CHAPTER-4 – Measurement of National Income

Q1
Solution:

Particulars of Firm ‘X’ Net value added (Market price)

(2000-01)
Sales + 90 Crores
Opening Stock - 15 Crores
Closing Stock + 25 Crores
Indirect taxes 10 Crores
Depreciation -20 Crores
Intermediate Consumption -40 Crores
Purchase of raw materials 15 Crores
Rent 5 Crores
+ 40 Crores

Net value addition at market price = Sales + Integral Difference of

closing stock and opening stock respectively – Intermediate
consumption - Depreciation

Q2
Solution:
Gross value addition (Factor cost) = Net Sales + Integral Difference
of closing and opening stock respectively – Intermediate products
purchased + Subsidy
Particulars of Firm ‘X’ Gross value added (Factor
Cost)
Sales + 500 Crores
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(Macro Economics)
Opening Stock - 30 Crores
Closing Stock + 20 Crores
Purchase of Intermediate - 300 Crores
products
Purchase of Machinery
Subsidy + 40 Crores
+ 230 Crores

Q3
Solution:
The Intermediate consumption is calculated by the formula:
Intermediate Consumption = Total value of Output – Net value
addition (Factor cost) – Depreciation (If any) – Integral Difference
between GST and Subsidy respectively
Intermediate Consumption
Particular Added/Subtracted
Value added Output +200 Crores
Net value addition at factor cost -80 Crores
Goods and services tax (GST) -15 Crores
Subsidy +5 Crores
Depreciation -20 Crores
90 Crores

Q4
Solution:
Given below is the formula to calculate Value of Output:
Value of output = Net value added at factor cost + Depreciation +
Intermediate Consumption + Integral Difference of GST and
Subsidy respectively
Net Value of output

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(Macro Economics)
Particular
Net value added at factor cost + 100 Crores
Intermediate consumption + 75 Crores
Goods and Service tax (GST) + 20 Crores
Subsidy - 5 Crores
Depreciation + 10 Crores
+200 Crores

Q5
Solution:
Below are three key differences between National income at Current
price and National income at Constant price

S.No. National Income at National income at

current price
1. It is defined as the monetary
value of the final goods and
services produced by the
normal population of
country in a particular time
period, considering the
prices of that time period
only. For example, if
national income of India for
the year 2019-2020 is X,
then calculation of this
income will be made on the
basis of prices of year 2019-
2020
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constant price
It is defined as the monetary
value of the final goods and
services produced by the
normal population of country
in a particular time period,
considering the prices of the
most stable time period in
terms of price fluctuations.
For example, if national
income of India for the year
2019-2020 is X, then
calculation of this income
will be made on the basis of
prices of year 2011-12 in
which price fluctuations was
at its minima. The base year
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(Macro Economics)
 is decided by the National
Statistical Commission after
considering different factors.
2. It is termed as Nominal It is termed as Real National
National Income as it may Income, as the income is not
show the higher income due affected by the fluctuations
to higher price level running in the price levels running in
in the economy. the economy.

Q6
Below given is the list of three methods used to measure the
National Income:
1. The Product or Output method: This approach measures the
National output in totality called gross Domestic Product,
referred to the value addition by each sector of the economy.
2. The Income method: Using this method, National income is
calculated in terms of income generated by Production
3. The Expenditure method: Using this method the calculation
of national income is based on the flow of expenditure required
to buy the entire Nation’s output.

Class XII www.vedantu.com SG Solutions

(Macro Economics)