(iii) Interest: It is the amount earned for lending funds to the production units. Case V: If Net subsidy is given, then to convert it into Net Indirect tax, we have to inverse the sign, Expenditure Method. means that income to abroad is less than income from abroad, which makes, In India, LPG cylinder is sold at subsidized rates. National income of a country means the sum total of incomes earned by the citizens of that country during a given period, say a year. In this way it may be called GDP deflator. (d) ‘Product’ in GDPMP  signifies that only final goods and services have to be included and intermediate goods should not be included to avoid the double counting. (i) Buying and selling of securities: • • Pension payments employees social security measures, etc. Example, Income from abroad =100 In an economy, various goods and services are produced by different productive units during a period of one year. These goods are used for generating income. OR Net Investment + Depreciation. This transaction should not be included as it has already been included in the 2010 GNP and if we again include it, then it will create the problem of double counting. It includes the value of depreciation or consumption of fixed capital. It includes building machinery, Housing construction, construction of factories, etc. NY = DY + NFIA DY = NY – NFIA (d) All products may not contribute equally to economic welfare: base year’s price is called National Income at Constant Prices. It changes only by change in physical output not by change price level. We at BYJU’S provide Sandeep Garg Economics Class 12 Solutions to give comprehensive insight about the subject to the students. Gross = Net + Depreciation Net = Gross – Depreciation (i) Buying and selling of securities Profit after tax = 1000 In this case, welfare is much less than indicated by GDP. Value Added by Secondary Sector(=VO-IC), 3. (ii) Government Transfer payments Net value added at factor cost  = – Net indirect tax. Gross Domestic Capital Formation or Gross Investment or Investment Expenditure: Techniques of Measurement of National Income. (iii) Gross Public Investment: This includes capital formation by government in the form of building of roads, bridges, schools, hospitals, etc. If you continue browsing the site, you agree to the use of cookies on this website. In other words, it is the sum of income from property and income from entrepreneurship. The factories are not required to pay anything for harming people. (vi) Creches for children of employees. Vegetables can be grown in the backyard instead of buying them from the super market or an electrical fault can be repaired by the house owner himself instead of hiring an electrician. (b) The addition of all these factor incomes gives us the calculation near by the (a) Income Method It also includes imputed interest of funds provided by entrepreneur. (c) Non-market goods and services: 3. (vii) Value of the interest foregone by employers when they provide loans to employees at reduced, or even zero rates of interest for the purposes of buying houses, furniture or other goods and services. Net factor income paid to abroad (NFPA) = income to abroad – income from abroad. (i) Meals and drinks including those consumed when travelling for business. Class 12 Economics notes on chapter 5 accounting for partnership firm’s fundamentals are also available for download in CBSE Guide website. Aggregates of National Income to Measure the Value of Goods and Services! Net Income from Property and entrepreneurship, 3. Since, rent is a payment for services rendered, even though rendered to the owner itself, it must be counted as a factor payment. In this NFPA is positive, which means that income to abroad is greater than income from abroad, which makes, National Income and Related Aggregates – CBSE Notes for Class 12 Macro Economics Introduction: This is a numerical based chapter to calculate national income by different methods (Income, expenditure and value added method, their steps and precautions). Net Domestic Product at Market Price (NDPMP ). ex- ice-cream and milk used by the households. Suppose, the income of the poor declines by one rupee and that of the rich increases by one rupee. Answers to MCQ on National Income are available at the end of the last question. NFIA = Income from Abroad- Income paid to abroad = 100 – 0 = 100 and vice versa Case III: If income from abroad and income paid to abroad both are given, then NFIA is the difference between them, This investment is called Gross when depreciation is not deducted and Net when depreciation is subtracted. The government enterprises also are expected to earn reasonable rate of profit on the funds invested. Methods Of National Income And How To Determine National Income By Income Method And Its Numericals, Steps And Precaution: There are three methods of calculating national income. the welfare which depends on economic factors is called economic welfare and the welfare which depends on non-economic factor is called non-economic welfare. Gifts, donations etc. So, any income arising to the owners of such things is not a factor income. 6. CBSE Class 12 Economics National Income And Related Aggregates Notes. (ii) Gross Domestic Product at FC : It is the value of all final goods and services produced within domestic territory of a country which does not include net indirect tax. Components of Expenditure Method (c) Change in the distribution of income (GDP) may affect welfare: NDPMP =GDPMP – Depreciation NIT = IT – Subsidies Class 12 Economics – National Income and Related Aggregates – Get here the Notes, Question & Practice Paper of Class 12 Economics for topic National Income and Related Aggregates Notes. For example, construction of a flyover or a highway reduces transport cost and journey time of its users who have not contributed anything towards its cost. Net Investment :Net addition made to the real stock of capital during a period of time. (b) Externality: Private Final Consumption Expenditure(C), b. 7. (ii) These are left on account of non-availability of data and problem in valuation. 4. Q.1. (vi) Therefore, if the rise in per capita real income inequality increases, it may lead to a decline in welfare (in the macro sense). Case I: Income paid to abroad is given, then to make NFIA inverse the sign. Q = Quantity of goods and services produced during an accounting year, P = Prices of goods and services prevailing during the current accounting year. Case IV: If sales tax and excise duty are given, then by adding both, we get indirect taxes. Download CBSE class 12th revision notes for chapter 5 National Income and Related Aggregate in PDF format for free. In other words, a higher GDP may not necessarily mean higher welfare of the people. National Income refers to net money value of all the final goods and services produced by the normal residents of a country during an accounting year. Net Factor Income from Abroad NFIA = It is difference between factor income received/earned by normal residents of a country and factor income paid to non-residents of the country. Net National Product at Market Price (NNPMP ). Gross value added at market price  = Value of output – Intermediate consumption. Any expenses incurred by the employees and thereafter reimbursed by the business enterprise should be excluded from Compensation Of Employees (COE) as such expenses are part of intermediate consumption of business enterprise. ADVERTISEMENTS: National Income and Related Aggregates! The difference between these two incomes is Net Factor Income from abroad (NFIA), which is included in National Income (NY) and excluded from Domestic Income (DY). (vi) Pensions at the time of retirement (Deferred Wage): Pensions at the time of retirement are related to factor services rendered by recipient prior to their retirement. If a person living in his own house, then it is assumed in an economy that he is paying rent to himself. Leakage :It is the amount of money which is withdrawn from circular flow of income. 3. Profit before tax = 1000 NCERT Solutions for Class 6, 7, 8, 9, 10, 11 and 12. Study Notes on National Income: Definition, Measurement Problems and Estimate (With Diagram)! Where, Indirect Taxes are the taxes which are levied by the government on production and sale of commodity. Distribution of GDP. 3. It is of the following three types: NFIA = Income from Abroad – Income paid to abroad (iv) Therefore, economic welfare depends not only on the volume of consumption but also on the type or goods and services consumed. NFIA = Income earned by Residents from rest of the world (ROW) – Payments to Example, IT = 100 Note: If in the examination problem household final consumption expenditure is not given, it can be calculated as under National Wealth, Inventory etc. These goods and services are valued at their cost to the government as they are not sold to the citizen and have been produced for the social welfare of the citizens. For this put income from abroad 0. GDCF = Gross domestic fixed capital formation (GDFCF) + Change in Stock (Closing Stock – Opening Stock) + Net acquisition of valuables Example, IT = 100 1. located abroad. It is also called consumption of fixed capital. Where NFIA is the difference between income earned by normal residents from rest of the world and similar payments made to Non residents within the domestic territory. rent, interest and profit during an accounting year. CBSE quick revision note for class-12 Chemistry Physics Math’s, Economics and other subject are very helpful to revise the whole syllabus during exam days. (e) Leisure Time Activities: Activities like painting, growing of flowers in kitchen garden, etc. Sales tax, excise duty, custom duty, etc. Stocks :Variables whose magnitude is measured at a particular point of time are called stock variables. Candidates who are ambitious to qualify the Class 12 with good score can check this article for Notes, Question & Practice Paper. Owners provide finance but do not charge any interest. The addition of all these factor incomes gives us the calculation near by the National Income, i.e. (a) Income from property: It is the income which has been arisen from rent, interest and royalty. Gross Residential Construction Investment, b. The best app for CBSE students now provides accounting for partnership firm’s fundamentals class 12 Notes latest chapter wise notes for quick preparation of CBSE board exams and school based annual examinations. It has been classified into the following categories. This is broadly divided into the following three components: (iii) It is generally agreed that these items contribute to economic welfare. GDPFC = GDPMP  – Net Indirect Taxes Gross Public Investment + Inventory Investment + Net Acquisition of Valuables, 4. (c) Ships and aircraft operated by the residents between two or more countries. educator will teach in Hindi, you have download the notes after class complete. How To Determine National Income By Expenditure Method And Its Numericals, Steps And Precautions: National income determination by Expenditure method: The difference between these two is Net Indirect Taxes (NIT) which is included in MP and excluded from FC. Step 4: To add all factor incomes / payments within domestic territory to get domestic income, i.e., NDPFC . Activities excluded from GDPMP: The activities are as follows: Domestic Income refers to a total factor incomes earned by the factor of production within the domestic territory of a country during an accounting year. The related aggregates of national income are:- (i) Gross Domestic Product at Market price (GDPMP) (ii) Gross Domestic Product at Factor Cost (GDPFC) (iii) Net Domestic Product at Market Price (NDPMP) (iv) Net Domestic Product at FC or (NDPFC) (v) Net National Product at FC or National Income (NNPFC) (vi) Gross National Product at FC (GNPFC) (vii) Net National. National income, change in stock etc. Operating surplus have the following two components: 12th class economic notes in hindi chapter-1 National Income and Related Aggregates CBSE Revision Hindi Notes for CBSE Class 12 Economics National Income and Related Aggregates Some basic concepts: consumption goods, capital goods, final goods, intermediate goods; stocks and flows; gross investment and depreciation. NNPMP = GNPMP – Depreciation Sample Paper all are made available through the best app for CBSE students and myCBSEguide website. (b) Change In Stock (Closing Stock – Opening Stock) Or Inventory Investment: It is the net change in inventories of final goods, finished goods, semi-finished goods and raw material. The design of our Class 12 Macro Economics Solutions is well- organized. Income from the sale of old cars, old house, bonds, debentures, etc. NCERT Solutions for Class 12 Macro Economics Chapter 2 National Income and Related Aggregates includes all the important topics with detailed explanation that aims to help students to understand the concepts better. may comparatively contribute less and may not directly affect the standard of living of the people. Revision notes in exam days is one of the best tips recommended by teachers during exam days. (ii) Milk may provide both immediate and ultimate satisfaction to consumers. GNPMP = NNPFC + Dep + NIT. Free PDF Download - Best collection of CBSE topper Notes, Important Questions, Sample papers and NCERT Solutions for CBSE Class 12 Economics National Income and Related Aggregates. National Income and Related Aggregates class 12 Notes Economics. It is also known as deferred wage. 3. ‘Per capita’ is only an average. Government Final Consumption Expenditure (GFCE): The expenditure made by a general government on current expenditure on goods and services like public health, defence, law and order, education, etc. Therefore, taking only GDP as an index of welfare overstates welfare. ... Class 12; Papers; Contact; Class 12 Economics Notes PDF CBSE Notes for Class 12. It’s so because such payments are intermediate consumption of business enterprises. (a) Political frontiers including territorial waters and airspace. (iv) If it increase it implies that rich become more rich and the poor become more poor. or value of output = price × qty. It helps to know the functioning of the economy. 2. Government Final Consumption Expenditure(G), a. (a) If National Income is calculated on the basis of current year price index, then it is known as national income at current price. Download revision notes for National Income and Related Aggregate class 12 Notes and score high in exams. Expenditure on construction is included in GDP but not the positive externalities flowing from it. The thing which has to be remembered is that, employers’ contribution towards social security scheme should be included whereas employees’ contribution towards Social Security Scheme should not be included as COE is that what the employer pays to employee and if anything borne by employee himself should not be included under COE. ADVERTISEMENTS: Q.2. (ii) Royalty: Royalties are the payments made for the use of mineral deposits such as coal, oil, etc. Eg. (iv) Bonuses Scope of Economic Territory : (a) Political frontiers including territorial waters and airspace. For example, Mr A sells his old bike to Mr B for rs. Change in Stock or Inventory Investment, b. (i) Rent: The income arising from ownership of land and building is known as rent. • Trading in financial instruments does not imply production of final goods and services. Exp., investment and exports. 2. (b) Net Subsidy = (-) 100. (i) Wages and salaries receivable by the employees in respect of their work. Aggregates 2. Components of Domestic Factor Income. year and valued these at base year’s prices or constant price, it is called real GDP or GDP at constant prices. (d) Fishing vessels, oil and natural gas rigs operated by residents in the international waters. (i) Many final goods and services are not acquired through regular market transaction. Net value added at market price  = – Depreciation. (d) Illegal Activities: Activities like gambling, black-marketing etc., should be excluded because all unlawful activities are beyond the scope of NY and also because there is statistical problem of their estimation. Non-monetary exchange Externalities not taken into GDP but it affects welfare. NFIA = (-)100 Personal Disposable Income from National Income. Step 1: To identify enterprises which employ primary factors (Land, Labour, Capital, enterprise). Define the concept of value added. (b) Embassies, consulates, military bases etc. Thus it is equal to the sum of all factor incomes (compensation of employees, rent, interest, profit and mixed income of self employed) generated in the domestic territory of the country. National Income at Current Prices : It is also called nominal National income. Nominal GDP : When the goods and services are produced by all producing units in the domestic territory of a country during an a/c. Gross Domestic Product at Factor Cost ( GDPFC): GDPFC is defined as the gross factor value of the final goods and services produced within the domestic territory of a country during an accounting year by all production units excluding Net Indirect Tax. National Income, i.e., Net Domestic Product at FC (NDPfc). (a) Consumption of fixed capital (b) Capital consumption allowance Non-Residents within Domestic territory. GDPFC  = GNPMP  – Net Indirect Taxes Thus, the difference between exports and imports of a country is called Net Exports. are some of the indirect taxes, and subsidies are the cash grants given by the government to the enterprises to encourage production of certain commodities, to promote exports or to sell goods at prices lower than the free market Price. FC = MP – NIT (Indirect Taxes – Subsidies) Depreciation :means fall in value of fixed capital goods due to normal wear and tear and expected obsolescence. Problem of Double Counting :Counting the value of a commodity more than once while estimating national income is called double counting. For example, there is a Contributory provident Fund Scheme for employees of educational institutions and public sector undertakings. If we want to calculate National Income by this method, we have to add different final expenditures from an economy. (a) Purely financial transactions: It may be of three types: Value added :It is the difference between value of output of a firm and value of inputs bought from the other firms during a particular period of time. NDPFC = GDPMP – Depreciation – Indirect tax + Subsidy. Gross National Product at Factor Cost (GDPFC ) or Gross National Income GNPFC  refers to gross factor value of all the final goods and services produced by the normal residents of a country during an accounting year. Ways to solve the problem of double counting. It is circular in nature. It is of three types: It includes all the topics given in NCERT class 12 Economics text book. PFCE = Purchases of currently produced goods and services in the domestic Market by consumer households and NPISH households + direct purchases made abroad by resident households – direct purchases in domestic market by non¬resident households. Capital Goods :Those final goods which help in production. Employers Contribution of Social security Schemes. (i) Distributed Profit (Dividend): It is that part of total profit which is given to shareholders. Net means the value of product excluding depreciation. Not be in the profit of the world ( ROW ) – payments to Non-Residents within territory! This chapter, quick revision notes from myCBSEguide mobile app taken for productive services only like who,,. Than to the income of factor and transfer incomes from the rest of following! To the owners of factors of production more production of final output for employees and their families such is! My CBSE guide website syllabus of Class 12th chapter 5 National income, National Disposable income it... Helps to know the functioning of the country, i.e bases etc. depreciation... Or theory of our Class 12 Economics text book b for rs for such schemes is a return of after... 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