Which of the following statements are correct ? A. Gross Domestic Product at Market Price = Gross National Product at Market Price + Net Factor Income From Abroad B. Gross Domestic Product at factor Cost = Gross Domestic Product at Market Price – Indirect Taxes + Subsidies C. Net Domestic Product at Market Price = Net National Product at Market Price – Net Factor Income From Abroad D. Gross Domestic Product at Market Price = Net Domestic Product at Market Price + Depreciation E. Net National Product at Market Price = Gross Domestic Product at Market Price + Net Factor Income From Abroad + Depreciation Choose the correct answer from the options given below :
B, C and D only
Statements B, C and D are correct — option 3.
The two adjustments that generate every identity.
| Adjustment | Rule |
|---|---|
| Domestic ↔ National | National = Domestic + Net Factor Income from Abroad. “National” counts what a country’s residents earn wherever they earn it; “domestic” counts what is produced inside the territory whoever produces it |
| Market price ↔ Factor cost | Factor cost = Market price − Indirect taxes + Subsidies |
| Gross ↔ Net | Net = Gross − Depreciation |
Checking each statement.
| Statement | Verdict | Why |
|---|---|---|
| A. GDPMP = GNPMP + NFIA | Wrong | The sign is reversed. GNP = GDP + NFIA, so GDP = GNP − NFIA |
| B. GDPFC = GDPMP − Indirect taxes + Subsidies | Correct | The standard market-price to factor-cost conversion |
| C. NDPMP = NNPMP − NFIA | Correct | The same national-to-domestic rule applied to the net aggregates |
| D. GDPMP = NDPMP + Depreciation | Correct | Gross = Net + Depreciation |
| E. NNPMP = GDPMP + NFIA + Depreciation | Wrong | NNPMP = GDPMP + NFIA − Depreciation. Adding it makes the net figure larger than the gross one, which is impossible |
The way to answer such a question quickly. Do not memorise the identities; hold the three rules above and apply them. Then note that A and E are both wrong by a sign — the commonest error in national income accounting is to add where one should subtract. Since A is wrong, options 1, 2 and 4 all fall together, leaving only option 3.
Why NFIA is usually negative for India. More income is paid out to foreign investors and lenders than Indian residents earn abroad, so India’s GNP is slightly smaller than its GDP — a useful check on the direction of the adjustment.
Hence, the answer is B, C and D only.
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