Question

How can we obtain national income from GDP_MP.

How can you obtain:

National income from GDP_MP.

Answer 1

To calculate national income from GDP at market prices (GDP_MP), a few key adjustments must be made. Start by subtracting depreciation (the reduction in the value of fixed assets due to wear and tear) from GDP_MP to arrive at Net Domestic Product at market prices (NDP_MP). Next, subtract net indirect taxes (the difference between indirect taxes and subsidies) from NDP_MP to get Net Domestic Product at factor cost (NDP_FC). Finally, add the Net Factor Income from Abroad (NFIA) to NDP_FC to obtain Net National Product at factor cost (NNP_FC), which represents the national income.

1. GDP at Market Prices (GDP_MP): Represents the total monetary value of all final goods and services produced within a country during a given time.
2. Depreciation: The decline in the value of capital assets over time due to use and obsolescence.
3. NDP at Market Prices (NDP_MP): Obtained by subtracting depreciation from GDP_MP.
4. Net Indirect Taxes: Calculated as indirect taxes minus subsidies. 
5. NDP at Factor Cost (NDP_FC): Derived by subtracting net indirect taxes from NDP_MP: (NDP_FC = NDP_MP − Net Indirect Taxes).
6. Net Factor Income from Abroad (NFIA): The net difference between the income residents earn abroad and the income paid to foreign residents working domestically. 
7. NNP at Factor Cost (NNP_FC) or National Income: The final step is to add NFIA to NDP_FC (NNP_FC = NDP_FC + NFIA).

Answer 2

National Income from GDP_MP can be obtained with the help of the following formula:

National Income (NNPFC) = GDPMP − depreciation + Net factor income from abroad − Net indirect taxes (Indirect tax − subsidy)