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Economics · 2025 · 6 marks
National Income AccountingCircular Flow of Income and Methods of Calculating National Income6 marksApplylong answer
CBSE 2025 · Region 4 · Set 3 · Q16
(a) (i) On the basis of the following data, estimate the value of Net Domestic Product (NDP_FC ): S.No. Items Amount (in ₹ Crore) (i) Household…
(i)
On the basis of the following data, estimate the value of Net Domestic Product (NDP$\displaystyle _{FC}$) :
| S.No. | Items | Amount (in ₹ Crore) |
| (i) | Household Consumption Expenditure | $\displaystyle 800$ |
| (ii) | Gross Business Fixed Capital Formation | $\displaystyle 150$ |
| (iii) | Gross Residential Construction Investment | $\displaystyle 120$ |
| (iv) | Government Final Consumption Expenditure | $\displaystyle 270$ |
| (v) | Excess of Imports over Exports | $\displaystyle 20$ |
| (vi) | Inventory Investments | $\displaystyle 50$ |
| (vii) | Gross Public Investments | $\displaystyle 130$ |
| (viii) | Net Indirect Taxes | $\displaystyle 20$ |
| (ix) | Net Factor Income from Abroad | (–) $\displaystyle 25$ |
| (x) | Consumption of Fixed Capital | $\displaystyle 40$ |
(ii)
“Disposition phase of circular flow of income involves flow of factor income from firms to households.”
Justify the statement giving valid reason.
(i)
Suppose there are only three firms in an imaginary economy, viz. X, Y and Z. During a year, the following transactions took place in the economy :
(I)
Firm X sold goods worth ₹ $\displaystyle 20,000$ to Firm Y and ₹ $\displaystyle 12,000$ to Firm Z.
(II)
Firm Y sold goods worth ₹ $\displaystyle 11,000$ to Firm X and ₹ $\displaystyle 35,000$ to Firm Z.
(III)
Firm Z sold goods worth ₹ $\displaystyle 57,000$ to households for final consumption.
On the basis of the given transactions, calculate the value of Gross Domestic Product at Market Price (GDP$\displaystyle _{MP}$) in the economy.
(ii)
Discuss the likely impact of construction of $\displaystyle 20$ new hospitals in a country on the Gross Domestic Product (GDP) and Welfare in the economy.
Marking-scheme solution
(i)
Net Domestic Product at Factor Cost (NDP$\displaystyle _{FC}$) = (i)+(iv)+(ii)+(iii)+(vii)+(vi)-(v)-(x)-(viii)
= $\displaystyle 800$+$\displaystyle 270$+$\displaystyle 150$+$\displaystyle 120$+$\displaystyle 130$+$\displaystyle 50$-$\displaystyle 20$-$\displaystyle 40$-$\displaystyle 20$
= ₹$\displaystyle 1,440$ crore
(a)
(ii)
Disposition phase of circular flow of income indicates the flow of spending by the households on purchase of goods and services produced by firms.
Whereas, the distribution phase which involves the flow of factor incomes, which comprises of rent, wages, interest and profits from firms to households.
(i)
| Firms | Value of Output (in ₹) (i) | Intermediate Consumption (in ₹) (ii) | Value Added (in ₹) {(i) – (ii)} |
| X | $\displaystyle 20,000$ + $\displaystyle 12,000$ | $\displaystyle 11,000$ | $\displaystyle 21,000$ |
| Y | $\displaystyle 11,000$ + $\displaystyle 35,000$ | $\displaystyle 20,000$ | $\displaystyle 26,000$ |
| Z | $\displaystyle 57,000$ | $\displaystyle 12,000$ + $\displaystyle 35,000$ | $\displaystyle 10,000$ |
| $\displaystyle 1,35,000$ | $\displaystyle 78,000$ | $\displaystyle 57,000$ |
Gross Domestic Product at Market Price (GDP$\displaystyle _{MP}$) = ₹ $\displaystyle 57,000$
(b)
(ii)
The construction of $\displaystyle 20$ new hospitals may impact the Gross Domestic Product (GDP) positively as improved health infrastructure may lead to an increase in employment opportunities. Moreover, it may improve the health status and in turn well being of the people, consequently improving the welfare in the economy.
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CBSE Class 12 Economics past-paper question from the 2025 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.