Question
Economics Question on National Income Accounting
Identify the correct formula:
A
GDPmp– Depreciation = NNPmp – Net Factor Income from Abroad
B
GDPmp – net indirect taxes = NNPfc + net indirect taxes
C
GNPfc + net indirect taxes = NNPfc
D
NDPmp + Net Factor Income from Abroad = GDPfc – depreciation
Answer
GDPmp– Depreciation = NNPmp – Net Factor Income from Abroad
Explanation
Solution
The correct formula is derived from the definition of national income at market prices NNPmp . NNPmp is obtained by subtracting depreciation from GDPmp (Gross Domestic Product at market prices) and then subtracting Net Factor Income from Abroad. This formula highlights how national income is adjusted to account for capital depreciation and international income flows.