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Homework1

School of LHSB Department of Management

NAME OF STUDENT: Sourabh Kumar Pandey


ROLL NO: RS1009B32
REG NO: 11010334

Name of the faculty member: PRABHJOT KAUR


Course No: ECO121 Course Title: Macroeconomics
Class: B.COM professional Section S1009 Batch: 2010
Max. Marks: 5 Date of Allotment: 18-01-11 Date of Submission: 31 Dec 2011
Q1: If you woke up in the morning and found that nominal GDP had doubled overnight,
what statistic would you need to check before you began to celebrate?

ANSWER
If there is such thing the first thing to do is to cheek the CFO site and stock exchange
market and RBI polices and then after if that’s true then time to celebrate.

Q2: Per capita Income is just an average and is affected by extreme values. Therefore it
cannot be taken as an indicator of standard of living of people of the country. Give logic in
support of your answer.

ANSWER
Per capita Income is just an average and is affected by extreme values. Therefore it cannot
be taken as an indicator of standard of living of people of the country because per capita
income is an average of national income or in other numerically national income divided
by population of our nation and it does not define the sanded of living of each and every
people because some are having more and some of them less some are rich some are poor
it depend on their personal income.

Q3: National income does not necessarily refer to income produced within the borders of a
country. In the context to this statement explain the difference between GNP and GDP?

ANSWER
National income does not necessarily refer to income produced within the borders of a
country. It may be from abroad or from rest of world.
GDP: - Gross Domestic Product means the income of country or the nation during a
finical year writhen there domestic boundary.
GNP:- Gross National Product means the income of country or the nation during a
finical year but it also i9nclude the income earn by India or Indians out of the domestic
territories or numerically it is like
GNP= GDP+ Net Factor Income From Abroad (NFIA)
So National income does not necessarily refer to income produced within the borders of a
country.
Q4: For the purposes of assessing an economy’s growth performance which is the more
important statistic-Real GDP or Nominal GDP.

ANSWER
For the purposes of assessing an economy’s growth performance more important statistic-
Real GDP because GDP" may refer to "nominal" or "current" or "historical" GDP, to
distinguish it from the real GDP. The real GDP is sometimes called "constant" GDP
because it is expressed in terms of constant prices. Depending on context, "GDP" may also
refer to real GDP,
Real GDP growth on an annual basis is the nominal and abnormal GDP growth rate
adjusted for inflation and expressed as a percentage. Because Real GDP is adjusted for
changes in prices and inflation throughout the year, it can be thought of in terms of
'purchasing power'. As a result, individual purchasing power can be measured by Real
GDP per capita, i.e., real GDP divided by the size of the population.
Real GDP is the useful concept for figuring out a country’s growth performance.
Nominal GDP may rise because of increases in prices rather than growth in real output.

Q5: There are many difficulties in measuring National income, yet no country can afford
not to measure National income. Discuss.

ANSWER
Yes there are many in measuring National income, yet no country can afford not to
measure National income because it is the mean of knowing there contribution of varies
sector in economy and there share and also it help the country to know there growth
during a time period and also get a numeric way to compare to other country so every
country measure National income.

Q6: Suppose in our country, everyone decides to take life a little easier and length of the
average work per week falls by 25%. How will it affect GDP? How will it affect economic
welfare? Support your answer by suitable examples.

ANSWER
If we take the case of the question that everyone started taking life easier and work fall
25% per week then the GDP will also go down with the reduce of work .let take a example
of a person who is working in factory on the wages weekly and get RS 500 per week and
when he reduce by 25% his income also decrease and the personal income reduce and the
government share of tax also reduce .and the production will also reduce so the share of
business sector in economy so the GDP will be affected in negative way and it will reduce
with this circumstance.
Q7:
Lakh Rs.
Corporation Taxes 250
Undistributed profits 460
Personal consumption expenditure 7500
Personal income tax 700
Personal saving 800
Interest on national debt 425
Net current transfer from abroad -20
NFIA -60
current transfer from govt 75
Income from domestic product accruing 2500
to govt.

From given information find


a. NDP at factor cost
b. Personal disposable income

ANSWER
NDP fc= 460+800+425+75+2500
= 4260 ans

Personal disposable income= Personal income-tax


= {2500-60-20+75+425-250}-700
= 2920-700
= 2210.

Q8: Prices were much higher in India in 2008 than in 2000. Does this fact mean that
people were economically better off in 2000? Why or Why not.

ANSWER
No because in 2000 there was no good technology as there is in 2008. And the rate of
inflation was not so much in 2000 as compare to 2008 so in the other way people are
developing but price does not show that people are economically better or not it is just a
money value increase or decrees.
Q9: What is the difference between intermediate and final goods and services? In which of
these categories do capital goods, such as factories and machines, fall? Why is the
distinction between intermediate and final goods important for measuring GDP?

ANSWER
Intermediate goods and services are used up in producing other goods in the same period
(year) in which they were produced, while final goods and services are those that are
Purchased by consumers or are capital goods that are used to produce future output. The
distinction is important, because we want to count only the value of final goods produced
In the economy, not the value of goods produced each step along the way.

Q10: State in case of each of the following items whether they are included in GNP,NNP
and personal income:
a. Depreciation
b. Old age pensions
c. Unemployment Allowance
d. Social security payments
e. Excise revenue
f. State sales tax revenue
g. Salary of the govt. officials

ANSWER
a. Depreciation is included in GNP.
b. Old age pensions is included in personal income
c. Unemployment Allowance is included in personal income
d. Social security payments is included in personal income
e. Excise revenue is included in NNP
f. State sales tax revenue is included in GNP
g. Salary of the govt. officials is included in GNP