain the two characteristics of national income.
Answer:
- National Income is a holistic idea.
- National income is a flow which is related to time.
Question 27.
Write any four examples of non-financial activities.
Answer:
- Buying and Selling of old items
- Buying and selling of securities by the government
- Buying and selling of shares, debentures
- Illegal activities.
Question 28.
What do you mean by private income?
Answer:
Private Income – It is the sum total of factor income received by private sector from all sources, transfer income’received from government and transfer income received from rest of the world.
Question 29.
How is personal income calculated ?
Answer:
Personal income is computed by deducting savings of corporations, corporation tax and net corporation savings of foreign companies from Private income.
Question 30.
What are the two points of importance of National Income?
Answer:
- Through national income figures, information about of the structure of the economy is gained. .
- National income is indicative of the economic progress of the country.
Question 31.
What are the problems with the double calculation of national income.
Answer:
By doubling, the value of goods and services are included multiple times. This increases the actual value of national income multiple times.
Question 32.
Mention one difference between national income and private income?
Answer:
Interest on national debt is included in national income but not in private income.
RBSE Class 12 Economics Chapter 15 Short Answer Type Questions (SA-II)
Question 1.
What do you understand by GDP?
Answer:
It is the total value of all the final goods and services produced by all the enterprises (both resident and non-resident) within the domestic territory of a country in a particular year. GDP is considered as one of the best indicators of judging the economic performance of a country.
Question 2.
What is GNP?
Answer:
Gross National Product is defined as the total value of all final goods and services produced in a country in a particular year, plus the income which is earned by its citizens who are located abroad and minus the income of non-residents located within the country, it includes depreciation.
Question 3.
What is net national product at factor cost (NNPFC)?
Answer:
Net National Product at factor cost refers to expenditure made on the factors of production of goods/services in country. For example, wages, cost and interest of capital investment, cost -and rent of land used, cost and benefit of use of entrepreneurship, etc. is collectively known as total cost. Indirect taxes levied by the government are deducted and grants or subsidies provided by the government are added to calculate Net National Product at factor cost.
NNPFC = NNPMP – IT + S
IT = Indirect Taxes
S = Subsidy
Or NNPFC = R + I + W + P
R = Rent
I = Interest
W = Wages
P = Profit
Question 4.
What is Net National Product at Market Price (NNPMP)?
Answer:
In the production of products and services, fixed capital is used. During the production process, machines get depreciated, or sometimes they get damaged due to wear and tear, and because of innovations, old machines become useless. Capital instruments get depreciated due to continuous use during the production process and some of them have also to be replaced. This depreciated value and replacement cost has to be deducted from Gross National Product for obtaining Net National Product at Market Price (NNPMP).
NNPMP – GNPMP – D
D = Depreciation
NNPMP = GNPMP – Depreciation
Question 5.
What is the meaning of Nominal Gross Domestic Product?
Answer:
It refers to the market value of the final goods and services produced within the domestic territory of a country during a financial year, as estimated using the current year prices. It is also called GDP at current price.
Question 6.
What is the meaning of Real Gross Domestic Product?
Answer:
The sum total of monetary values of all goods and services produced in an economy in 1 year on the basis of a base year prices, is called gross domestic product at fixed prices or real gorss domestic product.
Real gross domestic product = quantity of product in current year × price of product in base year
Question 7.
What is transfer payment?
Answer:
Transfer payments are all those unilateral payments corresponding to which there is no value addition in the economy, e.g. gifts, donations, etc.
Question 8.
Why GDP is not an appropriate indicator for economic welfare?
Answer:
GDP may be a good indicator of economic growth but not of economic welfare or economic development, because of the following reasons :
- Ignorance of distribution of income among the population.
- Welfare is not a component of GDP calculation.
- Non-monetary transactions are ignored.
- Externalities (good and bad impact of personal activities on others).
Question 9.
What do you mean by Net Factor Income from Abroad (NFIA)?
Answer:
This is the difference between the income earned from abroad for rendering factor services by the normal residents of the country to the rest of the world and the income paid for the factor services rendered by non-residents in the domestic territory of a country.
Question 10.
What is Factor Income?
Answer:
This is income received by the owners of factors of production for rendering their factor services to the producers, i.e. wages to the labourers, rent to landlord, interest to capital and profit to the entrepreneur.
Question 11.
What do you mean by Private Income?
Answer:
It is the total income from all factors (factor income as well as current transfers) that accrues to the private sector , during the period of one year.
Private Income = Factor Income from Net Domestic Product Accruing to Private Sector + Net Factor Income from Abroad – (Interest on National Debt + Net Current Transfers from Rest of the World + Current Transfer from Government)
Question 12.
What do you understand by Personal Income?
Answer:
It is the income actually received by the individual households from all factors in the form of current transfer payment and factor incomes.
Personal Income = Private Income – Corporation Tax – Retained Earnings or Corporate Savings
Question 13.
What is Personal Disposable Income?
Answer:
It is the amount which is actually available to the households and the non- corporate businesses after the deduction of all tax obligations to the government.
Personal Disposable Income = Personal Income – Direct Personal Taxes
Question 14.
What is the meaning of national disposable income?
Answer:
National Disposable Income (NDI) is defined as the maximum, the country can afford to spend on consumption goods or services during an accounting year without having to finance its expenditure by disposing of assets or by increasing its liabilities.
National disposable income can be ‘gross’ or ‘net’.
Net National Disposable Income = NNPFC + Net Indirect Taxes + Net Current Transfers from Rest of the World
Gross National Disposable Income = Net National Disposable Income + Depreciation
Question 15.
What do you understand by private sector?
Answer:
Private sector refers to all those businesses and enterprises which are owned and controlled by the private individuals.
Question 16.
What do you mean by personal disposable income?
Answer:
Individual earning income from all sources, which they can use according to their wishes, is called personal disposable income. In order to calculate personal income, the following is deducted from personal income-
Personal Disposable Income = Personal Income – Personal Direct Tax – Non Taxable Payment
OR
Personal Disposable Income = Consumption + Savings
Quesion 17.
Explain the concept of monetary GDP.
Answer:
The sum total of monetary values on the prevailing market prices of all goods and services produced in one year under an economy is called the gross domestic product at market prices or the monetary gross domestic product.
Monetary Gross Domestic Product = Quantity of Product in current year × Price of Product in current year
Question 18.
Why are exports included in the estimation of domestic product by the expenditure method? Can the gross domestic product be greater than the gross national product? Explain.
Answer:
Expenditure method estimates expenditure on domestic product, i.e. expenditure on final goods and services produced within the economic territory of the country. It includes expenditure by residents and non residents both. Exports though purchased by non residents are produced within the economic territory and are therefore a part of domestic product.
Domestic product can be greater than national product, if the factor income paid to the rest of the world is greater than the factor income received from the rest of the world, i.e., when net factor income received from abroad is negative.
RBSE Class 12 Economics Chapter 15 Essay Type Questions
Question 1.
Write down the definitions of National Income and explain the characteristics of national income.
Answer:
Following are the major definitions of National Income
1. According to Marshall, ” The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and non-materials including services of all kinds. This is known as national income.”
2. According to Pigou, ” National income is that part of the objective income of the community, including, of course, income derived from abroad, which can be measured in money.”
3. According to Fisher, ” National income refers solely to services received by ultimate consumers, whether from their material or human environments. In this way a piano or overcoat made for me this year is not a part of income of this year but an addition to capital. Only the services rendered by these goods is income.”
4. According to Simon Kuznets, ” It is the net output of commodities and services flowing during the year from the country’s productive system in the hands of the ultimate consumers.”
Following are the characteristics of National Income:
(a) National Income is concerned with a particular country. For example, national income of India, Pakistan, etc.
(b) National income relates to a fixed time period, normally a financial year. In India, it is 1st April to 31st March.
(c) National income is concerned with economic activities’of residents of a country. But . presently, economic activities of residents and non-residents of geographical area of a country are also included.
(d) National income is related with productive economic activities, i.e. non-productive activities are not included in the calculation of national income.
(e) Production of final goods and services are included in the calculation of national income. It means that production of interim, i.e. semi-finished goods and services, is not included in the calculation of national income.
(f) National income is calculated at current market prices.
(g) National income is expressed in currency terms of that country.
(h) National income is the money aggregate of goods and services.
(i) National income is a type of flow and not a stock.
(j) National income is calculated in net form, i.e. depreciation is deducted from gross national income/output.
RBSE Class 12 Economics Chapter 15 Numerical Questions
Question 1.
Calculate Value added at factor cost from the following:
Answer:
Sales + change in stock = value of output
200 + (cl. St – op. st)
200 + (10 – 15) – 200 – 5 = ₹ 195
Value of output – intermediate consumption = value added at MP
195 – 48 = ₹ 147
V. A. at FC = V. A. at MP Net indirect tax
= 147 – 20
= ₹ 127 crores
Question 2.
Calculate (a) Net National Product at MP, and
(b) Gross National Disposable Income
Answer:
NDPMP = a + e + g + – i
= 200 + 50 + 30 – 10
= 280 – 10 = ₹ 270 crores
NNPMP = NDPMP + NFIA
= 270 + 5 = ₹ 275
GNDI = NNPFC + NFIA + Net indirect taxes + Net current transfers from abroad + Depreciation (comp of fixed capital)
NNPMP – net in tax = 275 – 20 = ₹ 255 crores
GNDI = 255 + 20 + 5 + (-10) + 15
= 295 – 10 = ₹ 285 crores
GNDI = ₹ 285 crores
Question 3.
Calculate Gross Domestic Product at Market Price by
(a) Production Method and
(b) Income method
Answer:
GDPMP by production method
(b) (i) + (ii) + (iii) – a (i) + (ii) + (iii) = value added
(1000 + 900 + 700) – (500 + 400 + 400)
2600 – 1300 = ₹ 1300 crores = Value added at MP (GDPMP)
Income method
Compensation of employees + operating surplus + mixed income = NDPFC
= 400 + 300 + 550 = ₹ 1250 crores
GDPMP = NDPFC + consumption of fixed capital + net indirect tax
= 1250 + 40 + 10
GDPMP = ₹ 1300
Question 4.
Calculate Net National Disposable Income from the following data:
Answer:
NNDI = GDPMP – Consumption of fixed capital + FFIA + Net current transfer from abroad
= 1000 – 100 + (-20) + 50
= 880 + 50 = ₹ 930 crores
Question 5.
Calculate Gross National Disposable Income from the following :
Answer:
GNDI = (a) + (b) + (c) + (e)
= 2000 + 200 + 100 + 250
GNDI = ₹ 2550 crores
Question 6.
Estimate national income by :
(a) Expenditure method
(b) Income method from the following data:
Answer:
National Income (NNPFC)
Expenditure Method:
(1) + (2) + (3) + (4) = NDPMP
210 + 50 + 40 + (-5) = ₹ 295
NNPFC = NDPMP + Factor Income from Abroad – Net Indirect Tax (Indirect tax subsidy)
= 295 + 3 – (30 – 5)
= 295 + 3 – 25
= 298 – 25 = 273
NNPFC = ₹ 273 crores
Income Method :
NDPFC = (5) + (6) + (7) + (8) + (11) + (15)
= 170 + 10 + 45 + 20 + 10 + 15
= 270
NDPFC = NDPFC + FIFA
= 270 + 3 = ₹ 273 crores
Question 7.
From the following data calculate :
(a) National Income
(b) Personal Disposible Income.
Answer:
NNPFC (N. I) = (5) + (9) + (4) + (1) + (2)
= 1000 + 250 + 800 + 500 + 200 = ₹ 2,750 crores
NNPFC = NDPFC + (7)
= 2750 + (-50)
NNPFC = ₹ 2700 crores
PDI = (3) – (8) – (11) – (13)
= 2000 – 150 – 100 – 120
PDI = 2000 – 370 = ₹ 1630 crores
Question 8.
Calculate National Income and Gross National Disposable Income from the following data:
Answer:
= (4) + (6) + (2) + (7) + (3) = NDPMP
= 200 + 600 + 100 + 10 + ( – 20)
= 910 – 20 = ₹ 890 crores
NNPFC = NDPMP + (8) – (1)
= 890 + 5 – 5
NNPFC = ₹ 890 crores
Depreciation = (9) – (2)
= 125 – 100 = ₹ 25 crores
GNDI = NNPFC + Net Indirect Tax + Net Current Transfers from Abroad + Depreciation
= 890 + 05 + 15 + 25
GNDI = ₹ 935 crores
Question 9.
Calculate NNP at market price by production method and income method
Answer:
NNPMP by production method :
(2) Value of output – (1) Intermediate consumption = Value added at MP
(2) a + b + c – (1) a + b + c
(1000 + 900 + 700) – (500 + 400 + 300)
2600 – 1200
₹ 1400 = GDPMP
NNPMP = GDPMP – (9) + (7)
= 1400 – 40 + (-20)
NNPMP = ₹ 1340
Income Method :
NNPMP = (4) + (5) + (6) + (10) + (7)
= 400 + 650 + 300 + 10 + (-20)
NNPMP = 1350 + 10 – 20 = ₹ 1340
Question 10.
Calculate GNP at factor cost by income method and expenditure method.
Answer:
GNPFC by Income method :
GNPFC = 4 + 3 + 5 + 8 + 10 + 7
= 800 + 400 + 250 + 150 + (-10) + 60
GNPFC = ₹ 1650 crores
GNPFC by Expenditure Method :
GNPFC =1 + 2 + 6 + 10 + 11 – 12 + 7
= 1000 + 200 + 500 + (-10) + (-20) – 80 + 60
GNPFC = ₹ 1650 crores
Question 11.
Calculate private income and personal disposable income from the following data :
Answer:
Private Income = 1 – 2 + 3 + 5 + 9
= 5050 – 500 – 100 + 200 + 80
= 5430 – 500
Private Income = ₹ 4930 crores
PDI = Private Income – 4 – 10 – 7
= 4930 – 80 – 500 – 150
PDI = ₹ 4200 crores
Question 12.
Calculate private income :
Answer:
Private Income = 1 + 2 + 3 + 4 + 5
= 250 + 40 + 10 + 20 + 5
= ₹ 325 crores
Question 13.
Calculate net national disposable income and personal income from the following data :
Answer:
NDPFC = (2) + (4) + (6)
= 400 + 200 + 500 = ₹ 1100 crores
NNDI = NDPFC + (12) + (1) + (11)
= 1100 + (-50) + 90 + 20
NNDI = 1210 – 50
= ₹ 1160 crores
Personal Income
Private Income = NDPFC – (8) – (10)
= 1160 – 40 – 30 = ₹ 1090 crores
= 1090 + 7 + 9 + 11 + 12
= 1090 + 70 + 60 + 20 + (-50) = 1190 crores
Personal Income= Private Income – Corporation Profit Tax – Savings of Private Corporate sectors
= 1190 – 80 – 20 = ₹ 1090 crores
Question 14.
Calculate from the following data :
(a) Private income
(b) Personal income
(c) Personal disposable income.
Answer:
Private Income = 1 + 4 + 6 – 8 + 9 + 11
= 300 + 20 + 15 – 30 + 40 + 05
Private Income = 350 crores
Personal Income = Private income – 7 – 12
= 350 – 15 – 80
Personal income = 245 crores
PDI = Personal Income – 10
= 245 – 20
PDI = 225 crores
Question 15.
From the following data, calculate :
(a) Gross National Disposable Income
(b) Private Income
(c) Personal Disposable Income Items
Answer:
(a) GNDI = 1 + 2 – 3 + 6 + 4
= 700 + 60 – 10 + 45 + 40 = 805 – 10 + 40 = ₹ 835 crores
(b) Private income = 1 – 5 – 10 + 6 + 11
= 700 – 50 – 25 + 45 + 70
Private Income = ₹ 740 crores
(c) PDI = Private Income – 14 – 9 – 8
= 740 – 35 – 60 – 50
PDl = ₹ 595 crores
Question 16.
Calculate Gross National Disposable Income from the following data :
Answer:
GNDI = 1 + 5 + 2 + 3
= 2000 + 250 + 200 + 100
GNDI = ₹ 2550 crores
Question 17.
Calculate Net National Disposable Income from the following data :
Answer:
NNDI = 1 + 2 + 3 – 4
= 800 + 50 + 70 – 60
= ₹ 860 crores
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