Economics

FORMULAS & NUMERICAL
PROBLEMS RELATED TO
MEASUREMENT OF
NATIONAL INCOME

MEASUREMENT OF NATIONAL INCOME

INCOME METHOD
1.

EXPENDITURE METHOD

PRODUCT METHOD

INCOME METHOD :

Net Domestic Product At Factor Cost = Compensation Of Employees + Operating Surplus +
Mixed Income of Self Employed

1 WAGES & SALARIES CASH AS WELL AS KIND
+
* COMPENSATION OF EMPLOYEES

2 SOCIAL SECURITY CONTRIBUTION BY THE EMPLOYER
+
3 RETIREMENT PENSION

1 RENT
+

* OPERATING SURPLUS

2 INTEREST
+
3 PROFIT

Dividend
Corporate Profit Ta
Undistributed Profit

CONVERSIONS
( + )DEPRECIATION

NET

> GROSS

( - ) DEPRECIATION

DOMESTIC

( + )NET FACTOR INCOME FROM ABROAD

> NATIONAL

( - )NET FACTOR INCOME FROM ABROAD

FACTOR COST

___( + )NET INDIRECT TAXES

> MARKET PRICE

( - )NET INDIRECT TAXES

 Net Indirect Ta = Indirect Ta – Subsidies
 Net Factor Income from Abroad = Factor Income from abroad – Factor Income To abroad

2.

EXPENDITURE METHOD

Gross Domestic Product At Market Price = Private Final Consumption
Expenditure + Govt. Final Consumption Expenditure + Gross Domestic
Capital Formation + Net Exports

Gross Domestic Capital Formation = Gross Domestic Fixed
Formation + Change in Stock

Net Exports = Exports – Imports

CONVERSIONS
( + )DEPRECIATION

NET

> GROSS

( - ) DEPRECIATION

DOMESTIC

( + )NET FACTOR INCOME FROM ABROAD

> NATIONAL

( - )NET FACTOR INCOME FROM ABROAD

FACTOR COST

( + )NET INDIRECT TAXES
( - )NET INDIRECT TAXES

> MARKET PRICE

Q. From the following data calculate GNP at factor cost by Income Method & E penditure
Method
Sr. No.

Items

Rs. in Crore

1

Net Domestic capital formation

500

2

Compensation of employees

1850

3

Consumption of fi ed capital

100

4

Govt. Final consumption E penditure

1100

5

Private Final consumption E penditure

2600

6

Rent

400

7

Dividend

200

8

Interest