Home › Karnataka PUC II › economics › national_income_accounting › Why is NNP at FACTOR COST (rather than at market…
Why is NNP at FACTOR COST (rather than at market prices) called the National Income?
ABecause it is computed only by the Value Added method
BBecause it includes indirect taxes paid by the consumer
CBecause it measures the income actually accruing to factors of production after removing depreciation and indirect taxes
DBecause it includes all transfer payments
Answer & Solution
Correct answer: C. Because it measures the income actually accruing to factors of production after removing depreciation and indirect taxes
NNP_FC excludes depreciation (so it is 'net') AND net indirect taxes (so it is at the cost paid to factors of production). It is therefore the most accurate measure of incomes earned by factors.
Related questions
GDP and welfare are NOT identical because GDPIf GDP at market prices = ₹500, depreciation = ₹50, net indirect taxes = ₹40, NFIA = ₹10, Which equation correctly states the EXPENDITURE method of GDP at market prices?Which is a TRANSFER payment in the macroeconomic framework?Personal Disposable Income (PDI) equalsIf NDP at factor cost is ₹100 lakh and net indirect taxes are ₹15 lakh, NDP at market pricWhich of the following is INCLUDED in GDP?The Value-Added Method calculates national income by