Question

Bring out the relationship between ‘Gross Domestic Product’ at market prices and ‘Net National Product’ at factor cost.

Answer 1

Relationship Between GDP at MP and NNP at FC: To derive NNP at FC from GDP at MP, the following adjustments are made:

1. Add Net Factor Income from Abroad (NFIA) → Converts domestic product into national product
2. Subtract Indirect Taxes and Add Subsidies → Converts from market prices to factor cost
3. Subtract Depreciation → Converts from gross to net value