Consider the following factors related to estimation of national income by various methods for an economy.
A. Net Investment = Gross Domestic Investment - Depreciation
B. Intermediate consumption is excluded to avoid the problem of double counting
C. Net indirect taxes = Indirect Taxes - Subsidies
D. Stocks are measured over a period of time
E. NNP at factor cost = $NNP_{MP}$ - Net factor income from Abroad
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 3
The correct answer is option (3) : A, B and C only
Explanation :
- A. Net Investment is calculated as Gross Domestic Investment minus Depreciation. True
- B. Intermediate consumption is excluded to avoid double counting in the estimation of national income. True
- C. Net indirect taxes are calculated as Indirect Taxes minus Subsidies. True
- D. Stocks are measured over a period of time Incorrect. Stocks, or inventories, refer to the value of goods held by businesses at a specific point in time. They are not measured over a period of time for national income estimation.
- E. NNP at factor cost is calculated as NNP at market prices minus Net Factor Income from Abroad. Incorrect. NNP (FC) is calculated as NDP (FC) + NFIA. On the other hand NDP (MP)= NNP at market prices minus Net Factor Income from Abroad