Which step is necessary to move from GNP to national income?
Answer and explanation
Correct answer: Subtract depreciation and adjust from market price to factor cost
National income is defined as Net National Product at factor cost, written as NNP₍FC₎. Starting from GNP, depreciation must be subtracted to obtain NNP. Then net indirect taxes are removed, or equivalently the appropriate adjustment is made, to move from market price to factor cost. Thus option A describes the necessary conversion, while the other choices are unrelated or incorrect.
Frequently asked questions
What is the correct answer to this question?
Subtract depreciation and adjust from market price to factor cost
Why is this the correct answer?
National income is defined as Net National Product at factor cost, written as NNP₍FC₎. Starting from GNP, depreciation must be subtracted to obtain NNP. Then net indirect taxes are removed, or equivalently the appropriate adjustment is made, to move from market price to factor cost. Thus option A describes the necessary conversion, while the other choices are unrelated or incorrect.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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