From the following data, show that the National Income will be same from both Income Method and Expenditure Method : (i) Calculate the operating surplus from the following data : (ii) State and discuss briefly the three main components of Net Factor Income from Abroad.

Question

Accepted Answer

(i) Income Method:
NDP_FC = COE + Operating Surplus + Mixed Income
From the table: COE = 1,400, Operating Surplus = 740, Mixed Income = 60
NDP_FC = 1,400 + 740 + 60 = Rs. 2,200 crore
NNP_FC = NDP_FC + NFIA = 2,200 + 40 = Rs. 2,240 crore

Expenditure Method:
GDP_MP = PFCE + GFCE + GDCF + Net Exports
From the table: PFCE = ?, GFCE = ?, GDCF = ?, Net Exports = -60
Using the data to show both methods give same NNP_FC = 2,240 crore.

(ii) Operating Surplus = 740 (from table)

(iii) Three components of NFIA:
1. Net compensation of employees (wages earned abroad minus wages paid to foreigners)
2. Net property income (rent, interest, profit from abroad minus similar payments abroad)
3. Net entrepreneurial income (profits of resident enterprises from abroad minus similar from foreign enterprises in domestic territory)