GDP Welfare


GDP Welfare

Welfare is a sense of well being as affected by economic factors like National Income, resumption etc. is called economic welfare. Welfare as affected by non-economic factors called non-economic welfare. The sum total of economic and non-economic welfare is railed social welfare.

GDP is an indicator of economic welfare but it is not an adequate indicator because : the following.


  1. Changes in Distribution


All the people do not earn the same amount of income. Some earn more and some earn less. There is unequal distribution of income. It means that inequality in the Distribution of income may increase or decrease, if it increases, it implies that rich become more rich and the poor become more poor. Utility of a rupee of income to the poor is more than to the rich. Suppose the income of the poor declines by one rupee and that of the rich. Increases by one rupee. In such a case, decline in welfare of the poor will be more than the increase in the welfare of the rich. Therefore, if the rise in the per capita real GDP real income inequality increases, it may lead to a decline in welfare.


  1. All the Products may not Contribute Equally to the Economic Welfare

How much is the economic welfare depends more on the types of goods and services produced and not simply how much is produced. It means that if GDP rises, the increase in the welfare may not be in the same proportion GDP includes the production of food, clothing articles public services. Some of the products contributes more to the welfare like food, clothing etc., while others like public services contribute less.


  1. Many Goods and Services Contributing the Economic Welfare are not Included in GDP?

Many goods like services of housewife, family members is not included in GDP because of the estimation difficulties. These are left out on account of the non-availability of data and the problem of valuation.


  1. Externalities not Taken Into Account in GDP

When the activities of one results in benefits or harm to the other, such benefits or harm is called externalities activities resulting in benefits to others is called positive externalities while activities resulting in harm to others is called negative externalities which decreases welfare.

GDP does not take into account externality like construction of metro reduces the transportation cost of the people who have not contributed to its expenditure. Expenditure on it is included in GDP but not the positive. Externality out of it. GDP and positive externality both increases the welfare but taking GDP as an index of welfare underestimate the welfare. It means welfare is much more as indicated by GDP. On the other hand, GDP does not take into account negative externality like industries produces goods which is added to GDP but the pollution caused by same industries causes harm to people which is negative externality. The pollution reduces the welfare. Therefore, taking only GDP as an index of welfare, overestimates the welfare.


  1. Contribution of Some Products may be Different

          GDP indicates only the monetary value of the products and not their contribution to welfare. Therefore, economic welfare not only depends on the value of consumption but also on the types of goods and services consumed e.g. production of liquar may increase GDP but not welfare.




Q1       Calculate ‘private income’ from the following data

(i)        National debt interest                                                                           30

(ii)        Gross national product at market price                                                400

(iii)       Current transfers from government                                                      20

(iv)       Net indirect taxes                                                                                 40

(v)        Net current transfers from the rest of the world                      (-) 10

(vi)       Net domestic product at factor cost accruing to government                50

(vii)      Consumption of fixed capital                                                              70


Q2       Calculate national income and gross national disposable income from thefollowing data:

(Rs. crores)

(i)         Current transfers by government                                             15

(ii)        Private final consumption expenditure                                    400

(iii)       Net current transfers from the rest of the world                       20

(iv)       Government final consumption expenditure                            100

(v)        Net factor income from abroad                                               (-) 10

(vi)       Net domestic capital formation                                                80

(vii)      Consumption of fixed capital                                                  50

(viii)     Net exports                                                                              40

(ix)       Net indirect taxes                                                                     60

ANS   1) Rs. 550

2) Rs 680

Q 3      From the following data calculate national income :

(i)         Compensation of employees                                                               800

(ii)        Rent                                                                                         200

(iii)       Wages and salaries                                                                   750

(iv)       Net exports                                                                              (-30)

(v)        Net Factor income from abroad                                               (-20)

(vi)       Profit                                                                                       300

(vii)      Interest                                                                                     100

(viii)     Depreciation                                                                            50

ANS Rs.. 1380

Q 4      Calculate .gross domestic product of factor cost. from the following data.

  • Private final consumption expenditure. 800

(ii)        Net domestic capital formation                                                150

(iii)       Change in stock                                                                       30

(iv)       Net factor income from abroad                                               (.) 20

(v)        Net indirect tax                                                                        120

(vi)       Government final consumption expenditure                            450

(vii)      Net exports                                                                              (.) 30

(viii)     Consumption of fixed capital                                                  50

ANS  Rs1300

Q5       Calculate Gross National Product at Market Price and Personal Disposable Income from the following data

(i)        Subsidy                                                                                    20

(ii)        Net factor income from abroad                                               (-) 60

(iii)       Gross national disposable income                                            1050

(iv)       Personal Tax                                                                            110

(v)        Savings of private corporations                                               40

(vi)       National income                                                                      900

(vii)      Indirect tax                                                                              100

(viii)     Corporation tax                                                                        90

(ix)       Net national disposable income                                               1000

(x)        National debt interest                                                               30

(xi)       Net current transfers from abroad                                            20

(xii)      Current transfers from government                                          50

(xiii)     Miscellaneous receipts of the government administrative       30


(xiv)     Private income                                                                         700

ANS   1)  Rs.1030   2) Rs.430

 Q6      From the following data calculate national income

(i)         Compensation of employees                                                               800

(ii)        Rent                                                                                         200

(iii)       Wages and salaries                                                                   750

(iv)       Net exports                                                                              (-30)

(v)        Net Factor income from abroad                                               (-20)

(vi)       Profit                                                                                       300

(vii)      Interest                                                                                     100

(viii)     Depreciation                                                                            50

(ix)       Remittances from abroad                                                         80

(x)        Taxes on profits                                                                       60

ANS  Rs. 1380

Q7       Calculate .gross domestic product of factor cost from the following data.

(i)         Private final consumption expenditure.                                   800

(ii)        Net domestic capital formation                                                150

(iii)       Change in stock                                                                       30

(iv)       Net factor income from abroad                                               (-) 20

(v)        Net indirect tax                                                                        120

(vi)       Government final consumption expenditure                            450

(vii)      Net exports                                                                              (-) 30

(viii)     Gross fixed capital formation                                                  70

(ix)       Export of Machinery                                                               40

ANS  Rs. 1200


Q8       Find out (a) Personal disposable Income, b) Personal Income and c) private Income from the following data.

(i)         Payments of direct taxes by the households                                        650

(ii)        Corporation tax                                                                        150

(iii)       Household final consumption expenditure                              2450

(iv)       Savings of the a private corporate sector                                 350

(v)        Interest on national debt                                                          200

(vi)       Savings of the households                                                       750

ANS    a)  Rs3200  b) Rs.3850 c) Rs. 4350

Q9       Calculate value of output

                        NVA at FC                                                                               100

Intermediate consumption                                                         75

Excise duty                                                                                 25

Subsidy                                                                                          5

Depreciation                                                                                 10

AnsRs. 205


Q10     From the following data calculate net value added at factor cost

  • Sales 500

(ii)        Opening stock                                                                          30

(iii)       Closing stock                                                                           20

(iv)       Purchase of intermediate products                                           300

(v)        Purchase of machinery                                                            150

(vi)       Subsidy                                                                                    40

(vii)      Depreciation                                                                            20

ANS. Rs.  210

Q11     Calculate Net Domestic Product at factor cost and Personal Income from thefollowing data:

  1. Change in stock                                                                       5
  2. Personal taxes                                                                          40
  3. Private final consumption expenditure                                   480
  4. Net Indirect taxes                                                                     40
  5. Savings of non-departmental enterprises                                 15
  6. Net current transfers from rest of the world                             (-)   10
  7. Net domestic fixed capital formation                                       70
  8. Net factor income from abroad                                               10
  9. Undistributed profits                                                                5
  10. Current transfers from government                                          20
  11. Corporation tax                                                                        25
  12. National debt interest                                                               30
  13. Net Exports                                                                              (-)30
  14. Government final consumption expenditure                            100
  15. Income from property and entrepreneurship accruing to         20

Government administrative departments

ANS Rs.585 2) Rs.570

Q12     Calculate Gross Value Added at factor cost:-

(a)        Sales                                                                                        800

(b)        Opening stock                                                                          40

(c)        Closing stock                                                                           30

(d)        Subsidies                                                                                 50

(e)        Purchase of intermediate product                                            400
(f)        Purchase of machinery                                                            200

ANS   Rs.  440

Q13     From the following data calculate National income

  1. Income method
  2. Expenditure method
  3. a) Compensation of employees 1200
  4. b) NFIA                                                                                       -20
  5. c) NIT                                                                                          120
  6. d) Profit                                                                                       800
  7. e) Private final consumption exp.                                                2000
  8. f) Net domestic capital formation                                                770
  9. g) Consumption of fixed capital                                                  130
  10. h) Rent                                                                                         400
  11. i) Interest                                                                                     620
  12. j) Mixed income of self employed                                              700
  13. k) Net exports                                                                              -30
  14. l)      Govt final consumption exp.                                                   1100

ANS   a)  Rs 3700  b) Rs. 3700

Q14     From the following data, calculate Gross National Product at Market Price by

(a)        Income method and (b) expenditure method.

1 Mixed income of self employed 400
2 Compensation of employees 500
3 Private final consumption expenditure 900
4 Net factor income from abroad [-] 20
5 Net indirect taxes 100
6 Consumption of fixed capital 120
7 Net domestic capital formation 280
8 Net exports [-] 30
9 Profits 350
10 Rent 100
11 Interest 150
12 Government final consumption expenditure 450

ANS a) Rs.  1700   b)Rs. 1700

Q15     Calculate Personal Income from the following data :

(i)        Undistributed profits of corporations                                       20

(ii)        Net domestic product accruing to the private sector                 500

(iii)       Corporation tax                                                                        55

(iv)       Net factor income from abroad                                               (—) 10

(v)        Net current transfers from government                                    15

(vi)       National debt interest                                                               40

(vii)      Net current transfers from the rest of the world                       15

ANS Rs. 485

Q16     Calculate Gross Value Added at MP from the following data. 3M

Sl.No Items Rs. In lakhs
1 CFC/ Depreciation 15
2 Sales in domestic market 250
3 Exports 50
4 Opening stock 20
5 Purchase of raw material 150
6 Closing stock 30
7 Import of raw material 25

ANS Rs. 160

Q17     Calculate GDP at MP by a) Expenditure method, b) Income method

1)         Net domestic fixed capital formation                                       50

2)         Operating Surplus                                                                    50

3)         Subsidies                                                                                 5

4)         Mixed income                                                                          60

5)         Pvt. Final consumption expenditure                                         120

6)         Social security contributions by employees                             10

7)         Net factor income from abroad                                               0

8)         Indirect tax                                                                              30

9)         Addition to stocks                                                                    5

10)       Compensation of employees                                                   70

11)       Govt. final consumption expenditure                                      25

12)       Net exports                                                                                 5

ANS a)  Rs.  205  b) Rs. 205

Q18     Calculate GNP MP by Income Method & Expenditure Method

(a)        Rent                                                                                         40

(b)        Private Final Consumption Expenditure                                   800

(c)        Net Exports                                                                              20

(d)        Interest                                                                                     60

(e)        Profit                                                                                       120

(f)        Govt Final Consumption Expenditure                                             200

(g)        Net Domestic Capital Formation                                              100

(h)        Compensation of Employees                                                   800

(i)         Depreciation                                                                            20

(j)         Net Indirect Taxes                                                                   100

(k)        Net Factors Income From Abroad                                            (-) 20

ANS a)  Rs.1120  b)  Rs.1120

Q19     Calculate Gross National Product at Market Price and Net National Disposable

Income from the following data:

  1. Current transfers from government                                          25
  2. Compensation of employees                                                   600
  3. Net current transfers from rest of the world                             20
  4. Rent                                                                                         100
  5. Consumption of fixed capital                                                  50
  6. Interest                                                                                     120
  7. Net Indirect taxes                                                                     110
  8. Profit                                                                                       80
  9. Mixed Income of self employed                                              200
  10. Net factor income from abroad                                               (-)   10

ANS 1) Rs. 1250   2) Rs. 1220

Q20     From the following data about firm ‘X’. Calculate gross value at factors cost

  1. Purchase of Raw Material                                                        300
  2. Subsidies                                                                                             50
  3. Sales                                                                                                   800
  4. Net Exports                                                                                          40
  5. Value of Fuel                                                                                       100
  6. Closing stock                                                                                       50
  7. Compensation of employee                                                     400
  8. Opening stock                                                                                      60
  9. Consumption of fixed capital                                                  200
  10. Purchase of Machinery                                                            100

ANS  Rs. 440

Q21   From the following data calculate gross national income by

(a)        Income method

(b)        Expenditure Method.

  1. Factor Income from abroad                                                                 10
  2. Compensation of Employees                                                               150
  3. Net domestic capital formation                                                            50
  4. Private Final consumption expenditure                                    220
  5. Factor Income to abroad                                                                      15
  6. Change in stock                                                                               15
  7. Employers contribution to social security schemes                  10
  8. Consumption of fixed capital                                                              15
  9. Operating surplus                                                                                 180
  10. Net exports                                                                                     -(5)
  11. Govt. final consumption expenditure                                     85
  12. Net indirect taxes                                                                                 20

ANS  a) Rs.  360  b)  Rs.360


Q22     Calculate gross fixed capital formation from the following data:

(i)         Private final consumption expenditure                                                1,000

(ii)        Government final consumption expenditure                                        500

(iii)       Net exports                                                                                          (-) 50

(iv)       Net factor income from abroad                                                           20

(v)        Gross domestic product at market price                                               2,500

(vi)       Opening stock                                                                                      300

(vii)      Closing stock                                                                                       200

ANS- Rs, 1150

Q23     Calculate Gross National Product at market price and Personal

Disposable income from the following data:

(i)         Subsidy                                                                                                20

(ii)        Net factor income from abroad                                                (-) 60

(iii)       Consumption of fixed capital                                                              50

(iv)       Personal tax                                                                                         110

(v)        Savings of private corporations                                                           40

(vi)       Dividend                                                                                  20

(vii)      Indirect tax                                                                                          100

(viii)     Corporation tax                                                                                    90

(ix)       Net national disposable income                                              1,000

(x)        National debt interest                                                                           30

(xi)       Net current transfers from abroad                                                        20

(xii)      Current transfers from government                                                      50

(xiii)     Miscellaneous receipts of the government administrative        30


(xiv)     Private income                                                                                     700

(xv)      Private final consumption expenditure                                                380

ANS-  Rs.1030 and Rs. 430


Q24.    From the following data calculate net national product at factor cost by

(a)        Income method, and

(b)        expenditure method.

(i )        Current transfers from rest of the world                                   100

(ii)        Government final consumption expenditure                            1,000

  • Wages and salaries                                                               3,800

(iv)       Dividend                                                                                  500

(v)        Rent                                                                                         200

(vi)       Interest                                                                                     150

(vii)      Net domestic capital formation                                                500

(viii)     Profits                                                                                      800

(ix)       Employers’ contribution to social security schemes                 200

(x)        Net exports                                                                              (-) 50

(xi)       Net factor income from abroad                                               (-) 30

(xii)      Consumption of fixed capital                                                  40

(xiii)     Private final consumption expenditure                                    4,000

(xiv)     Net indirect tax                                                                        300

            Ans- Rs. 5120


Q25.    Calculate (a) private income, and (b) personal disposable income from the following data:

(i)         Income from property an entrepreneurship accruing to

Government administrative department                            500

(ii)        Savings of the non-departmental public enterprises                 100

(iii)       Corporation tax                                                                        80

(iv)       Income from domestic product accruing to private sector       4,500

(v)        Current transfers from government administrative departments           200

(vi)       Net factor income from abroad                                               (-) 50

(vii)      Direct personal taxes                                                               150

(viii)     Indirect taxes                                                                           220

(ix)       Current transfers from rest of the world                                  80

(x)        Savings of private corporate sector                                          500


ANS – Rs. 4730 and Rs. 4000

Q26     Will the following factor incomes be included in domestic factor income of India? Give

(a)        Compensation of employees to the residents of Japan working in Indian embassyin Japan.

(b)        Profits earned by a branch of foreign bank in India.

(c)        Rent received by an Indian resident from Russian embassy in India.

(d)        Profits earned by a branch of State Bank of Indian in England.


Q27.    Will the following be included in domestic factor income of India? Give reasons for your ANS

(i)         Profit earned by a foreign bank from its branches in India.

(ii)        Scholarships given by Government of India.

(iii)       Profits earned by a resident of India from his company in Singapore.                                                (iv)            Salaries received by Indians working in American Embassy in India.


Q 28    Giving reasons, how following should be treated while calculating national income

  1. Payment of fees to a lawyer engaged by the firm
  2. Rent free house ta an employer by an employee
  3. Purchases by a foreign tourists
  4. Wheat grown by a farmer but entirely used by family consumption
  5. Earnings of a shareholders from a sale of share
  6. Expenditure by a govt in providing free education
  7. Purchase of a truck for carrying goods by a production unit
  8. Payment of income tax by a production unit
  9. Services rendered by family member to each other

Q 29    Calculate NDP at FC

Private income                                                                         10000

Income from domestic product accruing to a govt sector         925

Transfer payments                                                                   125

Net income from abroad                                                          -200

NIT                                                                                          250

ANS- Rs. 11000


Q 30    From the following data calculate income accruing to the private sector

Operating surplus                                                                     30

Income from property and ent. accruing

to the govt administrative department                                                  5

Compensation of employees                                                               100

Mixed income of self employed                                                          180

Savings of non departmental enterprises                                              5

                        ANS-  Rs. 300


Q31     Calculate Intermediate consumption from the following data

Value of output                                                                                   400

Net value added at Fc                                                                          160

Depreciation                                                                                        40

Subsidy                                                                                                            10

Sales tax                                                                                              30

ANs- Rs.180


Q 32    Calculate Value of output from the following data

NVA at FC                                                                                           200

Intermediate consumption                                                                   150

Excise duty                                                                                          40

Subsidy                                                                                                            10

Dep                                                                                                      20

Ans- Rs. 400


Q33     Calculate sales

NVA at fc                                                                                            600

Intermediate consumption                                                                   400

Change in stock                                                                                   -100

Depreciation                                                                                        50

            Ans- 1150


Q 34    Calculate national income

Corporate tax                                                                                       10

Miscellaneous receipt of the govt

Adm. Department                                                                                5

NFIA                                                                                                   1

Net current transfer from rest of the world                                          -3

Direct tax                                                                                             10

Retained earnings of the private corporate sector                                7

Income from property and enterprenureship accruing to the

govt administrative department                                                            12

National debt interest                                                                             8

Net current transfer from govt                                                               2

Savings of non departmental Enterprises                                             6

Personal disposable income                                                                 100

            ANS- Rs. 143

Q 35    Calculate Net factor income from abroad

Income from property and ent. accruing to govtadm. Department       25

NDP at FC                                                                                           210

Savings of non departmental enterprises                                              15

Private income                                                                                     200

Net current transfer from rest of the world                                          10

Net current transfer from govt                                                             20

National debt interest                                                                           10

ANS- RS. -10

Q 36    Calculate contribution made by production unit to NNP at MP and to national income

Sales                                                                                                    5500

Decrease in stock of finished goods                                                    500

Raw material bought from other firms                                                 700

Indirect tax paid                                                                                   100

Subsidies received                                                                               80

Depreciation                                                                                        40

             ANS- Rs. 4260 and Rs.4240


Q37     Calculate Net value added at factor cost and value of output from the following data

  • subsidies 40
  • Intermediate cost 200
  • Compensation of employees 400
  • Consumption of fixed capital 50
  • Royalty 5
  • Interest 25
  • Indirect taxes 100
  • Rent 10
  • Profit 60
  • Net change in stock 20

            ANS- Rs. 500 and Rs. 810


Q38     How the following will be treated in the estimation of national income

  • Sale of an old car
  • Windfall gains
  • Salary received by an Indian employee from a foreign embassy n India
  • Change in stock
  • School examination fees paid by a student
  • Scholarship paid to the student
  • Purchase of books by parents for the child
  • Purchase of cold drink by a school canteen from a manufacturer
  • Earnings from a part time job by a student
  • Purchase of new share of a domestic fiem
  • Old age pension
  • Farm production for a self consumption
  • Purchase of a new car
  • Payment of wealth tax
  • Free medical facilities to employees
  • Expenditure on feeding beggars
  • Pension to retired person


Q39     Which of the following will be included in domestic factor income

  1. Old age pension given by govt
  2. Factor income from abroad
  3. Salaries to an Indian working in Russian embassy in India
  4. Profit earned by a company in India which is owned by a non resident
  5. Profit earned by a foreign bank in India

Q 40    Calculategross domestic product at factor cost and factor income to abroad

  • Compensation of employees 800
  • Profits 200
  • Dividends 50
  • GNP at MP 1400
  • Rent 150
  • Interest 100
  • Gross domestic capital formation 300
  • Net fixed capital formation 200
  • Change in stock 50
  • Factor income from abroad 60
  • NIT 120

ANS- Rs. 1300 and Rs. 80