Class 12 Macro Economics - Chapter National Income Accounting NCERT Solutions | What are the four factors of production
What are the four factors of production and what are the remunerations to each of these called?
The four factors of production are:
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Land – It denotes the natural resources like air, water, soil, etc. The payment that is paid by the firms to acquire these services is called rent.
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Labour – It refers to the physical and mental effort required to do a work. For example, engineer, manager, worker, etc. The payment made to the labour in exchange of his/her services are called wages.
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Capital – It refers to the monetary investments and physical and tangible investments like machinery, buildings, technology, tools, etc. which assists in the production process. The payment received in exchange of these services is called interest.
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Entrepreneur – It refers to the individual who undertakes the risk to organise the production process. Entrepreneurs are the risk takers and often are the innovators of new techniques. They receive profit in exchange for their entrepreneurship. The remunerations paid to the factors of productions are called factor payments or factor incomes. These are the aggregation of rent, wage, interest and profit.
More Questions From Class 12 Macro Economics - Chapter National Income Accounting
- Q:-
Write down some of the limitations of using GDP as an index of welfare of a country.
- Q:-
From the following data, calculate Personal Income and Personal Disposable Income.
Rs (crore)
(a) Net Domestic Product at factor cost 8,000
(b) Net Factor Income from abroad 200
(c) Undisbursed Profit 1,000
(d) Corporate Tax 500
(e) Interest Received by Households 1,500
(f) Interest Paid by Households 1,200
(g) Transfer Income 300
(h) Personal Tax 500 - Q:-
Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.
- Q:-
In a single day Raju, the barber, collects Rs 500 from haircuts; over this day, his equipment depreciates in value by Rs 50. Of the remaining Rs 450, Raju pays sales tax worth Rs 30, takes home Rs 200 and retains Rs 220 for improvement and buying of new equipment. He further pays Rs 20 as income tax from his income. Based on this information, complete Raju’s contribution to the following measures of income (a) Gross Domestic Product (b) NNP at market price (c) NNP at factor cost (d) Personal income (e) Personal disposable income.
- Q:-
Distinguish between stock and flow. Between net investment and capital which is a stock and which is a flow? Compare net investment and capital with flow of water into a tank.
- Q:-
Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP.
- Q:-
What is the difference between planned and unplanned inventory accumulation? Write down the relation between change in inventories and value added of a firm.
- Q:-
Define budget deficit and trade deficit. The excess of private investment over saving of a country in a particular year was Rs 2,000 crores. The amount of budget deficit was ( – ) Rs 1,500 crores. What was the volume of trade deficit of that country?
- Q:-
Suppose the GDP at market price of a country in a particular year was Rs 1,100 crores. Net Factor Income from Abroad was Rs 100 crores. The value of Indirect taxes – Subsidies was Rs 150 crores and National Income was Rs 850 crores. Calculate the aggregate value of depreciation.
- Q:-
The value of the nominal GNP of an economy was Rs 2,500 crores in a particular year. The value of GNP of that country during the same year, evaluated at the prices of same base year, was Rs 3,000 crores. Calculate the value of the GNP deflator of the year in percentage terms. Has the price level risen between the base year and the year under consideration?
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