Arrange the following aggregates in the order in which they are reached when we move from GDP towards Personal Disposable Income:
(A) Personal Income
(B) Gross National Product
(C) National Income (NNP at factor cost)
(D) NNP at market prices
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (B), (D), (C), (A)
Each step makes one adjustment.
(B) Gross National Product — GDP plus net factor income from abroad.
(D) NNP at market prices — GNP minus depreciation.
(C) National Income (NNP at factor cost) — NNP at market prices minus net indirect taxes.
(A) Personal Income — National income minus undistributed profits, net interest paid by households and corporate tax, plus transfer payments.
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 … 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)” “2.3 Some Macroeconomic Identities We can further subdivide the National Income into smaller categories. Let us try to find the expression for the part of NI which is received by households. We shall call this Personal Income (PI). …” |