Answer to Question #204676 in Macroeconomics for Akash Dutta

Question

consider the police force of a country . its job is to maintain law an order of the country. suppose that in a given year it spent rs 10 lakh interest on its outstanding loan

  ,rs 20 lakh in wages and salaries , rs 10 lakh on stationary, fuel,power, and acquired buildings,equipment and cars worth rs 30 crore. what is its GVA in a given year ?

  Did it contribute anything to G and transfer payments of goverment administration and defence ? explain?

Answer 1

The gross value added (GVA) is the GDP excess of net taxes and subsidies. The following shows the formula:

GVA=GDP-taxes+subsidies

=(Income+stationery and fuel+acquired things)

$=Rs20lakh+Rs10lakh+Rs30crore\\=Rs 30.3crore$

Hence, the GVA calculated is Rs 30.3 crore. 

Let it be considered that the police have paid for the loan, income and salaries and all allied things as mentioned in the problem. Since the government is having the facility and has the responsibility to keep the police force, the whole of GVA can be considered as a government expenditure. There is no transfer payments in the economy.