{"id":5182,"date":"2016-05-20T11:49:00","date_gmt":"2016-05-20T06:19:00","guid":{"rendered":"http:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-eco-macro-02-national-income-accounting\/"},"modified":"2018-10-22T14:19:50","modified_gmt":"2018-10-22T08:49:50","slug":"ncert-solutions-class-12-economics-national-income-accounting","status":"publish","type":"post","link":"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/","title":{"rendered":"NCERT Solutions class 12 Economics National income accounting"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_76 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#Microeconomics\" >Microeconomics<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#Macroeconomics\" >Macroeconomics<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#CHAPTER_Two_National_Income_Accounting\" >CHAPTER Two\u00a0National Income Accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting\" >NCERT Solutions class 12 Economics National income accounting<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-2\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#2_Why_should_the_aggregate_final_expenditure_of_an_economy_be_equal_to_the_aggregate_factor_payments_Explain\" >2. Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-3\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#3_Distinguish_between_stock_and_flow_Between_net_investment_and_capital_which_is_a_stock_and_which_is_a_flow_Compare_net_investment_and_capital_with_flow_of_water_into_a_tank\" >3. Distinguish between stock and flow. Between net investment and capital, which is a stock and which is a flow? Compare net investment and capital with flow of water into a tank.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-4\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#4_What_is_the_difference_between_planned_and_unplanned_inventory_accumulation_Write_down_the_relation_between_change_in_inventories_and_value_added_of_a_firm\" >4. What is the difference between planned and unplanned inventory accumulation? Write down the relation between change in inventories and value added of a firm.<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#In_this_case_the_inventory_accumulation_is_equal_to_the_expected_accumulation_Hence_this_is_an_example_of_a_planned_inventory_accumulation\" >In this case the inventory accumulation is equal to the expected accumulation. Hence, this is an example of a planned inventory accumulation.<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-5\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#5_Write_down_the_three_identities_of_calculating_the_GDP_of_a_country_by_the_three_methods_Also_briefly_explain_why_each_of_these_should_give_us_the_same_value_of_GDP\" >5. Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP.<\/a><ul class='ez-toc-list-level-5' ><li class='ez-toc-heading-level-5'><ul class='ez-toc-list-level-5' ><li class='ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#GDP_Total_consumption_Investment_Government_Consumption_expenditure_Net_exports\" >GDP\u00a0=\u00a0Total consumption + Investment + Government Consumption expenditure + Net exports<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#GDP_C_%E2%80%93_I_%E2%80%93_G_%E2%80%93\" >GDP = C &#8211; + I &#8211; \u00a0+ G &#8211; \u00a0+<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-6\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#6_Define_budget_deficit_and_trade_deficit_The_excess_of_private_investment_over_saving_of_a_country_in_a_particular_year_was_Rs_2000_crores_The_amount_of_budget_deficit_was_-_Rs_1500_crores_What_was_the_volume_of_trade_deficit_of_the_country\" >6. Define budget deficit and trade deficit. The excess of private investment over saving of a country in a particular year was Rs 2,000 crores. The amount of budget deficit was (-) Rs 1,500 crores. What was the volume of trade deficit of the country?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-7\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#7_Suppose_the_GDP_at_market_price_of_a_country_in_a_particular_year_was_Rs_1100_crores_Net_Factor_Income_from_Abroad_was_Rs_100_crores_The_value_of_Indirect_taxes_%E2%80%93_Subsidies_was_Rs_150_crores_and_National_Income_was_Rs_850_crores_Calculate_the_aggregate_value_of_depreciation\" >7. Suppose the GDP at market price of a country in a particular year was Rs 1,100 crores. Net Factor Income from Abroad was Rs 100 crores. The value of Indirect taxes &#8211; Subsidies was Rs 150 crores and National Income was Rs 850 crores. Calculate the aggregate value of depreciation.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-8\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#8_Net_National_Product_at_Factor_Cost_of_a_particular_country_in_a_year_is_Rs_1900_crores_There_are_no_interest_payments_made_by_the_households_to_the_firmsgovernment_or_by_the_firmsgovernment_to_the_households_The_Personal_Disposable_Income_of_the_households_is_Rs_1200_crores_The_personal_income_taxes_paid_by_them_is_Rs_600_crores_and_the_value_of_retained_earnings_of_the_firms_and_government_is_valued_at_Rs_200_crores_What_is_the_value_of_transfer_payments_made_by_the_government_and_firms_to_the_households\" >8. Net National Product at Factor Cost of a particular country in a year is Rs 1,900 crores. There are no interest payments made by the households to the firms\/government, or by the firms\/government to the households. The Personal Disposable Income of the households is Rs 1,200 crores. The personal income taxes paid by them is Rs 600 crores and the value of retained earnings of the firms and government is valued at Rs 200 crores. What is the value of transfer payments made by the government and firms to the households?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-9\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#9_From_the_following_data_calculate_Personal_Income_and_Personal_Disposable_Income\" >9. From the following data, calculate Personal Income and Personal Disposable Income.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-10\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#10_In_a_single_day_Raju_the_barber_collects_Rs_500_from_haircuts_over_this_day_his_equipment_depreciates_in_value_by_Rs_50_Of_the_remaining_Rs_450_Raju_pays_sales_tax_worth_Rs_30_takes_home_Rs_200_and_retains_Rs_220_for_improvement_and_buying_of_new_equipment_He_further_pays_Rs_20_as_income_tax_from_his_income_Based_on_this_information_complete_Rajus_contribution_to_the_following_measures_of_income_a_Gross_Domestic_Product_b_NNP_at_market_price_c_NNP_at_factor_cost_d_Personal_income_e_Personal_disposable_income\" >10. In a single day Raju, the barber, collects Rs 500 from haircuts; over this day, his equipment depreciates in value by Rs 50. Of the remaining Rs 450, Raju pays sales tax worth Rs 30, takes home Rs 200 and retains Rs 220 for improvement and buying of new equipment. He further pays Rs 20 as income tax from his income. Based on this information, complete Raju&#8217;s contribution to the following measures of income (a) Gross Domestic Product (b) NNP at market price (c) NNP at factor cost (d) Personal income (e) Personal disposable income.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-11\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#11_The_value_of_the_nominal_GNP_of_an_economy_was_Rs_2500_crores_in_a_particular_year_The_value_of_GNP_of_that_country_during_the_same_year_evaluated_at_the_prices_of_same_base_year_was_Rs_3000_crores_Calculate_the_value_of_the_GNP_deflator_of_the_year_in_percentage_terms_Has_the_price_level_risen_between_the_base_year_and_the_year_under_consideration\" >11. The value of the nominal GNP of an economy was Rs 2,500 crores in a particular year. The value of GNP of that country during the same year, evaluated at the prices of same base year, was Rs 3,000 crores. Calculate the value of the GNP deflator of the year in percentage terms. Has the price level risen between the base year and the year under consideration?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_class_12_Economics_National_income_accounting-12\" >NCERT Solutions class 12 Economics National income accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#12_Write_down_some_of_the_limitations_of_using_GDP_as_an_index_of_welfare_of_a_country\" >12. Write down some of the limitations of using GDP as an index of welfare of a country.<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#NCERT_Solutions_for_Class_12_Economics\" >NCERT Solutions for Class 12 Economics<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/mycbseguide.com\/blog\/ncert-solutions-class-12-economics-national-income-accounting\/#CBSE_App_for_Students\" >CBSE App for Students<\/a><\/li><\/ul><\/nav><\/div>\n<p>NCERT Solutions class 12 Economics National income accounting Class 12 Economics book solutions are available in PDF format for free download. These ncert book chapter wise questions and answers are very helpful for CBSE board exam. CBSE recommends NCERT books and most of the questions in CBSE exam are asked from NCERT text books. Class 12 Economics chapter wise NCERT solution for Economics part 1 and Economics part 2 for all the chapters can be downloaded from our website and myCBSEguide mobile app for free.<\/p>\n<p><strong>Download\u00a0<a href=\"https:\/\/mycbseguide.com\/downloads\/cbse-class-12-economics\/1327\/ncert-solutions\/5\/\">NCERT solutions for\u00a0National income accounting\u00a0<\/a>\u00a0as PDF.<\/strong><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright\" src=\"https:\/\/media-mycbseguide.s3.ap-south-1.amazonaws.com\/images\/blog\/12%20Economics%20macro.jpg\" alt=\"NCERT Solutions class 12 Economics Money and Banking\" width=\"130\" height=\"175\" \/><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Microeconomics\"><\/span><strong>Microeconomics<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Introduction<\/li>\n<li>Theory o Consumer Behavior<\/li>\n<li>Production and Costs<\/li>\n<li>Theory of Firm Under Perfect Competition<\/li>\n<li>Market Competition<\/li>\n<li>Non Competitive Markets<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Macroeconomics\"><\/span><strong>Macroeconomics<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Introduction<\/li>\n<li>National Income Accounting<\/li>\n<li>Money and Banking<\/li>\n<li>Income Determination<\/li>\n<li>Government Budget and Economy<\/li>\n<li>Open Economy Macroeconomics<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"CHAPTER_Two_National_Income_Accounting\"><\/span><strong>CHAPTER Two<\/strong><strong>\u00a0<\/strong><strong>National Income Accounting<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li>Some Basic Concepts of Macroeconomics<\/li>\n<li>Circular Flow of Income and Methods of Calculating National Income\n<ol>\n<li>The Product or Value Added Method<\/li>\n<li>Expenditure Method<\/li>\n<li>Income Method<\/li>\n<\/ol>\n<\/li>\n<li>Some Macroeconomic Identities<\/li>\n<li>Goods and Prices<\/li>\n<li>GDP and Welfare<\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p style=\"text-align: justify;\"><strong>1. What are the four factors of production and what are the remunerations to each of these called?<\/strong><\/p>\n<p style=\"text-align: justify;\"><strong>Ans:<\/strong> The four factors of production are:<\/p>\n<p style=\"text-align: justify;\"><strong>i.\u00a0Land-<\/strong> It denotes the natural resources like air, water, soil, etc. The payment that is paid by the firms to acquire these services is called rent.<\/p>\n<p style=\"text-align: justify;\"><strong>ii. Labour-<\/strong> It refers to the physical and mental effort required to do a work. For example, engineer, manager, worker, etc. The payment made to the labour in exchange of his\/her services is called as wage.<\/p>\n<p style=\"text-align: justify;\"><strong>iii.\u00a0Capital-<\/strong> It refers to the monetary investments and physical and tangible investments like machinery, buildings, technology, tools, etc, which assists in production process. The payment received in exchange of these services is called interest.<\/p>\n<p style=\"text-align: justify;\"><strong>iv.\u00a0Entrepreneur-<\/strong> It refers to the individual who undertakes the risk to organise the production process. Entrepreneurs are the risk takers and often are the innovators of new techniques. They receive profit in exchange of their entrepreneurship.<\/p>\n<p style=\"text-align: justify;\">The remunerations paid to the factors of productions are called factor payments or factor incomes. These are the aggregation of rent, wage, interest and profit.<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-2\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"2_Why_should_the_aggregate_final_expenditure_of_an_economy_be_equal_to_the_aggregate_factor_payments_Explain\"><\/span><strong>2.<\/strong> <strong>Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"text-align: justify;\"><strong>Ans:<\/strong> In a two sector economy, consisting of households and firms, the only way in which the households can dispose their income is on the goods and services produced by the firms. The factors of production use their remuneration to purchase goods and services. Thus, the income will come back to the producers in the form of sales&#8217; revenue. So, there is no difference between the amount that firms distribute in the form of factor payments and consumption expenditure incurred by the households. The same process continues year after year. However, if there has been any leakage in the form of savings, imports or taxes, then there arises a difference between the aggregate consumption expenditure and aggregate factor payments.<\/p>\n<p style=\"text-align: justify;\">In the case of some leakage, the households will spend less than their factor incomes. Consequently, the firms will receive lesser amount in the form of revenue, which will reduce the production level and employment level. This process will continue in every successive round and production and employment levels will continue to drop. Thus, the equality between the aggregate consumption expenditure and the aggregate factor payments is very necessary for the smooth functioning of the economy.<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-3\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"3_Distinguish_between_stock_and_flow_Between_net_investment_and_capital_which_is_a_stock_and_which_is_a_flow_Compare_net_investment_and_capital_with_flow_of_water_into_a_tank\"><\/span><strong>3.<\/strong> <strong>Distinguish between stock and flow. Between net investment and capital, which is a stock and which is a flow? Compare net investment and capital with flow of water into a tank.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"text-align: justify;\"><strong>Ans:<\/strong><\/p>\n<table style=\"height: 298px;\" border=\"1\" width=\"762\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody>\n<tr>\n<td style=\"width: 19.95pt;\">\n<p style=\"text-align: justify;\">\n<\/td>\n<td style=\"width: 183.4pt;\">\n<p style=\"text-align: justify;\">Stock<\/p>\n<\/td>\n<td style=\"width: 19.95pt;\">\n<p style=\"text-align: justify;\">\n<\/td>\n<td style=\"width: 203.95pt;\">\n<p style=\"text-align: justify;\">Flow<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.95pt;\">\n<p style=\"text-align: justify;\">1.<\/p>\n<\/td>\n<td style=\"width: 183.4pt;\">The variables that are measured at a particular point of time. For example, bank balance as on 1<sup>st<\/sup>\u00a0Oct 2010 is Rs.5000.<\/td>\n<td style=\"width: 19.95pt;\">\n<p style=\"text-align: justify;\">1.<\/p>\n<\/td>\n<td style=\"width: 203.95pt;\">The variables that are measured over an interval of time. For example, interest earned on bank deposits for 1 year, i.e. from 1 Oct-2009 to 30 Sep 2010.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.95pt;\">\n<p style=\"text-align: justify;\">2.<\/p>\n<\/td>\n<td style=\"width: 183.4pt;\">It has no time dimensions.<\/td>\n<td style=\"width: 19.95pt;\">\n<p style=\"text-align: justify;\">2.<\/p>\n<\/td>\n<td style=\"width: 203.95pt;\">It has time dimensions, like 1 year, 6 months, 10 days, etc.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.95pt;\">\n<p style=\"text-align: justify;\">3.<\/p>\n<\/td>\n<td style=\"width: 183.4pt;\">Examples: Capital, bank deposits, water in a tank.<\/td>\n<td style=\"width: 19.95pt;\">3.<\/td>\n<td style=\"width: 203.95pt;\">Examples: Capital formation, interest on capital, water flowing in a stream.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>An example of stock can be the amount or level of water in a tank. At any point of time the amount or the level of water in a tank can be measured. Similarly, the capital is also a stock variable, as the capital can also be measured at any point of time.<\/p>\n<p>Now, if water is flowing out of a tank through a tap, then the level of water will change over time. The difference in water level over an interval of time is an example of a flow variable. Similarly, net investment gives the difference in the investment level over a period of time.<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-4\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3><span class=\"ez-toc-section\" id=\"4_What_is_the_difference_between_planned_and_unplanned_inventory_accumulation_Write_down_the_relation_between_change_in_inventories_and_value_added_of_a_firm\"><\/span><strong>4. What is the difference between planned and unplanned inventory accumulation? Write down the relation between change in inventories and value added of a firm.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans:<\/strong> The stock of unsold goods (finished and semi-finished), which a firm carry forward from one year to another year is termed as an inventory.<\/p>\n<p style=\"text-align: justify;\">Inventory accumulation can be planned or unplanned. The planned inventory accumulation refers to the inventory that a firm can anticipate or plan. For example, a firm want to raise its inventory from 1000 to 2000 units of denims and expects sales to be 10000 units. Thereby, it produces 10000 + 1000 units, i.e. 11000 units (in order to raise the inventory by 1000 units). If, at the end of the year it is found that the actual sales that got realised were also 10000, then the firm experiences the rise in its inventory from 1000 to 2000 units. The closing balance of inventory is calculated in the following manner:<\/p>\n<p style=\"text-align: justify;\">Final Inventory = Opening inventory + Production &#8211; Sale<\/p>\n<p style=\"text-align: justify;\">= 1000 + 11000 &#8211; 10000<\/p>\n<p style=\"text-align: justify;\">= 2000 units of denims<\/p>\n<h4 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"In_this_case_the_inventory_accumulation_is_equal_to_the_expected_accumulation_Hence_this_is_an_example_of_a_planned_inventory_accumulation\"><\/span>In this case the inventory accumulation is equal to the expected accumulation. Hence, this is an example of a planned inventory accumulation.<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p style=\"text-align: justify;\">Unplanned inventory accumulation is an unexpected change in an inventory. There is an unplanned accumulation in an inventory when the actual sales are unexpectedly low or high. For example, let us assume, a firm want to raise inventory from Rs 1000 to 2000 and expects sales to be 10000 and thereby produces 11000 units of denims. If, at the end of the year, the actual sales realised were 9000 units only, which were not anticipated by the firm and therefore the inventory rose by 3000 units. The unexpected inventory accumulation is calculated as:<\/p>\n<p style=\"text-align: justify;\">Final Inventory = Opening inventory + Production &#8211; Sale<\/p>\n<p style=\"text-align: justify;\">= 1000 + 11000 &#8211; 9000<\/p>\n<p style=\"text-align: justify;\">= 3000 units of denims<\/p>\n<p style=\"text-align: justify;\">Hence, this is example of unexpected inventory accumulation.<\/p>\n<p style=\"text-align: justify;\">The relation between value added and the change in inventory is shown by the given equation:<\/p>\n<p style=\"text-align: justify;\">Gross value added by a firm = Sales + Change in inventory &#8211; Value of intermediate goods<\/p>\n<p style=\"text-align: justify;\">It implies that, as inventory increases, the value added by a firm will also increase, thus confirming the positive relationship between the two.<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-5\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"5_Write_down_the_three_identities_of_calculating_the_GDP_of_a_country_by_the_three_methods_Also_briefly_explain_why_each_of_these_should_give_us_the_same_value_of_GDP\"><\/span><strong>5.<\/strong> <strong>Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans:<\/strong> GDP can be calculated by the following three methods:<\/p>\n<p><strong>(a)<\/strong> Income method<\/p>\n<p>GDP = Total payments made to the factors of production<\/p>\n<p>GDP =<img decoding=\"async\" style=\"height: 45px; width: 178px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image001.png\" \/>\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026. (i)<\/p>\n<p><img decoding=\"async\" style=\"height: 26px; width: 40px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image002.png\" \/>represents total wages and salaries received by <em>i<\/em> = th households.<\/p>\n<p><img decoding=\"async\" style=\"height: 26px; width: 36px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image003.png\" \/>represents total profit received by\u00a0<em>i<\/em>-th households.<\/p>\n<p><img decoding=\"async\" style=\"height: 26px; width: 34px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image004.png\" \/>represents total Income received by\u00a0<em>i<\/em>-th households.<\/p>\n<p><img decoding=\"async\" style=\"height: 26px; width: 40px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image002.png\" \/>represents total Rent received by\u00a0<em>i<\/em>-th households.<\/p>\n<p>Equation (1) can be simplified as<\/p>\n<p>GDP\u00a0=\u00a0<em>W<\/em>\u00a0+\u00a0<em>R<\/em>\u00a0+\u00a0<em>I<\/em>\u00a0+\u00a0<em>P<\/em><\/p>\n<p><strong>(b)<\/strong> Value added or product method<\/p>\n<p>GDP\u00a0=\u00a0Sum of gross value added by all firms in an economy<\/p>\n<p><strong>or<\/strong> GDP\u00a0=\u00a0<img decoding=\"async\" style=\"height: 24px; width: 160px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image005.png\" \/><\/p>\n<p>Where,<\/p>\n<p><img decoding=\"async\" style=\"height: 24px; width: 37px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image006.png\" \/>represents gross value added by the 1st firm<\/p>\n<p><img decoding=\"async\" style=\"height: 24px; width: 39px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image007.png\" \/>represents gross value added by the 2nd firm and so on<\/p>\n<p><img decoding=\"async\" style=\"height: 24px; width: 39px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image008.png\" \/>represents gross value added by the\u00a0nth firm<\/p>\n<p>Therefore,<\/p>\n<p>GDP =<img decoding=\"async\" style=\"height: 45px; width: 57px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image009.png\" \/><\/p>\n<p><strong>(c)<\/strong> Expenditure method or final consumption method<\/p>\n<p>GDP\u00a0=\u00a0Sum total of revenues that firms earn<\/p>\n<p><strong>Or<\/strong><\/p>\n<h5><span class=\"ez-toc-section\" id=\"GDP_Total_consumption_Investment_Government_Consumption_expenditure_Net_exports\"><\/span>GDP\u00a0=\u00a0Total consumption + Investment + Government Consumption expenditure + Net exports<span class=\"ez-toc-section-end\"><\/span><\/h5>\n<p><img decoding=\"async\" style=\"height: 45px; width: 195px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image010.png\" \/><\/p>\n<p style=\"text-align: justify;\">As households spend some part of their income on imports, some portion of consumption expenditure also comprises of imports, which are denoted by\u00a0<img decoding=\"async\" style=\"height: 24px; width: 25px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image011.png\" \/>. Similarly, some part of the investment expenditure and government consumption expenditure is spent on the foreign investment goods and imports. These portions of investment and government consumption expenditure are denoted by\u00a0<img decoding=\"async\" style=\"height: 24px; width: 22px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image012.png\" \/>and\u00a0<img decoding=\"async\" style=\"height: 24px; width: 25px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image013.png\" \/>respectively. Thus, the final households&#8217; consumption expenditure, investment expenditure and final government expenditure that are spent on the domestic firms are denoted by <img decoding=\"async\" style=\"height: 24px; width: 51px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image014.png\" \/>, <img decoding=\"async\" style=\"height: 24px; width: 43px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image015.png\" \/>and <img decoding=\"async\" style=\"height: 24px; width: 51px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image016.png\" \/>respectively.<\/p>\n<p style=\"text-align: justify;\">Substituting these values in the above equation<\/p>\n<h5 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"GDP_C_%E2%80%93_I_%E2%80%93_G_%E2%80%93\"><\/span>GDP = C &#8211; <img decoding=\"async\" style=\"height: 24px; width: 25px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image011.png\" \/>+ I &#8211; <img decoding=\"async\" style=\"height: 24px; width: 22px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image012.png\" \/>\u00a0+ G &#8211; <img decoding=\"async\" style=\"height: 24px; width: 25px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image013.png\" \/>\u00a0+<img decoding=\"async\" style=\"height: 45px; width: 42px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image017.png\" \/><span class=\"ez-toc-section-end\"><\/span><\/h5>\n<p style=\"text-align: justify;\">= C + I + G + <img decoding=\"async\" style=\"height: 45px; width: 42px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image017.png\" \/>&#8211; <img decoding=\"async\" style=\"height: 26px; width: 107px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image018.png\" \/><\/p>\n<p style=\"text-align: justify;\">=\u00a0C\u00a0+\u00a0I\u00a0+\u00a0G\u00a0+\u00a0X\u00a0\u2013\u00a0M<\/p>\n<p style=\"text-align: justify;\">The three methods give the same result for measuring GDP because what is produced in the economy is either consumed or invested. The three methods depict the same picture of an economy from three different angles. While the product method presents the value added or total production, the income method depicts the income earned by all the factors, lastly, the expenditure method presents the expenditure incurred by all the factors. In the economy, the producer employs four factors of production to produce final goods and earns revenue by sale, which is equivalent to the total value addition by the firm. The firms pay remunerations to the factors, which act as the income of all the factors.<\/p>\n<p style=\"text-align: justify;\">These remunerations are equivalent to the factors&#8217; contributions to the value addition. These factor incomes are then expended on the goods and services, which verifies the equality between the factor income and expenditure. Hence, the three methods will always give the same value of GDP.<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-6\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"6_Define_budget_deficit_and_trade_deficit_The_excess_of_private_investment_over_saving_of_a_country_in_a_particular_year_was_Rs_2000_crores_The_amount_of_budget_deficit_was_-_Rs_1500_crores_What_was_the_volume_of_trade_deficit_of_the_country\"><\/span><strong>6.<\/strong> <strong>Define budget deficit and trade deficit. The excess of private investment over saving of a country in a particular year was Rs 2,000 crores. The amount of budget deficit was (-) Rs 1,500 crores. What was the volume of trade deficit of the country?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"text-align: justify;\"><strong>Ans: <\/strong>Budget Deficit<\/p>\n<p style=\"text-align: justify;\">The excess of government expenditure over government income is termed as budget deficit.<\/p>\n<p style=\"text-align: justify;\">Budget Deficit =\u00a0G\u00a0\u2013\u00a0T<\/p>\n<p style=\"text-align: justify;\">Where,<\/p>\n<p style=\"text-align: justify;\">\u2018G\u2019\u00a0represents government expenditure<\/p>\n<p style=\"text-align: justify;\">\u2018T\u2019\u00a0represents government income<\/p>\n<p style=\"text-align: justify;\">Trade Deficit<\/p>\n<p style=\"text-align: justify;\">Trade deficit measures the excess of import expenditure over the export revenue of a country.<\/p>\n<p style=\"text-align: justify;\">Trade Deficit =\u00a0M\u00a0\u2013\u00a0X<\/p>\n<p style=\"text-align: justify;\">Where,<\/p>\n<p style=\"text-align: justify;\">\u2018M\u2019\u00a0represents expenditure on imports<\/p>\n<p style=\"text-align: justify;\">\u2018X\u2019\u00a0represents revenue earned by exports<\/p>\n<p style=\"text-align: justify;\">It is given that,<\/p>\n<p style=\"text-align: justify;\">I\u00a0&#8211;\u00a0S\u00a0= Rs.2000 crores.<\/p>\n<p style=\"text-align: justify;\">G\u00a0&#8211;\u00a0T\u00a0= (-) Rs.1500 crores.<\/p>\n<p style=\"text-align: justify;\">Therefore,<\/p>\n<p style=\"text-align: justify;\">Trade deficit = [I\u00a0&#8211;\u00a0S] + [G\u00a0&#8211;\u00a0T]\n<p style=\"text-align: justify;\">= 2000 + [-1500]\n<p style=\"text-align: justify;\">= Rs.500 crores.<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-7\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"7_Suppose_the_GDP_at_market_price_of_a_country_in_a_particular_year_was_Rs_1100_crores_Net_Factor_Income_from_Abroad_was_Rs_100_crores_The_value_of_Indirect_taxes_%E2%80%93_Subsidies_was_Rs_150_crores_and_National_Income_was_Rs_850_crores_Calculate_the_aggregate_value_of_depreciation\"><\/span><strong>7. Suppose the GDP at market price of a country in a particular year was Rs 1,100 crores. Net Factor Income from Abroad was Rs 100 crores. The value of Indirect taxes &#8211; Subsidies was Rs 150 crores and National Income was Rs 850 crores. Calculate the aggregate value of depreciation.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"text-align: justify;\"><strong>Ans:<\/strong> National Income <img decoding=\"async\" style=\"height: 26px; width: 62px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image019.png\" \/>= Rs.850 crores<\/p>\n<p style=\"text-align: justify;\"><img decoding=\"async\" style=\"height: 24px; width: 49px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image020.png\" \/>\u00a0= Rs.1100 crores<\/p>\n<p style=\"text-align: justify;\">Net factor income from abroad = Rs.100 crores<\/p>\n<p style=\"text-align: justify;\">Net indirect taxes = Rs.150 crores<\/p>\n<p style=\"text-align: justify;\"><img decoding=\"async\" style=\"height: 24px; width: 48px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image021.png\" \/>=<img decoding=\"async\" style=\"height: 24px; width: 49px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image020.png\" \/>+ Net factor income from abroad &#8211; Depreciation &#8211; Net indirect taxes<\/p>\n<p style=\"text-align: justify;\">Putting these values in the formula,<\/p>\n<p style=\"text-align: justify;\">850 = 1100 + 100 &#8211; Depreciation \u2013 150<\/p>\n<p style=\"text-align: justify;\">850 = 1100 &#8211; 50 \u2013 Depreciation<\/p>\n<p style=\"text-align: justify;\">850 = 1050 \u2013 Depreciation<\/p>\n<p style=\"text-align: justify;\">Depreciation = 1050 &#8211; 850 = Rs.200 crores<\/p>\n<p style=\"text-align: justify;\">So, depreciation is Rs.200 crores.<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-8\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"8_Net_National_Product_at_Factor_Cost_of_a_particular_country_in_a_year_is_Rs_1900_crores_There_are_no_interest_payments_made_by_the_households_to_the_firmsgovernment_or_by_the_firmsgovernment_to_the_households_The_Personal_Disposable_Income_of_the_households_is_Rs_1200_crores_The_personal_income_taxes_paid_by_them_is_Rs_600_crores_and_the_value_of_retained_earnings_of_the_firms_and_government_is_valued_at_Rs_200_crores_What_is_the_value_of_transfer_payments_made_by_the_government_and_firms_to_the_households\"><\/span><strong>8. Net National Product at Factor Cost of a particular country in a year is Rs 1,900 crores. There are no interest payments made by the households to the firms\/government, or by the firms\/government to the households. The Personal Disposable Income of the households is Rs 1,200 crores. The personal income taxes paid by them is Rs 600 crores and the value of retained earnings of the firms and government is valued at Rs 200 crores. What is the value of transfer payments made by the government and firms to the households?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"text-align: justify;\"><strong>Ans:<\/strong> <img decoding=\"async\" style=\"height: 24px; width: 48px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image021.png\" \/>= Rs.1900 crores<\/p>\n<p style=\"text-align: justify;\">PDI = Rs.1200 crores<\/p>\n<p style=\"text-align: justify;\">Personal income tax = Rs.600 crores<\/p>\n<p style=\"text-align: justify;\">Value of retained earnings = Rs.200 crores<\/p>\n<p style=\"text-align: justify;\">PDI = <img decoding=\"async\" style=\"height: 24px; width: 48px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image021.png\" \/>\u00a0&#8211; Value of retained earnings of firms and government + value of transfer payments &#8211; personal tax<\/p>\n<p style=\"text-align: justify;\">1200 = 1900 &#8211; 200 + Value of transfer payments \u2013 600<\/p>\n<p style=\"text-align: justify;\">1200 = 1100 + Value of transfer payments<\/p>\n<p style=\"text-align: justify;\">Value of transfer payment = 1200 &#8211; 1100 = Rs 100 crores<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-9\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"9_From_the_following_data_calculate_Personal_Income_and_Personal_Disposable_Income\"><\/span><strong>9. From the following data, calculate Personal Income and Personal Disposable Income.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table style=\"height: 492px;\" border=\"1\" width=\"762\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody>\n<tr>\n<td style=\"width: 26.75pt;\">\n<p style=\"text-align: justify;\">\n<\/td>\n<td style=\"width: 193.5pt;\">\n<p style=\"text-align: justify;\">\n<\/td>\n<td style=\"width: 67.5pt;\">\n<p style=\"text-align: justify;\">Rs (Crore)<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 26.75pt;\">\n<p style=\"text-align: justify;\">(a)<\/p>\n<\/td>\n<td style=\"width: 193.5pt;\">Net Domestic Product at factor cost<\/td>\n<td style=\"width: 67.5pt;\">\n<p style=\"text-align: justify;\">8,000<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 26.75pt;\">\n<p style=\"text-align: justify;\">(b)<\/p>\n<\/td>\n<td style=\"width: 193.5pt;\">Net Factor Income from abroad<\/td>\n<td style=\"width: 67.5pt;\">\n<p style=\"text-align: justify;\">200<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 26.75pt;\">\n<p style=\"text-align: justify;\">(C)<\/p>\n<\/td>\n<td style=\"width: 193.5pt;\">\n<p style=\"text-align: justify;\">Undisbursed Profit<\/p>\n<\/td>\n<td style=\"width: 67.5pt;\">\n<p style=\"text-align: justify;\">1,000<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 26.75pt;\">\n<p style=\"text-align: justify;\">(d)<\/p>\n<\/td>\n<td style=\"width: 193.5pt;\">\n<p style=\"text-align: justify;\">Corporate Tax<\/p>\n<\/td>\n<td style=\"width: 67.5pt;\">\n<p style=\"text-align: justify;\">500<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 26.75pt;\">\n<p style=\"text-align: justify;\">(e)<\/p>\n<\/td>\n<td style=\"width: 193.5pt;\">\n<p style=\"text-align: justify;\">Interest Received by Households<\/p>\n<\/td>\n<td style=\"width: 67.5pt;\">\n<p style=\"text-align: justify;\">1,500<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 26.75pt;\">\n<p style=\"text-align: justify;\">(f)<\/p>\n<\/td>\n<td style=\"width: 193.5pt;\">\n<p style=\"text-align: justify;\">Interest Paid by Households<\/p>\n<\/td>\n<td style=\"width: 67.5pt;\">\n<p style=\"text-align: justify;\">1,200<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 26.75pt;\">\n<p style=\"text-align: justify;\">(g)<\/p>\n<\/td>\n<td style=\"width: 193.5pt;\">\n<p style=\"text-align: justify;\">Transfer Income<\/p>\n<\/td>\n<td style=\"width: 67.5pt;\">\n<p style=\"text-align: justify;\">300<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 26.75pt;\">\n<p style=\"text-align: justify;\">(h)<\/p>\n<\/td>\n<td style=\"width: 193.5pt;\">\n<p style=\"text-align: justify;\">Personal Tax<\/p>\n<\/td>\n<td style=\"width: 67.5pt;\">\n<p style=\"text-align: justify;\">500<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Ans:<\/strong> Personal Income = <img decoding=\"async\" style=\"height: 24px; width: 48px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image022.png\" \/>+ Net factor income from abroad (NFIA) + Transfer Income &#8211; Undistributed profit &#8211; corporate tax &#8211; Net interest paid by households<\/p>\n<p><img decoding=\"async\" style=\"height: 24px; width: 48px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image022.png\" \/>\u00a0= Rs.8000 crores<\/p>\n<p>NFIA = Rs.200 crores<\/p>\n<p>Transfer Income = Rs.300 crores<\/p>\n<p>Undistributed profit = Rs. 1,000 crores<\/p>\n<p>Corporate tax = Rs.500 crores<\/p>\n<p>Net interest paid by households = Interest paid &#8211; Interest received<\/p>\n<p>= 1200 \u2013 1500<\/p>\n<p>= (-) Rs.300 crores<\/p>\n<p>So, putting the values in the above formula<\/p>\n<p>PI = 8000 + 200 + 300 &#8211; 1000 &#8211; 500 &#8211; (- 300)<\/p>\n<p>= 8000 + 200 + 300 &#8211; 1000 &#8211; 500 + 300<\/p>\n<p>PI = 7300<\/p>\n<p>So, Personal Income = Rs.7300 crores<\/p>\n<p>Personal Disposable income = Personal Income &#8211; Personal Payments<\/p>\n<p>= 7300 \u2013 500<\/p>\n<p>= Rs.6800 crores<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-10\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"10_In_a_single_day_Raju_the_barber_collects_Rs_500_from_haircuts_over_this_day_his_equipment_depreciates_in_value_by_Rs_50_Of_the_remaining_Rs_450_Raju_pays_sales_tax_worth_Rs_30_takes_home_Rs_200_and_retains_Rs_220_for_improvement_and_buying_of_new_equipment_He_further_pays_Rs_20_as_income_tax_from_his_income_Based_on_this_information_complete_Rajus_contribution_to_the_following_measures_of_income_a_Gross_Domestic_Product_b_NNP_at_market_price_c_NNP_at_factor_cost_d_Personal_income_e_Personal_disposable_income\"><\/span><strong>10.<\/strong> <strong>In a single day Raju, the barber, collects Rs 500 from haircuts; over this day, his equipment depreciates in value by Rs 50. Of the remaining Rs 450, Raju pays sales tax worth Rs 30, takes home Rs 200 and retains Rs 220 for improvement and buying of new equipment. He further pays Rs 20 as income tax from his income. Based on this information, complete Raju&#8217;s contribution to the following measures of income (a) Gross Domestic Product (b) NNP at market price (c) NNP at factor cost (d) Personal income (e) Personal disposable income.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans: <\/strong><\/p>\n<p><strong>(i)<\/strong> <img decoding=\"async\" style=\"height: 24px; width: 49px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image020.png\" \/>= Rs.500 [Barber collects from haircut]\n<p><strong>(ii)<\/strong> <img decoding=\"async\" style=\"height: 24px; width: 48px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image023.png\" \/>= GDP \u2013 Depreciation<\/p>\n<p>= 500 \u2013 50<\/p>\n<p>= Rs.450<\/p>\n<p><strong>(iii) <img decoding=\"async\" style=\"height: 24px; width: 48px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image021.png\" \/><\/strong>= NNP &#8211; Sales tax<\/p>\n<p>= 450 \u2013 30<\/p>\n<p>= Rs.420<\/p>\n<p>NCERT Solutions class 12 Economics National income accounting<\/p>\n<p><strong>(iv) <\/strong>PI = <img decoding=\"async\" style=\"height: 24px; width: 48px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image021.png\" \/>&#8211; Retained earnings<\/p>\n<p>= 420 \u2013 220<\/p>\n<p>= Rs.200<\/p>\n<p><strong>(v) <\/strong>PDI = PI &#8211; Income tax<\/p>\n<p>= 200 &#8211; 20<\/p>\n<p>= Rs.180<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-11\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"11_The_value_of_the_nominal_GNP_of_an_economy_was_Rs_2500_crores_in_a_particular_year_The_value_of_GNP_of_that_country_during_the_same_year_evaluated_at_the_prices_of_same_base_year_was_Rs_3000_crores_Calculate_the_value_of_the_GNP_deflator_of_the_year_in_percentage_terms_Has_the_price_level_risen_between_the_base_year_and_the_year_under_consideration\"><\/span><strong>11.<\/strong> <strong>The value of the nominal GNP of an economy was Rs 2,500 crores in a particular year. The value of GNP of that country during the same year, evaluated at the prices of same base year, was Rs 3,000 crores. Calculate the value of the GNP deflator of the year in percentage terms. Has the price level risen between the base year and the year under consideration?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"text-align: justify;\"><strong>Ans:<\/strong> Nominal GNP = Rs.2500<\/p>\n<p style=\"text-align: justify;\">Real GNP = Rs.3000<\/p>\n<p style=\"text-align: justify;\">GNP deflator=<img decoding=\"async\" style=\"height: 42px; width: 135px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image024.png\" \/><\/p>\n<p style=\"text-align: justify;\">So,<\/p>\n<p style=\"text-align: justify;\">GNP deflator =<img decoding=\"async\" style=\"height: 42px; width: 74px;\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/static\/ncert\/12\/eco\/ch02\/image025.png\" \/><\/p>\n<p style=\"text-align: justify;\">= 83.33%<\/p>\n<p style=\"text-align: justify;\">No, the price level has fallen down by 16.67 % [(100 &#8211; 83.33) %].<\/p>\n<hr \/>\n<h3 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"NCERT_Solutions_class_12_Economics_National_income_accounting-12\"><\/span>NCERT Solutions class 12 Economics National income accounting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3><span class=\"ez-toc-section\" id=\"12_Write_down_some_of_the_limitations_of_using_GDP_as_an_index_of_welfare_of_a_country\"><\/span><strong>12. Write down some of the limitations of using GDP as an index of welfare of a country.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Ans:<\/strong> Limitations of using GDP as an indicator are as follows:<\/p>\n<p style=\"text-align: justify;\"><strong>(i) Non-monetary exchanges:<\/strong> GDP measures the goods and services produced in an economy during a particular period of time. However, it does not take into account those transactions that do not come under monetary terms. In less developed countries there are non-monetary exchanges, particularly in rural areas. Hence, these transactions remain outside the domain of GDP. The household sector and volunteer sectors get ignored in GDP.<\/p>\n<p style=\"text-align: justify;\"><strong>(ii) Inflation:<\/strong> GDP does not take into account the level of prices in a country. Because of inflation, the cost of living increases leading to a decrease in the standard of living. The loss of welfare due to this decrease is not taken into consideration by GDP as an index of welfare.<\/p>\n<p style=\"text-align: justify;\"><strong>(iii) Externalities:<\/strong> Increase in the national income is associated with increased levels of pollution, accidents, disasters, shortage and depletion of natural resources, etc. These factors affect human health and lead to ecological degradation. GDP fails to consider the costs or valuations of such factors.<\/p>\n<p style=\"text-align: justify;\"><strong>(iv) Income pattern:<\/strong> GDP disregards the income distribution pattern. The increase in aggregate national income may be a result of the increase in income of a few individuals. Thus, this may lead to false interpretation of social welfare.<\/p>\n<p style=\"text-align: justify;\"><strong>(v)\u00a0Welfare: <\/strong>GDP ignores the welfare component as the goods and services produced may or may not add to the welfare to a society. For example, the production of goods, like guns, narcotic drugs, high-end luxurious goods increase the monetary value of production, but they do not add to the welfare of the majority of population.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"NCERT_Solutions_for_Class_12_Economics\"><\/span><strong>NCERT Solutions for Class 12 Economics<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>NCERT Solutions class 12 Economics National income accounting PDF (Download) Free from myCBSEguide app and myCBSEguide website. Ncert solution class 12 Economics includes text book solutions from both part 1 and part 2. NCERT Solutions for CBSE Class 12 Economics have total 12 chapters. 12 Economics NCERT Solutions in PDF for free Download on our website. Ncert Economics class 12 solutions PDF and Economics ncert class 12 PDF solutions with latest modifications and as per the latest CBSE syllabus are only available in myCBSEguide<\/p>\n<h2><span class=\"ez-toc-section\" id=\"CBSE_App_for_Students\"><\/span>CBSE App for Students<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>To download\u00a0NCERT Solutions for class 12 Physics, Chemistry, Biology, History, Political Science, Economics, Geography, Computer Science, Home Science, Accountancy, Business Studies and Home Science; do check myCBSEguide app or website. myCBSEguide provides sample papers with solution, test papers for chapter-wise practice, NCERT solutions, NCERT Exemplar solutions, quick revision notes for ready reference, CBSE guess papers and CBSE important question papers. Sample Paper all are made available through\u00a0<a href=\"https:\/\/play.google.com\/store\/apps\/details?id=in.techchefs.MyCBSEGuide&amp;referrer=utm_source%3Dmycbse_bottom%26utm_medium%3Dtext%26utm_campaign%3Dmycbseads\"><strong>the best app for CBSE students<\/strong><\/a>\u00a0and myCBSEguide website.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>NCERT Solutions class 12 Economics National income accounting Class 12 Economics book solutions are available in PDF format for free download. These ncert book chapter wise questions and answers are very helpful for CBSE board exam. CBSE recommends NCERT books and most of the questions in CBSE exam are asked from NCERT text books. 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