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(a) Define Externality. (b) Find National Income from following using expenditure method :1. Current Transfers from Rest of the World( ₹ in Crores) 502. Net Indirect Taxes1003. Net Exports(-) 254. Rent905. Private Final Consumption Expenditure9006. Net Domestic Capital Formation2007. Compensation of Employees5008. Net Factor Income from Abroad(-) 109. Government Final Consumption Expenditure40010. Profit22011. Mixed Income of Self-Employed40012. Interest230 |
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Answer» Externalities refer to those benefits or harms accruing to another for which they are not paid or penalised. Externalities may be positive or negative. Externality occurs when the actions of consumers or producers give rise to negative or positive side effects on third party who are not part of these actions, and whose interests are not taken into consideration. E.g., introduction of metro rail on one hand has increased the prices of property but has also saved the time and money of general public and has provided safe means of transports. • National Income by Expenditure Method = Private final consumption expenditure + Government final consumption expenditure + Net domestic capital formation + Net exports + Net factor income from abroad – Net indirect taxes = 900 + 400 + 200 + (-) 25 + (-) 10 – 100 = 1,500- 135 = ₹ 1,365 Crores |
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