Class - XII

Economics
Macro Economics
National Income

E
Expenditure Method (GDP MP)

C
ER
Private F inal Government Gross Domestic Net Export
Consumption F inal Capital ( X - M)
Expenditure Consumption F ormation

M
Expenditure

M
Fixed Capital Investment in Stock

O
F ormation
( Closing stock – Opening stock)
C Or
Inventory Investment
T
G

NNPFC = GDPMP + NFIA - Depreciation + Subsidies - Indirect Tax

,P

Example No. 1 From the following data, calculate National Income by a) Income method, and b)
AJ

Expenditure method
S. No. Items ₹ (In crores)
i) Private final consumption expenditure 2,000
IR

ii) Net capital formation 400

iii) Change in stock 50
iv) Compensation of employees 1,900
H

v) Rent 200
IS

vi) Interest 150

vii) Operating surplus 720
viii)
R

Net Indirect Taxes 400

ix) Employers contribution to social security schemes 100
x) Net exports 20
xi) Net factor income from abroad (-)20
xii) Government final consumption expenditure 600
xiii) Consumption of fixed capital 100
Sol. a) Income Method:
National Income
= Compensation of employees + Operating surplus + Net factor income from abroad

= ₹ 1,900 crore +720 crore +(-)20 crore

E
= ₹ 2,600 crore
Expenditure Method:

C
National Income

ER
= Private final consumption expenditure + Government final consumption expenditure + Net capital
formation + Net exports + Net factor income from abroad - Net Indirect Taxes

M
= ₹ 2,000 crore + ₹ 600 crore + ₹ 400 crore + ₹ 20 crore + (-) ₹ 20 crore – ₹ 400 crore

M
= ₹ 2,600 crore
Example No. 2 Calculate GDPMP and NDPMP with the help of expenditure method from the data give

O
below:
S. No. Items ₹ (In crores)
i) Personal disposable income
C 8,600
ii) Personal savings 1,500
T
iii) Fixed capital formation 3,000
iv)
G

Net exports (-)300

v) Net factor income from abroad (-)500
,P

vi) Net indirect taxes 600

vii) Government final consumption expenditure 2,200
viii) Change in stock 800
AJ

ix) Consumption of fixed capital 450

IR

Sol. a) GDPMP = Personal disposable income - Personal savings + Net exports + Fixed capital formation +
Change in stock + Government final consumption expenditure

= ₹ 8,600 crore – ₹ 1,500 crore + (-) ₹ 300 crore + ₹ 3,000 crore + ₹ 800 crore + ₹ 2,200 crore = ₹
H

12,800 crore
IS

NDPMP = GDPMP - Consumption of fixed capital

R

= ₹ 12,800 crore – ₹ 450 crore

= ₹ 12,350 crore
GDPMP = ₹ 12,800 crore
NDPMP = ₹ 12,350 crore

Example No. 3 National Income from the following data.

 S. No. Contents ₹ (In crores)
i) Private Final Consumption Expenditure 900
ii) Profit 100
iii) Government Final Consumption Expenditure 400
iv) Net Indirect Taxes 100

E
v) Gross domestic Capital Formation 250
vi)

C
Change in stock 50
vii) Net factor income from abroad (-)40

ER
viii) Consumption of Fixed Capital 20
ix) Net Imports 30

M
Sol. National Income (NNPFC) = Private Final Consumption Expenditure + Government Final
Consumption Expenditure + Gross domestic Capital Formation - Net Imports - Net Indirect Taxes -

M
Consumption of Fixed Capital + Net factor income from abroad

O
= 900+400+250-30-100-20+ (-40)

=1,550-190 = ₹ 1,360 crore

C
T
G
,P
AJ
IR
H
IS
R
Example No. 4 Calculate National Income by the

a) Expenditure method and

b) Production method from the following data
S. No. Contents ₹ (In crores)
i)

E
Gross Value Added at Market Price by the Primary Sector 300
ii) Private Final Consumption Expenditure 750

C
iii) Consumption of Fixed Capital 150
iv) Net Indirect Taxes 120

ER
v) Gross Value Added at Market Price by the Secondary Sector 200
vi) Net Domestic Fixed Capital Formation 220
vii) Change in Stocks (-)20

M
viii) Gross Value Added at Market Price by the Tertiary Sector 700
ix) Net Imports 50

M
x) Government Final Consumption Expenditure 150
xi) Net Factor Income from Abroad 20

O
C
Sol. a) By Expenditure Method
National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption
T
Expenditure + Net Domestic Fixed Capital Formation + Change in Stocks - Net Imports - Net Indirect
G

Taxes + Net Factor Income from Abroad

,P

= 750+150+220+ (-20) -50-120+20

= 1,140-190= ₹ 950 crore

AJ

b) By Production Method
National Income (NNPFC) = Gross Value Added at Market Price by the Primary Sector + Gross Value
IR

Added at Market Price by the Secondary Sector + Gross Value Added at Market Price by the
Tertiary Sector - Net Indirect Taxes - Consumption of Fixed Capital + Net Factor Income from Abroad

= 300+200+700-120-150+20
H

=1,220-270 = ₹ 950 crore

IS
R
Example No. 5 Calculate Gross National Product at Factor cost from the following data by
a) Income method and
b) Expenditure method
S. No. Contents ₹ (In crores)
i) Private Final Consumption Expenditure 1,000

E
ii) Net Domestic Capital Formation 200
iii) Profits 400

C
iv) Consumption of Employees 800

ER
v) Rent 250
vi) Government Final Consumption Expenditure 500
vii) Consumption of Fixed Capital 60
viii) Interest

M
150
ix) Net Current Transfer from Rest of the world (-)80

M
x) Net Factor Income from Abroad (-)10
xi) Net Exports (-)20

O
xii) Net Indirect Taxes 80
C
Sol. a) By Income method
T
Gross National Product at Factor Cost (GNPFC) = Consumption of Employees + Profits + Rent +
Interest + Consumption of Fixed Capital + Net Factor Income from Abroad
G

= 800+400+250+150+60+ (-10)
,P

= ₹ 1,650 crore b) By Expenditure method

Gross National Product at Factor Cost (GNPFC) = Private Final Consumption Expenditure +
AJ

Government Final Consumption Expenditure + Net Domestic Capital Formation + Consumption of Fixed
Capital + Net Exports - Net Indirect Taxes + Net Factor Income from Abroad
IR

= 1,000+500+200+60+ (-20) -80+ (-10)

=1,760-110
H

= ₹ 1,650 crore
IS
R