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Economics · 2023 · 6 marks
National Income AccountingCircular Flow of Income and Methods of Calculating National Income6 marksAnalyselong answer
CBSE 2023 · Region 1 · Set 2 · Q17
(a)“In the estimation of Gross Domestic Product (GDP) using expenditure method, focus lies only on expenditure by the residents of the country.”Do you agree with the given statement ? Give valid reasons for your answer.(b)“National income exceeds domestic income only when exports are greater than imports.” Comment.
(a)
“In the estimation of Gross Domestic Product (GDP) using expenditure method, focus lies only on expenditure by the residents of the country.”
Do you agree with the given statement ? Give valid reasons for your answer.
(b)
“National income exceeds domestic income only when exports are greater than imports.” Comment.
Marking-scheme solution
(a)
No. This is because Gross Domestic Product (GDP) by expenditure method takes into account the aggregate spending on all the final goods and services in the domestic territory, whether incurred by the residents or non-residents during a given period of time.
(b)
Net factor income from abroad (NFIA) is the difference between National income (NNP$\displaystyle _{FC}$) and Domestic income (NDP$\displaystyle _{FC}$).
Net exports is the excess of exports over imports.
National income exceeds domestic income only when NFIA is positive i.e. factor income from abroad is greater than factor income to abroad, irrespective of whether exports are greater than or less than imports.
NNP$\displaystyle _{FC}$ = (PFCE + GFCE + NDCF + NX ) + NFIA - NIT
NNP$\displaystyle _{FC}$ = NDP$\displaystyle _{FC}$ + NFIA
Net Exports being a part of National Income is already included whereas, NFIA is added to arrive at the value of NNP$\displaystyle _{FC}$ from NDP$\displaystyle _{FC}$.
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CBSE Class 12 Economics past-paper question from the 2023board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.