chapter 4

Question 1

value added method is also called

Answer 1

product method
inventory method
net output method
industrial origin method
commodity service method

Question 2

value added method

Answer 2

the addition of value to the raw material by a firm, by virtue of its productive activities

Question 3

value added=

Answer 3

value of output - intermediate consumption

Question 4

sum of GVA at mp =

Answer 4

GDP at mp

Question 5

intermediate consumption

Answer 5

the expenditure incurred by a production unit on purchasing those goods and services from other production units, which are meant for resale or for using up completely during the same year.

Question 6

final consumption

Answer 6

the expenditure on goods and services meant for final consumption and investment

Question 7

value of output

Answer 7

market value of all goods and services produced during a period of one year

Question 8

value of output=

Answer 8

sales+ change in stock

Question 9

change in stock=

Answer 9

closing stock- opening stock

Question 10

steps of calculating national income using value added

Answer 10

1. identify and classify the production units
2. estimate gross domestic product at market price
3. calculate domestic income
4. estimate NFIA to arrive at national income

Question 11

precautions of value added method

Answer 11

1. intermediate goods are not to be included in the national income
2. sale and purchase of second hand goods are not included
3. production of services for self consumption are not included
4. production of goods for self consumption are included
5. imputed value of owner occupied house should be included
6. change in stock of goods will be included
7. sale and purchase of shares, bonds and debentures will not be included

Question 12

double counting

Answer 12

counting of an output more Tham once while passing through various stage of production

Question 13

how to avoid double counting?

Answer 13

1. final output method
2. value added method

Question 14

value added method gives me

Answer 14

GVA at mp
GDP at mp

Question 15

income method

Answer 15

all the incomes that accrue to the factor of production by way of wages, profits, rent, interest etc are summed up to obtain the national income

Question 16

elements of income method

Answer 16

1. compensation of employees
2. rent and royalty
3. interest
4. profit
5. mixed income

Question 17

compensation of employee

Answer 17

refers to the sum total of remuneration paid to employees, by employer for rendering productive service in the form of cash/kind/social society contribution.

Question 18

3 elements of compensation of employee

Answer 18

wages and salaries
wages and salaries in kind
employers contribution to social security scheme

Question 19

profit=

Answer 19

corporate tax+divided+retained earning

Question 20

mixed income

Answer 20

it is the income generated by own-account workers and unincorporated enterprises

Question 21

steps of income method

Answer 21

1. identify and classify the production units
2. estimate the factor income paid by each sector
3. calculate domestic income
4. estimate NFIA and calculate national income

Question 22

precaution of income method

Answer 22

windfall gains are to included
transfer incomes are not included
income from sale of second-hand goods will not be included
income from sale of shares, bonds and debentures are not included
payments out of past savings are not included
inputed values off services provided by ours of production units will be included