Aggregates related to national income - GDP

Cash assistance is a transfer payment: the government transfers purchasing power to a household without receiving a currently produced good or service in return. GDP measures the market value of current production, so the transfer itself is not counted as GDP. If the household later spends the money on newly produced goods or services, that resulting expenditure may enter GDP.

Software newly developed and licensed during the current year represents current economic production. GDP includes market-valued services and intangible products, not only physical goods. The sale of a new software license can therefore be recorded as current output, subject to national accounting rules and the software's treatment as a product or service. It is not a resale, transfer payment, or automatically an import.

GDP follows the domestic concept, so it counts production according to where the economic activity takes place rather than according to the nationality or ownership of the producer. Since the phone is newly produced within the country’s domestic territory and sold as a final good, its value is included in domestic GDP. Net factor income from abroad is relevant when converting a domestic measure into a national measure.

To convert GDP at market price into GDP at factor cost, subtract net indirect taxes. Net Indirect Taxes = Indirect Taxes − Subsidies = 320 − 80 = ₹240 crore. Therefore, GDP at Factor Cost = GDP at Market Price − Net Indirect Taxes = 2,400 − 240 = ₹2,160 crore. Equivalently, 2,400 − 320 + 80 gives the same result. Hence, option C is correct.

Nominal GDP measures current production using current-year prices. The current quantities remain 60 and 25, so the first good contributes ₹12 × 60 = ₹720 and the second contributes ₹21 × 25 = ₹525. Their sum is ₹720 + ₹525 = ₹1,245. Thus option C is correct. Applying base-year prices here would instead produce real GDP.

Per capita GDP means GDP per person, so the governing formula is total GDP divided by total population. Calculation: ₹6000 crore ÷ 3 crore = ₹2000 per person. The word crore cancels because it appears in both the numerator and denominator. Thus option B is correct. ₹1000 and ₹3000 use an incorrect division or assumption, while ₹18000 comes from multiplication rather than division.

GDP is mainly compiled from recorded market transactions valued at market prices. Volunteer tree planting creates an environmental benefit, but when the service is provided freely there is no observed wage or purchase payment to record as current production. Hence option A is correct. Trees can be final assets or productive resources, so B is not a valid reason; C ignores environmental value, and D incorrectly classifies domestic volunteer work as imports.

The governing accounting principle is that GDP records production that has an observable market value, usually through a sale or payment. A domestic worker’s paid service generates a wage and can therefore be valued and included. The same household task performed without payment by a family member may be economically useful, but it lacks a recorded market transaction. Thus option C is correct; the other choices confuse quality, nationality, or the intermediate-good concept.

GDP records the market value of final goods and services produced within a country during a period. When a family repairs its own house without hiring a service provider or making a market payment, the activity has no observable market transaction and is difficult to value consistently. Thus option B is correct. The house can be a final good, the repair is not automatically an import, and the family is part of the domestic economy.