Aggregates related to national income - NDP

Correct answer: A. 150 crore rupees

Explanation: The governing concept is that a percentage of GDP is found by multiplying GDP by the percentage divided by 100. Depreciation = 5/100 × 3000 = 0.05 × 3000 = 150 crore rupees. Hence option A is correct. Option B treats 5 percent as 10 percent, while options C and D represent subtraction or addition involving GDP rather than calculating the depreciation amount itself.

Correct answer: B. 2850 crore rupees

Explanation: NDP is obtained by subtracting depreciation from GDP. First calculate depreciation: 5 percent of 3000 = (5/100) × 3000 = 150 crore rupees. Then NDP = 3000 − 150 = 2850 crore rupees. Therefore, option B is correct. Option A fails to deduct depreciation, option C adds it, and option D subtracts an incorrect amount of 300 crore rupees.

Correct answer: C. By subtracting subsidies from indirect taxes

Explanation: Net indirect taxes are defined as indirect taxes minus subsidies: NIT = indirect taxes − subsidies. Subsidies reduce the effective burden included in market prices, so they are deducted from indirect taxes to obtain the net amount. Hence option C is correct. Option A adds subsidies, option B uses direct taxes rather than indirect taxes, and option D wrongly combines depreciation with taxation.

Correct answer: D. 40 crore rupees

Explanation: Use the definition NIT = indirect taxes − subsidies. Rearranging for subsidies gives subsidies = indirect taxes − NIT = 140 − 100 = 40 crore rupees. Therefore, option D is correct. Options A, B and C do not produce the stated net amount when subtracted from 140; for example, only 140 − 40 equals the given NIT of 100 crore rupees.

Correct answer: A. Indirect taxes

Explanation: Net indirect taxes are calculated as indirect taxes minus subsidies: NIT = indirect taxes − subsidies. When subsidies are zero, no amount is deducted from indirect taxes. Therefore, net indirect taxes are exactly equal to indirect taxes. Direct taxes, depreciation and net factor income from abroad are separate concepts and do not determine this equality.

Correct answer: C. Net factor income from abroad

Explanation: NDP is a net domestic measure because it covers production within domestic territory after deducting depreciation. To convert the domestic measure into a national measure, net factor income from abroad is added: NNP = NDP + NFIA. Depreciation and net indirect taxes relate to other conversions, while capital gains are excluded from this adjustment.

Correct answer: D. Both will be equal

Explanation: The relationship between the two net aggregates is NNP = NDP + net factor income from abroad. If net factor income from abroad is zero, the additional term has no effect. Therefore NNP and NDP have the same numerical value, although one is a national measure and the other is a domestic measure. Zero NFIA does not mean that either product is zero.

Correct answer: A. 1,875 crore rupees

Explanation: To convert NDP into NNP, use the formula NNP = NDP + NFIA. Substituting the given values gives NNP = 1,800 + 75 = 1,875 crore rupees. Since NFIA is positive, national product is greater than domestic product. The other values result from subtracting, ignoring, or adding the amount incorrectly.

Correct answer: B. 2,040 crore rupees

Explanation: The conversion formula is NNP = NDP + NFIA, so NDP = NNP − NFIA. Substituting the values gives NDP = 2,100 − 60 = 2,040 crore rupees. Because the given NFIA is positive, it must be subtracted when moving from the national aggregate to the domestic aggregate. Thus option B is correct.

Correct answer: D. Capital

Explanation: The governing factor-income principle assigns interest to capital because it is the payment for using financial or physical capital in production. Thus option D is correct. Land earns rent, labour earns wages or employee compensation, and entrepreneurship earns profit. The question concerns the classification of factor income, not the particular interest rate or the total amount paid on a loan.

Correct answer: C. Generally faster than population

Explanation: Per capita NDP is calculated as total NDP divided by population. Therefore, for per capita NDP to increase, total NDP must generally grow faster than the population, assuming a meaningful comparison at constant prices. If both grow at the same rate, per capita NDP remains broadly unchanged; if population grows faster, it falls. Hence option C is correct.

Correct answer: D. 60000 rupees

Explanation: Per capita NDP equals total NDP divided by population. Convert the units first: 7200 crore rupees equals 7200 × 10,000,000 rupees, and 12 lakh persons equals 12 × 100,000 persons. Thus, per capita NDP = 72,000,000,000 ÷ 1,200,000 = 60,000 rupees. Therefore, option D is correct; the other values result from incorrect unit conversion or division.

Correct answer: A. It shows net output after deducting capital wear

Explanation: GDP measures the gross value of final goods and services produced within domestic territory, before deducting depreciation. NDP is obtained as GDP minus depreciation, so it reflects the value of output remaining after allowing for the wear and tear of capital assets. This can provide a better indication of sustainable output available for consumption and fresh investment. Hence option A is correct.

Correct answer: B. It measures final output within domestic territory after deducting depreciation

Explanation: NDP is a domestic and net measure of national income accounting. It covers the value of final goods and services produced within a country’s domestic territory during the relevant period, and it deducts depreciation from GDP. Production by citizens abroad belongs to a national, not domestic, measure. Transfer payments and purchases of financial assets are not current production. Therefore, option B is correct.

Correct answer: B. 2200 crore rupees

Explanation: To move from a national aggregate to the corresponding domestic aggregate, subtract net factor income from abroad: NDP at market price = NNP at market price − NFIA. Therefore, NDPMP = 2300 − 100 = 2200 crore rupees. Since NFIA is positive, national product exceeds domestic product by 100 crore rupees.

Correct answer: B. 1210 crore rupees

Explanation: The conversion from factor cost to market price is NDP at market price = NDP at factor cost + net indirect taxes. Here, NIT is −40 crore rupees, so NDPMP = 1250 + (−40) = 1210 crore rupees. A negative NIT means subsidies exceed indirect taxes, reducing the market-price measure below the factor-cost measure.

Correct answer: A. 3360 crore rupees

Explanation: The governing distinction is between gross and net domestic product. Gross GDP includes the value of depreciation, so depreciation must be deducted to obtain net GDP while keeping the market-price basis unchanged. Thus, NDP at market price = GDP at market price − depreciation = 3600 − 240 = 3360 crore rupees. Adding depreciation would move in the opposite direction.

Correct answer: C. 2590 crore rupees

Explanation: Market price includes net indirect taxes over and above factor payments. Therefore, to convert NDP at market price into NDP at factor cost, subtract net indirect taxes: NDP at factor cost = 2750 − 160 = 2590 crore rupees. Option A adds the tax, B makes no adjustment, and D subtracts too much.

Correct answer: A. It is not payment for a current productive service

Explanation: A government scholarship is normally a transfer payment: the recipient receives income, but the government does not receive a directly corresponding current productive service in exchange for that payment. Since NDP measures current production rather than transfers of purchasing power, the scholarship is excluded. Option A states this principle; the other options misclassify its source, tax status or nature.

Correct answer: A. It is payment for a current health service

Explanation: A government doctor performs a current health-care service, and the salary is the factor payment associated with that productive service. Government production is still included in national accounting even when the service is supplied without a direct market sale; its value is commonly estimated through the cost of inputs such as wages. Therefore option A is correct, while a salary is not a transfer or capital gain.

Correct answer: A. Depreciation is 280 crore rupees

Explanation: The governing identity is NDP = GDP − depreciation, or equivalently GDP − NDP = depreciation. Since GDP exceeds NDP by 280 crore rupees, the deduction for consumption of fixed capital, called depreciation, must be 280 crore rupees. Net indirect taxes explain the difference between market price and factor cost, NFIA converts domestic into national product, and net investment is a different capital-formation concept.

Correct answer: A. 16 lakh rupees

Explanation: The governing calculation is net capital formation = gross investment − depreciation. The firm’s purchase of the machine is gross investment of 18 lakh rupees. Deducting depreciation of 2 lakh rupees gives 18 − 2 = 16 lakh rupees. The gross purchase value is not the net addition, 20 lakh incorrectly adds depreciation, and 2 lakh represents only the depreciation amount rather than the resulting capital formation.

Correct answer: A. 3940 crore rupees

Explanation: The governing distinction is between gross and net domestic product. Gross GDP includes the value of depreciation, so depreciation must be deducted to obtain the net measure while keeping market-price valuation unchanged. NDP at market price = GDP at market price − depreciation = 4200 − 260 = 3940 crore rupees. Option B adds depreciation, while C fails to adjust and D subtracts it twice.

Correct answer: C. 3170 crore rupees

Explanation: The market-price measure includes net indirect taxes, whereas factor-cost income excludes this net tax component. Therefore, NDP at factor cost = NDP at market price − net indirect taxes = 3380 − 210 = 3170 crore rupees. Option A adds the taxes instead of removing them, option B makes no conversion, and option D subtracts too much. Hence option C is correct.

Correct answer: B. 3710 crore rupees

Explanation: To change a national aggregate into the corresponding domestic aggregate, subtract net factor income from abroad. Thus, NDP at market price = NNP at market price − NFIA = 3850 − 140 = 3710 crore rupees. Hence, option B is correct. Option A adds NFIA instead of subtracting it; option C makes no adjustment, and option D subtracts an incorrect amount.