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Aggregates And Dimension Of National Earnings

 Aggregates and Dimension of National Earnings

Illustration 116

Given below is the facts and figures of a nation’s fiscal system, ascertain the following.

1. GNP at Factor Cost
2. NNP at Factor Cost
3. Net Domestic Product at Factor Cost
4. Net Domestic Product at market prices

Data

Value in Million $

GNP at Market Prices

200,005

Net Factor Income from Foreign nation

- 1002

Capital Consumption Stipend

15,065

Net Indirect Taxes

19,865

Solution

Given that GNP at Market Price                    $200,005

(i) GNP at Factor Cost is                                GNP at Market Prices – Indirect Taxes
                                   
                                                            =          $200,005 – 19,865

                                                            =          $180,140

(ii) NNP at Factor Cost                                   GNP at Factor Cost – Depreciation

                                                            =          $180,140 – 15,065

                                                            =          $165,075

(iii) NDP at Factor Cost                                  NNP at Factor Cost – Net Factor Earning
                                                                                                From foreign nation

                                                            =          $165,075 – (- 1002)

                                                            =          $166,077

(iv) NDP at Market Prices                              NDP at Factor Cost + Indirect Taxes

                                                            =          $166,077 + 19,865

                                                            =          $185,942

Illustration 117

Based on the facts and figures associating to a nation’s economy ascertain the following.

1. GNP at Market Prices
2. Private Earnings
3. Personal Earnings
4. Personal Disposable Income

Data

Value in Million $

Net Domestic Factor

182,669

Earnings from Domestic Product accumulating to the Government Sector

3,245

Net Factor Income from Foreign nation

-1,002

Indirect Taxes

20,250

Subsidies

3,200

Interest on National Debt

2,010

Transfers from Government Administrative Department

4,025

Other Current Transfer from other parts of the Globe

2,775

Corporation Tax

2,222

Undistributed Corporate Profits

875

Direct Taxes paid by the house holds

3,980

Consumption of Fixed Capital

9,285

Solution:

(i) GNP at Market Prices        =          Net Domestic Product at Factor Cost + Net
                                                          Factor Income from foreign nation + Capital
                                                          Consumption Stipend or Consumption Fixed
                                                          Capital + Indirect Taxes – Subsidies   

                                                =          $182,669 + (-1,002) + 9,285 + 20,250 – 3,200
                                               
                                                =          $291,570

To ascertain Private, Personal and Personal Disposable earnings, primarily we must find out the NNP at Factor Cost and as NDP at factor cost is by now made available in the given information. Also the sum of Transfer Payments is ought to be ascertained.

(a) NNP at Factor Cost           =          NDP at Factor Cost + Net Factor Income from
                                                            Foreign nation

                                                =          $182,669 + (-1,002)
                                               
                                                =          $181,667

(b) Transfer Payments            =          $4,025 + 2,775
                                               
                                              =          $6,800

(ii) Private Earnings                =          NNP at Factor Cost + Transfer Payments +
                                                           Interest on Public Debt – Social Security Contributions –
                                                           Income from Government Departments – Profits and
                                                           Surplus of Public Corporations

                                                =          $182,669 + 6,800 +2,010 – 3,245

                                                =          $188,234

(iii) Personal Earnings             =          Private Earnings – Undistributed Corporate
Profit
                                                           (or Savings of Private Corporate Sector) –
                                                           Corporation Tax

                                                =          $188,234 – 875 – 2,222
                                   
                                                =          $185,137

(iv) Personal Disposable          =          Personal Earnings – Direct Taxes paid by
   Income                                              Households

                                                =          $185,137 – 3,980
           
                                                =          $181,157

Foot Note:

  1. Transfer from government administrative departments and erstwhile current transfers from the other divisions of the sphere are under the heading Transfer Payments.
  1. Social Security Contributions and Profits and Surpluses of Public Corporations are not provided in the given question and ought to be uncared for.

Illustration 118

The below data is presented with the facts and figures concerning a nation’s economy. Ascertain the following.

1. Net National Product at Market Prices
2. Disposable Personal Earnings

Data

Value in Million $

Net Domestic Product at Factor Price

28,470

Income from Domestic Product accumulating to the Government Sector

520

Interest on National Debt

460

Transfer Payments by Government

320

Net Private donations from foreign nation

130

Net earned income from foreign nation

280

Indirect Taxes

3240

Direct Taxes

520

Subsidies

375

Taxes on Corporate profits

123

Undistributed Profits of Corporations

154

Solution

(i) Net National Product NNP is computed as follows

            NDP at Factor Price                                                                $28,470
            (+) Net Earned Income from Foreign nation                          $     280
                                                                                                           
            NNP at Factor Cost                                                                $28,750
           
           (+) Indirect Taxes                                                                  $  3,240
           
                                                                                                           $31,990
            (- ) Subsidies                                                                          $     375

            NNP at Market Price                                                              $31,615

First, in order to determine the Disposable Personal Earnings, we have to ascertain the private and Personal Earnings.

(a) Private Earnings

NNP at Factor Cost                                                                $31,615

(+) Transfer Payments by Government                                  $     320
(+) Net Private Donations from foreign nation                       $     130
(+) National Debt Interest                                                      $     460
                                                                                                           
                                                                                                $32,525
(-) Income from Domestic product accumulating                     $     520
                                                to government
Private Earnings                                                                      $32,005

(b) Personal Earnings

            Private Earnings                                                                      $32,005

            (- ) Taxes on Corporate Profits                                               $     123
            (- )Undistributed Profits of Corporations                                 $     154

            Personal Earnings                                                                    $31,728

(ii) Disposable Personal Earnings is determined as follows

            Private Earnings                                                                      $31,728
            (-) Direct Taxes on Persons                                                     $     520

            Disposable Personal Earnings                                                 $31,208

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