For a hypothetical economy, assuming there are only two firms (X and Y) with equal values of Gross Value Added (GVA). On the basis of the following data, estimate the value of Domestic Sales of both the firms (X and Y) : 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 various sources : - Rental income from a flat she owns. - Interest income from her fixed deposits. - Money sent by her children settled abroad. Identify and classify, her monthly incomes into 'factor income' and 'transfer income', with valid reasons.

Question

Accepted Answer

(i) Given: GVA_X = GVA_Y

From table:
- Value of Output of firm Y = 700
- Purchases by X from Y = 200
- Exports by X = 100
- Purchases by Y from X = 150
- Additions to Stock of X = 50

GVA = Value of Output - Intermediate Consumption
Since GVA_X = GVA_Y:
GVA_Y = 700 - IC_Y
GVA_X = Value of Output_X - IC_X

IC_X = Purchases from Y = 200
IC_Y = Purchases from X = 150

GVA_Y = 700 - 150 = 550
GVA_X = 550 (since equal)
Value of Output_X = GVA_X + IC_X = 550 + 200 = 750

Sales of X = Value of Output_X - Change in Stock = 750 - 50 = Rs. 700 crore
Sales of Y = Value of Output_Y - Change in Stock_Y = 700 - 0 = Rs. 700 crore
(Change in Stock of Y not given, assumed 0)

(ii) Reeta's incomes:
- Rental income = Factor income (income from property)
- Interest income = Factor income (income from lending)
- Money from children abroad = Transfer income (no productive service)