Which pair correctly distinguishes concepts related to GNP?
Answer and explanation
Correct answer: Gross and net differ by depreciation; domestic and national differ by NFIA
The word gross indicates that depreciation has not yet been deducted. Thus, Net National Product equals Gross National Product minus depreciation. The distinction between domestic and national aggregates is based on the residence principle and is made through NFIA: GNP = GDP + NFIA. Indirect taxes are relevant to conversion between market price and factor cost, while exports are part of trade accounting, not the basic gross-net or domestic-national distinction.
Frequently asked questions
What is the correct answer to this question?
Gross and net differ by depreciation; domestic and national differ by NFIA
Why is this the correct answer?
The word gross indicates that depreciation has not yet been deducted. Thus, Net National Product equals Gross National Product minus depreciation. The distinction between domestic and national aggregates is based on the residence principle and is made through NFIA: GNP = GDP + NFIA. Indirect taxes are relevant to conversion between market price and factor cost, while exports are part of trade accounting, not the basic gross-net or domestic-national distinction.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - Market price and factor cost.
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