Arrange the following steps of calculation of National income in sequence.
(A) Deduction of intermediate cost
(B) Estimation of value of output
(C) Add net factor income from abroad
(D) Deduction of depreciation and NIT
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (B), (A), (D), (C)
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(B) Estimation of value of output. – First, the total value of gross output produced in the economy is estimated.
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(A) Deduction of intermediate cost. – To avoid double counting, the value of intermediate goods is deducted from gross output to get Gross Value Added (GVA).
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(D) Deduction of depreciation and NIT. – From GVA, depreciation (consumption of fixed capital) and Net Indirect Taxes (NIT) are deducted to get Net Domestic Product at Factor Cost (NDPfc).
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(C) Add net factor income from abroad. – Finally, Net Factor Income from Abroad (NFIA) is added to NDPfc to arrive at National Income or Net National Product at Factor Cost (NNPfc).