Match List-I with List-II.
| List-I | List-II |
|---|---|
| (A) NNPFC | (I) Net indirect taxes |
| (B) Market price to factor cost | (II) Depreciation |
| (C) Gross to net | (III) National income |
| (D) Domestic product to national product | (IV) Net factor income from abroad |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A)-(III), (B)-(I), (C)-(II), (D)-(IV)
Three adjustments link the aggregates: gross and net differ by depreciation, market price and factor cost by net indirect taxes, and domestic and national by net factor income from abroad.
| List-I | List-II | Reason |
|---|---|---|
| (A) NNPFC | (III) National income | NNP at factor cost is another name for national income. |
| (B) Market price to factor cost | (I) Net indirect taxes | Market price includes indirect taxes less subsidies. Deduct net indirect taxes to get factor cost. |
| (C) Gross to net | (II) Depreciation | Gross includes wear and tear of capital. Deduct depreciation to get net. |
| (D) Domestic product to national product | (IV) Net factor income from abroad | Add net factor income from abroad to domestic product to get national product. |
NCERT (2026-27): “Gross National Product (GNP) … Hence, GNP ≡ GDP + Net factor income from abroad (Net factor income from abroad = Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy). We have already noted that a part of the capital gets consumed during the year due to wear and tear. This wear and tear is called depreciation. Naturally, depreciation does not become part of anybody’s income. If we deduct depreciation from GNP the measure of aggregate income that we obtain is called Net National Product (NNP). Thus NNP ≡ GNP – Depreciation” “2.3 Some Macroeconomic Identities It is to be noted that all these variables are evaluated at market prices. Through the expression given above, we get the value of NNP evaluated at market prices. But market price includes indirect taxes. When indirect taxes are imposed on goods and services, their prices go up. Indirect taxes accrue to the government. We have to deduct them from NNP evaluated at market prices in order to calculate that part of NNP which actually accrues to the factors of production. Similarly, there may be subsidies granted by the government on the prices of some commodities (in India petrol is heavily taxed by the government, whereas cooking gas is subsidised). So we need to add subsidies to the NNP evaluated at market prices. The measure that we obtain by doing so is called Net National Product at factor cost or National Income. Thus, NNP at factor cost ≡ National Income (NI ) ≡ NNP at market prices – (Indirect taxes – Subsidies) ≡ NNP at market prices – Net indirect taxes (Net indirect taxes ≡ Indirect taxes – Subsidies)” |