EKYA SCHOOLS/CMR NATIONAL PUBLIC SCHOOL

TERM 1 GRADE XII

SUBJECT : ECONOMICS

Chapter Test: National Income

Marks 30
1. In an economy the value of Net Factor Income from Abroad is ₹ 200 crores and the value 1
of Factor Income to Abroad is ₹ 40 crores. Identify the value of Factor INcome from
Abroad.

a) ₹ 200 crore b) ₹ 1600 crore c) ₹ 240 crore d) ₹ 180 crore

2. Calculate Net Domestic Product at factor cost. 3

Particulars Amount ( in ₹ crores)

i) Interest 700

ii) Compensation of 3,000

Employees

iii) Net Indirect Taxes 500

iv) Rent and Profit 700

v) Transfer Payments by 10
Government

3. In a single day, Raju,a barber, collects ₹ 500 from haircuts. Over this day, his equipment 3
depreciates in value by ₹ 50. Of the remaining ₹ 450, Raju pays sales tax ₹ 30, takes home
₹ 200 and retains ₹ 220 for improvement and buying of new equipment. He further pays ₹
20 as income tax. Based on this information, calculate Raju’s contribution to GDP, NDP
and National Income.

4. Calculate compensation of employees from the following data: 3

Patriculars Amount ( in ₹ crores)

i) Profits after tax 20

ii) Interest 45

iii) Gross Domestic Product at 200

Market Price

iv) Goods and Services Tax 10

v) Consumption of Fixed Capital 50

EKYA SCHOOLS/CMR NATIONAL PUBLIC SCHOOL
TERM 1 GRADE XII
SUBJECT : ECONOMICS

vi) Rent 25

vii) Corporate Tax 5

5. Calculate ‘Depreciation on Capital Asset’ from the following data: 3

Particulars Amount ( in ₹ crores)

i) Capital value of the asset 1, 000

ii) Estimated life of the asset 20 years

iii) Scrap Value Nil

6. “ India’s GDP is expected to expand 7.5% in 2019-20: World Bank” - The Economic Times. 3
Does the given statement mean that welfare of people of India increase at the same rate?
Comment with reason.

7. Using the following data of an imaginary economy, calculate and compare the Real Gross 4
Domestic Product (RGDP) for the given years:

Year 2015-16 2016-17

Nominal GDP 8.4% 9%

Growth Rate

GDP deflator 140 125

8. Compute National Income. 4

(₹ in crore)
i) Private final consumption expenditure 900
ii) Government final consumption expenditure 400
iii) Net imports 30
iv) Gross domestic capital formation 250
v) Change in stock 50
vi) Net domestic fixed capital formation 180
vii) Net indirect taxes 100
viii) Net factor income from abroad (-) 40
ix) Profits 100

9. Answer the following: 6

a) Giving valid reasons, state how the services of a School Teacher’ will be undertaken in
EKYA SCHOOLS/CMR NATIONAL PUBLIC SCHOOL
TERM 1 GRADE XII
SUBJECT : ECONOMICS

estimation of National Income.

b) Gross investment is always greater than net investment. Defend or refute the given
Statement with valid argument.
c) Net factor income from abroad can never be negative.” Defend or refute the given
statement with valid argument.
d) Discuss briefly how the money received from the sale of a second-hand car will be
undertaken in estimation of National Income.
EKYA SCHOOLS/CMR NATIONAL PUBLIC SCHOOL
TERM 1 GRADE XII
SUBJECT : ECONOMICS

Hints
Class Test: National Income
Marks 30
1. If in an economy the value of Net Factor Income from Abroad is ₹ 200 crores and the value 1
of Factor Income to Abroad is ₹ 40 crores. Identify the value of Factor INcome from
Abroad.

a) ₹ 200 crore b) ₹ 1600 crore c) ₹ 240 crore d) ₹ 180 crore

Ans: Rs. 240 crore

2. Calculate Net Domestic Product at factor cost. 3

Particulars Amount ( in ₹ crores)

i) Interest 700

ii) Compensation of 3,000

Employees

iii) Net Indirect Taxes 500

iv) Rent and Profit 700

v) Transfer Payments by 10
Government

Solution : Net Domestic Product at factor cost = i + ii+iv

= ₹ 700+ 3,000+700
= ₹ 1400 crores

3. In a single day, Raju,a barber, collects ₹ 500 from haircuts. Over this day, his equipment 3
depreciates in value by ₹ 50. Of the remaining ₹ 450, Raju pays sales tax ₹ 30, takes home
₹ 200 and retains ₹ 220 for improvement and buying of new equipment. He further pays ₹
20 as income tax. Based on this information, calculate Raju’s contribution to GDP, NDP
and National Income.

Solution: Raju’s contribution to

i) GDP = Value of haircuts service produced by him = ₹ 500

ii) NDP = GDP - Depreciation of equipment = 500-50 = ₹ 450
iii) National Income ( NNP at factor cost) = NDP - Sales Tax = 450-30 = ₹ 420

4. Calculate compensation of employees from the following data: 3

EKYA SCHOOLS/CMR NATIONAL PUBLIC SCHOOL
TERM 1 GRADE XII
SUBJECT : ECONOMICS

Patriculars Amount ( in ₹ crores)

i) Profits after tax 20

ii) Interest 45

iii) Gross Domestic Product at 200

Market Price

iv) Goods and Services Tax 10

v) Consumption of Fixed Capital 50

vi) Rent 25

vii) Corporate Tax 5

Solutions:
GDPmp (iii)=Compensation of Employees (COE) + (vi) +
(ii) + (vii)+(i)+(v)+(iv)3
200 = COE + 25+45+5+20+50+10
COE = 200 - 155 = ₹ 45 crore

5. Calculate ‘Depreciation on Capital Asset’ from the following data: 3

Particulars Amount ( in ₹ crores)

i) Capital value of the asset 1, 000

ii) Estimated life of the asset 20 years

iii) Scrap Value Nil

Solution: Depreciation on capital (annual)

𝐶𝑜𝑠𝑡 𝑜𝑓 𝑡ℎ𝑒 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡 − 𝑆𝑐𝑟𝑎𝑝 𝑣𝑎𝑙𝑢𝑒

= 𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑙𝑖𝑓𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 (𝑖𝑛 𝑦𝑒𝑎𝑟𝑠)

1000−0
= 20
= ₹50 𝑐𝑟𝑜𝑟𝑒𝑠

6. “ India’s GDP is expected to expand 7.5% in 2019-20: World Bank” - The Economic Times. 3
Does the given statement mean that welfare of people of India increase at the same rate?
Comment with reason.
Ans:
Generally it is considered that an increase in the Gross Domestic Product (GDP) of any
EKYA SCHOOLS/CMR NATIONAL PUBLIC SCHOOL
TERM 1 GRADE XII
SUBJECT : ECONOMICS

economy (*India in this case) ensures an increase in welfare of the people of the country.
However, this may not always be correct. GDP is not the best indicator of the economic
welfare of a country. Some of the prime reasons for the same are:

a) Unequal distribution and composition of GDP,

b) Non-monetary transactions in the economy which are not accounted for in GDP,
and
c) Occurrence of externalities in the economy (both positive and negative).

7. Using the following data of an imaginary economy, calculate and compare the Real Gross 4
Domestic Product (RGDP) for the given years:

Year 2015-16 2016-17

Nominal GDP 8.4% 9%

Growth Rate

GDP deflator 140 125

Solution: Real GDP = Nominal GDP/GDP deflator × 100 Suppose the Base year be
2014-15 and Nominal GDP and Real GDP of 2014-15 = ₹ 10, 000 crore

Year 2014-15 2015-16 2016-17

Nominal GDP ₹ 10, 000 ₹ 10, 840 ₹ 11, 815

crore crore crore
( Assume)

Real GDP= ₹ 10,000 ₹ 7742 cr. ₹ 9452 cr.

Nominal GDP/ cr (aprox.) (approx)
GDP deflator ×100 (Assume)

8. Compute National Income. 4

(₹ in crore)
i) Private final consumption expenditure 900
ii) Government final consumption expenditure 400
iii) Net imports 30
iv) Gross domestic capital formation 250
v) Change in stock 50
vi) Net domestic fixed capital formation 180
EKYA SCHOOLS/CMR NATIONAL PUBLIC SCHOOL
TERM 1 GRADE XII
SUBJECT : ECONOMICS

vii) Net indirect taxes 100

viii) Net factor income from abroad (-) 40
ix) Profits 100

Ion: National income = (i) + (ii) + (vi)+(v) - (iii) - (vii)

+ (viii) = 900+400+180+50-30-100+(-40)
= ₹ 1360 crore

9. Answer the following: 6

a) Giving valid reasons, state how the services of a School Teacher’ will be undertaken in
estimation of National Income.
b) Gross investment is always greater than net investment. Defend or refute the given
Statement with valid argument.

c) Net factor income from abroad can never be negative.” Defend or refute the given
statement with valid argument.

d) Discuss briefly how the money received from the sale of a second-hand car will be
undertaken in estimation of National Income.

Ans:

a) The services of a school teacher will be included in the national income of the country
as it contributes to the current flow of services in the economy.

b) The given statement is refuted. Gross investment includes addition to capital stock
which also includes replacement of the normal wear and tear (depreciation). Whereas,
addition to capital stock in an economy is measured by net investment. So, in an
accounting sense, if the value of depreciation becomes zero, only then gross
investment will be equal to net investment.

c) The given statement is refuted. Net factor income from abroad is the difference between
factor income.earned from rest of the world and factor income paid to rest of the world
the resulting value (net factor income from abroad) can be negative.

d) The money received from the sale of a second hand car will not be included in the
the national income of the country as it does not contribute to the current flow of
goods in the economy.