National Income Accounting

Question 1

Define Stock

Answer 1

Quantity measured at time ‘t’

Question 2

Define Flow

Answer 2

Quantity measured over time ‘t’ (or) per unit time ‘t’

Question 3

Factor Income is named as ____ for the following:
1. Land
2. Labor
3. Capital
4. Entrepreneurship

Answer 3

1. Land - Rent
2. Labor - Wages (or) Salaries
3. Capital - Interest
4. Entrepreneurship - Profits

Question 4

Circular Flow of Income:

1. Real Flow - ______
2. Money Flow - ________

Answer 4

1. Real Flow
   HHs —–> Firms [Factors of Production: Labor]
   Firms ——-> HHs [Goods and Services]
2. Money Flow
   HHs ——-> Firms [Expenditure]
   Firms ——-> HHs [Wages (or) Salaries]

Question 5

Resident in Economy

Answer 5

Minimum of 1 year outside the territory carrying consumption, production, and investment in that said country

Exception(s): Students, Govt. Officials

Question 6

Will the goods resold money be added to NI?

Will the goods brought with the resold money be added to NI?

Will the commission taken in selling the used vehicle by a mediator be added to NI?

Answer 6

[1] No - As there is no new production

[2] Yes - The money is used to value the goods produced newly and used as the final products

[3] Yes - Mediation is considered as service

Question 7

Define:
MP (Market Price)
BP (Base Price)
FC (Factor Cost)

Answer 7

MP = Cost of Production (COP) + Net Production Taxes + Net Product Taxes

BP = COP + Net Production Taxes

FC = Cost of Production

Question 8

Relation between Factor Cost and Market Price

Other forms of production and product taxes

Answer 8

MP = FC + Indirect Taxes - Subsidies

Question 9

GDP at MP

Answer 9

GDP (MP) = C + I + G + NX

Question 10

GDP (at FC)

Answer 10

GDP (FC) = GDP(MP) - Indirect Taxes + Subsidies

Question 11

NDP (at MP)

Answer 11

NDP (MP) = GDP (MP) - Depreciation

Question 12

NDP (at FC)

Answer 12

NDP (FC) = NDP (MP) - Net Production Taxes - Net Product Taxes

Question 13

GNP (at MP)

Answer 13

GNP (MP) = GDP (MP) + NFIA

Question 14

GNP (at FC)

Answer 14

GNP (FC) = GNP (MP) - Net Production Taxes - Net Product Taxes

Question 15

NNP (at MP)

Answer 15

NNP (MP) = GNP (MP) - Depreciation

Question 16

NNP (at FC)

Answer 16

National Income
NNP (FC) = NNP (MP) - Net Production Taxes - Net Product Taxes

(or) From the above equations
NNP (FC) = NDP (FC) + NFIA

Question 17

Define Product Taxes

Answer 17

Per unit basis tax when produced/sold
(Eg) GST, VAT, Excise Duty on Alcohol

Question 18

Define Production Taxes

Answer 18

Tax upon good rather volume
(Eg) Property Tax

Question 19

What were the changes to New GDP Series?

Answer 19

1. Change of Base year from 2004 - 05 to 2011 - 12
2. Change of measure from GDP (FC) to GDP (MP)
3. Change of measure from GVA (FC) to GVA(BP)

Question 20

Define MER [Money Exchange Rate]

Answer 20

MER determined through the demand and supply of dollars in India

Question 21

Define PPPER [Purchasing Power Parity Exchange Rate]

Answer 21

PPPER = (Expenditure on X in India (INR)) : (Expenditure on X in USA (USD))

Question 22

Relation between MER and PPPER

Answer 22

GDP _MER < GDP _PPPER

• India is 5th largest economy according to MER
• India is 3rd largest economy according to PPPER