Aggregates related to national income - NDP

Correct answer: C. 14 lakh rupees

Explanation: The value of output includes all goods produced during the current period, not merely the portion sold. Thus, market sales of ₹8 lakh, self-consumed output of ₹4 lakh and the inventory increase of ₹2 lakh together equal ₹14 lakh. Option C is correct. Option A counts only sales, and option B omits inventory; option D overstates production by adding an amount not produced.

Correct answer: B. 300 crore rupees

Explanation: Government expenditure is included in current production when it pays for current goods or productive services. Employee salaries of ₹190 crore represent current government services, and new bridge construction of ₹110 crore represents current construction output. Pensions of ₹260 crore are transfer payments and do not purchase current output. Hence, included production equals ₹190 crore + ₹110 crore = ₹300 crore, so option B is correct.

Correct answer: C. 120

Explanation: The implicit price index, or NDP deflator, compares the value of output at current prices with its value at base-year prices: Implicit price index = nominal NDP ÷ real NDP × 100. Therefore, 10,800 ÷ 9,000 × 100 = 120. Option C is correct. An index of 100 would indicate equal nominal and real values, while 83.33 reverses the ratio and 125 is an arithmetic error.

Correct answer: A. 5.56 percent

Explanation: The governing concept is that real NDP removes the effect of price changes from nominal NDP. The exact growth factor is (1 + nominal growth) divided by (1 + price growth), so it is 1.14 ÷ 1.08 − 1 = 0.05556, or approximately 5.56%. Therefore option A is correct. Subtracting 8% directly from 14% gives only the rough approximation of 6%, not the exact approximate result requested.

Correct answer: A. A fall of about 3.64%

Explanation: Real NDP is obtained by deflating nominal NDP, so the relevant growth factor is 1.06 divided by 1.10. Thus real growth equals 1.06 ÷ 1.10 − 1 = −0.03636, or about −3.64%. Real NDP therefore falls by approximately 3.64%, making option A correct. Option B uses direct subtraction and incorrectly calls the result exact; options C and D ignore that prices rose faster than nominal output.

Correct answer: C. 320 crore rupees

Explanation: The governing relationship is NDP at market price = NDP at factor cost + net indirect taxes, where net indirect taxes equal indirect taxes minus subsidies. Since the two NDP measures are equal, net indirect taxes must be zero. Therefore 320 − subsidies = 0, so subsidies equal 320 crore rupees. Option C is correct; zero would ignore the stated tax amount, while the other values do not make net indirect taxes zero.

Correct answer: B. 360 crore rupees

Explanation: NDP is calculated as gross output minus depreciation. Since gross output does not change, the fall in NDP equals the additional depreciation caused by the rate increase. The depreciation rate rises by 8% − 5% = 3 percentage points, so the additional depreciation is 12,000 × 3/100 = 360 crore rupees. Hence option B is correct; 600 is based on 5%, and 960 is based on 8% alone.

Correct answer: B. 33.33 percent

Explanation: Per capita NDP equals total real NDP divided by population. Let the second population be P and the first be 1.5P. Since total real NDP is equal, the first per capita value is 1/1.5, or 2/3, of the second. Its reduction is therefore 1/3 × 100 = 33.33 percent. Thus option B is correct; 50 percent incorrectly compares population growth directly with per capita decline.

Correct answer: B. It will remain unchanged

Explanation: Real per capita NDP is calculated as real NDP divided by population. Real NDP changes from 10,800 to 11,664, an increase of 864, which is 8 percent. Population changes from 135 lakh to 145.8 lakh, also an increase of 8 percent. Because numerator and denominator rise in the same proportion, their ratio remains unchanged. Hence option B is correct; an 8 percent rise would occur only if population did not rise.

Correct answer: B. ₹7,650 crore

Explanation: Market price includes net indirect taxes, whereas factor cost measures the payment accruing to factors of production. To convert NDP at market price into NDP at factor cost, subtract net indirect taxes: NDPFC = NDPMP − NIT = ₹8,200 crore − ₹550 crore = ₹7,650 crore. Hence option B is correct. Option C ignores the price adjustment, while adding the tax would move in the wrong direction.

Correct answer: B. ₹6,650 crore

Explanation: National income is NNP at factor cost. It is obtained by adding net factor income from abroad to NDP at factor cost: NNPFC = NDPFC + NFIA. Here NFIA is negative ₹250 crore, so national income = ₹6,900 + (−₹250) = ₹6,650 crore. Option B is correct. The domestic figure alone would ignore foreign factor income, and adding ₹250 would wrongly treat a negative inflow as positive.

Correct answer: C. It will not change

Explanation: NDP is defined as GDP minus depreciation: NDP = GDP − depreciation. The change in NDP is therefore change in GDP minus change in depreciation. Here ΔNDP = ₹500 crore − ₹500 crore = zero. The increase in output is exactly offset by the increase in capital consumption, so NDP remains unchanged. Option C is correct; options A and B ignore the simultaneous depreciation rise, while D reverses the net effect.

Correct answer: B. Minus ₹250 crore

Explanation: Net indirect taxes are calculated as indirect taxes minus subsidies. Thus, NIT = ₹700 crore − ₹950 crore = −₹250 crore. Because subsidies exceed the taxes collected, the result is negative, meaning that net subsidies are ₹250 crore. Hence option B is correct; ₹1,650 crore would incorrectly add taxes and subsidies instead of finding their net difference.

Correct answer: B. ₹6,850 crore

Explanation: The conversion formula is NDP at market price = NDP at factor cost + net indirect taxes. Substituting the data gives ₹7,100 crore + (−₹250 crore) = ₹6,850 crore. A negative net indirect tax means subsidies exceed indirect taxes, so market price is lower than factor cost. Therefore option B is correct; adding ₹250 crore would wrongly ignore the negative sign.

Correct answer: B. Wages, rent, interest, profit and mixed income

Explanation: Under the income method, NDP at factor cost is measured by adding factor incomes generated within the domestic territory during the accounting period. These include compensation of employees, rent, interest, profit, and mixed income of the self-employed. Therefore option B is correct. Consumption and investment belong to the expenditure method, while indirect taxes and depreciation are adjustments rather than the required sum of factor incomes.

Correct answer: C. ₹6,500 crore

Explanation: Using the income method, NDP at factor cost equals the total of factor incomes. The calculation is ₹3,800 + ₹500 + ₹400 + ₹1,100 + ₹700 = ₹6,500 crore. Hence option C is correct. The smaller alternatives omit one or more listed incomes, while ₹7,200 crore overstates the total. Transfer payments or unrelated financial transactions should not be added to this factor-income total.

Correct answer: B. Employer contribution to provident fund

Explanation: Compensation of employees includes wages and salaries in cash or kind, together with employers’ contributions to social security schemes such as provident funds. Therefore option B is correct. Lottery winnings and old-share gains are not payments for current productive services. An old-age pension is generally a transfer payment rather than compensation for current employment, so it is excluded from this aggregate.

Correct answer: B. Because labour and entrepreneurial income are difficult to separate

Explanation: Mixed income is the return received by an unincorporated self-employed person whose work combines several productive roles. A shopkeeper may supply labour, use personal capital, and organize the business as an entrepreneur; the total receipt cannot be reliably divided into wages, interest, rent, and profit. Thus option B is correct. It is factor income from production, not a transfer or foreign receipt.

Correct answer: B. They are subtracted and NDP falls

Explanation: Net exports are defined as exports minus imports: NX = X − M. In the expenditure identity, NDP includes net exports as a component. If imports exceed exports, NX is negative and its negative value lowers the total expenditure attributed to domestic production. Thus option B is correct. The amount is not converted into depreciation, and it cannot be ignored because imports must be removed from domestic output.

Correct answer: C. ₹320 lakh

Explanation: The governing calculation is NVA at market price = Gross Value Added at market price − depreciation. First, GVA = ₹900 lakh − ₹520 lakh = ₹380 lakh. Then NVA = ₹380 lakh − ₹60 lakh = ₹320 lakh. Thus option C is correct. Option D is only the gross value added, while the lower alternatives result from incorrect deductions.

Correct answer: B. The agent's service is produced in the current year

Explanation: NDP records the value of current domestic production after allowing for depreciation. An old house was constructed and counted when it was originally produced, so its resale is only a transfer of an existing asset and is excluded. The property agent performs a service in the current year; therefore the fee represents current production and is included. Hence option B is correct.

Correct answer: B. It is included at imputed market value

Explanation: National product aims to measure production, not merely market sales. Grain grown by a farmer is current domestic production even when the farmer consumes it without a cash transaction. Its value is therefore estimated using the relevant market price, known as imputed valuation, and included in NDP. Option B is correct; it is not a transfer payment and need not be exported to count as production.

Correct answer: A. It is a transfer of ownership of a financial asset

Explanation: NDP records current production of goods and services, whereas buying an already issued company bond only changes who owns a financial claim. No new bond is produced at the time of resale, so the purchase price is excluded from expenditure on current output. Consequently, option A is correct. However, a separate brokerage or financial service provided during the transaction may represent current production and can be included.

Correct answer: B. 9 percent

Explanation: The governing identity is NDP = GDP − Depreciation. Therefore, depreciation equals ₹20,000 crore − ₹18,200 crore = ₹1,800 crore. Its share in GDP is (₹1,800 ÷ ₹20,000) × 100 = 9%. Thus option B is correct. The other percentages arise from using the wrong base or failing to subtract NDP from GDP.

Correct answer: A. 4 percent

Explanation: Real NDP measures output after removing the effect of price changes. For an approximate calculation, real growth equals nominal growth minus inflation: 10% − 6% = 4%. Therefore, option A is the appropriate answer. The exact index calculation gives a slightly different figure, but the question asks for an approximate rate. Options B and C confuse inflation or nominal growth with real growth, while D adds them.