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Class 12 Macroeconomics Sandeep Garg Solutions Chapter 4 - Measurement of National Income

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Last updated date: 14th Apr 2024
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MVSAT 2024

“Measurement of National Income” is a Significant Part of the Economics Syllabus for Board Exams.

Putting in simple terms, National Income is the amount of money earned by a country’s individuals and businesses all summed up. National income is the total value of the final output of all new goods and services produced in a country in one year. It includes all sectors that contribute to the economy. Since it is an important indicator of the nation's economy, the measurement of National Income becomes important. This is where National Income class 12 Numericals with solutions by Sandeep Garg Macroeconomics comes as a useful resource.  The students understand the concept well with help of Sandeep Garg Macroeconomics class 12 chapter 4 solutions. These contain the suggested way of answering the questions as expected by the examiners.

The experts from the latest edition of Sandeep Garg explain Measurement of National Income in Chapter 4 of the Macro Economics Solutions for Class 12 students. Macroeconomics textbook solutions for Classes 12 students. Vedantu offers students Sandeep Garg Economics Class 12 Solutions to provide them with a comprehensive view of the subject.

Students can use these insights to complete their homework or study for exams to their advantage. Our solution comes from the Measurement of National Income concept, which students would find useful to score high on board exams. Economics has many concepts, but here we provide you with the solution.

A popular and easily understandable book for class 12 macroeconomics is Introduction to Class 12 Macroeconomics by Sandeep Garg. Many questions remain unanswered at the end of every chapter in Sandeep Garg's book. This is a highly valuable book for revision and for exams.

Providing the students with comprehensive solutions for Macroeconomics Chapter 4 of Sandeep Garg, Enthusiast has prepared this resource for their benefit.

In this section, we have discussed the Sandeep Garg macroeconomics solutions in detail. Every aspect of the problem was covered in detail.

Moreover, Chapter 4's solutions can assist students in gaining a better understanding of how national income numericals are set up in the CBSE board examinationSandeep Garg macroeconomics class 12 solutions of chapter 4 provided by us will also help the students to identify their mistakes in the numericals and correct them accordingly.

Class 12 Chapter 4 Macroeconomics Sandeep Garg Solutions - Measurement of National Income

Types of Questions

Sandeep Garg Macroeconomics Class 12 solutions on National Income focus on questions that appear in the exams. Sandeep Garg Economics Class 12 solutions Macroeconomics pdf by Vedantu can be downloaded to get a detailed understanding of the types of questions that are asked in the exams. There are Short descriptive questions and Numerical Questions.

Important Topics

Class 12 Macroeconomics Chapter 4 Measurement of National Income by Sandeep Garg covers the following important topics:

1. Gross Value Addition: 

Also known as factor cost. It is an important concept. It can be calculated numerically. To begin, Net sales are added to the integral difference of opening and closing stock respectively from which intermediate products purchased are subtracted. This figure is then added to a subsidy to reach the GVA.

 

2. Net Value Addition: 

This refers to the value achieved when Net sales are added to the integral difference of opening and closing stock respectively from which intermediate consumption is subtracted. From this figure, depreciation is then subtracted to get what is called NVA.

 

3. Intermediate Consumption: 

To achieve this, from the Total Consumption, we subtract the Net Value Addition and then the depreciation. The integral difference between GST and subsidy respectively is then subtracted from this figure.

 

4. Value of Output: 

This refers to a figure achieved when the Net value is added to depreciation and intermediate consumption along with an integral difference of GST and subsidiary, respectively.

 

5. National Income at Current Price: 

The money value of goods and services produced by individuals over a time period, measured at the prices of the current year is called  National Income at Current price.

 

6. National Income at Constant Price: 

This means the money value of final goods and services produced by residents of a country in a year, measured at base year price free from price variations.

Methods of Measuring National Income

The measurement of National Income can be done using the following methods:

Sandeep Garg Macroeconomics class 12 solutions National income by Vedantu helps you understand these methods in detail.

  • Output Method: Also called Value Added Method of Production Method. In this method, the value added by each enterprise in the production of goods and services is measured. 

  • Income Method: National income in the distribution phase side is looked at in this method. Thus, under this method, national income is obtained by adding the incomes of all individuals of a country. Incomes through their services and use of land and capital add up to national production.

  •  Expenditure Method: This method calculates National Income by adding up all expenditures made on goods and services during a year, on consumer goods or capital goods by individuals, households and also includes that by government and private businesses. Gross domestic capital formation is an important determinant of measuring National Income.

Preparing from Macroeconomics Class 12 Chapter 4 Measurement of National Income

In addition to the prescribed Economics textbook that you must thoroughly read, downloading Measurement of National Income Sandeep Garg solutions class 12 by Vedantu will be of great help. It is a wholesome resource for quick revision and solved numerical questions. Following tips will be helpful for exam preparation:

  • Writing and practising help to memorise the formulae, you may need to write and practise them.

  • Refer to National Income class 12 numericals with solutions Sandeep Garg Macroeconomics every two days for regular practice.

Sandeep Garg Economics Class 12 solutions Macroeconomics pdf is easily accessible and is a  good resource for quick revision and contains topics like Gross Value Addition, Net Value Addition, Intermediate Consumption Value of Output and different methods of measuring National Income with solved numerical examples These solutions for practical questions will help you in understanding the details of the calculations.

FAQs on Class 12 Macroeconomics Sandeep Garg Solutions Chapter 4 - Measurement of National Income

1. Compare the national income at current prices with the national income at constant prices and describe the differences.

Input parameters

Current values of the national income

At constant prices, national income

patterns at constant prices

will change both according to price changes and according to quantity changes.

Prices are only affected by quantity change.

Comparatively.

National income cannot be compared between different years with this tool.

This is used more as a means to compare national incomes over time.

Growth of economic output index

It cannot be used to measure the growth of a country's economy.

A country's economic growth can be better measured with this tool.

2. What are Nominal gross Domestic Product and real gross domestic Product? 

The nominal Gross Domestic Product is an estimate of market value of the final goods and services produced in a country during a financial year at current prices. It is also referred to as GDP at current prices. 


A country's real Gross Domestic Product is defined as the market value of the final goods and services produced within its domestic territory during a financial year, as determined by using the base year prices. It is also known as GDP at constant prices.

3. What are the components of national income accounting?

National income is measured using the following methods:

  • Method for producing the product: Product method is also known as value addition method and is based on how much value is added to a product at each stage of production. According to the product method, the economy is typically divided into different sectors, such as fishing, agriculture, and transportation. In order to calculate national income, the total output of the companies in the economy must be added. This method provides an estimate of the contribution of each sector to the national income, which shows how the contributions of different sectors vary depending on the sector. 

  • Methods of determining income: The national income is derived by adding up the pre-tax incomes earned by individuals and businesses in the country. It includes wages and salaries, rents from buildings and land, interest on capital, profits, etc. This method of income distribution shows how the national income is distributed among the various earning groups within the economy.

  • The method of expenditure: Under this method, the national income is calculated by adding up the expenditures made by individuals, businesses, and the government. Therefore, national income combines consumer spending, investments made by businesses, net exports, and government spending.

4. What is the significance of national income accounting?

  • Inputs and outputs of an economy can be measured using the statistics provided by national income accounting.

  • Government economic policy is formulated based on the data provided, and systemic changes in the economy are also recognized through the data.

  • The trend of economic activity level is identified through national income accounting. Data can provide explanations for a wide range of socio economic phenomena, which aid policymakers in structuring better economic policies.

  • In order to determine the rate of interest and to set or revise monetary policy, central banks can use national income accounting statistics.

  • In addition, the government uses data on GDP, investments, and expenditures to assist in deciding whether to make changes to infrastructure spending and tax rates.

  • Additionally, national income accounting data provides an overview of how different sectors, compared to one another, contribute to economic growth.

5. How do you explain the National Income Accounting Equation?

As illustrated in the following equation, the national income equation represents the relationship between national income and the economy's expenses, among other characteristics. 

Y=C + I + G + (X-M) 

Where:

  • Y-Income at the national level (Y)

The income or output of Y is represented. ... Output or income is represented here. In view of the fact that Y is the total value of all goods and services purchased by consumers, businesses, and governments, this is necessary for economic output. The gross domestic product is also affected by Y.


  • C-Consumption expenditures - Personal

Personal consumption expenditures (PCEs) are defined as imputed household expenditures defined over a specified period of time. ... The PCE Price Index measures changes in the price of consumer goods and services based on personal consumption expenditures.


  • I – Private investment

An investment fund that solicits public investment is considered private. Investment company exemptions in the Investment Company Act of 1940 classify private funds as such. Private investment funds include hedge funds and private equity funds, which are among the most commonly encountered.


  • G – Government spending

Spending on final goods and services by the government is referred to as government spending (G). Generally, this includes salaries of public servants, the purchase of military weapons, and any investment expenditures on behalf of the government. The amount does not include any transfer payments, such as social security or unemployment compensation.


  • X – Exports & M – Imports

(X-M) is the net export quantity in the above equation. The net export value is the difference between a country's total export value and its total import value minus the total value of its exports. The figure is positive if a country has an export surplus.


A negative net exports figure on the other hand signifies a trade deficit. In economics, trade surpluses or deficits indicate a country's balance of trade (which, in essence, is whether the country is a net exporter or importer, and how large that deficit is).