KSLU Solved Question Papers
Economic Theory and Public Finance
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 3
2022 Apr Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 3 Economic Theory and Public Finance 2022 Apr Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2022 Apr examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2022 Apr examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2022 Apr examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all five units. (2) One eassy type question and short note/problem is compulsory from each unit. (3) Figures to the right indicate marks. (4) Answer should be written either in English or Kannada completely.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)Explain the various concepts of national income.[10]
Answer
For full marks, cover: a definition of national income; the four choices that produce every concept (domestic or national, gross or net, market price or factor cost, total or per head); each concept defined with its formula: GDP, NDP, GNP, NNP at market price, NNP at factor cost (national income), personal income, disposable income, per capita income and GVA; real and nominal values; the whole ladder in one table with a worked example; and a conclusion.
Definition
National income is the total money value of all final goods and services produced by the residents of a country during a year. Depreciation is deducted and net income from abroad is included. Strictly it is the net national product at factor cost. Alfred Marshall called it the national dividend: the "net aggregate of commodities, material and immaterial, including services of all kinds" that the labour and capital of a country produce each year.
The four choices behind every concept
- Domestic or national? Domestic counts what is produced inside the country, by anyone. National counts what is produced by the country's residents, wherever they are.
- Gross or net? Gross ignores depreciation, the wear and tear of capital. Net deducts it.
- Market price or factor cost? Market price includes indirect taxes and deducts subsidies. Factor cost is what the factors of production actually receive.
- Total or per head? Dividing by population gives per capita figures.
The concepts
1. Gross Domestic Product (GDP). The market value of all final goods and services produced within the country in a year, before deducting depreciation. It is the most widely quoted figure.
2. Net Domestic Product (NDP). NDP = GDP minus depreciation.
3. Gross National Product (GNP). The value of final output produced by a country's residents, at home and abroad. GNP = GDP plus net factor income from abroad (NFIA). For India NFIA is usually negative, because more profit and interest flow out to foreign owners than flow in. So GNP is a little below GDP.
4. Net National Product at market price (NNP at MP). NNP = GNP minus depreciation.
5. Net National Product at factor cost (NNP at FC), which is national income. NNP at FC = NNP at MP minus indirect taxes plus subsidies. It is the sum of wages, rent, interest and profit earned by residents.
6. Personal income (PI). The income actually received by individuals and households from all sources. PI = national income minus undistributed company profits minus corporate tax minus employees' social security contributions plus transfer payments (pensions, scholarships, interest on public debt). Some income earned is not received, and some income received is not earned.
7. Disposable personal income (DPI). What households can actually spend or save. DPI = personal income minus direct personal taxes such as income tax. DPI = consumption plus saving.
8. Per capita income. National income divided by population. It is the usual measure of average living standards, but it hides how income is shared.
9. Gross Value Added (GVA). The value of output minus the value of inputs used up, at basic prices. GDP = GVA plus product taxes minus product subsidies. India publishes GVA by industry to show which sectors are growing.
10. Nominal and real. Nominal GDP is valued at current prices. Real GDP is valued at the constant prices of a base year, so it measures changes in output only. India's base year is now 2022-23, after the new series released on 27 February 2026. Only real GDP measures growth: real GDP grew about 7.7 per cent in 2025-26 (Provisional Estimates).
Two boundaries that cause most mistakes
Domestic against national. A car plant in Chennai owned by a foreign company adds to India's GDP, because the output is produced in India. The part of its profit sent abroad is deducted in arriving at India's GNP. An Indian resident's earnings from a business in Dubai are in India's GNP but not in its GDP.
Earned against received. Personal income differs from national income for two reasons. Some income is earned but not received by persons, such as profits a company keeps and the tax it pays. Some income is received but not earned, such as pensions. That is why transfer payments are added and retained profits are deducted.
The ladder, with a worked example
Suppose the figures, in lakh crore rupees, are as follows.
- GDP at market price 300; depreciation 30; NFIA minus 4.
- Indirect taxes 40; subsidies 15.
- Undistributed profits and corporate tax 20; social security contributions 5.
- Transfer payments 12; direct personal taxes 18.
- Population 145 crore.
| Step | Concept | Value |
|---|---|---|
| Start | GDP at market price | 300 |
| minus depreciation | NDP at market price | 270 |
| plus NFIA | NNP at market price | 266 |
| Step | Concept | Value |
|---|---|---|
| minus net indirect taxes (40 minus 15) | NNP at factor cost = national income | 241 |
| minus 20, minus 5, plus 12 | Personal income | 228 |
| minus direct taxes | Disposable personal income | 210 |
| national income / population | Per capita income | about 1.66 lakh rupees |
Uses of the concepts
GDP measures the size and growth of the economy. National income measures what residents earn. Personal and disposable income show what households can spend and save, which guides tax and consumption policy. Per capita income compares living standards across countries and years.
Conclusion. National income is not one number but a family of related concepts, each drawing the boundary differently. Starting from GDP, deducting depreciation, adding net income from abroad and removing net indirect taxes gives national income, NNP at factor cost. From it come personal income, disposable income and per capita income. Knowing how each is built, and which one a question means, is the key to answering any problem on national income.
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