National Income usually refers to:
Options
ANNP at Factor Cost
BGDP at Factor Cost
CNNP at Market Price
DGDP at Market Price
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Determination of National IncomePYQ - May 2018 (Inter)Question 101 of 20
All Questions Correct Answer
✅ Option a — NNP at Factor Cost
All Options:
- ANNP at Factor Cost
- BGDP at Factor Cost
- CNNP at Market Price
- DGDP at Market Price
Detailed Solution & Explanation
To determine what National Income usually refers to, let's break it down:
• National Income is the total income earned by a country's citizens, both within and outside the country.
• It is calculated by adding up all the incomes earned by the factors of production, such as labor and capital.
• The concept of National Income is closely related to Net National Product (NNP), which is the total value of goods and services produced by a country's citizens, minus depreciation.
• NNP at Factor Cost is the value of goods and services produced, minus depreciation, and is not affected by indirect taxes and subsidies, making it a more accurate representation of National Income.
The correct answer is NNP at Factor Cost because it reflects the total income earned by a country's citizens, without the influence of indirect taxes and subsidies.
In contrast, options like GDP at Market Price are incorrect because they include the value of goods and services produced within a country, regardless of who owns the factors of production, and are also affected by indirect taxes and subsidies.
About This Chapter: National Income
Paper
Paper 4: Business Economics
Weightage
15%
Key Topics
Aggregates, Measurement, Keynesian Theory
A crucial chapter covering national income aggregates like GDP, GNP, NDP, NNP, and the methods of measuring national income (Income, Expenditure, and Output methods). It also introduces Keynesian Theory including the concepts of Aggregate Demand, Consumption Function, and the Multiplier.
View Official ICAI SyllabusExam Strategy Tip
Practice numerical questions on GDP/GNP calculations and the Multiplier. These are guaranteed marks in every exam. Also understand the circular flow of income clearly.
More Questions from Determination of National Income
Personal Income minus Direct Taxes equals:
If MPC is 0.8, the value of the investment multiplier is:
Depreciation is also known as:
In a two-sector economy, Aggregate Demand equals:
Which method is also known as the "Value Added Method"?
The multiplier effect explains how an initial increase in investment leads to a greater increase in:
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