NDPRC Sum total of factor incomes generated within the domestic territory of a country during an

acounting year. It is briefly called domestic income.

National income (NNPFc) is found out by adding net factor income
from abroad to NDPpc
NNPFC NDPFC + Net factor income from abroad
Check the following flow chart for further illustration:

Measurement ofNational Income using Income Method

Compensation of 003
2p Employees
4
Compensation
of Employees Operating Surplus Operating
Surplus = Rent

Operating
Net
Factor
+
Mixed Income +Interest+Profit FoCuS
Surplus Income Zone
+ from Net Factor Income
Mixed Income Abroad from Abroad

NDPFC
Domestic Income)
NNPFC
(National Income)
EXAMPLES
Example 1.
Given the
following data and using income method calculate
Net Domestic Income, (6) Gross c ) Net

National Income, and Domestic Income

(d) Net National Product at Market Price
Items Rin crore)
() Indirect taxes 9,000

i) Subsidies 1,800
 Na
Methods of Calculating

1,700
(ii) Depreciation

income of self-employed 28,000

(iv) Mixed
10,000
()Operatingsurplus
income from abroad
300
(vi) Net factor
of employees
24,000
Compensation
(vii)
Solution:
Domestic
Income
(a) Net Compensation
ofself-employed+Operatingsurplus+
= Mixedincome
of employees
+R 10,000 crore + 24,000 crore

= 7 28,000 crore

= 6 2 , 0 0 0 crore

62,000 crore.
domestic
income =
Ans. Net Income
Domestic
(b) Gross income + Depreciation
Net domestic
=

+ 1,700 crore

7 62,000
crore
=

= 6 3 , 7 0 0 crore
crore.
= 63,700
domestic income
Ans. Gross
National Income from abroad
(c) Net income + Net factor
income

= Net domestic
HR 300
crore
crore +
= 62,000

= 62,000 crore- 300 c r o r e

= 6 1 , 7 0 0 crore
crore.
income 61,700
Ans. Net national Market Price
Product at
(d) Net National taxes
-
Subsidies
+
Indirect
income
Net national 1,800 crore

61,70 + 9,000crore
crore

68,900 crore market price = 68,900

crore.

at
national product
Ans.Net
On the
Example 2. available for
an
economy.
Domestic

information is calculate: (a)

olowing method,
bac
basis this information using
income

i n crore)
Incom Income
Income, and (b) National
10,000
Items
5,000
Wages 400
i) Rent
3,000
i) Interest
400
Giv) Dividend
200
(v) Mixed income
vi Undistributed profit
economics

contribution
(vii) Social security 400
(viii) Corporate profit tax 400
(ix) Net factor income from abroad 1,000
Solution:
(a) Domestic Income
=
Wages+ Rent+ Interest+Dividend+Mixedincome+Undistributed
profit+ Social security contribution + Corporate profittax
= 7 10,000 crore+ 5,000 crore+400 crore 3,000 crore
7 400 crore + 7 200 crore + R 400 crore + 400 crore
= 7 19,800 crore
Ans. Domestic income = 7 19,800 crore.
(b) National Income
= Domestic income + Net factor income from abroad
= 19,800 crore +1,000 crore
= 20,800 crore
20,800 crore.
Ans. National income
=
 12. From the following data calculate Gross National Product at Factor Cost by (a) income .
ne methe
and (b) expenditure method:
tems
Rin crore)
fi) Net domestic capital formation
500
Compensation of employees 1,850
i ) Consumption of fixed capital
100
(v) Government final consumption expenditure
1,100
w Private finaB consumption expenditure
2,600
vil Rent
400
fvi Dividend
200
vtnterest
S00
ixNetexports H100
(x) Proft
1,100
(xi) Net factor income from abroad
(xii) Net indirect taxes 50
Ans. 250
(a) income Method
Gross National Product at Factor Cost
Compensation of employees+Operating surplus (Rent+
fixed capital+ Net factor income from Interest+ Profit) + Consumpre
abroad
=1,850 crore + R 400 crore+ 500 crore+1,100
crore) +100 crore + (- S0 Cr
1,850 crore +
2,000 crore + 100 crore-7 50 crore
= T 3,900 crore
(b) Expenditure Method
Gross Nationai Product at Factor Cost
=
Private final consumption expenditure+ Government final consumption
domestic capital formation + Net exports- Net indirect taxes + Net factor expen
2,600 crore + 1,100 crore income
+
( S00 crore+ 100 crore) + (-) 100 Crore- 250
+(- 50crore crore-
=2.600crore + 1,100 crore +600 crore - 100 crore-7 250 crore-
= 73,900 crore S0 Cro e
(al Gros national product at factor cost (by income
method)= 3,900 crore.
(b) Gros national product at tactor cost (Dy expenditure method) = 3,900 crore.
 Page 3771 CBSE Delh
12. Calculate Net National Product at Factor Cost and Private Income from thefollowing
Items in arab)
) National debt interest 60
)Wages and salaries 600
air)Net current transfers to abroad 20
ivRent 200
Transfer payments by government 70
vi) interest 300
(wis Net domestic product at factor cost accruing to government 400
wi Social security contributions by employers 100
(ixNet factor income paid to abroad 50
x)Profits 300
ICASE Dehi
 Methods of Calculating National Income

tii) Expenditure on purchasing a car for use by a firm.

[Page 393] CBSE Delhi 2014]

Calculate 'Net National Product at Factor Cost' and Gross National Disposable Income' from the
15.
following:
Items (in arab)
()Social security contributions by employees 90
(i) Wages and salaries 800
(i)Net currenttransfers to abroad 30
(iv) Rent and royalty 300
(Net factor income to abroad 50
(vi) Social security contributions by employers 100
1 (vi) Profit 500
(vii) Interest 400
(ix) Consumption of fixed capital 200
x) Net indirect tax 250

Page 379] CBSE (Al) 2014]

16. Calculate 'National Income' and 'Net National Disposable Income' from the following:
Items Rin arab)
() Net change in stocks 50
(i) Government final consumption expenditure 100

(i) Net current transfers to abroad 30

3
(iv) Gross domestic fixed capital formation 200
400 500
() Private final consumption expenditure
100 40
(vi) Net imports
70
vil) Depreciation
vii) Net factor income to abroad 10
120
ix) Net indirect tax
25
x) Net capital transfers to abroad
[CBSE (AI) 2014]
Page 379] Income' from the
Product at Market Price' and Gross
National Disposable
/.
Lalculate 'Net National
following: in arab)
Items
10
30 ) Closing stock 40
i) Consumption of fixed capital 600
i) Private final consumption expenditure 50
(iv) Exports 20
Opening stock 100.
Government final consumption expenditure
60
(vii) Imports 80
n Net domestic fixed capital formation
(10
) Net current transfers to abroad
30
Net factor income to abroad
Page 380 [CBSE (A) 2014
10. Given the following data, find Net National Product at Market Price by (a) expenditure method, and (b) income
method:
items in lakh)
1,400
() Personal consumption expenditure 1,400
(i) Wages and salaries 200
social security
i) Employers' contribution to the employer 100
fund by the employees through
iv) Contribution to provident 120
formation
(v} Gross business fixed capital 120
investment
residential construction 480
vi) Gross
1000
vii) Gross public expenditure 40
vii) Rent 120
x) inventory investment 80
profit tax 40
xDividend and corporate
80
xCorporate saving 200
imports
Excess of exports over
X
txii interest seif-employed 367
xiv Mixed i n c o m e of
 introductoy MaCroeconomics

(xv) Net factor income to abroad

(xvi) Depreciation (Depreciation =Gross capital formation Net capital 20
formation)
-

(xvii) Indirect taxes

(xvii) Subsidy 40
Sol (a) Expenditure Method 20
Gross Domestic Product at Market Price
=
Personal consumption expenditure + Gross business fixed
construction investment+ Gross
capital formation Gros recid.
public expenditure Inventory investment+ Excess of
exoortedential
+
imports
=
1,400 lakh+ Over
120 lakh + 120 lakh
= 2,200 lakh
+ 480 lakh + 40 lakh +40 lakh
Net National Product at Market Price
Gross domestic product at market
=
2,200 lakh-T0 lakh-7 20 lakh
price-Depreciation Net factor income to abroad
= 2,180 lakh

(b) Income Method

Net Domestic Product at Factor Cost
=
Wages and salaries + Employers' contribution to social
security +Rent+ Interest+Dividend
corporate profit tax+ Corporate saving+ Mixed income of and
self-employed
T1400 lakh +200 lakh + 100 lakh+80 lakh +120 lakh +80 lakh
= 2,180 lakh
+200 lakh
Net National Product at Market Price
=
Net domestic product at
factor
cost +Net indirect taxes- Net factor income to abroad
=
2,180 lakh + 40 lakh-R 20 lakh) -20 lakh
=
2,180 lakh +20 lakh- 20 lakh
= T 2,180 lakh
Ans. Net national product at market price (by Expenditure and Income
11. Calculate Gross Domestic Product at Market Price using (a)
method) =
{ 2,180 lakh.
production method, and (b) income method:
Items
in crore)
(i) Intermediate consumption of
(a) Primary sector 1,000
(b) Secondary sector 800
(c) Tertiary sector 600
(ii) Value of output of
(a) Primary sector 2,000
(b) Secondary sector 1,800
(c) Tertiary sector 1,400
(ii) Rent and royalty 20

(iv) Compensation of employees 800

400
() Benefit of rent free accommodation, and interest free loans to the employees
1,,300
(vi) Mixed income of the people using family inputs
600
(vii) Operating surplus
40
(vii) Net factor income to rest of the world
10
ix) Interest
80
()Consumption of fixed capital 20
(xi) Net indirect taxes
Sol. (a) Production Method
Gross Domestic Product at Market Price
=
Value of output- Intermediate
consumption
 Solved Numericals

R2,000 crore +1,800crore +1,400 crore)- 1,000 crore + 800crore +600 crore)
= 5,200 crore-R 2,400 crore
= 72,800 crore
(b) Income Method

Gross Domestic Product at Market Price

fixed capital + Net
+ Mixed income+ Consumption of
= Compensation of employees+Operating surplus
indirect taxes
600 crore +1,300 crore + 80 crore +7 20
crore
= 800 crore +
= 2,800 crore
Production and Income method) R 2,800
= crore.

Gross Domestic Product at Market Price (by data:

Ans. and net) from the foliowing
Disposable Income, and National Disposable Income (gross
12. Calculate Personal Rin crore)
Items 4,000
) Private income 800
sector
(ii) Net retained earnings of private 60

factor income to rest of

the world 450
(ii) Net
400
(iv) Corporate profit tax
1,500
(v) Direct personal taxes 1,400
(vi) Compensation of employees 300
(vii) Mixed income of self-employed
400
(vii) Rent
1,000
(ix) Interest
250
(x) Profit
400
Consumption of fixed capital
40
over subsidy
Excess of excise duty 30
Excess of imports exports
over
30
of the world
(xiv) Current transfers to rest
(xv) Capitaltransfers to rest of the world taxes
tax- Direct personal
Corporate profit
Sol. Personal Disposable Income sector -
retained earnings
of private
crore
-7 450 crore- 400
e N e t

4 , 0 0 0 crore - 800 crore

2,350 crore + Mixed
income
or selr-
+ Profit)
Interest
National Income surplus (Rent
Operating
emplovees + Crore

of worla
1,400 crore-
6U
pensation
income to rest ofthe +
employed N e t factor +
1,000 crore)
c r o r e +R
400 crore

0 0
crore + (R 300 Current
transfers
FA5A0 crora n f fived capital-
 Introductory Macroeconomics

13 Calculate National Income by (a) income method, and (b) expenditure method. Also find privatei
is 2/3rd of income generated within the domestic territory of the country. income which
Items
( in crore)
(i) Capital transfers from rest of the world
(i) Government final consumption expenditure 200
(ii) Current transfers from rest of the world 2,000
(iv) Wages and salaries 200
(v) Dividend 7,600
(vi) Rent and royalty 1,000
(vi) Interest 400
(vii) Addition to the stock of capital 300
(ix) Profit 1,000
(x)Employers' contribution to social security on behalf of employees 1,600
(xi) Excess of imports over exports 400
(xii) Excess of factor income earned by the 100
non-residents from the domestic territory over
the factor income earned by the residents
from rest of the world
(xii) Consumption of fixed capital 60
80
(xiv) Private final consumption expenditure
(xv) Net indirect taxes 8,000
600
Sol. (a) Income Method
National Income
=
Wages and salaries + Rent and
royalty+ Interest+ Profit +Employers' contribution to social security
-

Excess of factor income earned by the non-residents

=
7,600 crore + 400 crore + 300 +
T 10,240 crore
crore 1,600 crore +7 400 crore 7 60 crore

(b) Expenditure Method

National Income
Government final consumption expenditure + Private final
consumption expenditure+ Addition to the
stock of capital Excess of imports over exports Net indirect taxes-Excess of factor income earned
by the non-residents
2,000 crore+8,000 crore+1,000 crore-7 100 crore -600 crore- 60 crore
= 10,240 crore

Domestic income
NNPFc+Excess offactor income earned bythe non-residents
=10,240 crore + 60 crore
=T10,300crore
Private Income x 10,300 = R 6,867 crore (approx.)
3
Ans. National Income (by Income and Expenditure method) = F 10,240 crore.
Private income = 6,867 crore.
14. From the following information, calculate Gross National Product at Factor Cost by (a) income method,a
(b) expenditure method
Items Rin crore)
(i) Factor income from abroad 10
(i) Compensation of employees 150
(ii) Net domestic capital formation 50
iv) Private final 220
consumption expenditure 15
(v) Factor income to abroad
(vi) Change in stock 15
 Solved Numericals

(vii) Employer's 10
(vi) Consumption contribution to social secunty
of fixed
capital
> 15
(ix) Interest 40
(x) Exports 20
(xi) Imports 25
(xii) Indirect taxes 30
(xii) Subsidies 10
(xiv) Rent
40
(xv) Government final
consumption expenditure 85
(xvi) Profit
100
sol. (a) Income Method
Gross National Product at Factor Cost

o
fixed n
capital employees +Interest+ Rent Profit Factorincome from abroad+Consumption or
Factor income to abroad
-

150 crore * 40crore +R 40 crore 100crore 10 crore+15 crore-7 15 crore

340 crore
(b) Expenditure Method
Gross National Product at Factor Cost
Private final consumption expenditure Government final consumption expenditure+Net domestic
capital formation+ Consumptton of fixed capital Exports - imports- Indirect taxes + Subsidies
+Factor income from abroad- Factor incometoabroad
? 10 crore
220 croreT85 crore 50crore 15 crore 20crore- 25
crore- 30 crore +

10 crore- 15 crore
340 crore R 340 crore.
ns. Gross National Product at Factor Cost (by Income and Expenditure method)=
Income Method, and (b) National income by
15. Calculate (a) Gross National Product at Market Price by
data:
Expenditure Method on the basis of the following
(Rin lakh)
Items 10
() Net export 20
(i) Rent 400
(i) Private final consumptrion expenditure 30
(iv) Interest 45
v) Dividend 5
vi) Undistributed profit 10
(vi) Corporate tax 100
expenditure 50
(l Government final consumption
0) Net domestic capital formation 400
N Compensation of employees 10
Consumption of fixed capital 50
u) Net indirect tax ()10
Ivi} Net factor income from abroad
a) Income Method
Corporate tax
oross Nationai Product at Market Price Dividend
+Undistributed profit
Interest +
+ Rent from abro0ad
mpensation of employees
income
Con Net factor
indirect tax
+
10lakh
onsumption offixed capitaB+ Net
lakh 10 lakh+ 10lakh +7 50lakh+(R 10 lakh
45 lakh 5 50 lakh-
l a k h 7 20lakh
7 30lakh+ lakh +75 lakh
+ 7 10 lakh
+ R 10 lakh
lakh +7 45
20 lakh +7 30
lakh
560 iakh