✓ Board-verified
Economics · 2025 · 6 marks
National Income AccountingCircular Flow of Income and Methods of Calculating National Income6 marksAnalyselong answer
CBSE 2025 · Region 6 · Set 1 · Q17
(a) (i) Suppose, there are only three firms in a hypothetical economy, viz. A, B and C. During a given period of time, the following transactions…
(i)
Suppose, there are only three firms in a hypothetical economy, viz. A, B and C. During a given period of time, the following transactions were under, taken by them :
(I)
Firm A sold goods worth ₹ $\displaystyle 2,000$ to firm B and ₹ $\displaystyle 1,200$ to Firm C.
(II)
Firm B sold goods worth ₹ $\displaystyle 1,100$ to Firm A and ₹ $\displaystyle 3,500$ to Firm C.
(III)
Firm C sold to households for final consumption, goods worth ₹ $\displaystyle 5$,700.
Estimate the value of Net Domestic Product at Market Price (NDP$\displaystyle _{MP}$) assuming depreciation to be ₹ 120.
(ii)
Explain the likely impact of construction of $\displaystyle 2000$ new schools providing high-quality education in a nation on Gross Domestic Product and welfare in an economy.
(i)
Distinguish between Real Gross Domestic Product (GDP) and Nominal Gross Domestic Product.
(ii)
As per a news dated April $\displaystyle 11$, $\displaystyle 2023$ :
“Electric Vehicle sales crossed one million mark in FY 2023.”
Analyse its impact on Gross Domestic Product (GDP) and economic welfare.
Marking-scheme solution
(i)
| Firms | Value of Output (in ₹) (i) | Intermediate Consumption (in ₹) (ii) | Value Added (in ₹) {(i) – (ii)} |
| A | $\displaystyle 2,000$ + $\displaystyle 1,200$ | $\displaystyle 1,100$ | $\displaystyle 2,100$ |
| B | $\displaystyle 1,100$ + $\displaystyle 3,500$ | $\displaystyle 2,000$ | $\displaystyle 2,600$ |
| C | $\displaystyle 5,700$ | $\displaystyle 1,200$ + $\displaystyle 3,500$ | $\displaystyle 1,000$ |
| $\displaystyle 13,500$ | $\displaystyle 7,800$ | ||
| Gross Domestic Product at Market Price (GDP$\displaystyle _{MP}$) | $\displaystyle 5,700$ |
Net Domestic Product at Market Price (NDP$\displaystyle _{MP}$) = GDP$\displaystyle _{MP}$ – Depreciation
= $\displaystyle 5,700$ – $\displaystyle 120$
= ₹ $\displaystyle 5,580$
(ii)
The construction of $\displaystyle 2,000$ new schools may impact the Gross Domestic Product (GDP) positively as construction generally attracts higher investments in an economy and may lead to an increase in employment opportunities. It may lead to provision of high-quality education, enhancing knowledge, skills, efficiency and increasing civic engagement. Consequently, the well-being of citizens will increase.
(i)
Real Gross Domestic Product (GDP) is the money value of all the final goods and services produced in the domestic territory of an economy, measured at base year prices.
Whereas;
Nominal Gross Domestic Product (GDP) is the money value of all the final goods and services produced in the domestic territory of an economy, measured at current year prices.
(ii)
The increased sales of Electric Vehicles (EVs) is expected to have positive impacts on both Gross Domestic Product (GDP) and welfare. An increase in the sale of EVs directly contributes to the value addition, in turn GDP of an economy. Moreover, EVs are eco-friendly as they do not produce pollutants and are energy efficient. Consequently, the well-being of citizens will increase thereby creating positive externalities.
More from National Income Accounting
- Calculate the values of Operating Surplus and Gross Domestic Product at Market Price (GDP_MP ) from the following data: S. No. Particulars Amount (in…2026
- If the Real Gross Domestic Product is ₹ 16,000 crores and Gross Domestic Product at current prices is ₹ 20,000 crores, calculate the value of price…2022
- Giving valid reasons, explain how the following would be treated while estimating domestic income? (i) Payment made by a Japanese tourist for goods…2022
- To arrive at the value of Net Value Added at Market Price (NVA_MP ), must be to/from Gross Value Added at Market Price (GVA_MP ). (Choose the correct…2025
- Briefly explain the different phases of circular flow of income. OR In an economy, if the Real Gross Domestic Product (GDP) is ₹ 300 crore and Price…2022
- Income generated from Aircrafts of Air India operating between Canada and England would be added to the domestic income ( NDP_FC ) of. (Choose the…2026
- Ms. Reeta D'Costa, retired from the post of Income Tax Commissioner in the year 2023. Apart from her pension, she also receives the following from…2026
- State any two precautions to be adopted while estimating National Income by Value Added Method. OR State any two precautions to be adopted while…2022
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.