National Income and Related Aggregates
What this domain tests
This domain tests the definitions and interrelationships of GDP, GNP, NNP, NDP, market price and factor cost, the three measurement methods, and real versus nominal income.
Core rules
- GDP at market price: value of final goods and services produced within domestic territory in a year.
- GNP: GDP plus net factor income from abroad (NFIA).
- NNP: GNP minus depreciation.
- Factor cost: market price minus net indirect taxes.
- Methods: product or value-added, income, and expenditure methods.
- Real vs nominal: real GDP uses constant prices; nominal GDP uses current prices.
Worked example
GDP at market price = ₹1,000 crore, NFIA = ₹50 crore, depreciation = ₹100 crore, net indirect taxes = ₹80 crore. GNP at market price = 1,000 + 50 = ₹1,050 crore. NNP at factor cost = 1,050 − 100 − 80 = ₹870 crore.
Traps that cost marks
Do not include transfer payments, intermediate goods or sale of second-hand goods in national income. Depreciation must be subtracted to move from gross to net. NFIA can be negative. Do not confuse GDP with GNP: GDP is domestic, GNP is national. Personal income is not the same as national income because it includes transfers and excludes some earned income.