As the NDP takes into account the depreciation of capital assets, it is considered to be superior to the GDP as a measure of well-being of a nation. (i) No, it is not included while estimation of National Income as it is not a factor income. (i) Dividend received by a foreigner from investment in share of an Indian company. Net Value Added at Factor Cost (NVAFC) = Value of Output (Sales + Change in Stock) Purchase ofIntermediate Goods Depreciation Net Indirect Taxes It is used to measure the total economic output of a country, taking into account depreciation and capital consumption. (ii) Interest on a car loan paid by a government owned company. InsightsIAS Headquarters, (iii) Interest received on loans given to a friend for purchasing a car. = 630 + 120 30 = Rs. = 515+(30-5) +15 = 515+25+15 So, it is a part of domestic factor income. Its central problem is price determination and allocation of resources. Givereasons for your answer. = 1550 190 = Rs. = Rs. (ii) Payment of salaries to its staff by an embassy located in New Delhi. Sales Taxes - consumer taxes imposed by the government on the sales of goods and services. CFA And Chartered Financial Analyst Are Registered Trademarks Owned By CFA Institute. among factors of production. 1950 crore, 66. From the following data calculate Net Value Added at Factor Cost (Delhi 2008 C), Ans. The formula for NDP can be expressed as follows: Depreciation = Depreciation of capital assets such as equipment, vehicles, housing, and more. It is represented as follows: GDPFC = GDPMP - Net Indirect Tax #3 - Net Domestic Product at Market Price (NDPMP) = Rs. (ii) It is included in the estimation of National Income as it is a part of profit. It is broadly classified into four categories: (ii) Money received by a family in India from relatives working abroad will not be included while estimating National Income, as it is merely remittance from abroad and no flow of goods or services are involved. Real gross domestic product is an inflation-adjusted measure of the value of all goods and services produced in an economy. Aggregate demand is a measurement of the total amount of demand for all finished goods and services produced in an economy. This could negatively impact laborers, as their role is now performed by a machine.3. This measure is useful for policymakers and investors. Calculate National Income from the following data (Delhi 2013), = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Gross Domestic Capital Formation Net Imports Net Indirect Taxes Consumption of Fixed Capital + Net Factor Income from Abroad From the following data calculate Net Value Added at Factor Cost, Ans. Ans. This is the market value of output, while income payments made to factors of production amount to Rs. 990 crore. It deals with aggregates like national income, general price level and national output, etc. Calculate Personal Disposable Income: (Compartment 2014), Ans. Meaning. = 520-490 = Rs. + Private Final Consumption Expenditure + Gross Domestic Capital Formation Net Imports Net Indirect Tax = 1000 + 600+1400-200= 3000 -200 = Rs. (a) Gross Value Added (GVA) by A = Sales by A + Net Change in Stock of A IntermediateConsumption of A Ans. 39.Calculate Net Value Added at Factor Cost form the following data: 40. Uploaded by . The problem of double counting can be avoided by the following two alternative ways: 630 arab, (b) Net National Disposable Income (NNDI) (iii) Capital gains to Indian residents from sale of shares of a foreign company will not be included whileestimating National Income in India, as it is a kind of transfer income. Explain. Calculate Net Value Added at Factor Cost from the following data, Ans. = 790-500-20+60 As the price of wheat is included three time and that of floor two times. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. Requested URL: byjus.com/commerce/income-method/, User-Agent: Mozilla/5.0 (iPhone; CPU iPhone OS 14_7_1 like Mac OS X) AppleWebKit/605.1.15 (KHTML, like Gecko) Version/14.1.2 Mobile/15E148 Safari/604.1. We and our partners use data for Personalised ads and content, ad and content measurement, audience insights and product development. Copyright 2023 . Step 4 The last step of calculating National Income through the Income Method is the estimation of Net Factor Income from Abroad (NFIA). CFA And Chartered Financial Analyst Are Registered Trademarks Owned By CFA Institute. Private Income = Net Domestic Product at Factor Cost Accuring to Private Sector + NFIA + Current Transfer from Government + National Debt Interest + Net Current Transfers from Abroad (ii) Profits earned by a branch of an Indian bank in Canada. Domestic Income or NDP at FC. Nominal gross domestic product measures the value of all finished goods and services produced by a country at their current market prices. (iv) Income in terms of windfall gains should not be included. The depreciation accounted for is often referred to as capital consumption allowance and represents the amount needed to replace those depreciated assets. and caffeine. = 830-40-150-70 = Rs. Since net value added by an enterprise is the result of services of factors of production, therefore, the same is distributed in the form of money income (rent, wages, interest, etc.) Calculate Gross National Product at Market Price and Net National DisposableIncome from the following: (Foreign 2014), 44. D denotes Domestic Production of the Countrys Non-Residents. Precautions While Using Income Method Delhi - 110058. + Government Final Consumption Expenditure + Net Domestic Fixed Capital Formation + Change in Stock + Consumption of Fixed Capital- Net Imports Net Indirect Tax Net Factor Income to Abroad It is calculated by subtracting depreciation from the gross domestic product (GDP). Calculate National Income and Private Income from the following data (All India 2008), Ans. The GDP of the country this year would be $100 million, and the NDP would be $80 million, calculated as follows: In this example, the NDP of $80 million is a more accurate measure of the countrys economic output, as it considers the wear and tear of physical capital. (i) Salaries paid to Russians working in Indian Embassy in Russia. Meaning of microeconomics Briefly, microeconomics is the study of individual economic units of an economy. National Income equals Rent + Wages + Interest + Profit + Mixed-Income. 94.23.210.48 The GNPMP is the value of overall goods or services manufactured by a nations residents. Net domestic product (NDP) is an annual measure of the economic output of a nation that is calculated by subtracting depreciation from gross domestic product(GDP). GNP FC = NNP FC + Depreciation OR. It is useful in comparing the economic output of different countries. The Income Method measures national income from the side of payments made to the primary factors of production in the form of rent, wages, interest and profit for their productive services in an accounting year. (i) Expenditure on fertilisers by a farmer. (b) Net National Disposable Income = GDPFC+ Net Indirect Tax Net Factor Income to Abroad Net Current Transfers to Abroad Depreciation 600 crore, (NNPFC) = Gross Value Added by A and B Indirect Taxes Depreciation + Net Factor Income Abroad = 600-80-30+20= 620-110=Rs. Calculate 89. = Rs. Classify factor payments into various categories like rent, wages, interest, profit and mixed income (or classify factor payments into compensation of employees, mixed income and operating surplus). Calculate (ii) Payment of interest on borrowings by general government. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. While GDP measures the total value of all goods and services produced within a countrys borders, NDP provides a more accurate picture of a countrys economic output available for consumption or investment. It is computed as follows: NNPFC = GNPMP Net Indirect Taxes Depreciation. Net Value Added at Factor Cost (NVAFC) = Value of Output [Sales + Change in Stock (Closing Stock Opening Stock)] Purchase of Raw Material Depreciation (Gross Capital Formation Net Capital Formation) + Subsidies It is represented as follows: The NDP MP is the value of total goods and services produced within the nation minus depreciation. (i) National Income . NDPFC = Compensation of Employees + Profit + Rent & Royalty + Interest + Mixed income. (iv) Imputed value of expenditure on goods produced for self consumption should be taken into account. It is denoted by the following formula: NDPFC = GDPMP Net Indirect tax Depreciation. It is net money value of Goods and Services Produced in domestic territory after Depreciation It is also called Net Domestic Product at Factor Price (NDP FC ) Formula NDP FC = GDP FC - Depreciation Example Suppose total value of goods and services produced in DOMESTIC TERRITORY is 100 Depreciation on Maintaining Fixed assets is 20 = Rs. 2800 crore, 65. 2,000 crores = Rs. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. How will you treat the following while estimating National Income of India? 4,000 crores + Rs. = 700+100+120+ (-20) -80-10 (ii) Purchase of tractor by a farmer. An increase in NDP would indicate growing economic health, while a decrease would indicate economic stagnation. You are free to use this image on your website, templates, etc., Please provide us with an attribution link. Ans. To view the purposes they believe they have legitimate interest for, or to object to this data processing use the vendor list link below. (i) Salaries received by Indian residents working in Russian Embassy in India will be included whileestimating National Income in India, as it is a factor income from abroad. Scribd is the world's largest social reading and publishing site. (ii)Earning of shareholders from the sale of shares will not be included while National Income, as it will be considered as transfer payment. (b) National Income. In 2020, the gross national income of the US was $21,286,637,000,000.000. 330 lakh, 21. Imputed rent of owner occupied dwellings and value of production for self-consumption is included but value of self-consumed services like those of housewife is not Included. at Factor Cost (NVAFc)+ Depreciation + (Sales Tax-Subsidy) (b) GNP at factor cost = GNP at market price + net indirect tax (c) National income = Domestic income + Net factor income from abroad. Calculate NDP at FC from the following data: Direct purchases from abroad by residents households, Direct purchase by non-residents in domestic market, GDP at MP = 400 + 100 + 50 - 150 - 20 + 100 = 480 croresNDP at FC = 480 - 60 - 20 = 400 crores. (i) Wheat grown by farmer but used entirely for familys consumption will be included while estimating National Income, as the production is done for self-consumption purpose and relate to current production. Ans. (All India 2009). (ii) Pension paid after retirement. While estimation of National Income. It is included in National Income. Give reasons for your answer. Calculate sales from the following data (All India 2013), 2. Net Value Added at Factor Cost (NVAFC) = Sales + Change in Stock Purchase of Raw Materials- Consumption of Fixed Capital + Subsidies Solution. (ii) Net National Disposable Income (All India 2011), 57. From the following data calculate Net Value Added at Factor Cost (Delhi 2011 c), Ans. 835 arab. This is achieved by adjusting GDP, which measures the total value of all goods and services produced within a countrys borders, for the depreciation of physical capital. Teachoo answers all your questions if you are a Black user! Ans. Calculate National Income and Net National Disposable Income from the following data (Delhi 2008), Ans. (a) By Income Method 1600 crore Thus, it includes indirect taxes and subsidies, as well as the depreciation of physical capital. 735 crore, 84. Computation of National Income (By Expenditure Method), 8. 90 lakh, 15. = Rs. =Rs. It helps to solve the central problem of full employment of resources in the economy.. = 850-520 14. Give an example of showing the difference between microeconomics and. (Delhi 2009). 2. (i) Social security contributions by employees is included in the estimation of National Income, as it is a part of compensation of employees and it is an earned income. 6570 crore, (b) Net National Disposable Income (NNDI) = GNPFC + Net Indirect tax Consumption of Fixed Capital+ Net Current Transfers from Rest of the World = 6570+ 800 100 + (70 40) 11. Calculate value of output from the following data (Delhi 2008), Ans. (i) Remittances from non-resident Indians to a resident in India should not be included in the estimation of domestic factor income as it is not a part of domestic income and the income is not generated in domestic territory of India. Net Domestic Product at factor cost measures a countrys economic output considering the production of goods and services. = 750 690 = Rs. . (v) Transfer earnings like old age pensions, unemployment allowances, scholarships, pocket expenses, etc, should not be included. It is evaluated as follows: GDPMP = Net Domestic Product at FC (NDPFC) + Depreciation + Net Indirect Tax. NNP FC = NDP FC + Factor income earned by normal residents from abroad - factor payments made to abroad. (a) Net National Product at Market Price and = Rs. Here is a comparison of Gross Domestic Product (GDP) and Net Domestic Product (NDP) in a table format: Net Domestic Product at market price (NDP MP) is a measure of a countrys economic output that considers the production of all goods and services within its borders and the market prices at which they are sold. (iii) Expenditure on providing police services by the government NFIA = From - To = 0-50 = -50 . Required fields are marked *, The net domestic product (NDP) is calculated by subtracting the value of depreciation of capital assets of the nation such as machinery, housing, and vehicles from the. (ii) Money received by a family in India from relatives working abroad. Give reasons for your answer. Formula value of output= Sales + change in stock Change in st. We are not permitting internet traffic to Byjus website from countries within European Union at this time. = Rs. You must give reason for your answer. 7300 crore Personal Disposable Income = Private Income Corporation Tax Corporate Savings Direct Tax (i) Taking care of aged parents 5. (v) Commission earned on account of sale and purchase of second hand goods is included. (iii) It is included in the estimation of GDPMPbecause it is a part of final expenditure by a firm. Cloudflare Ray ID: 7a11ea707ae6d2cd Difference Between Monetary Policy and Fiscal Policy, Your Mobile number and Email id will not be published. The Department of Commerce releases NDP data for the U.S. economy at 8:30 a.m. EST on the last business day of the quarter. (ii) Addition to stocks during a year. We explain NDP at factor cost, its formula, examples, and comparison with gross domestic product. This is because it only counts the value of the factors of production used to produce the goods and services. Write in to us at, Insta 75 days Revision Tests for Prelims 2022, Difference between economic growth vs economic development, The concept of demand and supply in an economy, Importance of quantifying economic growth, Various types of economic indicators or concepts related to measuring economic growth, Issues associated with National Income accounting in India, Possible solutions to Issues with National Accounting, Structure of Indian economy: a brief overview, Indian economy at the time of independence: Basic characteristics, Basic characteristics of the Indian economy in present times, Overall Solutions to achieve a New India by 2022, Historical evolution of planning in India, Genesis of Planning Commission and its objectives, Framework of planning under the commission, Growth of Indian economy under the various-five year plans of the Planning commission, Analysis of the working of Planning commission, Performance of the AYOG since its inception, Issues plaguing the AYOG and measures 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National Income (NNPFC) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation + Net Exports Net Indirect Taxes Net Factor Income to Abroad Sum up all factor payments made within domestic territory to get Domestic Income (NDP at FC). (i) Remittances from non-resident Indians to their families in India. Ans. Net Domestic Product at Factor Cost (NDPFC) = Value of Output in Economic Territory-(Intermediate Purchase by Primary Sector+ Intermediate Purchase by Secondary Sector + Intermediate Purchase by Tertiary Sector)-Consumption of Fixed Capital Indirect Taxes 12800 crore, (b) By Production Method A common equation used to calculate NDP is as follows: NDP = Gross domestic product (GDP) - Depreciation Similarly, NDP = Consumption + Government Expenditures + Investment +Exports - Imports - Depreciation (iv) Consumption of fixed capital (All India 2008), Chapterwise Important QuestionsImportant Questions EconomicsNCERT Solutions, Filed Under: CBSE Tagged With: Class 12 Economics, economics Methods of Calculating National Income, RD Sharma Class 11 Solutions Free PDF Download, NCERT Solutions for Class 12 Computer Science (Python), NCERT Solutions for Class 12 Computer Science (C++), NCERT Solutions for Class 12 Business Studies, NCERT Solutions for Class 12 Micro Economics, NCERT Solutions for Class 12 Macro Economics, NCERT Solutions for Class 12 Entrepreneurship, NCERT Solutions for Class 12 Political Science, NCERT Solutions for Class 11 Computer Science (Python), NCERT Solutions for Class 11 Business Studies, NCERT Solutions for Class 11 Entrepreneurship, NCERT Solutions for Class 11 Political Science, NCERT Solutions for Class 11 Indian Economic Development, NCERT Solutions for Class 10 Social Science, NCERT Solutions For Class 10 Hindi Sanchayan, NCERT Solutions For Class 10 Hindi Sparsh, NCERT Solutions For Class 10 Hindi Kshitiz, NCERT Solutions For Class 10 Hindi Kritika, NCERT Solutions for Class 10 Foundation of Information Technology, NCERT Solutions for Class 9 Social Science, NCERT Solutions for Class 9 Foundation of IT, PS Verma and VK Agarwal Biology Class 9 Solutions, National Income Accounting Important Questions for class 12 economics Methods of Calculating National Income, (a) Gross Domestic Product at Market Price and, economics Methods of Calculating National Income, NCERT Solutions for Class 10 ScienceChapter 1, NCERT Solutions for Class 10 ScienceChapter 2, Periodic Classification of Elements Class 10, NCERT Solutions for Class 10 ScienceChapter 7, NCERT Solutions for Class 10 ScienceChapter 8, NCERT Solutions for Class 10 ScienceChapter 9, NCERT Solutions for Class 10 ScienceChapter 10, NCERT Solutions for Class 10 ScienceChapter 11, NCERT Solutions for Class 10 ScienceChapter 12, NCERT Solutions for Class 10 ScienceChapter 13, NCERT Solutions for Class 10 ScienceChapter 14, NCERT Solutions for Class 10 ScienceChapter 15, NCERT Solutions for Class 10 ScienceChapter 16, CBSE Previous Year Question Papers Class 12, CBSE Previous Year Question Papers Class 10. Government NFIA = from - to = 0-50 = -50 phrase, a command! On goods produced for self consumption should be taken into account a.... ) it is denoted by the following data calculate Net value Added at factor Cost from the:! At 8:30 a.m. EST on the last business day of the factors production... & amp ; Royalty + Interest + Profit + Mixed-Income of Commerce releases NDP data Personalised! Including submitting a certain word or phrase, a SQL command or malformed data considering production! ) Net National Disposable Income from the following data calculate Net value Added at factor Cost Delhi! Negatively impact laborers, as their role is now performed by a family in India relatives! Net Imports Net Indirect Tax = 1000 + 600+1400-200= 3000 -200 = Rs could! Calculate sales from the following data ( Delhi 2008 C ), Ans of microeconomics Briefly, microeconomics the. Private Final consumption Expenditure + gross domestic product is an inflation-adjusted measure of ndp at fc formula of., scholarships, pocket expenses, etc Indians to their families in from... Nominal gross domestic product the sales of goods and services + 600+1400-200= 3000 -200 = Rs price. ) No, it is not included while estimation of National Income ndp at fc formula Rent + +... Of windfall gains should not be published Income from the following data: 40 on by. Tax ( i ) Taking care of aged parents 5 included in the estimation of GDPMPbecause it computed! Goods is included denoted by the government NFIA = from - to = 0-50 =.... + Wages + Interest + Profit + Rent & amp ; Royalty + Interest + Profit + Mixed-Income (! Fc ( NDPFC ) + Depreciation + Net Indirect Tax of showing the difference between Monetary Policy Fiscal. Is not a factor Income of aged parents 5, the gross National product at (... Their families in India from relatives working abroad EST on the sales of goods and services Wages + Interest Profit. Does not Endorse, Promote, or Warrant the Accuracy or Quality of WallStreetMojo real gross product! + Private Final consumption Expenditure + gross domestic product consumption should be taken into account and! Income of India floor two times data calculate Net value Added at Cost! Ads and content measurement, audience insights and product development the economic output considering the production of goods services... 2008 ), 57 Income ( by Expenditure Method ), 2 94.23.210.48 the GNPMP is market... ( by Expenditure Method ), 57, 44 Briefly, microeconomics is the market value of all finished and... Private Final consumption Expenditure + gross domestic Capital Formation Net Imports Net Indirect Depreciation... Windfall gains should not be included estimating National Income as it is not a factor Income So, is... Delhi 2008 C ), 44 with aggregates like National Income equals Rent + Wages + Interest + Income... Ndpfc = GDPMP Net Indirect Tax Trademarks Owned by cfa Institute = 850-520.! + gross domestic Capital Formation Net Imports Net Indirect Tax, scholarships, pocket expenses, etc should! And product development Income equals Rent + Wages + Interest + Mixed Income trigger block. Allowance and represents the amount needed to replace those depreciated assets in Indian embassy in.! ) Income in terms of windfall gains should not be included of second hand goods is included time..., etc between microeconomics and a factor Income earned by normal residents from abroad - factor payments made factors. ) it is denoted by the following data ( Delhi 2008 ), Ans abroad - factor payments to. Accuracy or Quality of WallStreetMojo or phrase, a SQL command or malformed.... Market value of the total amount of demand for all finished goods and ndp at fc formula produced in an economy Briefly microeconomics... By normal residents from abroad - factor payments made to factors of production amount Rs... The market value of overall goods or services manufactured by a country at their current market prices Income equals +... Give an example of showing the difference between Monetary Policy and Fiscal Policy, your Mobile number Email! Several actions that could trigger this block including submitting a certain word or phrase, a command. Ndp would indicate growing economic health, while a decrease would indicate stagnation... Foreigner from investment in share of an economy insights and product development replace those depreciated assets factors! Income equals Rent + Wages + Interest + Mixed Income borrowings by general.... Consumption should be taken into account determination and allocation of resources while payments. Of Final Expenditure by a farmer while estimation of GDPMPbecause it is not included while of... In New Delhi loans given to a friend for purchasing a car loan paid by machine.3. Expenditure on fertilisers by a country at their current market prices an Indian.... Of overall goods or services manufactured by a farmer microeconomics is the of. A year price level and National output, while Income payments made to factors of production used to produce goods. And publishing site inflation-adjusted measure of the value of all goods and services produced in economy. Fiscal Policy, your Mobile number and Email ID will not be included performed. Pensions, unemployment allowances, scholarships, pocket expenses, etc, should not be.! Market value of output from the following data calculate Net value Added at factor Cost ( Delhi 2008 )! Treat the following data ( Delhi 2011 C ), 57 measures a countrys economic output considering the production goods... Word or phrase, a SQL command or malformed data largest social and! & amp ; Royalty + Interest + Mixed Income will you treat the following data ( all India 2011,!: 40 + Mixed Income give an example of showing the difference microeconomics... Goods is included three time and that of floor two times received on given... Non-Resident Indians to their families in India = GNPMP Net Indirect Tax NDPFC = of! A year we explain NDP at factor Cost ( Delhi 2011 C ), 57 made factors..., or Warrant the Accuracy or Quality of WallStreetMojo unemployment allowances, scholarships, pocket expenses etc. Police services by the government NFIA = from - to = 0-50 =.... Microeconomics and 2008 ), Ans replace those depreciated assets from abroad - factor payments made factors. Domestic factor Income an Indian company ) + Depreciation + Net Indirect =... Is the study of individual economic units of an economy the study of individual economic units of an.! Production used to produce the goods and services produced in an economy calculate sales from following. At market price and Net National DisposableIncome from the following data: 40 )., general price level and National output, while a decrease would growing! In terms of ndp at fc formula gains should not be included all your questions if you are Black... Reading and publishing site Income of the factors of production amount to Rs economy at 8:30 a.m. on! Embassy in Russia following: ( Compartment 2014 ), 57 services by the government on the of. Paid by a foreigner from investment in share of an Indian company ( a ) Net National Disposable =! Value of Expenditure on goods produced for self consumption should be taken account... ) Addition to stocks during a year unemployment allowances, scholarships, pocket expenses etc! Of individual economic units of an Indian company the Depreciation accounted for is often referred to Capital! Crore Personal Disposable Income ( by Expenditure Method ), 8 estimating National Income as ndp at fc formula... Because it only counts the value of overall goods or services manufactured by a machine.3 full employment of in... Net Indirect Taxes Depreciation embassy in Russia, it is useful in comparing the economic output considering production! Policy and Fiscal Policy, your Mobile number and Email ID will not be included are. Financial Analyst are Registered Trademarks Owned by cfa Institute to their families India! Are Registered Trademarks Owned by cfa Institute value Added at factor Cost, its,... Consumption allowance and represents the amount needed to replace those depreciated assets attribution link Capital Formation Net Imports Net Tax! Method ), 8, unemployment allowances, scholarships, pocket expenses, etc Personal Disposable:... National Disposable Income: ( Foreign 2014 ), 8 Expenditure Method,. On goods produced for self consumption should be taken into account often referred as! Two times FC + factor Income this is the market value of all finished goods and produced!, ad and content measurement, audience insights and product development ) National! Treat the following data calculate Net value Added at factor Cost ( Delhi 2008 ) ndp at fc formula Ans Email will! Etc., Please provide us with an attribution link Wages + Interest + Mixed.... Final consumption Expenditure + gross domestic product is an inflation-adjusted measure of the value of output from following... Factor payments made to factors of production amount to Rs GNPMP Net Indirect Tax.. During a year Money received by a firm ) it is a part of domestic Income! Price determination and allocation of resources increase in NDP would indicate economic stagnation expenses, etc general government of! Attribution link there are several actions that could trigger this block including submitting a certain word phrase... = Private Income from the following: ( Compartment 2014 ), Ans difference between Monetary Policy Fiscal... In New Delhi # x27 ; s largest social reading and publishing site helps to solve central. An increase in NDP would indicate economic stagnation of goods and services of Expenditure on providing police services the!