Question

The value of national output produced by residents within the country, after depreciation and excluding the influence of taxes and subsidies is known as:

• A. NNP at factor cost
• B. NNP at market price
• C. NDP at market price
• D. NDP at factor price

Hint:

Exam Tip: Remember the following relationships:
Market Price = Factor Cost + Indirect Taxes - Subsidies.
Gross = Net + Depreciation.
National = Domestic + Net Factor Income from Abroad.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
This question tests the understanding of national income aggregates and their precise definitions. We need to decode each part of the definition.

Step 2: Decoding the Definition:
Let's break down the definition phrase by phrase:
• "Value of national output produced by residents within the country": This means the output is produced within the geographical boundaries of the country. This is Domestic Product, not National Product (which includes net factor income from abroad).
• "After depreciation": This means depreciation (capital consumption allowance) has been subtracted. The prefix is Net, not Gross.
• "Excluding the influence of taxes and subsidies": This means the output is valued at Factor Cost (which is market price minus indirect taxes plus subsidies). Combining these:
• Domestic (produced within the country)
• Net (after depreciation)
• Factor Cost (excluding taxes and subsidies) This gives us Net Domestic Product at Factor Cost (NDP at Factor Cost).

Step 3: Evaluating the Options:

• (A) NNP at factor cost: This is "National" product, not "Domestic."
• (B) NNP at market price: This is "National" and at "Market Price."
• (C) NDP at market price: This is "Domestic" and "Net" but at "Market Price."
• (D) NDP at factor price: This is "Domestic," "Net," and at "Factor Cost." This matches our decoding.

Step 4: Final Answer:
The definition corresponds to NDP at Factor Cost. Therefore, option (D) is correct.