Aggregates related to national income - NNP

Correct answer: B. 7,000 crore

Explanation: The three listed factor incomes first give domestic factor income: compensation of employees 3,200 + operating surplus 2,400 + mixed income 1,300 = 6,900 crore. Because the question states that NFIA has not yet been included, add NFIA of 100 crore to convert domestic factor income into national factor income. Thus, NNP_FC = 6,900 + 100 = 7,000 crore.

Correct answer: A. NFIA should not be added again

Explanation: National factor income already represents factor income earned by the normal residents of a country, including the net factor income adjustment from abroad. Therefore, if the given sum is explicitly stated to be on a national basis, NFIA has already been incorporated. Adding it again would make the result incorrect through double counting. It should be added only when the starting total is on a domestic basis.

Correct answer: A. The valuation basis and NFIA

Explanation: Net value added may initially be measured on a domestic basis and either at market prices or at factor cost. To obtain NNP_FC, the calculation must account for both changes: add NFIA when moving from domestic to national income, and subtract net indirect taxes when moving from market price to factor cost. Thus, the relationship depends on the initial valuation basis and the NFIA adjustment.

Correct answer: B. 5,850 crore

Explanation: NVA_MP is already net value added at market price, so depreciation does not need to be deducted again. To convert it into national factor-cost income, add NFIA and subtract net indirect taxes: NNP_FC = NVA_MP + NFIA − NIT = 6,000 + 250 − 400 = 5,850 crore. Therefore, option B is correct.

Correct answer: A. 7,200 crore

Explanation: Start with GVA_MP of 9,000 crore. Deduct depreciation of 1,100 crore to convert gross value into net value, add NFIA of −200 crore to convert domestic into national income, and subtract NIT of 500 crore to convert market price into factor cost. Therefore, NNP_FC = 9,000 − 1,100 − 200 − 500 = 7,200 crore.

Correct answer: A. Current production income may be overstated

Explanation: Capital gains are increases in the value of assets, such as land, shares, or buildings, caused by price changes rather than by current production. They may represent a holding gain and do not necessarily arise from a factor service performed during the accounting period. Adding them to NNP_FC would mix valuation changes with current production income and could overstate national income.

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

Explanation: A government pension is generally classified as a transfer payment when it is paid without a corresponding current productive service by the recipient. National income measures factor payments generated by current production, whereas a transfer merely redistributes income that was generated elsewhere or in an earlier period. Including the pension as factor income would therefore overstate current production income. A pension paid as compensation for current employment would be treated differently.

Correct answer: A. NNP at factor cost will fall

Explanation: Use NNP at market price = NNP at factor cost + NIT, so NNP at factor cost = NNP at market price − NIT. When NIT is negative, subtracting it adds a positive amount, making factor-cost NNP higher than market-price NNP. When NIT becomes zero, the two aggregates become equal. With market-price NNP fixed, factor-cost NNP therefore falls.

Correct answer: A. Adjustment signs change according to the direction of conversion from the target aggregate to the base aggregate

Explanation: Reverse calculation means starting with a known aggregate and moving back to another aggregate. The signs cannot be chosen mechanically; they must be reversed according to the identity being used. For example, because NNP = GNP − depreciation, depreciation is added when moving from NNP back to GNP. Similarly, NFIA and NIT adjustments depend on the exact direction and valuation basis.

Correct answer: A. They represent separate dimensions of national, valuation and net conversion

Explanation: These three adjustments perform different jobs. NFIA converts a domestic aggregate into a national aggregate; NIT, or net indirect taxes, helps convert between market price and factor cost; and depreciation converts a gross measure into a net measure. Their values and signs may differ, so recording them separately reduces confusion and prevents calculation errors.

Correct answer: A. Because depreciation is deducted when moving from a gross aggregate to a net aggregate

Explanation: GDPMP is gross because it includes depreciation, whereas NNPFC is net because depreciation must be deducted. A complete conversion also requires adding NFIA to move from domestic to national and subtracting net indirect taxes to move from market price to factor cost. Therefore, adding depreciation moves in the wrong direction and makes the result too high.

Correct answer: A. 1800

Explanation: Begin with GDP at market price of 2400. Add NFIA of -200 to obtain GNP at market price: 2400 - 200 = 2200. Subtract depreciation of 300 to obtain NNP at market price: 2200 - 300 = 1900. Finally, subtract net indirect taxes of 100 to convert market price to factor cost: 1900 - 100 = 1800. Thus, A is correct.

Correct answer: C. 400 crore rupees

Explanation: Use the national-income identity NNP = NDP + net factor income from abroad, ignoring the stated comparison as the required net adjustment. Since NNP is ₹130 crore below NDP, NFIA = −₹130 crore. NFIA equals factor income received from abroad minus factor income paid abroad. Therefore 270 − paid income = −130, giving paid income = ₹400 crore. Option C is correct.

Correct answer: C. 500 crore rupees

Explanation: The added zero-depreciation assumption makes the comparison valid: NNP = NDP + NFIA, where NFIA is factor income received from abroad minus factor income paid abroad. Since NNP is 170 crore lower than NDP, NFIA = −170 crore. Therefore 330 − factor income paid = −170, giving factor income paid = 500 crore rupees. Option C is correct; the other choices fail this identity.

Correct answer: C. 600 crore rupees

Explanation: Because NNP is being compared with NDP, the difference represents net factor income from abroad (NFIA), assuming the gross/net basis is held constant. NFIA = factor income received from abroad − factor income paid abroad = −210 crore rupees. Therefore, 390 − paid income = −210, giving paid income = 600 crore rupees. Option C is correct.

Correct answer: C. ₹22,400 crore

Explanation: National income is NNP at factor cost. First subtract depreciation from GNP at market price: ₹24,000 − ₹1,800 = ₹22,200 crore, which is NNP at market price. Then subtract net indirect taxes: ₹22,200 − (−₹200) = ₹22,400 crore. Because the tax is negative, the second subtraction becomes addition. Thus option C is correct.

Correct answer: C. ₹25,200 crore

Explanation: National income is NNP at factor cost. First subtract depreciation from GNP at market price: ₹27,000 − ₹2,100 = ₹24,900 crore, which is NNP at market price. Convert to factor cost by subtracting net indirect taxes. Because NIT is negative ₹300 crore, subtracting it means adding ₹300 crore: ₹24,900 − (−₹300) = ₹25,200 crore. Option C is correct.

Correct answer: C. ₹27,950 crore

Explanation: National income is NNP at factor cost. First remove depreciation from GNP at market price: ₹30,000 − ₹2,400 = ₹27,600 crore, which is NNP at market price. Then convert to factor cost by subtracting net indirect taxes. Since NIT is negative ₹350 crore, ₹27,600 − (−₹350) = ₹27,950 crore. Thus option C is correct; subtracting a negative amount increases the result.