Question

Section C - 2

Use the following information and calculate the following: Explain the steps and formula clearly while doing the calculation showing formula and steps is a MUST. Direct writing of the answer will not be awarded with the marks. Please don’t write the short forms of the formulas write full forms with clarity in detail.

No

Items

Values

1.

Corporate tax

39692

2.

Government final consumption expenditure

4587

3.

Wage

480291

4.

Undistributed profit

18983

5.

Rent

35892

6.

Interest

35681

7.

Income earned by doctors and entrepreneurs

25897

8.

Net Indirect Taxes

1287

9.

Net Domestic Capital Formation

5897

10.

Salaries

239852

11.

Private Final Consumption Expenditure

3799

12.

Royalty

17982

13.

Net Factor Income from Abroad

5989

14.

Dividend

28970

15.

Consumption on Fixed Capital

897

16.

Social Security Scheme Contributed by the employer

328722

17.

Social Security Scheme Contributed by the employee

56897

18.

Net Export

1897

1. Calculate the National Income through Income Method.

2. Calculate the National Income through Expenditure Method.

Answer 1

Answer 1:

National Income through Income Method=Net National Product at Factor Cost

=Net Domestic Product at Factor Cost+Net Factor income from abroad

=Compensation of Employees (Salaries+Wages+Social security contribution by employer)+Operating Surplus(Rent+Interest+Royalty+Dividend+Corporate tax+undistributed profits)+Mixed income of self employed(Income earned by doctors and entrepreneurs)+Net Factor income from abroad.

=Salaries+Wages+Social security contribution by employer+Rent+Interest+Royalty+Dividend+Corporate tax+undistributed profits+Income earned by doctors and entrepreneurs+Net Factor income from abroad

=239852+480291+328722+35892+35681+17982+28970+39692+18983+5989=1232054.

Answer 2:

National Income through Expenditure Method=Net National Product at Factor Cost

=Private final consumption expenditure+Net Domestic Capital Formation+Government final consumption expenditure+Net Exports+Net factor income from abroad-Net Indirect taxes

=3799+5897+4587+1897+5989-1287=20882.

Note:Social security contribution by employees is not taken into account for calculating national income. And Consumption of fixed capital is also ignored because Net domestic capital formation is given.Consumption of fixed capital is deducted out of the Gross domestic capital formation.