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Class 12 Macroeconomics: Chapter 3 Solutions by Sandeep Garg

Q: 2. What are the categories of circular flow of income in chapter 3 National Income and Aggregates?

There are three types of circular flow stages.(i) Production Category: Responsible for the production of goods and services by the manufacturer. When we read it in terms of the number of goods and services produced, it is a real flow. But, it is the flow of money, if we read it in terms of the market value of the goods produced.(ii) Distribution Phase: Means the entry of income in the form of rent, interest, profits and salaries, paid by the producer sector in the domestic sector. Cash Flow.(iii) Dissolution phase: Withdrawal means the costs incurred. This category covers the cost of purchasing goods and services by households and other sectors.This is the Flow of Money from other sectors to the producer sector. These categories are shown in the image provided here.

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Class 12 Macroeconomics: Chapter 3 Solutions by Sandeep Garg

Class 12 Macroeconomics Sandeep Garg Solutions Chapter 3 - National Income and Related Aggregate

The Sandeep Garg Macroeconomics Class 12 Solutions Chapter 3 has been referred to in this article. The chapter deals with the details of the national income and related aggregate. To present a concise form of the chapter National Income and Related Aggregate, Sandeep Garg Macroeconomics Class 12 Solutions Chapter 3 are provided by Vedantu. Sandeep Garg Macroeconomics Class 12 solutions Chapter 3 National Income and Related Aggregate are considered by many commerce students as the ideal note to score well in the examination.

Chapter 3 - National Income and Related Aggregate

Let’s start with covering the concepts in this chapter:

1. Gross Domestic Product (GDPMP): GDPMP is defined as the total market value of the goods and services produced locally within a year of accounting by all production units.

‘Gross’ in GDPMP means that depreciation is included, that is, no provision is made for depreciation.
Domestic’ in GDPMP symbolizes that it includes all the storage goods and services produced by all production units located in the economic zone (whether locally produced or non-resident).
‘Market Price’ in GDPMP means that indirect taxes are included and subsidies are not included, that is, it indicates that Net Indirect Tax (NIT) is included.
‘Product’ in the GDPMP indicates that only final goods and services should be included and that medium goods should not be included to avoid double counting.

2. Gross Domestic Product by Factor Cost (GDPFC): GDPFC is defined as the total amount of goods and services produced locally within a year of accounting by all production units other than the Net Indirect Tax.

GDPFC = GDPMP - Indirect Tax Amount

3. Net Domestic Product at Market Price (NDPMP).

The NDPMP is defined as the total market value of all final goods and services produced locally within the country of its ordinary residents and non-residents during the accounting year.

NDPMP = GDPMP - Depreciation

4. Net Domestic Product at Factor Expense (NDPFC).

NDPFC refers to the total amount of revenue earned by the factor of production within the domestic area of a country during the calculation year.

NDPFC = GDPMP - Depreciation - Indirect Residual Taxes NDPFC is also known as Domestic Income or Income.

5. Gross National Product at Market Price (GNPMP).

GNPMP refers to the market value of all final goods and services produced by ordinary citizens of the country during the accounting year.

GNPMP = GDPMP + Net factor income from abroad It should be noted that GNPMP may be below GDPMP if NFIA is negative. However, GNPMP will be higher than GDPMP if NFIA approves.

6. Gross National Product at Factor Cost (GDPFC) or Gross National Income GNPFC refers to the total value of all final goods and services produced by ordinary citizens of the country during the census year.

GDPFC = GNPMP - Indirect Tax Amount

7. Net National Product at Market Price (NNPMP).

NNPMP refers to the total market value of all final goods and services produced by ordinary citizens of the country during the year of accounting.

NNPMP = GNP - Depreciation

8. Net National Product at Factor Cost (NNPFC).

NNPFC refers to the total amount of all final goods and services produced by ordinary citizens of the country during the census year.

NNPFC = GNPMP - Depreciation - Indirect Residual Tax It should be noted that NNPFC is also known as National Income.

Actual, Normal Aggregates, Activities Excluded From GDP and Is GDP Measuring Social Welfare:

National Income at Normal Amount
National Income at Current Amount
GNP to current MP
GNP to MP always
GNP Deflator

FAQs on Class 12 Macroeconomics: Chapter 3 Solutions by Sandeep Garg

1. What is the Circular Income Flow in the Sandeep Garg Macroeconomics Class 12 Solutions Chapter 3?

Refers to cash flow, revenue or the movement of goods and services in various economic sectors in a circular manner. There are two types of circular flow:

Real Flow / Product / Physical
Money / Money / Small Flow
Real flow

(i) Real flow of income means the flow of feature services from the domestic sector to the manufacturing sector and the corresponding flow of goods and services from the manufacturing sector to the domestic sector.

(ii) Let us consider a simple economy that includes only 2 sectors:

Manufacturer Category.
Home Area.

2. What are the categories of circular flow of income in chapter 3 National Income and Aggregates?

There are three types of circular flow stages.

(i) Production Category:

Responsible for the production of goods and services by the manufacturer.
When we read it in terms of the number of goods and services produced, it is a real flow. But, it is the flow of money, if we read it in terms of the market value of the goods produced.

(ii) Distribution Phase: Means the entry of income in the form of rent, interest, profits and salaries, paid by the producer sector in the domestic sector. Cash Flow.

(iii) Dissolution phase:

Withdrawal means the costs incurred. This category covers the cost of purchasing goods and services by households and other sectors.
This is the Flow of Money from other sectors to the producer sector. These categories are shown in the image provided here.

3. What do you mean by the problem of double counting?

In terms of national revenue and estimates related to class 12 notes, calculating the value of an asset more than once while estimating national income is doubled. It leads to over-estimation of national income. Hence, it is called double counting. Ways to solve the double count problem are listed below. (a) By taking the amount of final goods only. (b) By way of adding value. You are suggested to follow the solutions of Sandeep Garg Macroeconomics Class 12 Chapter 3 National Income and Aggregates. This can be found on Vedantu in the form of a free PDF for download. Students can avail this feature and many more on the website which can help them with their preparation. So do visit Vedantu

4. What is the relationship between national product and domestic product?

The concept of national product is based on the production units found within the domestic (economic) environment, used by both citizens and non-citizens. The national product of resident-based products also incorporates their contribution to productivity both within and outside the economic environment.

National Product = Domestic Product + Citizens' Contribution to Production outside the Economic Zone (Revenue from Abroad) - Non-local contribution to production within the economic zone (Factor income to overseas). You are suggested to follow Sandeep Garg Macroeconomics Class 12 Solutions Chapter 3 National Income and Aggregates for preparation.

5. What is the Unemployment Rate?

Unemployment rates tell big economists how many people from an existing group of workers (workers) can find work. Major economists agree that when the economy sees periodic growth, which is reflected in GDP growth rates, unemployment rates are often lower. This is because in terms of rising (real) GDP levels, we know that productivity is high, therefore, more workers are needed to keep up with high production levels. You are suggested to follow the answer in Sandeep Garg Macroeconomics Class 12 Solutions Chapter 3 National Income and Aggregates for preparation.