Based on given information, estimate the value of National Income:
A. Compensation to employees in cash 300 cr
B. Compensation to employees in kind 400 cr
C. Operating surplus 865 cr
D. Profits 280 cr
E. Mixed Income 620 cr
F. Net factor income from abroad (-) 30 cr
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 2155 cr
Everything produced in a country is paid out as income to those who helped produce it: compensation to employees, rent, interest and profit to the owners of land and capital, and mixed income to the self-employed. These factor incomes earned within the domestic territory add up to domestic income; adding the net factor income from abroad turns it into national income, which is NNP at factor cost.
Given:
Compensation to employees in cash = 300 cr
Compensation to employees in kind = 400 cr
Operating surplus = 865 cr
Profits = 280 cr
Mixed income = 620 cr
Net factor income from abroad = (−) 30 cr
Working it out:
Profits are not added separately: operating surplus is rent, interest and profits taken together, so the 280 cr of profits is already inside the 865 cr.
Compensation of employees = 300 + 400 = 700 cr
Domestic income (NDPFC) = 700 + 865 + 620 = 2185 cr
National income (NNPFC) = 2185 + (−30) = 2155 cr
National income = 2155 cr, which is Option (3).