Determination of Income and Employment — Economics STD 12 Humanities & Commerce — Question

Giving reason explain how the following should be treated in estimation of national income:

1. Payment of interest by a firm to a bank.
2. Payment of interest by a bank to an individual.
3. Payment of interest by an individual to a bank.

From the following data, calculate “national income” by (1) income method and(2) expenditure method:

		(Rs. in crores)
1	Interest.	150
2	Rent.	250
3	Government final consumption expenditure.	600
4	Private final consumption expenditure.	1200
5	Profits.	640
6	Compensation of employees.	1000
7	Net factor income to abroad.	30
8	Net indirect taxes.	60
9	Net exports.	(-)40
10	Consumption of fixed capital.	50
11	Net domestic capital formation.	340

Do you consider a commercial bank ‘creator of money’ in the economy?

Calculate net national disposable income from the following data:

	(Rs. in Crores)
Gross domestic product at market price	2000
Net current transfers to rest of the world	(-)200
Net indirect taxes	150
Net factor income to abroad	60
National debt interest	70
Consumption of fixed capital	200
Current transfers from Government	150

Calculate “Gross National Product at Market Price” from the following data:

	( in lakhs)
Compensation of employess	2,000
Interest	500
Rent	700
Profits	800
Employer’s contribution to social security schemes	200
Dividends	300
Consumption of fixed capital	100
Net indirect taxes	250
Net exports	70
Net factor income to abroad	150
Mixed income of self-employed	1,500

Explain the following functions of Central Bank:

1. Custodian of foreign exchange reserves.
2. Lender of last resort.

What is ‘deficient demand’ in macroeconomics? Show it on a diagram. Explain the role of open market operations in correcting it.

Calculate ‘Net National Product at Market Price’ and ‘Personal Income’:

		(₹ crore)
(i)	Transfer payments by government	7
(ii)	Government final consumption expenditure	50
(iii)	Net imports	(-)10
(iv)	Net domestic fixed capital formation	60
(v)	Private final consumption expenditure	300
(vi)	Private income	280
(vii)	Net factor income to abroad	(-)5
(viii)	Closing stock	8
(ix)	Opening stock	8
(x)	Depreciation	12
(xi)	Corporate tax	60
(xii)	Retained earnings of corporations	20

Explain with the help of saving and investment curves, the determination of equilibrium level of income.OR
Explain the determination of equilibrium level of income using S - I approach.