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SubjectsEconomics
राष्ट्रीय आय से संबंधित समुच्चय—शुद्ध राष्ट्रीय उत्पाद (NNP)
This Class 12 Economics topic, part of the chapter “National Income and Related Aggregates,” explains Net National Product (NNP) as the value of final goods and services produced by a country’s normal residents after deducting depreciation. Students learn how NNP is related to Gross National Product (GNP), distinguish NNP at market price from NNP at factor cost, and understand the role of net indirect taxes and depreciation in national income calculations. The topic also helps them interpret NNP as an indicator of economic activity and income.
TOPIC PRACTICE
Up to 25 questions from this page. Select your focus, then start.
The standard identity is NNP at factor cost = GDP at market price + NFIA − depreciation − net indirect taxes. Therefore, to move in the reverse direction from NNPFC to GDPMP, add depreciation, subtract NFIA, and add NIT. The signs must be reversed because the calculation is being rearranged backward. This sequence also converts net to gross, national to domestic, and factor cost to market price.
Use the reverse-conversion identity GDPMP = NNPFC + depreciation − NFIA + NIT. Substitution gives GDPMP = 6000 + 700 − (−200) + 350 = 7250 crore. Because NFIA is negative, subtracting it means adding 200. Depreciation is added to change net into gross, while NIT is added to change factor-cost valuation into market-price valuation.
An aggregate carries three important classifications: domestic or national, gross or net, and market price or factor cost. Identifying the given base tells us which conversions remain necessary. For example, a net figure requires depreciation only when converting to gross, while a domestic figure requires NFIA to become national. Market-price and factor-cost conversion requires NIT with the correct sign. Therefore, the base aggregate determines the entire calculation path.
Start with the identity NNPFC = GDPMP + NFIA − depreciation − NIT. To isolate NFIA, subtract GDPMP from both sides and add depreciation and NIT to both sides. The result is NFIA = NNPFC − GDPMP + depreciation + NIT. This rearrangement is valid for positive or negative NFIA; the computed value itself will show whether receipts from abroad exceed payments to foreign factors.
The conversion formula is NNPFC = GDPMP + NFIA − depreciation − NIT. A negative NFIA must still be inserted with its negative sign; for example, adding −120 reduces the aggregate by 120. The word ‘negative’ changes the numerical effect, not the algebraic position of NFIA in the formula. Depreciation is deducted because the target is net, and NIT is deducted to move from market price to factor cost.
In national-income accounting, national income is NNP at factor cost. Starting from GDP at market price, use NNPFC = GDPMP + NFIA − depreciation − NIT. Thus NNPFC = 3000 + (−120) − 250 − 180 = 2450 crore. The negative NFIA reduces the result because it represents a net outflow of factor income to the rest of the world.
The relationship is NNPMP = NNPFC + net indirect taxes, where NIT equals indirect taxes minus subsidies. If subsidies exceed indirect taxes, NIT becomes negative. Adding a negative NIT makes NNPMP lower than NNPFC. Depreciation and NFIA do not determine the difference between market price and factor cost because they change gross-net and domestic-national status, respectively.
NDP at market price is already domestic and net. To obtain NNP at factor cost, first add NFIA to change domestic income into national income, then subtract NIT to change market-price valuation into factor-cost valuation. No depreciation adjustment is made because the starting aggregate is already net. Thus the required adjustments are exactly NFIA addition and NIT subtraction.
Consumption of fixed capital is another name for depreciation. To convert a gross national aggregate into its corresponding net aggregate, depreciation is subtracted because it represents the value of capital used up during production. Therefore, NNP₍FC₎ = GNP₍FC₎ − depreciation = ₹2,100 − ₹260 = ₹1,840 crore. Hence, option A is correct.
GNP is already a national aggregate because it includes net factor income from abroad. Therefore, no further NFIA adjustment is required. To obtain NNP₍FC₎ from GNP₍MP₎, subtract depreciation to move from gross to net and subtract net indirect taxes to move from market price to factor cost.
To convert GNP at market price into NNP at factor cost, first subtract depreciation to change gross into net, then subtract NIT to remove the market-price adjustment. Therefore, NNP_FC = GNP_MP − depreciation − NIT = ₹1,750 − ₹130 − ₹75 = ₹1,545 crore. Option A is correct. Option B subtracts only depreciation, and the other values use incorrect operations.
At the same market-price and net basis, NNP₍MP₎ = NDP₍MP₎ + NFIA. Rearranging gives NFIA = NNP₍MP₎ − NDP₍MP₎ = ₹1,525 − ₹1,600 = −₹75 crore. The negative sign means factor income paid to the rest of the world exceeds factor income received from abroad by ₹75 crore. Therefore, option B is correct.
The correct identity is NNP_FC = GDP_FC + NFIA − depreciation. Adding NFIA changes the domestic measure into a national measure, while subtracting depreciation changes the gross measure into a net measure. NIT is not adjusted because both starting and target aggregates are at factor cost. Hence option A is correct; B reverses both required adjustments, and C reverses the NFIA sign.
To convert GDP₍FC₎ into NNP₍MP₎, add NFIA to change domestic into national, subtract depreciation to change gross into net, and add NIT to change factor cost into market price. Therefore, NNP₍MP₎ = ₹1,400 + ₹50 − ₹90 + ₹40 = ₹1,400 crore. Hence, option A is correct.
NNP₍FC₎ is national, net, and at factor cost, while GDP₍MP₎ is domestic, gross, and at market price. Reverse the three conversions: subtract NFIA to move from national to domestic, add depreciation to move from net to gross, and add NIT to move from factor cost to market price.
To move from NNP₍FC₎ to GDP₍MP₎, subtract NFIA to change national into domestic, add depreciation to change net into gross, and add NIT to change factor cost into market price. Thus, GDP₍MP₎ = NNP₍FC₎ − NFIA + depreciation + NIT = ₹1,800 − ₹100 + ₹150 + ₹80 = ₹1,930 crore. Option A is correct.
NNP is calculated by subtracting depreciation from GNP: NNP = GNP − depreciation. If GNP does not change but depreciation rises sharply, the remaining net product falls. This indicates that more of the gross output is being used to replace worn-out or obsolete capital, leaving less output after accounting for capital consumption.
Net National Product at market price is obtained by first converting GDP into GNP through the addition of Net Factor Income from Abroad (NFIA), and then converting the gross figure into a net figure by deducting depreciation. Therefore, NNPMP = GNPMP − depreciation = GDPMP + NFIA − depreciation. NIT is used only when changing market-price figures into factor-cost figures.
To move from factor cost to market price, add net indirect taxes. Here, NIT = indirect taxes − subsidies = ₹90 crore − ₹120 crore = −₹30 crore. Therefore, NNPMP = NNPFC + NIT = ₹1,000 crore + (−₹30 crore) = ₹970 crore. A negative NIT lowers the market-price value below the factor-cost value.
Conversions among GDP, GNP, NDP, and NNP require three important adjustments. Depreciation converts a gross measure into a net measure or vice versa; NFIA converts a domestic measure into a national measure or vice versa; and NIT, equal to indirect taxes minus subsidies, converts factor-cost values into market-price values or vice versa. Therefore, option A is the correct set.
First calculate net indirect taxes: NIT = indirect taxes − subsidies = ₹140 − ₹50 = ₹90 crore. To convert GDP at market price into NNP at factor cost, add NFIA to change domestic into national income, subtract depreciation to change gross into net income, and subtract NIT to change market price into factor cost. Thus, NNPFC = 2,100 + 80 − 170 − 90 = ₹1,920 crore. Option B is correct.
NDP at market price is already a net domestic aggregate: it is net because depreciation has already been deducted, and domestic because it excludes NFIA. To obtain NNP at factor cost, add NFIA to convert domestic into national income and subtract NIT to convert market price into factor cost. No depreciation adjustment is required. Hence, option A is correct.
NDP at market price is already net, so depreciation must not be deducted again. Add NFIA to convert domestic income into national income and subtract NIT to convert market price into factor cost. Therefore, NNP at factor cost = NDPMP + NFIA − NIT = 5,300 + 210 − 380 = ₹5,130 crore. Thus, option A is correct.
NDP at factor cost is already net, so no depreciation adjustment is needed. It is domestic, so NFIA must be added to obtain the national aggregate. It is measured at factor cost, so NIT must be added to convert it into market price. Therefore, NNP at market price = NDP at factor cost + NFIA + NIT, making option A correct.
Because NDP at factor cost is already net, no depreciation adjustment is required. Convert domestic to national by adding NFIA and convert factor cost to market price by adding NIT. Since NFIA is negative, it reduces the result: NNPMP = 4,450 + (−140) + 220 = ₹4,530 crore. Therefore, option A is correct.
QUIZ COMPLETE
