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Answer is (c) From April 1 to March 31

Concept: Second hand goods. 

Explanation : Expenditure on second hand goods should be excluded from NI. Such goods were accounted for in the year when it was produced and sold.

Paper purchased by a publisher is intermediate good.

Explanation: 

Intermediate goods are the goods which are used as a raw material in the production of final goods Accordingly, paper purchased by a publisher is an intermediate good. This is because the publisher would then further use the paper for the books he will publish.

The above table can be matched as follows:

Explanations:

1) Income method is also known as factor cost method as in this method, national income is estimated by aggregating all the factor incomes (in the form of wages, rent, interest and profits) paid to the owners of these factors of production (land, labour, capital and enterprise) within the domestic territory in an accounting year.

2) Transfer payments refer to those payments in exchange of which no factor services are employed. Unemployment allowance is a kind of transfer income since no services are rendered in return for this allowance.

3) Disposable income is that part of personal income that is actually available for consumption and saving by the households after paying personal direct taxes and other miscellaneous payments (such as fees and fines) to the government.

Thus, Disposable income = Personal income – direct taxes + subsidy

4) One of the methods to calculate national income is output method. The output approach measures the national income by estimating the contribution made by each of the producing units in the economy to the total production within the domestic territory during an accounting year.

5) Net (N) is the value that is obtained after deducting depreciation of that year from the gross (G) value. Thus, to arrive at an estimate of Net National Product at market price (NNP_MP), we need to deduct depreciation from the value of the Gross National Product at market price (GNP_MP).

That is, NNP(_MP) = GNP(_MP) – depreciation

(c) (i) is true but (ii) is false

National income is computed every year. - True

Explanation:

The above statement is true. National income is the net value of all the final goods and services produced by the normal residents of a country during an accounting year. It is calculated every year. The accounting period for calculating national income is from the 1st of April to the 31st of March of every year.

Closed economy

National Income or NNP at FC

= GDP at MP -M Consumption of fixed capital + (Factor income from abroad – factor income to abroad) – (Goods and Services tax – Subsidies)

=5,500 – 300 + (150-250) – (120-70)

= ₹ 5,050 crores

Factor costs are the actual payments made to the factors of production for rendering their service in the course of production. In case subsidy is provided for the same, its value must also be included to get the correct value of factor cost.

Depreciation can be described as the reduction in the value of fixed assets in use due to factors such as normal wear and tear, passage of time, technological changes, deterioration due to natural forces such as rain, weather etc.

Income from the second hand sale of goods is not included in the national income of that current accounting year. This is because the value of these goods was included in the national income in the accounting year in which they were produced. Thus, if the value of these goods is also included in the current year, it will lead to the problem of double counting of the value of such goods.

Personal income is the total income received by the individuals of a country from all sources before payment of direct taxes in a year.

(i) Both (A) and (R) are true and (R) is the correct explanation of (A).

Correct option: (iv) (A) and (R) both are false.

GDP is the total market value of final goods and services produced within the country during a year. This is calculated at market prices and is known as GDP at market prices. Thus GDP by expenditure method at market prices = C + I + G + (X – M)

Where 

C – consumption goods;

I – Investment goods; 

G – Government purchases; 

(X – M) is net export which can be positive or negative.

Farmer producing for his own consumption.

1. Farmers keep a large portion of food and other goods produced on the farm for self consumption. 

2. The problem is whether that part of the produce which is not sold in the market can be included in national income or not.

When a tax payer uses loopholes of law, to avoid the payments of tax it is called tax avoidance. Tax Avoidance is legal.

The property of having material worth (often indicated by the amount of money something would bring if sold) is called the monetary value.

There are three methods of calculating national income. They are

1. Production method
2. Income method and
3. Expenditure method.

• All the methods are equally reliable and so one can adopt any of these three methods for calculating national income.
• If true data is available, national income will be the same irrespective of the method of calculation used.
• However, every method has one or the other limitation. Hence, it is said that these methods are mutually complementary to each other and can be used to cross-verify the figures obtained from any method.
• For example, if national income is calculated in form of production its truthfulness can be tested in terms of expenditure.
• As per the practice of economics, the method of production is suitable for developing countries like India whereas for countries like America and Russia, the methods of income and expenditure are suitable.
• So we can say that all the methods have their own pros and cons and hence the decision of using the method of calculation of nation lies on the country.

Correct option is (A) GDP

Household work done by housewives is not sold in the market. Hence, its monetary value cannot be measured and so is not considered while calculating national income.

The interest obtained from the government is not considered as income. The reason for this is that a state generates income through taxes and pays it as interest which means that the money is simply transferred.

Yes, I agree with this statement.

There are many statistical difficulties faced in the estimation of National Income due to which N.I. estimates are not accurate. 

They are as follows:

There is the danger of double counting by including the value of intermediate goods.

Inadequate and unreliable information regarding income and expenditure leads to inaccuracy in estimating N.I.

In India, people are illiterate and ignorant, so they do not maintain proper accounts.

To evade tax people do not reveal their exact income.

The sources from which data are obtained are not absolutely reliable.

Statistical staff are untrained and inefficient.

Income received by people/households by supplying the factors of production is called factor payment.

India uses a combination of the output method and the income method for the calculation of national income. Income method of calculating national income is very much accurate but the output method is not that reliable as it ignores some of the values or there are some services whose values cannot be measured in monetary terms. So, national income estimates in India are not exactly accurate but these estimations are very near to the exact value.

(d) (i) is false but (ii) is true

• Land: Land earns rent.
• Labour: On selling labour the labourer earns wages.
• Capital: On providing capital, one earns interest.
• Entrepreneur: Entrepreneur earns profit.

Financial year in India is leap year. - False

Explanation: 

The above statement is incorrect. Leap year is a year containing 366 days and comes after every four years. Whereas, the financial year is from 1st April to 31st March of every year and contains either 365 or 366 days. Thus, it is not necessarily a leap year.

Correct option is (D) None of these

Concept : Intermediate goods. 

Explanation : In the above case, wheat flour is not the final product. 

Wheat flour will be used by Sheetal to produce cake or pastry or biscuits which will be final product for her.

So, in above case wheat flour is considered j! (8) as intermediate goods. Intermediate goods are excluded while calculating NI by Final Ans. Goods approach method and included while calculating by Value Added approach method.

(i) Both (A) and (R) are true and (R) is the correct explanation of (A).

• Human resource, including technical experts who are well versed in the English language.
• Wide domestic market.
• Strong private sector.
• Development of science and technology.
• Favourable attitude of the government.
• Increase of foreign investment.
• Better employment opportunities.

Net National Product refers to the value of the net output of the economy during the year. NNP is obtained by deducting the value of depreciation, or replacement allowance of the capital assets from the GNP. It is expressed as, NNP = GNP – depreciation allowance.

To avoid double counting, instead of counting the value of goods that are half-made or in interim use, the monetary value of the final good and raw material used in it is separately valued.

The expenditure incurred by citizens, families and firms on consumable goods is called consumption expenditure. It includes expenditure done on durable goods like TV, scooter, car, etc., perishable goods like food grains, fruits, vegetables, services like education, medical treatment, transportation and communication, etc.

It is the expenditure incurred on building a factory, plant, machinery and necessary goods, equipment for running a business or profession, etc.

The expenditure incurred by general government on various administrative services like defence, law and order, education etc. is called government expenditure.

Incomes that are considered:

1. Income earned from factors of production:

(A) Income of rent:

• The rent obtained on land/building.
• Those who live in their own house do not need to pay rent. This benefit of rent that they get is a part of their income and is called imputed rent. ‘ It is considered in national income.
• The income obtained through various rights such as copy right of a book, patent, etc.

(B) Income of interest:

• The interest obtained by people on their capital during a year.
• The interest obtained from the government is not considered as income. The reason for this is that a state generates income through taxes and pays it as interest which means that the money is simply transferred.

(C) Income of wages:

The wage or salary given to labourers for their work during a year.

(D) Income of profit:

The income obtained in the form of profit or dividend by investor/. It includes reserved profit and taxes paid on it.

Income method is measured by summing up of all forms of Income.

According to the income method, national income is estimated by aggregating all the factor incomes (in the form of wages, rent, interest and profits) paid to the owners of these factors of production (land, labour, capital and enterprise) within the domestic territory in an accounting year.

That is, NNP_FC or National Income (NI) = Compensation of employees (COE) + Operating surplus + Mixed income +Net Factor Income from Abroad (NFIA)

Where: 

Compensation of Employees (COE) includes 

a. Wages and salaries paid in cash. 

b. Compensation paid in kind 

c. Employer's contribution to the social security schemes such as pension fund, provident fund etc.

Operating surplus includes rent, interest, royalty and profit.

National income is the sum of the values of all the final goods and services produced during an accounting period by the normal residents of a country. It can be calculated by three different methods, namely:

a) Output method 

b) Income method 

c) Expenditure method

Some of the important features of national income are as follows: -

i. Macroeconomic concept: Macroeconomics studies how an economy operates as a whole and focuses on the aggregate measures. Since national income is an aggregate term, it can be regarded as a macroeconomic concept. 

ii. Flow concept: National income is measured over (during) a period of time. In other words, it can be said that the national income has an element of time attached to it. Thus, it is a flow concept. 

iii. Money valuation of goods: Since national income is the total market value of all the final goods and services in terms of money produced within the domestic territory during an accounting year, it can be concluded that national income is the money valuation of goods. 

iv. Includes the value of final goods and services: National income includes only the value of final goods. The value of intermediate goods is not included in the estimation of national income. This is to avoid the problem of double counting. 

v. Net aggregate value: National income is the net aggregate value. In the sense, it includes goods and services produced by the firms during an accounting year. It does not include depreciation or consumption of the fixed capital. 

vi. Inclusion of Net factor Income from Abroad (NFIA): National income includes the net factor income from abroad. That is, it includes the net export value and net receipts.

Precautions regarding calculation of national income by the expenditure method are: 

i. National income estimation should include only the final goods and services. Intermediate consumption expenditure should not be included. 

ii. Expenditure on the purchase of second hand goods should not be included in the national income estimation of the current accounting year. This is because it has already been included in the national income of the accounting year in which these goods were originally purchased. 

iii. Expenditure on shares and bonds is not included. This is because these shares and bonds are mere financial assets and do not reflect any production activity of the goods or services. 

iv. Imputed value of the goods and services produced for self consumption are included. 

v. Expenditure on transfer payments by the government should not be included. This is because such payments are not related to any production activity in an economy. 

vi. The value of subsidies should be included.

Gross Domestic Product at Market Prices (GDP_MP) refers to the market value of all the final goods and services produced within the domestic country during an accounting year inclusive of depreciation. It is a gross concept as depreciation is not taken into account in its estimation. Also, GDP is limited to the domestic territory and excludes the Net Factor Income from Abroad (NFIA).

Output Method Or Product Method:

1. According to the product or output method, National Income is estimated by adding up the value of all final goods and services produced in the country during one year. 

2. NI = C+I+G+(X-M)+(R – P) – Depreciation – Income Tax + Subsidies 

3. In India, this method is applied to agriculture, mining and manufacturing. 

4. Here we look at National Income from production side.

5. In this method we deduct indirect tax and then add subsidies to arrive at National Income at Factor Cost from Market Price.

Income Method Or Factor Cost:

1. According to Income method the National Income is estimated by adding the factor Incomes that accrue to factors of production by way of rent, wages, interest and profit.

2. NI = R + W + I + P + MI + (X-M) + (RP) – Depreciation – Transfer Income. 

3. In India this method is used by National Income Committee in trade, transport, professionals, liberal arts, public administration. 

4. Here we look at National Income from distribution side. 

5. This method is a direct method as we arrive at National Income at factor cost.

NNP:

1. NNP refers to the market value of output. 

2. NNP at factor cost is the total of income payment made to factors of production.

NDP: 

1. NDP is the value of net output of the economy during the year 

2. The country’s capital equipment wears out of becomes outdated each year during the production process.

NP at market prices means the gross value of final goods and services produced annually in a country plus net factor income from abroad 

(C + I + G + (X – M) + (R – P)).