|
|
Items |
In crores |
|
1 |
Private final consumption expenditure |
397 |
|
2 |
Exports |
28 |
|
3 |
Govt. Final consumption expenditure |
919 |
|
4 |
Gross fixed capital formation |
764 |
|
5 |
Opening stock |
30 |
|
6 |
Closing stock |
35 |
|
7 |
Consumption of fixed capital |
100 |
|
8 |
Imports |
50 |
|
9 |
Net factor income from abroad |
(-)200 |
|
10 |
Subsidies |
40 |
|
11 |
Indirect taxes |
45 |
From the above information calculate National income by expenditure method.
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: 1758
GDP at MP (by Expenditure Method)≡ C + Ι + G +Change in stock+ X – M
Change in Stock =Closing Stock-Opening Stock= 35 - 30=5
GDP at MP (by Expenditure Method)= 397 + 764 + 919 + 28 - 50 + 5 = 2063
GNP at MP ≡ GDP at MP + Net factor income from abroad =2063-200=1863
NNP at MP ≡ GNP at MP – Depreciation=1863-100=1763
NNP at Factor Cost (National Income)= NNP at MP – Net indirect taxes (Indirect taxes – Subsidies)
=1763 - (45-40)
=1763-5
=1758
NNP at Factor Cost (National Income)=1758
C=the aggregate final consumption expenditure on the goods and services produced by the firm
I= the aggregate final investment expenditure incurred by other firms on the capital goods produced by firm
G=the aggregate expenditure that the government makes on the final goods and services produced by firms
X= the export revenues
M=Imports Made
Note: The change in stock has been added separately because the item given in the question is Gross Fixed Capital Formation, not total Gross Capital Formation. In macroeconomics, Gross Fixed Capital Formation includes expenditure only on fixed assets such as machinery, buildings, and equipment. However, total investment expenditure under the expenditure method also includes inventory investment, i.e., change in stock. Therefore, change in stock must be added separately to Gross Fixed Capital Formation to calculate total capital formation correctly.