Aggregates related to national income - NDP

Correct answer: A. 20 percent lower

Explanation: Per capita NDP is calculated as total real NDP divided by population. Let the second economy’s population be P and its NDP be Y. The first has the same Y but population 1.25P, so its per capita NDP is Y/(1.25P) = 0.8Y/P. Thus it is 80 percent of the second economy’s figure, or 20 percent lower. Option B incorrectly compares the population increase directly with the per-capita decrease.

Correct answer: B. It will remain unchanged

Explanation: Real NDP increases from 9,600 to 10,080, a rise of 480/9,600 = 5 percent. Population also increases from 120 lakh to 126 lakh, a rise of 6/120 = 5 percent. Since per capita NDP equals total real NDP divided by population, the two equal growth rates cancel: the new ratio is (10,080/126) compared with (9,600/120), and both are 80. Therefore per capita real NDP remains unchanged.

Correct answer: B. 9,150 crore rupees

Explanation: First convert NDP at market price to NDP at factor cost by subtracting net indirect taxes. Net indirect taxes = indirect taxes − subsidies = 800 − 300 = 500 crore, so NDP at factor cost = 9,000 − 500 = 8,500 crore. Add net factor income from abroad to obtain NNP at factor cost: 8,500 + 200 = 8,700 crore. Finally add depreciation to convert net into gross: GNP at factor cost = 8,700 + 450 = 9,150 crore. Hence option B is correct.

Correct answer: B. 11,550 crore rupees

Explanation: Convert GNP at market price to NNP at market price by deducting depreciation: 12,500 − 700 = 11,800 crore. Net factor income from abroad is 360 − 510 = −150 crore. Since NNP = NDP + NFIA, NDP at market price = 11,800 − (−150) = 11,950 crore. Net indirect taxes equal 650 − 250 = 400 crore. Therefore NDP at factor cost = 11,950 − 400 = 11,550 crore, so option B is correct.

Correct answer: A. An equal increase in depreciation

Explanation: The key relationship is NDP = GDP − consumption of fixed capital, or depreciation. If GDP rises by an amount exactly equal to the increase in depreciation, the subtraction leaves NDP unchanged. For example, if both GDP and depreciation rise by ₹100 crore, NDP changes by ₹100 − ₹100 = zero. Factor income from abroad affects national rather than domestic aggregates; subsidies alter valuation, and imports are treated through expenditure accounting, so those choices do not express the required direct condition.

Correct answer: B. ₹8,500 crore

Explanation: Two adjustments are required. First, convert GDP into NDP by subtracting depreciation: ₹10,000 − ₹800 = ₹9,200 crore. Second, convert market price into factor cost by subtracting net indirect taxes. Net indirect taxes = indirect taxes − subsidies = ₹900 − ₹200 = ₹700 crore. Therefore, NDP at factor cost = ₹9,200 − ₹700 = ₹8,500 crore. Option A subtracts an incorrect total, whereas C and D fail to apply both adjustments correctly.

Correct answer: A. Gross value added at market price of all sectors

Explanation: In the value-added method, the gross value added at market price of all domestic producing sectors is aggregated to obtain GDP at market price. Depreciation is then deducted because the transition from gross to net measures removes consumption of fixed capital: NDP at market price = GDP at market price − depreciation. Thus option A is correct; intermediate consumption is already excluded through value addition.

Correct answer: D. Old-age pension

Explanation: The income method measures factor incomes generated by current domestic production. It includes compensation of employees, operating surplus, and mixed income because these reward labour, capital, entrepreneurship, or self-employed production. An old-age pension is a transfer payment: it is received without providing a current productive service. Therefore, option D is excluded from NDP at factor cost.

Correct answer: B. ₹7,000 crore

Explanation: Using the expenditure method, GDP at market price = private consumption + government consumption + gross domestic capital formation + net exports. Thus GDP = ₹5,000 + ₹1,200 + ₹1,500 − ₹200 = ₹7,500 crore. Since NDP is GDP minus depreciation, NDP = ₹7,500 − ₹500 = ₹7,000 crore. Option B is correct; negative net exports must be subtracted.

Correct answer: A. Because the base levels of GDP and depreciation are unknown

Explanation: NDP is calculated as GDP minus depreciation. Percentage growth rates cannot be subtracted directly because the two percentages apply to different initial amounts. The absolute base levels are needed to calculate the new GDP, the new depreciation and then the two NDP values. Without those levels, NDP could rise, fall or grow at different rates depending on the starting relationship.

Correct answer: A. About 5.56%

Explanation: First calculate NDP in each year: base-year NDP = ₹1,000 crore − ₹100 crore = ₹900 crore, while next-year NDP = ₹1,100 crore − ₹150 crore = ₹950 crore. The increase is ₹50 crore. Therefore, growth rate = (₹50/₹900) × 100 = approximately 5.56%, not the 10% growth rate of GDP.

Correct answer: C. About a 2% decrease

Explanation: Real NDP per capita equals real NDP divided by population. For a quick approximation, its percentage change is the growth of real NDP minus population growth: 4% − 6% = −2%. Hence, real NDP per person falls by approximately 2%. The exact factor calculation, 1.04/1.06 − 1, gives about −1.89%, confirming option C.

Correct answer: B. ₹900 crore

Explanation: Use the valuation-conversion identities carefully. Since NDP at market price = NDP at factor cost + net indirect taxes, NDPMP = ₹10,500 + ₹600 = ₹11,100 crore. Also, GDPMP = NDPMP + depreciation. Hence depreciation = ₹12,000 − ₹11,100 = ₹900 crore. Thus option B is correct. The other amounts result from failing to add the tax adjustment or from using GDP and NDP incorrectly.

Correct answer: B. ₹8,500 crore

Explanation: The governing relation is NDPFC = NDPMP − net indirect taxes, where net indirect taxes equal indirect taxes minus subsidies. Net indirect taxes = ₹800 − ₹300 = ₹500 crore. Therefore, NDP at factor cost = ₹9,000 − ₹500 = ₹8,500 crore. Option B is correct. Option A subtracts too much, option C uses an incomplete adjustment, and option D adds the net tax instead of subtracting it.

Correct answer: B. ₹8,200 crore

Explanation: The relevant identity is NDPMP = NDPFC + net indirect taxes. Substituting the values gives NDPMP = ₹8,400 + (−₹200) = ₹8,200 crore. A negative net indirect tax means subsidies exceed indirect taxes, so the market-price measure is ₹200 crore below the factor-cost measure. Therefore option B is correct; option D incorrectly treats the negative amount as positive.

Correct answer: C. Mixed income of a self-employed person

Explanation: Under the income method, NDP at factor cost includes compensation of employees, operating surplus and mixed income of the self-employed. Compensation of employees includes wages or salaries, payment in kind and employers’ social-security contributions. Mixed income is different because it combines the labour income and property or entrepreneurial income of an unincorporated self-employed producer. Hence option C is correct.

Correct answer: C. ₹10,000 crore

Explanation: National income is NNP at factor cost. The relationship is NNPFC = NDPFC + NFIA, so rearranging gives NDPFC = NNPFC − NFIA. With NFIA = −₹400 crore, NDPFC = ₹9,600 − (−₹400) = ₹10,000 crore. Subtracting a negative amount increases the result. Hence option C is correct; options A and D mishandle the sign, while B ignores NFIA.

Correct answer: A. ₹13,050 crore and ₹12,750 crore

Explanation: Use net indirect taxes = indirect taxes − subsidies = 1,000 − 250 = ₹750 crore. First convert GDP to NDP: 15,000 − 1,200 = ₹13,800 crore. Then remove net indirect taxes to obtain NDP at factor cost: 13,800 − 750 = ₹13,050 crore. National income is NNP at factor cost, so subtract negative NFIA: 13,050 + (−300) = ₹12,750 crore. Thus A is correct.

Correct answer: A. ₹9,080 crore

Explanation: To move from GNP to NDP at factor cost, first remove depreciation, then remove NFIA to change the national measure into a domestic measure, and finally remove net indirect taxes to change market prices into factor cost. The calculation is: 10,400 − 620 = 9,780; 9,780 − 240 = 9,540; 9,540 − 460 = ₹9,080 crore. Therefore option A is correct.

Correct answer: B. ₹8,690 crore

Explanation: NNP at factor cost is a national aggregate, while NDP at market price is domestic and market-valued. First remove NFIA: NDP at factor cost = 8,120 − (−180) = ₹8,300 crore. Net indirect taxes equal 600 − 210 = ₹390 crore. Adding them gives NDP at market price = 8,300 + 390 = ₹8,690 crore. The negative NFIA must be subtracted algebraically, so B is correct.

Correct answer: B. ₹550 crore

Explanation: The comparison must use the same net basis. Convert GDP at market price into NDP at market price by subtracting depreciation: 9,300 − 370 = ₹8,930 crore. The difference between NDP at market price and NDP at factor cost is net indirect taxes: 8,930 − 8,380 = ₹550 crore. Hence option B is correct; ₹920 crore incorrectly compares gross GDP with net NDP.

Correct answer: A. ₹160 crore

Explanation: The difference between NDP at market price and NDP at factor cost equals net indirect taxes: 7,540 − 7,180 = ₹360 crore. Since net indirect taxes = indirect taxes − subsidies, substitute the data: 360 = 520 − subsidies. Therefore subsidies = 520 − 360 = ₹160 crore. Option A is correct; ₹360 crore is the net tax amount, not the subsidy itself.

Correct answer: B. ₹520 crore

Explanation: First convert GNP to NNP at market price: 11,800 − 680 = ₹11,120 crore. Remove NFIA to obtain NDP at market price: 11,120 − 250 = ₹10,870 crore. The gap between NDP at market price and NDP at factor cost is net indirect taxes: 10,870 − 10,350 = ₹520 crore. Thus option B is correct; the other figures omit or misapply one adjustment.

Correct answer: B. ₹340 crore

Explanation: First remove net indirect taxes from NDP at market price to obtain NDP at factor cost: 7,240 − 480 = ₹6,760 crore. GDP at factor cost exceeds NDP at factor cost by depreciation, because GDP is gross and NDP is net. Therefore depreciation = 7,100 − 6,760 = ₹340 crore. Option B is correct; ₹480 crore is only the valuation adjustment.

Correct answer: C. ₹7,910 crore

Explanation: First calculate NFIA: income received from abroad minus income paid to foreigners = ₹530 − ₹640 = −₹110 crore. The relationship is NNP = NDP + NFIA. Therefore NDP = NNP − NFIA = ₹7,800 − (−₹110) = ₹7,910 crore. Option C is correct. The negative NFIA must be subtracted, which increases NDP relative to NNP; option A uses the wrong sign.