Numericals on National Income Accounting

1. Answer based on the following information:

Year Nominal GNP GNP deflator
2001-02 5000 250
2002-03 6600 300
a) What is the growth rate of real GNP from year 2001-02 to 2002-03?
b) What is the rate of inflation in the economy for the year 2002-03?

Real GDP01-02 = 5000*100/250= 2000, Real GDP02-03= 6600*100/3000= 2200, Real GDP growth rate = 2200-
2000/2000*100= 10%

Rate of inflation = 300-250/300*100= 20%

2. Calculate CPI by Laspeyre’s formula for the year 1980-81 assuming 1970-71 as base year:

Item Qty.1970-71 Prices 1970-71 Prices 1980-81

Rice 15 kg Rs.3 / kg Rs. 4 / kg
Wheat 10 kg Rs.2 / kg Rs. 3 / kg
Milk 30 ltrs Rs.3 / ltr Rs. 5 / ltr.
Cotton Cloth 5 mtrs Rs.8 / mtr. Rs.12 / mtr
Housing A two room house Rs. 100 / p.m. Rs.200 / p.m.

3. For the year 2000-01, the national accounts statistics at current prices were as follows:

National Income 2000

Wages & Salaries 1500
Proprietor’s Income & Rental Income 200
Net Interest 100
Dividends 50
Transfer Payments 300
Personal Tax Payments 200
a) What is the amount of Profits earned by Corporates?
b) What is the Total Disposable Income of the Households?

Corporate profits =
National income = (Wages and salaries + Rental income + Proprietor’s income + Net interest)
= 2,000 – (1,500 + 200 + 100) = 2,000 – 1,800 = 200 MUC
Personal income = National income – (Corporate profits-Dividends) + Transfer payments = 2,000 – 200 +
300 + 50 = 2,150 MUC
Personal disposable income = Personal income – Personal taxes
= 2,150 – 200 = 1,950 MUC.
4. Calculate the following: 5 marks
1. Net factor Income from Abroad
2. The value of GDP at factor cost Year Price of Bread Price of Butter
3. Personal Income in the economy is (Rs. Per unit) (Rs. Per unit)
4. Current account balance is (to explain twin 2002 20 15
deficits) 2003 25 20
Particulars Rs. crores
NDP at market prices 5,000
NNP at factor cost 4,200
Personal saving 1,075
Gross domestic investment 800
Corporate profits (profit before tax) 750
Transfer payments by the government 75
Subsidies 100
Net domestic investment 650
Corporate profit tax 350
Personal tax payments 350
Indirect taxes 950
Government budget deficit 300
Dividends 150
GDPFC = NDPMP + Depreciation – Indirect Taxes + Subsidies
5000 + (800 – 650) – 950 + 100 = 4,300 MUC
Personal Income (PI) (i.e. income received by the households) = NI –
Corporate profit + Dividends + Transfer payments = 4,200 – 750 + 150 + 75
= 3,675 MUC
Current account balance (CAB) = Net Domestic Savings (NDS) – Net
Domestic Investment (NDI)
NDS = Retained Earnings (RE) + Budget surplus + PS
RE = Corporate Profits – Corporate Profit Tax –
Dividends.
= 750 – 350 -150 = 250
Thus, NDS = 250 – 300 + 1,075 MUC
Thus, CAB = 1,025 – 650 = 375 (surplus)

5. The following information is extracted from the National Income Accounts of an economy for the year
2013-14:
Particulars Million Units of
Currency (MUC)
Personal Consumption Expenditure 1000
Indirect business taxes 91
Undistributed corporate profits 50
Corporate income tax 101
Personal savings 34
 Depreciation 87
Transfer payments by government 114
Personal tax payments 102
Calculate: GNP@fc (1000+50+101+34-114+102+87=1260), NNP@mp (1260-87+91=1264), NNP@fc
(1264-91=1173), Personal Income (1173-50-101+114=1136) and Personal Disposable Income (1136-
102=1034).

6. The following are the inter-industry transactions in an economy (the figures represent the money value
of output).
Industries A B C Total
Output
A 25 40 15 100
B 10 30 25 120
C 15 20 30 80
Total 100 120 80
a. The value of national Income in this economy is: Total output - inter-industry transactions
100 – (25+40+15) + 120 – (10+30+25) + 80 – (15+20+30) = 90
b. The value added in industry B is: Total output of B = 120 less output from A, C and captive
consumption = 40+30+20 = 90 hence value added by B = 120 – 90 = 30.

7. Particulars Rs. Crores

GNP 2400
Gross Investment 400
Net Investment 150
Consumption 1500
Govt. purchases 480
National Income 1925
Wages & salaries 1460
Proprietors income +rent 160
Dividends 50
Govt. Budget surplus 15
Interest 60
Transfer Payments 260
Personal tax and
Non-tax payments 300
Calculate:

NNP at MP : 2150
Net Exports : 20
Net direct taxes: 225
Corporate Profits: 245
Taxes – Transfers: 495
Personal Income: 1990
Personal Disposable Income : 1690
Personal Savings: 190