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calculate NNPat FC by income method and expenditure method :1. current transfer from rest of world 1002. govt. purchases of goods and services 8003. compensation of employees paid by the govt. 2004. wages and salaries 38005. dividends 5006. rent 2007. interest 1508. net domestic capital formation 5009. profit 80010. employer contribution to social security saving scheme 20011. import 5012. factor income to abroad 3013. depreciation 4014. private final consumption exp. 400015. net indirect tax 300

Question

calculate NNPat FC by income method and expenditure method :1. current transfer from rest of world 1002. govt. purchases of goods and services 8003. compensation of employees paid by the govt. 2004. wages and salaries 38005. dividends 5006. rent 2007. interest 1508. net domestic capital formation 5009. profit 80010. employer contribution to social security saving scheme 20011. import 5012. factor income to abroad 3013. depreciation 4014. private final consumption exp. 400015. net indirect tax 300

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Solution

To calculate NNP at factor cost (FC) by income method, we need to add up all the incomes earned by the factors of production i.e., rent, wages, interest and profit. We also add net factor income from abroad and subtract depreciation.

Here's the calculation:

  1. Rent = 200
  2. Wages and Salaries = 3800
  3. Interest = 150
  4. Profit = 800
  5. Employer contribution to social security saving scheme = 200
  6. Net factor income from abroad = 100 (current transfer from rest of the world) - 30 (factor income to abroad) = 70
  7. Depreciation = 40

So, NNP at FC (Income method) = Rent + Wages and Salaries + Interest + Profit + Employer contribution to social security saving scheme + Net factor income from abroad - Depreciation

= 200 + 3800 + 150 + 800 + 200 + 70 - 40 = 5180

To calculate NNP at FC by expenditure method, we add up all the expenditures i.e., private final consumption expenditure, government purchases of goods and services, and net domestic capital formation. We also add net exports (exports - imports) and subtract net indirect tax.

Here's the calculation:

  1. Private final consumption expenditure = 4000
  2. Government purchases of goods and services = 800
  3. Net domestic capital formation = 500
  4. Net exports = 0 (since no data on exports is given) - 50 (imports) = -50
  5. Net indirect tax = 300

So, NNP at FC (Expenditure method) = Private final consumption expenditure + Government purchases of goods and services + Net domestic capital formation + Net exports - Net indirect tax

= 4000 + 800 + 500 - 50 - 300 = 4950

So, the NNP at FC calculated by income method is 5180 and by expenditure method is 4950. The difference could be due to statistical discrepancies or errors in data collection.

This problem has been solved

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