Lesson plan Topic Measurement of national income By

Lesson plan Topic Measurement of national income By S Khan PGT ( Economics) K V Aligarh

1 - Product method � Steps: - 1 - Estiumation of Value of out put: Value of out put = Sales + change in stock. � 2 -Estimatimg the value of intermediate consumption=value of inputs& purchases from other firms �

� 3 - Estimating the value of GDP at MP GDP mp = Value of output – intermediate consumption � 4 - Estimating National income NI = GDP mp – Depreciation – NIT + NFIA

Difficulties of product method 1 - Problem of double counting 2 -Non availability of reliable data 3 - Difficulty in estimating value of goods produced but kept for self consumption

Precautions of product method � 1 -Inclusion of imputed rent of self occupied building. � 2 -Own account production of capital goods is included � 3 -Goods produced purely for self consumption are not imcluded.

Numerical problem � Find national income, GNP mp, GDP fc Sales of primary sector= Rs 3000, Value of output in secondary sector = Rs 3500, Change in stock of primary sector = Rs 400, its closing stock is Rs 450, change in stock of secondary sector = Rs 300, Value of services supplied = Rs 5000, Intermediate consumption of three sectors = Rs 4500, Depreciation = Rs 50, NIT = Rs 60, Net Factor Income to Abroad = (-) Rs 100

� Find NI. GNP mp, � Primary sector: -Sales in the country= Rs 2500, Closing stock 200, opening stock=Rs 150, Exports=Rs 600. Intermediate consumption = Rs 500, imports =Rs 210 � Secondary sector: - Sales = 3500, Exports= Rs 400, Change in stock =Rs 550, Purchase of raw material from within the country=Rs 250, Imports = Rs 300. Value of services supplied = Rs 4500, intermediate consumption of tertiary sector Rs 1500, Dep = Rs 40, NIT = Rs 30, NFIA = Rs 60

Income Method � Steps : � 1 -Estimating COE: COE = Wages and salaries + Contribution to Social security’s Schemes � 2 -Estimating OS : OS = Rent + Interest + Royalty + Profit OS = Rent + Interest + Royalty + (Dividend + retained earnings of corporate enterprises + corporate gain tax)

� 3 - Estimating Mixed income – it is the income of self employed persons � 4 - Estimating NDP fc = COE + OS + MI 5 -Estimating national income NI = NDP fc + NFIA

Difficulties of income method � 1 - Non availability of reliable data � 2 - Difficulty created by intercorporate dividend

Precautions of income method � 1 -Imputed rent of self occupied building is included in national income. � 2 -Income from wind fall gains like lottery is not included. � Transfer earnings like scholarship is not included in national income.

Numerical problem based on income method � Find National ioncome , GNP mp, NDP mp, and GDP fc COE = Rs 5400, contribution to Social scurrility schemes = Rs 500, Rent and interest = Rs 3000, Dividend = Rs 800, Profit Rs 900, Corporate gain tax = Rs 30, Mixed income of self employed persons= Rs 100, Net export = Rs 40, Factor income to abroad = Rs 60, Depreciation Rs 20, Subsidies = Rs 70.

Expenditure method � Steps: - � 1 -Estimating private final consumption expenditure ( c) � 2 -Estimating Investment expenditure / Gross domestic capital formation ( I) � 3 -Estimating Government final consumption expenditure ( G) � 4 -Estimating Net Export ( X – M )

� 5 -Estimating GDP mp = C + I + G + ( X – M ) 6 -Estimating national Income NI = GDP mp + NFIA – NIT - Depreciation

Difficulties of expenditure method � 1 -Non availability of reliable data � 2 -Difficulty in classification of goods into intermediate and final goods.

Precautions of expenditure method � 1 -Imputed rent of self occupied building is included in national income. � 2 -Expenditure on purchasing second hand goods is not included in national income. But Income earned in the form of commission on sale of second hand goods is included

Numerical problem on expenditure method � Find National income, GNPmp, � Private final consumption expenditure= Rs 4000, Government final consumption expenditure= Rs 3000, Net fixed capital formation= Rs 1400, Net Export = Rs 1000, Closing stock = Rs 400, Opening Stock = Rs 600, Depreciation = Rs 550, Indirect tax = Rs 460, factor income to abroad = Rs 570.

Numerical problem � Find National income by income and expenditure methods � COE = Rs 2000, Rent and interest = Rs 300, Operating Surplus = Rs 4500, Mixed income = Rs = 1000, Private final consumption expenditure = Rs 2500, Government Final expenditure = Rs 1400, Net domestic fixed capital formation= Rs 550 , Net Export = Rs 600 , Depreciation = Rs 100, Change in stock = Rs 150. NFIA = Rs 25, NIT = Rs 45 �

Thank you very much

Lesson plan � Topic : - Aggregates relating to National income. Prepared By S Khan PGT Economics , K V Aligarh

Private income � Income accrued to private individuals and households from what ever sources in an accounting year Private income = N I - Income from property and entrepreneurship accruing to Govt administrative departments – savings of non departmental enterprises + Current transfers from Government + Net current transfers from ROW + National debt interest

Personal income � Income actualy received by private individuals and households from what ever sources in an accounting year Personal income = Private income - Corporate gain tax - Corporate Savings

Personal Disposable income � It is the sum of personal consumption expenditure and personal savings � PDI = Personal Income –diect personal income tax – insurance premium paid by employees – miscellaneous receipts of the government � OR � PDI = C + S

Income from Domestic product Accruing to Private sector � It is that part of NDP fc which accrues to private sector only IDPAPS = NDP fc - - Income from property and entrepreneurship accruing to Govt administrative departments – savings of non departmental enterprises.

Net National Disposable Income � It is the Sum of NI , NIT and Net current transfers from ROW NNDI = NI + NIT + Net current Transfers from ROW.

Gross National Disposable income � It is the Sum of NNDI and Depreciation GNDI = NNDI + Depreciation.

Sales + Change in Stock Value of Gross Product - Intermediate Consumption GDP mp , GVA mp - Depreciation NDP mp , NVA mp - NIT NDP fc, NVA fc + NFIA NNP fc, NI

NDP fc -income of Depart + NFIA - Savings of non NI Depart Ent IDPAPS - income of department + Current. Trans Govt Enterprises – savings of +net “ “ ROW Non Depart. Enterprises + NFIA +Current Trans from Govt +Natioanal debt int +Net “ “ “ ROW + National Debt interest Private Income - Corporate Savings -Corporate Gain Tax Personal Income

Personal Income - direct personal income tax -Insurance premium by Employees - Misc Receipts of the Govt PDI - consumption Expenditure Personal savings

Numerical Pr, oblem � Find Pvt Income , PI, PDI, IDPAPS, GNDI NI = Rs 4000, Income from property and entrepreneurship accruing to Govt administrative departments= Rs 500, savings of non departmental enterprises= Rs 400, Income tax = Rs 55, Corporate tax = Rs 30 , Corporate Savings = Rs 25, Current transfers from Government= 75, Net current transfers from ROW= Rs 80, Depreciation = Rs 100 , National debt interest= Rs 85, NIT Rs 20, NFIA = Rs 65

� Find Private income, GNDI , PDI Personal Savings= Rs 1200, Private consumption Exp= Rs 5000, Income from property and entrepreneurship accruing to Govt administrative departments= Rs 500, savings of non departmental enterprises= Rs 400, Income tax = Rs 55, Corporate tax = Rs 30 , Corporate Savings = Rs 25, Current transfers from Government= 75, Net current transfers from ROW= Rs 80, Depreciation = Rs 100 , National debt interest= Rs 85, NIT Rs 20, NFIA = Rs 65