CA INTER ECONOMICS ADDITIONAL PRACTICE SOLUTION 1. a. NNP at Market Prices = GNP at Market Prices – depreciation Depreciation = Gross investment – Net investment = 600 – 200 = 400 NNP at market prices = 3000 – 400 = 2600 b. Net Exports = GNPMP – (C + I + G) = 3000 – (1400 + 600 + 600) = 3000 – 2600 = 400 c. Net indirect taxes = NNP at market prices – National income = 2600 – 2000 = 600 2. a. GNPMP = GDPMP + NFIA = GDPMP (as NFIA = 0) GDPMP = GDPFC + Indirect taxes – Subsides GDPFC = All factor incomes generated in the economy + Depreciation Factor incomes (National income) = Wages & Salaries + Rent + Interest + Profits = (5,000 + 2,000) + 1,000 + 2,000 + 5,000 = 15,000 Depreciation = Gross investment – Net investment = 2,700 – 1,100 = 1,600 GNPMP = 15,000 + 1,600 + (1,950 – 1,050) = 17,500 b. Personal income (PI) = National income – Corporate Profits + Dividends + Net transfer payments = 15,000 – 5,000 + 750 + (900 + 400 + 500 – 50) = 12,500 1 4. Answer c Personal Income = National Income – Undistributed corporate profit – corporate tax + Transfer payments National Income = GNP at market price – Depreciation – Indirect taxes + Subsidies = 1,700 – 190 – 173 + 20 = 1,357 Personal Income = 1,357 – 28 – 75 + 262 = Rs.1,516 cr 5. Answer b GDP at market price = C + I + G + NX = 2191 + 639 + 594 + (134 – 165) = 3393 Thus, NDP at market price = GDP at market price – depreciation = 3393 – 118 = 3275. 6. Answer e Personal Income = National Income – Undistributed corporate profits – corporate tax + Transfer payments National Income = GNP at market price – Depreciation – Indirect taxes + Subsidies = 1,900 – 190 – 173 + 20 = 1,557 Personal Income = 1,557 – 28 – 75 + 242 = 1,696 MUC 7. Answer c National income = NNP at factor cost 2 NNP at factor cost = GDP at market price – Indirect taxes + subsidies + NFIA – Depreciation Or, GDP at market price = NNP at factor cost + Indirect taxes – subsidies - NFIA + Depreciation = 96,000 + 22,800 – 12,000 – (– 6,000) + 24,000 = 1,36,800 MUC Where NFIA = (Factor income received from abroad – Factor income paid abroad) = (18000 – 24000) = – 6,000 MUC 8. Answer b Net factor Income from Abroad (NFIA) = NNPat factor cost – NDPat factor cost NNP at factor cost= 50,000 MUC NDPat factor cost = GDP market price – Depreciation – Indirect taxes + Subsidies = 70,000 – 3,000 – 2,000 + 500 = 65,500 NFIA = 65,500 – 50,000 = 15,500 MUC 9. Answer d Inflation = (230–200)/200) 100= 15.00 10. Answer b Personal income = National income – (corporate taxes + retained earnings) + Transfer payments =30000 – (720 + 1,500) + 725 = 28,505 MUC Personal disposable income = personal income – personal taxes = 28,505 – 2,000 = 26,505 Personal savings in the economy = Personal disposable income – Consumption expenditure =26505 – 22,000 = 4,505MUC 11. Answer e NNP at market price = GNP at market prices – Depreciation = 212500– (15000–10000) = 207500 NNP at factor cost = NNP at market prices – Indirect taxes + subsidies = 207500–7500+2500 = 202500 Net factor income from abroad = 202500– 162500 = 40,000 MUC. 12. Answer b GNPMP = GDPMP + NFIA = GDPMP (as NFIA = 0) GDPMP = GDPFC + Indirect taxes – Subsides GDPFC = All factor incomes generated in the economy + Depreciation Factor incomes (National income) = Wages & Salaries + Rent + Interest + Profits = (5,000 + 2,000) + 1,000 + 2,000 + 5,000 = 15,000 Depreciation = Gross investment – Net investment = 2,700 – 1,100 3 = 1,600 GNPMP = 15,000 + 1,600 + (1,950 – 1,050) = 17,500. 114.3. Answer d GDPFC = NDPMP + Depreciation – Indirect Taxes + Subsidies 5000 + (800 – 650) – 950 + 100 = 4,300 MUC. 14. a. National Income (NNPFC) = Sum of all factor incomes earned by domestic factors of production = Rent + Wages and salaries + Interest + Profits = 2,000 + 30,000 + 1,500 + 6,500 = 40,000 b. GDPMP = NNPFC + Depreciation + Indirect Taxes – Subsidies – NFIA Depreciation = Gross Investment – Net investment = 11,000 – 7,000 = 4,000 GDPMP = 40,000 + 4,000 + 4,200 – 700 = 47,500 c. Personal Income (PI) = NI – Corporate profits + Dividends + Transfer payments = 40,000 – 6,500 + 500 + 1,200 = 35,200 d. Personal Savings (PS) = PDI – Personal consumption PDI = PI – Personal income taxes = 35,200 – 8,000 = 27,200 PS = 27,200 – 21,600 = 5,600. 4.