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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.
Practice questions
01 If GNP at market price is 54,000, GNP at factor cost is 51,800, and NNP at factor cost is 49,200, what is depreciation?
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Answer and explanation
Correct answer: B. 2,600
Explanation: First, the movement from GNP at market price to GNP at factor cost removes net indirect taxes: 54,000 − 2,200 = 51,800. Depreciation is found by comparing gross and net national product at the same factor cost. Since NNP at factor cost = GNP at factor cost − depreciation, depreciation = 51,800 − 49,200 = 2,600. Therefore, option B is correct.
02 Which is the correct combined formula to derive NNP at Factor Cost from GDP at Market Price?
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Answer and explanation
Correct answer: A. NNP at FC = GDP at MP + NFIA − Depreciation − NIT
Explanation: Three adjustments are required. Add NFIA to convert a domestic aggregate into a national aggregate; subtract depreciation to convert gross into net; and subtract NIT to convert market price into factor cost, because MP = FC + NIT. Combining these steps gives NNP at FC = GDP at MP + NFIA − Depreciation − NIT. Therefore, option A has every adjustment with the correct sign.
03 If GDP at Market Price is ₹2,200 crore, NFIA is ₹150 crore, depreciation is ₹300 crore and NIT is ₹90 crore, what will be NNP at Factor Cost?
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Answer and explanation
Correct answer: A. ₹1,960 crore
Explanation: Use the combined conversion formula: NNP at FC = GDP at MP + NFIA − Depreciation − NIT. Substitution gives ₹2,200 + ₹150 − ₹300 − ₹90 = ₹2,350 − ₹390 = ₹1,960 crore. NFIA raises the domestic value to a national value, while depreciation and NIT are deducted for the net and factor-cost measures. Thus option A is correct.
04 If one has to move from GDP at market price to NNP at factor cost, which sequence is correct?
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Answer and explanation
Correct answer: A. Add NFIA, subtract depreciation, and subtract NIT
Explanation: The conversion is: NNP at factor cost = GDP at market price + NFIA − depreciation − NIT. NFIA changes the measure from domestic to national, depreciation changes gross to net, and subtracting net indirect taxes changes market price to factor cost. Thus the correct sequence is to add NFIA, subtract depreciation, and subtract NIT.
05 If GDP at market price is ₹2,000 crore, NFIA is −₹50 crore, depreciation is ₹180 crore, and NIT is ₹120 crore, what is NNP at factor cost?
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Answer and explanation
Correct answer: A. ₹1,650 crore
Explanation: Use the conversion formula: NNP at factor cost = GDP at market price + NFIA − depreciation − NIT. Substituting the values gives ₹2,000 + (−₹50) − ₹180 − ₹120 = ₹1,650 crore. The negative NFIA must be added algebraically, so it reduces the result by ₹50 crore.
06 If NNP at market price is given and subsidies are greater than indirect taxes, what will be the effect on NNP at factor cost?
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Answer and explanation
Correct answer: A. NNP at factor cost will be greater than NNP at market price
Explanation: The relationship is NNP at factor cost = NNP at market price − net indirect taxes. Net indirect taxes (NIT) equal indirect taxes minus subsidies. If subsidies are greater than indirect taxes, NIT is negative. Subtracting a negative number increases the value, so NNP at factor cost is greater than NNP at market price.
07 If NNP at factor cost is ₹900 crore and NIT is −₹40 crore, what is NNP at market price?
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Answer and explanation
Correct answer: B. ₹860 crore
Explanation: The formula is NNP at market price = NNP at factor cost + NIT. Therefore, NNP at market price = ₹900 + (−₹40) = ₹860 crore. Because NIT is negative when subsidies exceed indirect taxes, adding NIT reduces the market-price aggregate below the factor-cost aggregate.
08 If GNP at market price is ₹1,500 crore, depreciation is ₹100 crore, indirect taxes are ₹90 crore, and subsidies are ₹30 crore, what is NNP at factor cost?
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Answer and explanation
Correct answer: B. ₹1,340 crore
Explanation: First calculate net indirect taxes: NIT = indirect taxes − subsidies = ₹90 − ₹30 = ₹60 crore. Then convert gross to net and market price to factor cost: NNP at factor cost = GNP at market price − depreciation − NIT = ₹1,500 − ₹100 − ₹60 = ₹1,340 crore. Therefore, option B is correct.
09 If GDP at factor cost is ₹1,800 crore, NFIA is ₹100 crore, and depreciation is ₹150 crore, what is NNP at factor cost?
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Answer and explanation
Correct answer: A. ₹1,750 करोड़
Explanation: To move from GDP at factor cost to NNP at factor cost, first add NFIA to change domestic into national, and then subtract depreciation to change gross into net. The formula is NNP_FC = GDP_FC + NFIA − depreciation. Hence, ₹1,800 + ₹100 − ₹150 = ₹1,750 crore. No NIT adjustment is needed because the figures are already at factor cost.
10 If NNP at market price is ₹1,200 crore, indirect taxes are ₹150 crore, and subsidies are ₹60 crore, what is national income?
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Answer and explanation
Correct answer: A. ₹1,110 करोड़
Explanation: National income is NNP at factor cost. First calculate net indirect taxes: NIT = indirect taxes − subsidies = ₹150 crore − ₹60 crore = ₹90 crore. Then convert market price to factor cost: NNP_FC = NNP_MP − NIT = ₹1,200 crore − ₹90 crore = ₹1,110 crore. Therefore, national income is ₹1,110 crore.
11 If NDP at market price (NDP_MP) is ₹1000 crore, NFIA is ₹80 crore and net indirect taxes (NIT) are ₹50 crore, what is NNP at factor cost (NNP_FC)?
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Answer and explanation
Correct answer: A. ₹1030 crore
Explanation: Convert domestic to national by adding NFIA, and convert market price to factor cost by subtracting net indirect taxes. Since the given measure is already net, depreciation is not involved: NNP_FC = NDP_MP + NFIA − NIT = 1000 + 80 − 50 = ₹1030 crore. Thus option A is correct.
12 If NDP at factor cost (NDP₍FC₎) is to be derived from NNP at market price (NNP₍MP₎), which combination of adjustments is correct?
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Answer and explanation
Correct answer: A. Subtract NFIA and subtract NIT
Explanation: Two conversions are required. First, national is changed to domestic by subtracting NFIA: NDP = NNP − NFIA. Second, market price is changed to factor cost by subtracting net indirect taxes: FC = MP − NIT. Therefore, NDP₍FC₎ = NNP₍MP₎ − NFIA − NIT. Depreciation is not adjusted because both aggregates are already net.
13 If NNP at market price (NNPₘₚ) is ₹1,000 crore, NFIA is ₹40 crore, and net indirect taxes (NIT) are ₹70 crore, what is NDP at factor cost (NDP𝒇𝒄)?
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Answer and explanation
Correct answer: A. ₹890 crore
Explanation: To convert NNP at market price into NDP at factor cost, first remove NFIA because national income must be converted into domestic income, and then subtract NIT because market prices include net indirect taxes. Thus, NDPₘₚ = NNPₘₚ − NFIA = 1,000 − 40 = ₹960 crore. Therefore, NDP𝒇𝒄 = NDPₘₚ − NIT = 960 − 70 = ₹890 crore. Hence, option A is correct.
14 What is the main technical reason for excluding cooking for one’s own family from NNP?
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Answer and explanation
Correct answer: A. Its reliable market valuation is difficult
Explanation: Cooking for one’s own family is a non-market household service. Since it is not normally sold, there is no observed market price for valuing the service, and estimating its value reliably and consistently is difficult. National-income accounting therefore generally excludes such unpaid household services, although an equivalent paid service would be counted.
15 In which conversion is no depreciation adjustment needed to reach NNP at factor cost?
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Answer and explanation
Correct answer: A. From NDP at factor cost to NNP at factor cost
Explanation: NDPFC is already net, meaning depreciation has already been deducted, and it is already measured at factor cost. To obtain NNPFC from NDPFC, only net factor income from abroad is added: NNPFC = NDPFC + NFIA. The other starting aggregates are gross and therefore require a depreciation adjustment before reaching a net aggregate.
16 If NDP at market price is ₹850 crore, net indirect taxes are ₹90 crore, and NFIA is −₹20 crore, what is national income?
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Answer and explanation
Correct answer: A. ₹740 crore
Explanation: National income is NNP at factor cost. Starting with NDPMP, first remove net indirect taxes to obtain NDPFC: ₹850 − ₹90 = ₹760 crore. Then add NFIA to convert domestic to national: ₹760 + (−₹20) = ₹740 crore. Since the given figure is already net, no depreciation is deducted.
17 If GDP at market price is ₹4800 crore, NFIA is −₹120 crore, depreciation is ₹430 crore, and NIT is ₹260 crore, what will be NNP at factor cost?
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Answer and explanation
Correct answer: A. ₹3990 crore
Explanation: Use the complete conversion formula: NNPFC = GDPMP + NFIA − depreciation − NIT. Substituting the values gives 4800 + (−120) − 430 − 260 = 4680 − 430 − 260 = ₹3990 crore. The negative NFIA reduces GNP relative to GDP, while depreciation and NIT are also deducted. Thus, option A is correct.
18 Which option correctly shows the conversion from GNP at factor cost (GNP_FC) to NNP at market price (NNP_MP)?
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Answer and explanation
Correct answer: A. Deduct depreciation and add NIT
Explanation: GNP_FC is already a national aggregate because it includes NFIA, and it is valued at factor cost. To convert gross into net, depreciation must be deducted. To convert factor cost into market price, net indirect taxes (NIT) must be added. Therefore, NNP_MP = GNP_FC − depreciation + NIT, making option A correct.
19 If GNP at factor cost (GNP_FC) is 3900 crore, depreciation is 510 crore, and NIT is −70 crore, what will be NNP at market price (NNP_MP)?
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Answer and explanation
Correct answer: A. 3320 crore
Explanation: First convert GNP_FC into NNP_FC by deducting depreciation: 3900 − 510 = 3390 crore. Then convert factor cost into market price by adding NIT. Since NIT is −70 crore, the adjustment is 3390 + (−70) = 3320 crore. Thus, NNP_MP is 3320 crore, so option A is correct.
20 If NNP at market price (NNP_MP) is 2950 crore, indirect taxes are 420 crore, and subsidies are 520 crore, what will be NNP at factor cost (NNP_FC)?
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Answer and explanation
Correct answer: C. 3050 crore
Explanation: First calculate net indirect taxes: NIT = indirect taxes − subsidies = 420 − 520 = −100 crore. The relationship is NNP_MP = NNP_FC + NIT, so NNP_FC = NNP_MP − NIT. Therefore, NNP_FC = 2950 − (−100) = 3050 crore. Because NIT is negative, factor-cost income is higher than market-price income in this case. Option C is correct.
21 Which type of income will not be included in the factor-income basis of NNP?
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Answer and explanation
Correct answer: C. A transfer-type payment such as interest on national debt
Explanation: Factor income is earned by supplying a factor of production—labour, land, capital, or entrepreneurship—to current production. Wages, rent, interest on productive capital, profits, and the mixed income of self-employed persons are factor rewards. Interest paid on public debt is generally treated as a transfer payment in this context because it is not a payment for a current productive service, so it is excluded from factor income.
22 If the difference between GDP at market price and NNP at factor cost is to be found, which three components are the main adjustments?
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Answer and explanation
Correct answer: A. NFIA, depreciation, and net indirect taxes
Explanation: To convert GDP at market price into NNP at factor cost, three adjustments are required. Add NFIA to move from domestic to national income, subtract depreciation to move from gross to net income, and subtract net indirect taxes to move from market prices to factor cost. Thus NNPFC = GDPMP + NFIA − depreciation − NIT, so these are the three key components.
24 If GNP at market price is ₹9,000 crore, NIT is ₹400 crore, and NNP at factor cost is ₹8,200 crore, what is depreciation?
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Answer and explanation
Correct answer: A. ₹400 crore
Explanation: First convert NNP at factor cost to NNP at market price by adding net indirect taxes: NNPMP = NNPFC + NIT = 8,200 + 400 = ₹8,600 crore. The relation between gross and net national product at the same market-price basis is GNPMP = NNPMP + depreciation. Therefore, depreciation = 9,000 − 8,600 = ₹400 crore.
25 In the national concept of NNP, how is factor income earned by foreign companies from the domestic territory treated?
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Answer and explanation
Correct answer: A. It is treated as factor income paid to the rest of the world and is deducted in calculating NFIA
Explanation: National income is based on the income of normal residents, whereas domestic income is based on production within the domestic territory. Factor income earned in the territory by foreign companies belongs to non-residents and is therefore a payment to the rest of the world. NFIA is factor income received from abroad minus factor income paid abroad, so this income reduces NFIA. It is not depreciation or an indirect tax.
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