Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: National Income Accounting

Question:

Analyse the information given below , and answer the questions

  ₹ in crores
(i) Net Indirect Taxes 38
(ii) Consumption of fixed capital 34
(iii) Net factor Income from Abroad (-)3
(iv) Rent 100
(v) Profits 225
(vi) Interest 40
(vii) Mixed Income of self-employed 150
(viii) Wages and salaries 200
(ix) Employers' contribution to social security schemes 50

 

From the above information, calculate $NNP_{MP}$ is :

Options:

₹724 crores

₹800 crores

₹750 crores

₹862 crores

Correct Answer:

₹800 crores

Explanation:

The correct answer is option (2) : ₹800 crores

Step 1: Calculate $NDP_{FC}$ : NDPFC is the sum of all incomes earned within the domestic economy (Rent, Profits, Interest, Mixed Income, Wages and salaries, Employers' contribution to social security schemes).

$NDP_{FC}$ =Rent+Profits+Interest+Mixed Income+Wages and salaries+ Employers' contribution to social security schemes

$NDP_{FC}$ = 100+225+40+150+200+50=765 crores

Step 2: Calculate $NNP_{FC}$ to adjust for Net Factor Income from Abroad (NFIA)

$NNP_{FC}$ = $NDP_{FC}$ + NFIA

                     = 765-3

                     = 762 Crores

Step 3: Convert $NNP_{FC}$ to $NNP_{MP}$: $NNP_{MP}$ is calculated by adding Net Indirect Taxes to $NNP_{FC}$ .

Net Indirect Taxes = Indirect Taxes - Subsidies. 

$NNP_{MP}$ = $NNP_{FC}$ + Net Indirect Taxes

                     = 762 + 38

                     = 800 Cr