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CBSE Class 12 Commerce Economics National Income And Related Aggregates Complete Notes

CBSE Class 12 Commerce Economics National Income And Related Aggregates : CBSE is a renowned educational Board, which comes under the Union Government of India. This eminent board was formed in 1952 and associated with the Board of High School and Intermediate Education, Rajputana. Ajmer, Gwalior, Merwara and Central India were included in the administrative territory of this board along with the other places including Bhopal, Ajmer and Vindhya Pradesh. From 1952 onwards, it has been providing a standard education and robust learning environment to all. The Central Board of Secondary Education or CBSE is a prestigious board of education and it provides affiliation to public and private schools. Apart from this, all Jawahar Navodaya Vidyalayas and kendriya vidyalayas are affiliated to this board.

CBSE Class 12 Commerce Economics National Income And Related Aggregates Complete Notes

CBSE Class 12 Commerce Economics National Income And Related Aggregates : CBSE Basic Concepts for Class XII Ecomonics -National Income and Related Aggregates . Based on CBSE and CCE guidelines. The students should read these basic concepts to gain perfection which will help him to get more marks in CBSE examination.

Download here CBSE Class 12 Commerce Economics National Income And Related Aggregates Complete Notes in PDF Format 

CBSE Class 12 Commerce Economics National Income And Related Aggregates Complete Notes

CBSE Class 12 Commerce Economics National Income And Related Aggregates :   The related aggregates of national income are:

  1. Gross Domestic Product at Market price (GDPMP)
  2. Gross Domestic Product at Factor Cost (GDPFC)
  3. Net Domestic Product at Market Price (NDPMP)
  4. Net Domestic Product at FC or (NDPFC)
  5. Net National Product at FC or National Income (NNPFC)
  6. Gross National Product at FC (GNPFC)
  7. Net National Product at MP (NNPMP)
  8. Gross National Product at MP (GNPMP)

1. Gross Domestic Product at Market Price

It is the money value of all the final goods and services produced within the domestic territory of a country during an accounting year.

GDPMP = Net domestic product at FC (NDPFC) + Depreciation + Net Indirect tax

2. Gross Domestic Product at FC

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It is the value of all final goods and services produced within domestic territory of a country which does not include net indirect tax.

GDPFC = GDPMP – Indirect tax + Subsidy

GDPFC = GDPMP – NIT

3. Net Domestic Product at Market Price

It is the money value of all final goods and services produced within domestic territory of a country during an accounting year and does not include depreciation.

NDPMP = GDPMP – Depreciation

4. Net Domestic Product at FC

It is the value of all final goods and services which does not include depreciation charges and net indirect tax. Thus it is equal to the sum of all factor incomes (compensation of employees, rent, interest, profit and mixed income of self employed) generated in the domestic territory of the country.

NDPFC = GDP at MP – Depreciation – Indirect tax + Subsidy

5. Net National Product at FC (National Income)

It is the sum total of factor incomes (compensation of employees + rent + interest + profit) earned by normal residents of a country in an accounting year.

NNPFC = NDPFC + Factor income earned by normal residents from ROW – factor payments made to ROW

6. Gross National Product at FC

It is the sum total of factor incomes earned by normal residents of a country along with depreciation, during an accounting year.

GNPFC = NNPFC + Depreciation

7. Net National Product at MP

It is the sum total of factor incomes earned by the normal residents of a country during an accounting year including net indirect taxes.

NNPMP = NNPFC + Indirect tax – Subsidy

8. Gross National Product at MP

It is the sum total of factor incomes earned by normal residents of a country during an accounting year including depreciation and net indirect taxes.

GNPMP = NNPFC + Depreciation + NIT

CBSE Class 12 Commerce Economics National Income And Related Aggregates Complete Notes

CBSE Class 12 Commerce Economics National Income And Related Aggregates : The modern concept of National Income is more dynamic in the content than earlier concepts. The National Income Committee of India defined national income as: “ A National Income estimate measures the volume of commodities and services turns out during a given period, counted without duplication.” We can think of the aggregate income of an economy in three different ways. In an economy, there are three flows, flowing at the same time: income, output and expenditure. When something is produced factors of production is paid which is their income, which they (income receiver) spend on consumption or investment. Actually, expenditure is just another name for income. Three types of flows: income, output and expenditure are always equal to each other for a particular period of time giving rise to what we call triple identity: output = income = expenditure.

GROSS NATIONAL PRODUCT (GNP)

Gross National Product is the total amount of final goods and services which the labour and capital of a country working on its natural resources produced in a year. When we express the value of this aggregates output in money, it is called Gross National Income. Gross National Product at market price is the market value of the aggregate goods and services produced in the country in a year

There are two things we should be careful about GNP

  • It is a monetary measure of the total goods and services produced during the period, because there is no other method of adding up the heterogeneous types of goods and services. GNP thus obtained is what economists would call Nominal GNP. But nominal GNP can not be considered to compare one year with the other. We may find nominal GNP for a particular year may be greater than previous year only because the price is raised, there being no change in actual production. For comparison over a time we need real GNP – obtained when any change in price of goods and services which enter into output have been removed and taken care of.
  • In calculating the value of production, we must take care to avoid firms are further processed by the other firms. Only the value added must be taken into account, that is, the value of intermediate goods has to be deducted.
  • There comes a problem of distinction between final goods and intermediate products. Final products are those once produced and/or purchased but not resold during the current accounting period and goods purchased for resale with or without further processing in the physical sense are termed as intermediate goods. Coal purchased by the household for direct consumption is final product but by a steel mill is an intermediate product. GNP figure represents the gross value of final product turned out by the whole economy in a specific period.

CBSE Class 12 Commerce Economics National Income And Related Aggregates Complete Notes

CBSE Class 12 Commerce Economics National Income And Related Aggregates : When we deduct depreciation charges for renewals, repairs and obsolescence from gross national income we have Net National Income at market price. Thus, GNP at market price –depreciation = NNP at market price. Depreciation means the loss of value suffered by nation’s stock of fixed capital through wear and tear. The concept of NNP is that it clarifies the net increase in total production over and above current consumption and current replacement investment.

 GROSS NATIONAL EXPENDITURE

In an economy total income always equal total expenditure, on account of the dual nature of monetary transactions. Without expenditure, there cannot be any income as one man’s expenditure is other man’s income. The earning of the factors of production is made of expenditure on goods and services by individual. GNE is the sum total of all consumption and investment expenditure. GNE consist of personal consumption expenditure, gross private domestic investment on new construction, net foreign investment and government purchase of goods and services excluding transfer payments, GNE is sum of all final expenditure and is not the sum of all expenditure made in a country during a given period. Only those transactions are to be included which pertain to the purchase of final goods and services and which don not exchange hands again during the same period, that is, it is essential to exclude all purchases which are of intermediate nature.

Performance of an economy depends on the amount of goods and services produced in that economy. In monetary terms its measure is the Gross Domestic Product (GDP), Gross National Income (GNI), and Net National Income (NNI). Apart from these macro-economic aggregates, the other important indicators to measure health of economy are capital formation and savings. Thus, measurement of these macroeconomic indicators is an extremely important exercise, which requires collection and analysis of large volume of data. The conceptual framework guiding such an exercise has to be robust and evolve with the time to keep pace with the dynamics of the manifested world.

CBSE Class 12 Commerce Economics National Income And Related Aggregates Complete Notes

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