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Class 12
Macro Economics
National Income Accounting
Distinguish between stock and flow. Between net investment and capital...

Distinguish between stock and flow. Betw | Class 12 Macro Economics Chapter National Income Accounting, National Income Accounting NCERT Solutions

Welcome to the NCERT Solutions for Class 12 Macro Economics - Chapter National Income Accounting. This page offers a step-by-step solution to the specific question from Exercise 1, Question 3: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.

Question 3:

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.

Answer:

Stock	Flow
The variables that are measured at a particular point of time. For example, bank balance as on 1st Oct 2010 is Rs. 5000.	The variables that are measured over an interval of time. For example, interest earned on bank deposits for 1 year, i.e. from 1 Oct-2009 to 30 Sep 2010.
It has no time dimensions.	It has time dimensions, like 1 year, 6 months, 10 days, etc.
Examples: capital, bank deposits, water in a tank.	Examples: capital formation, interest on capital, water flowing in a stream.

An example of stock can be the amount or level of water in a tank. At any point of time the amount or the level of water in a tank can be measured. Similarly, the capital is also a stock variable, as the capital can also be measured at any point of time.

Now, if water is flowing out of a tank through a tap, then the level of water will change over time. The difference in water level over an interval of time is an example of a flow variable. Similarly, net investment gives the difference in the investment level over a period of time.

Other Questions of Chapter National Income Accounting

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?

What is the difference between planned and unplanned inventory accumulation? Write down the relation between change in inventories and value added of a firm.

What are the four factors of production and what are the remunerations to each of these called?

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.

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?

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.

Net National Product at Factor Cost of a particular country in a year is Rs 1,900 crores. There are no interest payments made by the households to the firms/government, or by the firms/government to the households. The Personal Disposable Income of the households is Rs 1,200 crores. The personal income taxes paid by them is Rs 600 crores and the value of retained earnings of the firms and government is valued at Rs 200 crores. What is the value of transfer payments made by the government and firms to the households?

Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.

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

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.

Popular questions of class 12 Macro Economics

Differentiate between devaluation and depreciation.

What is a barter system? What are its drawbacks?

Explain the relation between government deficit and government debt.

Give the relationship between the revenue deficit and the fiscal deficit.

Explain ‘Paradox of Thrift’.

Discuss the issue of deficit reduction.

What is the difference between ex ante investment and ex post investment?

Suppose C = 40 + 0.8Y D, T = 50, I = 60, G = 40, X = 90, M = 50 + 0.05Y

(a) Find equilibrium income. (b) Find the net export balance at equilibrium income (c) What happens to equilibrium income and the net export balance when the government purchases increase from 40 and 50?

Are fiscal deficits inflationary?

Suppose the exchange rate between the Rupee and the dollar was Rs. 30=1$ in the year 2010. Suppose the prices have doubled in India over 20 years while they have remained fixed in USA. What, according to the purchasing power parity theory will be the exchange rate between dollar and rupee in the year 2030.

Recently Viewed Questions of Class 12 Macro Economics

What is High Powered Money?

Differentiate between balance of trade and current account balance.

What is the difference between ex ante investment and ex post investment?

Explain the automatic mechanism by which BoP equilibrium was achieved under the gold standard.

Suppose that for a particular economy, investment is equal to 200, government purchases are 150, net taxes (that is lump-sum taxes minus transfers) is 100 and consumption is given by C = 100 + 0.75Y (a) What is the level of equilibrium income? (b) Calculate the value of the government expenditure multiplier and the tax multiplier. (c) If government expenditure increases by 200, find the change in equilibrium income.

Describe the four major sectors in an economy according to the macroeconomic point of view.

What are the important features of a capitalist economy?

What are the instruments of monetary policy of RBI?

What is the difference between microeconomics and macroeconomics?

Explain why the tax multiplier is smaller in absolute value than the government expenditure multiplier.

Study Tips for Answering NCERT Questions:

NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:

Read the question carefully and focus on the core concept being asked.
Reference examples and data from the chapter when answering questions about National Income Accounting.
Review previous year question papers to get an idea of how such questions may be framed in exams.
Practice answering questions within the time limit to improve your speed and accuracy.
Discuss your answers with your teachers or peers to get feedback and improve your understanding.

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