Introductory Macroeco:rn:i

Ex~mple 30. Calculate Gross Fixed Capital Formation from the following data:
-: · {CBSE, Sample Paper 20101
Particulars in Crores

(i) Private final consumption expenditure ' 1,000

(ii) Government final consumption expenditure sOO
-...
(iii) Net exports
---
. (-) so
20

-
(iv) Net factor income from abroad
(v) Gross domestic product at market price 2,500
(vi) Opening stock
(vii) Closing stock
300
200 --
Solution:
Gross Fixed Capital Formation
= (v) - (i) - (ii) - (iii) - {(vii) - (vi)}= 2,500 - 1,000 - 500 - (-) SO - {200 -· 300} = f 1,150 cror~s
Ans. f 1,1SO crores
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Miscellaneous
. _•..---.~-~~•x•·
Practicals
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c<t •

Example 31. Calculate National Income by Income and Expenditure method ..

Particulars I tin crores
(i) Final Consumption Expenditure
- Private Sector , . 350
- Government Sector 100
(ii) Mixed income of self employed .35
(iii) Gross domestic fixed capital formation 70
(iv) Opening stock 15
(v) Compensation of employees (COE) 250
(vi) Closing stock 25
(vii) Imports 20
(viii) Rent 75
(ix) Consumption of fixed capital 10
(x) Net indirect taxes
25
(xi) Interest
25
(xii) Net factor Income from abroad
-5 -
(xiii) Exports . 10 -
(xiv) Profit
, 100 _
•
Solution:
National Income by Income method
= Mixed income of self employed +COE+ Rent+ Interest+ Profit+ Net &actor·
1, income f rom abroad
= 35 + 250 + 75 + 25 + 100 + (-5) = 480 crores
Ans. r 480 crores.
 Chapt er 4 Measurement of National Income

Natk)nal Income by Expenditure method

. . _
= Anal consumption expenditure of Private sector+ Finalconsumption expenditure of Gove rnme nt sec_tor
+Gross domestic fixed capital formation+ (Closing stock-Opening
stock)+ Net Exports-CoosumptJon
offtxed capital+ Net Factor Income from abroad - Net Indire
ct tax
=350 + 100+ 70 + (25 -15) + (10- 20)-1 0 + (- 5)-2 5 =
t 480 crores
Ans- , 480 aores.
Example 32. Calculate Nati onal Inco me by Inco me and
Expe nditu re method.
Partic ulars tina ores
(i) Compensation of employees (COE)
(i) Imports
20
(ii) Mixed income of self employed
50
fav) Gross fixed capital formation
120 I
(v) Private final consumption expenditure
(vO Consumption of fixed capital
550 I
10
(vi} Net factor income from abroad
20
(viii) Indirect taxes
100
(ix) Change in stock
20
(x) Subsidies
20
'1d) Rent
100
Interest
200
Profit
Exports
so
10
(x.v) Government final consumption expenditure
60
llltion:
Income by Income method
=CO E+ Mixed income of self employed+ Rent + Inter est+
Profit + Net factor income from abroad
= 250 +SO + 100 + 200 +SO + 20 = f 670 crores
f670 aore s.
tm:N III Income by Expenditure method
= Gross fixed capital formation + Change in stock + Private Final
consumption expenditure + (Exports
- Impo rts)+ Government final consumption expenditu
re - Consumption of fixed capital + Net factor
income from abroad - (Indirect taxes - Subsidies)
= 120 + 20 + 550 + (10 - 20) + 60 - 10 + 20-(1 00 - 20) = f 670
crores
Ans. f 670 aores.
Example 33. From the following data , calculate National
Income by (a) Income method and
Expenditure method:
{CBSE, Dellu 20061

--
f- .:-:rticulars
in crore s
na consum on expen re
capital formation 400
so
1,900
 Intro ducto ry Macroecon .
Olll1es

(v) Rent
(vi) Interest 200
(vii) Operating surplus
(viii) Net indire ct tax - 720'
(ix) Employers' contr ibutio n to social security schemes 400'
(x) Net exports
10()
(xi) Net factor income from abroad 20
(xii) Government final consumption expenditu
=---
(-) 20

------
re
(xiii) Consumption of fixed capital
600
100
Solution:
National Income {NNPFe> by Income method
=(iv) + {vii)+ (xi)= 1,900 + 720 + (-) 20 = 2,600 crores
Ans. t 2,600 crores.
National Income (NNPFe> by Expenditure method
= (i) +(ii)+ (x) + (xii) - (viii)+ (xi)= 2,000 + 400 + 20 +
600- 400 + (-) 20 = t 2,600 crores
Ans. t 2,600 crores.
Example 34. From the follo wing data , calculate Nati
onal Inco me by Inco me and Expenditure
meth ods:
{CBSE, Sample Paper 2012}
Particulars
\ t in crores
(i) Government final consumption expenditure
100
(ii) Subsidies
10
(iii) Rent
200
(iv) Wages and salaries
600
(v) Indirect taxes
60
(vi) Private final consumption expenditure
800
(vii) Gross domestic capital formation
120
(viii) Social security contr ibutio n by employer
55
(ix) Royalty
25
(x) Net factor income paid to abroad
30
(xi) Interest
• 20
(xii) Consumption of fixed capital
(xiii) Profit
Net exports
Change in Stock
Jolution:
al Income (NNPFe> by Income method
= (Iv) + (viii) + (Iii) + (ix) + (xi) + (xiii) - (x) = 600 + 55 + 200 + 25 + 20 + 130
- 30 =, 1,000 crores
AM ., 1,000 crores.
National Income (NNPFC) by Expenditure method
=(vi) + (I)+ (vii)+ (xiv) - {(v) - (Ii)}- (xii) - (x) = 800 + 100 + ·~
120 + 70 - {60 -1 0} - 10- 30 =, 1,000 ~.I
Ans. , 1,000 crores.
 r4 Measurement of National Income 4.53
chaP te

example 35. Calculate national income by Income & Expenditure method from the following data:
particulars
in crores I
1,997
(i) Salaries and wages In cas h
- (ii) Transfer payments by government
25
- (iii) Rent 132
200
(iv) Indirect taxes
89
(v) Subsidies
(vi) Compensation of workers in kind 95

(vii) Depreciation 81

(viii) Net increase in factor income from rest of the world 52

(ix) Interest 92
(x) Government expenditure on goods and services 574
(xi) Personal consumption expenditure on goods and services 1,805
(xii) Corporate profit tax 10
(xiii) Income of the self employed 264
(xiv) Undistributed corporate profit 26
(xv) Dividends 201
(xvi) Export of goods and services 900
(xvii) Addition to stock 7
(xviii) Social security contributions by employer 54
(xix) Import of goods and services 323
(xx) Gross fixed investment 100
Solution:
National Income (NNPFe> by Income method
= (i) + (iii) + (vi) + (viii) + (ix) + (xii) + (xiii) + (xiv) + (xv) + (xviii)
= 1,997 + 132 + 95 + 52 + 92 + 10 + 264 + 26 + 201 + 54 = f 2,923 crores
Note: • 'Compensation of Employees' is calculated as the sum total of (i), (vi) and (xviii).
• 'Profit' is calculated as the sum total of (xii), (xiv) and (xv).
National Income (NNPFe> by Expenditure method
= (x) + (xi) + {(xx) + (xvii)}+ {(xvi) - (xix)} - (vii) - {(iv) - (v)} + (viii)
= 574 + 1,805 + {100 + 7} + {900 - 323} - 81 - {200 - 89} + 52 = f 2,923 crores
Note: • 'Government expenditure on goods and services' is another name for Government final consumption
expenditure.
• 'Personal consumption expenditure on goods and services' is another name for Private final consumption
expenditure.

Example 36. Calculate GNP at FC by Income and Expenditure method.

Particulars
I tin crores
- ( i) Compensation of employees 1,000
- (ii) Operating surplus 500
,___(iii) Employers' contribution to social security schemes 120

-
(iv) Net exports
-
(-) 30
 Introductory Macroecon0.,.. ,
•••Its
4.54

(v) Net indirect taxes

(vi) Mixed Income of the self employed
(vii) Net factor income to abroad
40
(viii) Consumption of fixed capital
1,44()
(ix) Private final consumption expenditure
490
(x) Government final consumption expenditure
250
(xi) Gross fixed capital formation
30
(xii) Change in stock
25
(xiii) Interest on national debt

Solution:
GNP at FC by Income method
= (i) + (ii) + (vi) - (vii) + (viii) = 1,000 + 500 + 600 - 20 + 40 = f 2, 120
Ans. , 2, 120 crores. .
Note: Net factor income to abroad means that the paid amount is more than received amount.
GNP at FC by Expenditure method
= (ix) + (x) + (xi) + (xii) + (iv) - (v) - (vii) = 1,440 + 490 + 250 + 30 + (-30) - 40 - 20 = f 2, 120 crores
Ans. f 2,120 crores.
Example 37. Calculate NOP at FC by expenditure method and GDP at MP by income method.
Particulars . • I in crores
(i) Gross fixed capital formation 130
(ii) Private final consumption expenditure 510
(iii) Mixed income of the self employed 280
(iv) Net factor income from rest of the world (-) 5
(v) Exports 50
(vi) Imports 60
(vii) Compensation of employees 240
(viii) Government final consumption expenditure 70
(ix) Consumption of fixed capital
(x) Indirect tax
(xi) Subsidies
(xii) Rent, interest and profit
(xffi) Change in stock
bdv) Interest on national debt
Solution:
NDP at FC by Expenditure method
= (I) +(xiii) + (ii) + {(v) - (vi)} + (viii) - (ix) - {(x) - (xi)}
= 130 +30 + 510 + {50 - 60} + 70 - 40 - {90 - 1O} = f 61 ocrores
Ans. f 61 Ocrores.
GDP at MP by Income method
= (iii) + (vii) + (xii) + (Ix) + {(x) - (xi)} = 280 + 240 + 90 +40 + {90 - 1O} = , 730 crores
Ans. f 730 crores.
 Chapter 4 Measurement of National Income

Example 38. Fro1n the following data, calculate National Income:

-
.. ·.' .. , l
.. -. . ..
. ,
. .
Particulars ..
. .. .
• '

fin crores
1. - • ••
• • '• I ' •.·
.. . '
.. ..

(i) Net exports (-)70

(ii) Compensation of employees 800
(iii) Mixed income of self-employed 900
(iv) Net factor income from abroad (-)50
(v) Net retained earnings of private enterprises 600
(vi) Rent 350
(vii) Profit 600
(viii) Consumption of fixed capital 200
(ix) Interest 450
(x) Corporation tax 350
(xi) Net indirect taxes 250
Solution:
National Income
= (ii) + (iii) + (vi) + (vii) + (ix) + (iv) = 800 + 900 + 350 + 600 + 450 + (-) 50 = t 3,050 Crores
Ans. 3,050 crores
Example 39. From the following data, calculate Gross National Product at Market Prices by
(a) Income method and (b) Expenditure method. {CBSE, Delhi 2003}
- .. ..
. Particulars ' '•
. . .. -•... • _.·. - ·; • _ - 1 •. tin cro.res
'
- '

(i) Government final consumption expenditure 250

(ii) Change in stocks 65
(iii) Net domestic capital formation 150
(iv) Interest 90
(v) Profits 210
(vi) Corporation tax 50
(vii) Rent 100
(viii) Factor income from abroad 20
(ix) Indirect taxes 55
(x) Factor income to abroad 40
(xi) Exports 60
(xii) Subsidies 25
(xiii) Imports 80
(xiv) Consumption of fixed capital 20
(xv) Private final consumption expenditure 500
(xvi) Compensation of employees 450
(xvii) Value of rent for free accommodation to employees 40
Solution:
Gross National Product at Market Price by Income method
= (iv) + (v) + (vii)
+ (xvi) + {(viii) - (x)} + (xiv) + {(ix) - (xii)}
== 90 + 210 + 100 + 450 + {20 - 40} + 20 + {55 - 25} = 880 crores
Ans. t 880 crores.

J
 4.56 Introductory Macroecono
rrtles

Gross National Product at Market Price by Expenditure method

1= Ci) + (111) + {(xi) - (xiii)} + (xv) + {(viii) - (x)} + (xiv)
= 250 + 150 + {60 - 80} + 500 + {20 - 40} + 20 = , 880 crores
Ans. , 880 crores.
Note: Value of rent for free accommodation to employees' is not included separately as it is already included In
Compensation of employees.
Example 40. Calculate: (a) Domestic Income; (b) Compensation of employees.
Particulars I in crores

---
(i) Net factor income from abroad -20
(ii) Net exports
(iii) Net indirect taxes -----
10
so
20
---
(iv) Rent and royalty
(v) Consumption of fixed capital 10
(vi) Private final consumption expenditure 400
-
(vii) Corporate tax ;_ - - 10
-
(viii) Interest 30
(ix) Net domestic capital formation I . so
(x) Dividends . 22
'· .
(xi) Government final consumption expenditure ;
. 100
'
(xii) Undistributed profits - . ' • . '{ .: s
(xiii) Mixed Income , 23
'
Solution:
(a} Domestic Income
=(ii)+ (vi)+ (ix)+ (xi) - (iii)= 10 + 400 + 50 + 100 - 50 =, 51 0 crores
Ans. , 510 crores.
(b} Compensation of employees
= NOPFe- Rent and royalty- Interest - Corporate tax - Dividends - Undistributed profits - Mixed Income
= 510 - 20 - 30 - 10 - 22 -. 5 - 23 =, 400 crores
Ans. , 400 crores.
Note: We know: NOPFe (by Income method) = Rent and royalty+ Interest+ Corporate tax+ Dividends
+ Undistributed profits+ Compensation ofemployees+ Mixed Income.
It means: Compensation ofemployees= NOPFe- Rent and royalty- Interest - Corporate tax- Dividend$
- Undistributed profits - Mixed Income.
Example 41. From the following data, calculate GNP at MP by Income and Expendi,tuft
method. . - {CBSE, Delhi!tJJ4l
Particulars in cror1h

(i) Mixed income of self-employed

(ii) Compensation of employees
(iii) Private final consumption expenditure
(iv) Net factor Income from abroad
Chapter 4 Measurement of National Income

(v) Net indirect taxes 100

(vi) Consumption of fixed capital 120
(vii) Net domestic capital formation 280
(viii) Net exports (-) 30
(ix) Profits 350
(x) Rent 100
(xi) Interest 150
(xii) Government final consumption expenditure 450

Solution:
GNP at MP by Income method
= (i) +(ii)+ (ix)+ (x) +(xi)+ (vi)+ (iv)+ (v)
= 400 + 500 + 350 + 100 + 150 + 120 + (-) 20 + 100 = f 1,700 crores
Ans. f 1,700 crores.
GNP at MP by Expenditure method
=(iii)+ (vii)+ (viii)+ (xii)+ (iv)+ (vi)= 900 + 280 + (-) 30 + 450 + (-) 20 + 120 = f 1,700 crores
Ans. f 1,700 crores.
Example 42. Calculate "Gross National Product at Factor Cost" from the following data by
(a) Income method, and (b) Expenditure method: {CBSE,, Delhi 2009)

I
l.
Particulars fin crores
(i) Private final consumption expenditure 1,000
(ii) Net domestic capital formation 200
(iii) Profits 400
(iv) Compensation of employees 800
(v) Rent 250
(vi) Government final consumption expenditure 500
(vii) Consumption of fixed capital 60
(viii) Interest 150
(ix) Net current transfers from rest of the world (-) 80
(x) Net factor income from abroad (-) 10
(xi) Net exports (-) 20

(xii) Net indirect taxes 80

Solution:
Gross National Product at Factor Cost by Income Method
= (v) +(viii)+ (iii)+ (iv)+ (vii)+ (x) = 250 + 150 + 400 + 800 + 60 + (-10) = f 1,650 crores
Ans. t 1,650 crores.
Gross National Product at Factor Cost by Expenditure Method
= (i) +(vi)+ (Ii)+ (vii)+ (xi)+ (x) - (xii)= 1,000 + 500 + 200 + 60 + (- 20) + (-1 O) - 80 = 1,650 crores
Ans. 1,650 crores.