CA Foundation · Business Economics · Determination of National Income
An economy has NNP at market prices of ₹1,200 crore. Indirect taxes are ₹150 crore and subsidies are ₹30 crore. What is the Net National Product at factor cost (National Income)?
National income, or NNP at factor cost, is ₹1,080 crore. Market price includes indirect taxes and excludes subsidies, so subtract net indirect taxes of 150 − 30 = 120 crore from NNP at market prices of ₹1,200 crore.
- A₹1,080 croreCorrect
- B₹1,320 crore
- C₹1,350 crore
- D₹1,230 crore
Explanation
NNP at factor cost = NNP at market prices − indirect taxes + subsidies. Net indirect taxes = 150 − 30 = 120. So 1,200 − 120 = 1,080 crore. Option B adds net indirect taxes instead of subtracting them, which is a wrong sign.
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