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(a) Define Externality. (b) Find National Income from following using expenditure method• (in crores)1Current transfers from rest of the world 502Net Indirect taxes100 3Net Exports - 25 4Rent 90 5Private Final Consumption Expenditure900 6Net Domestic Capital Formation200 7Compensation of Employees 5008Net Factor Income from Abroad - 10 9Government Final Consumption Expenditure400 10Profit 220 11Mixed Income of Self Employed400 12Interest230 |
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Answer» a. Externality occurs when the actions of consumers or producers give rise to negative or positive side effects on third party who are not part of these actions, and whose interests are not taken into consideration. E.g. :- introduction of metro rail on one hand has increased the prices of property but has also saved the time and money of general public and has provided safe means of transport b. National Income by Expenditure Method = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports + NFIA - NIT National Income by Expenditure Method = v + ix + vi + iii + viii - ii National Income by Expenditure Method = 900 + 400 + 200 + (-25 ) + (-10) - 100 National Income by Expenditure Method = Rs. 1365 Crores |
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