Gross National Product (GNP) is equal to which of the following?
- A.GDP + net factor income from abroad
- B.GDP - depreciation
- C.GDP + indirect taxes
- D.GDP - subsidies
Correct answer
Explanation
The correct answer is A. Net factor income from abroad is the income residents earn outside the country minus the income foreigners earn inside it. Adding it to GDP converts a domestic concept into a national one, which is exactly what GNP is.
Option B gives Net Domestic Product, because subtracting depreciation turns a gross figure into a net one; the word depreciation always signals the shift from gross to net, never from domestic to national. Options C and D confuse the two aggregates with the difference between market price and factor cost, where factor cost equals market price minus indirect taxes plus subsidies. Keep the two axes separate in your mind: gross against net is decided by depreciation, and domestic against national by net factor income from abroad.
Read the full article: GDP and National Income: Concepts, Methods and Formulas
Practice Questions
View allGross Domestic Product (GDP) is the value of all final goods and services produced
- A.by the residents of a country, wherever they may be
- B.within the domestic territory of a country in a year
- C.by the government sector alone in a year
- D.including intermediate goods used in production
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GDP measures production inside the borders of a country in one accounting year, whoever the producer may be. A foreign firm making cars in India adds to India's GDP, because the test is the place of production and not the nationality of the producer.
Read the full explanation →Net National Product (NNP) is obtained by subtracting which item from Gross National Product?
- A.Indirect taxes
- B.Depreciation
- C.Subsidies
- D.Net factor income from abroad
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Machines, buildings and vehicles wear out as they are used, and the value of that wear and tear must be set aside if the country is to keep its capital intact.
Read the full explanation →Who made the first estimate of the national income of India?
- A.V. K. R. V. Rao
- B.P. C. Mahalanobis
- C.Dadabhai Naoroji
- D.D. R. Gadgil
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He made the earliest estimate of India's national income in the nineteenth century and used it to argue that British rule was draining wealth out of the country, putting the average income at about twenty rupees a person a year.
Read the full explanation →The National Income Committee, set up by the Government of India in 1949, was chaired by
- A.P. C. Mahalanobis
- B.Dadabhai Naoroji
- C.V. K. R. V. Rao
- D.C. Rangarajan
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The committee was appointed in 1949 to prepare official estimates of national income after independence, and it submitted its final report in 1954.
Read the full explanation →National income at factor cost is obtained from national income at market price by
- A.adding indirect taxes and subtracting subsidies
- B.subtracting indirect taxes and adding subsidies
- C.adding both indirect taxes and subsidies
- D.subtracting both indirect taxes and subsidies
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A market price contains the indirect taxes the buyer pays, which never reach the producer, so they must be taken out.
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