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Kautilya Batch
National Income DPP-2

1. If factor income received from abroad is equal to 6. National income is equal to:
factor income paid abroad, then which of the (1) Domestic product plus factor incomes earned
following is not a valid statement? from abroad
(1) National Income = Domestic Income (2) Domestic product plus net factor incomes
(2) NDPFC + Depreciation = GNPFC earned from abroad
(3) NDPFC + Depreciation = GNPMP (3) Domestic product minus factor incomes to
(4) All are valid abroad
(4) Domestic product plus export minus imports
2. Fill in the blank: NNPFC__________=GDPMP
(1) + Depreciation - Net factor income from 7. If net national product is given at Market Prices, we
abroad - Net Indirect taxes ______ indirect taxes and _______ subsidies to get
(2) + Depreciation + Net factor income from National Income of the economy.
abroad + Net Indirect taxes (1) Add, Subtract
(3) + Depreciation - Net factor income from (2) Add, Divide
abroad + Net Indirect taxes (3) Subtract, Add
(4) + Depreciation + Net factor income from (4) Subtract, Divide
abroad - Net Indirect taxes
8. From the following information, compute GNPMP.
3. If economic subsidies are added to and indirect GDPFC = ₹3,000; Net factor income to abroad =
taxes are subtracted from the national income at ₹200. Indirect Taxes = ₹420, Subsidies = ₹240.
market prices, then it will be equal to: (1) 3,380
(1) Domestic Income (2) 2,980
(2) National Income (3) 3,020
(3) Gross national product at market prices (4) 2,620
(4) Gross domestic product at factor cost
9. GNP exceeds NNP by:
4. In which type of economy, domestic income is equal (1) Amount of total taxes
to national income? (2) Government expenditure
(1) Open Economy (3) Transfer payments
(2) Closed Economy (4) Difference between gross and net investment
(3) Both (1) and (2)
(4) Neither (1) nor (2)

5. Net domestic product at factor cost is less than

national income when:
(1) Net factor income from abroad is positive
(2) Net factor income from abroad is negative
(3) Net factor income from abroad is zero
(4) Net exports are positive
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Answer Key
1. (3) 6. (2)
2. (3) 7. (3)
3. (2) 8. (2)
4. (2) 9. (4)
5. (1)

Hints & Solutions
1. (3)
If factor income received from overseas
equals factor income paid abroad, the
statement NDP (at factor cost) + depreciation
= GNP (at market price) is invalid.
The appropriate statement is this:
Depreciation plus net indirect tax plus NDP
(at factor cost) equals GNP (at market price).
2. (3)
Depreciation, Net Factor Income from
Abroad, Net Indirect Taxes, and NNP(at
Factor Cost) = GDP (at market price)
NNP(at factor cost) + Depreciation = GNP is
a conversion (at factor cost)
GDP is equal to GNP (at factor costs) minus
net factor income from overseas (at factor
cost)
Net indirect taxes plus GDP (at factor cost)
equals GDP (at market price)
3. (2)
Market pricing for the national income will
equal the national income if economic
subsidies are added and indirect taxes are
deducted (NNP at factor cost).
Formula:
NNP(at market price) (at market price) −
Subsidies + Indirect Tax = NNP (at factor
cost)
NNP (at market price) (at market price) NNP
= Net Indirect Tax (at factor cost)
Here, indirect tax minus subsidies equals net
indirect tax.
4. (2)
Since there is no such thing as the "external
sector" or "rest of the world sector" in a
closed economy structure, domestic income
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in a closed economy is equal to national
income, as there will be no net factor income
from abroad.
5. (1)
When net factor income from abroad is
positive, net domestic product at factor cost is
smaller than national income.
This circumstance will be evident when net
factor income from abroad is positive (NNP
at FC > NDP at FC) > NDP (at FC)).
6. (2)
Uncertain terms like "national dividend,"
"national production," and "national
expenditure" are all used to refer to national
revenue. Based on this, there are various
approaches to determining national income.
The total value of products and services
produced annually in a nation is referred to as
"national income."
7. (3)
Indirect taxes and subsidies should be
deducted from and added to, respectively, the
net national product, which is delivered at
market prices, to determine the national
income of the economy.
NNP (at factor cost) is calculated using the
following formula: NDP (at market price) –
indirect tax + subsidies + net factor income
from abroad.
8. (2)
GNP at the MP = 2980
Calculation:
GNP (at MP) is calculated as follows: GDP
(at FC) - Net factor income from outside +
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indirect tax - subsidies = 3000 - 200 + 420 - difference between a gross and net
200 = Rs. 2980. investment. GNP minus depreciation equals
NNP, or GNP minus the difference between
9. (4) gross and net investment equals NNP.
By the gap between gross and net investment,
GNP exceeds NNP. Depreciation is the

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