Q. Consider the following statements regarding national income aggregates:
1.GDP at Factor Cost is derived by subtracting depreciation and indirect taxes from GDP at Market Price.
2.NNP at Market Price is calculated by adjusting NNP at Factor Cost for indirect taxes and subsidies.
3.GNP at Factor Cost includes net income from abroad added to GDP at Factor Cost.
Which of the statements given above is/are correct?

[A] 2 and 3 only

[B] 1 and 2 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: A
Notes:

Explanation:

  • Depreciation is not subtracted while calculating GDP at Factor Cost from GDP at Market Price. The correct formula is:
    GDP at Factor Cost = GDP at Market Price − Indirect Taxes + Subsidies
  • NNP at Market Price = NNP at Factor Cost + Indirect Taxes − Subsidies
  • GNP at Factor Cost = GDP at Factor Cost + Net Income from Abroad (Exports − Imports)

Source: Laxmikant (Polity)

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