14_GDP NATIONAL INCOME
ECONOMICS (CLASS-XII)
Chapter-14
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.
- 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.
- 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.
- 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.
- 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.
- 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.
ASSIGNMENT
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
ANS -PRIVATE INCOME Rs. 280
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
departments.
(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:
- Change in stock 5
- Personal taxes 40
- Private final consumption expenditure 480
- Net Indirect taxes 40
- Savings of non-departmental enterprises 15
- Net current transfers from rest of the world (-) 10
- Net domestic fixed capital formation 70
- Net factor income from abroad 10
- Undistributed profits 5
- Current transfers from government 20
- Corporation tax 25
- National debt interest 30
- Net Exports (-)30
- Government final consumption expenditure 100
- 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
- Income method
- Expenditure method
- a) Compensation of employees 1200
- b) NFIA -20
- c) NIT 120
- d) Profit 800
- e) Private final consumption exp. 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
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:
- Current transfers from government 25
- Compensation of employees 600
- Net current transfers from rest of the world 20
- Rent 100
- Consumption of fixed capital 50
- Interest 120
- Net Indirect taxes 110
- Profit 80
- Mixed Income of self employed 200
- 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
- Purchase of Raw Material 300
- Subsidies 50
- Sales 800
- Net Exports 40
- Value of Fuel 100
- Closing stock 50
- Compensation of employee 400
- Opening stock 60
- Consumption of fixed capital 200
- Purchase of Machinery 100
ANS Rs. 440
Q21 From the following data calculate gross national income by
(a) Income method
(b) Expenditure Method.
- Factor Income from abroad 10
- Compensation of Employees 150
- Net domestic capital formation 50
- Private Final consumption expenditure 220
- Factor Income to abroad 15
- Change in stock 15
- Employers contribution to social security schemes 10
- Consumption of fixed capital 15
- Operating surplus 180
- Net exports -(5)
- Govt. final consumption expenditure 85
- 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
Departments
(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
- Payment of fees to a lawyer engaged by the firm
- Rent free house ta an employer by an employee
- Purchases by a foreign tourists
- Wheat grown by a farmer but entirely used by family consumption
- Earnings of a shareholders from a sale of share
- Expenditure by a govt in providing free education
- Purchase of a truck for carrying goods by a production unit
- Payment of income tax by a production unit
- 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
- Old age pension given by govt
- Factor income from abroad
- Salaries to an Indian working in Russian embassy in India
- Profit earned by a company in India which is owned by a non resident
- 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
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