CA Foundation · Business Economics · Determination of National Income
In an economy, GDP at market prices is ₹900 crore, depreciation (consumption of fixed capital) is ₹60 crore, net factor income from abroad is ₹20 crore, and net indirect taxes (indirect taxes less subsidies) are ₹70 crore. What is National Income (NNP at factor cost)?
National Income is ₹790 crore. Add net factor income from abroad to GDP to get GNP of ₹920 crore, subtract depreciation of ₹60 crore to get NNP at market price of ₹860 crore, then subtract net indirect taxes of ₹70 crore to reach NNP at factor cost.
- A₹790 croreCorrect
- B₹770 crore
- C₹810 crore
- D₹750 crore
Explanation
GNP at market price = 900 + 20 = 920. NNP at market price = 920 - 60 = 860. NNP at factor cost = 860 - 70 = 790. Option 770 wrongly subtracts net factor income; 810 adds net indirect taxes... actually it fails to remove them properly (860 - 70 +20 mix); 750 subtracts net factor income too.
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