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National Income differs from Net National Product at market price by the amount of : 
  • a)
    Current transfers from rest of the world 
  • b)
    Net indirect Taxes 
  • c)
    National debt interest 
  • d)
    It does not differ
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
National Income differs from Net National Product at market price by t...
Being at MP it includes net indirect taxes and being national it includes net factor income from abroad. Note that GNP is the core concept of national income accounting. 
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National Income differs from Net National Product at market price by t...
Explanation:

Net National Product at market price (NNPmp):

Net National Product at market price (NNPmp) is a measure of the total value of all final goods and services produced by the residents of a country in a particular period of time, after deducting depreciation. It takes into account the value of goods and services produced by the country's residents within the country's borders.

National Income:

National Income, on the other hand, is a measure of the total income earned by the residents of a country in a particular period of time. It includes all incomes earned, whether from wages, salaries, profits, rents, or any other source, within the country's borders.

Difference between National Income and NNPmp:

National Income differs from Net National Product at market price by the amount of net indirect taxes. Net indirect taxes refer to the difference between indirect taxes (such as sales tax, excise tax, value-added tax) collected by the government and subsidies provided by the government.

Explanation of the options:

a) Current transfers from rest of the world: Current transfers from the rest of the world do not affect the difference between National Income and NNPmp. They represent transfers of money or goods between residents of one country and residents of another country. These transfers do not directly impact the calculation of NNPmp or National Income.

b) Net indirect taxes: Net indirect taxes are included in National Income but excluded from NNPmp. This is because indirect taxes are considered as part of the production process and are included in the value of goods and services produced. However, when calculating NNPmp, these taxes are deducted to account for the depreciation of capital goods used in the production process.

c) National debt interest: National debt interest does not affect the difference between National Income and NNPmp. It represents the interest payments made by the government on its outstanding debt. While it is a component of National Income, it does not impact the calculation of NNPmp.

d) It does not differ: This option is incorrect as National Income and NNPmp differ by the amount of net indirect taxes, as explained above.

Conclusion:

The correct answer is option 'B' - Net indirect taxes. National Income differs from Net National Product at market price by the amount of net indirect taxes.
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National Income differs from Net National Product at market price by the amount of :a)Current transfers from rest of the worldb)Net indirect Taxesc)National debt interestd)It does not differCorrect answer is option 'B'. Can you explain this answer?
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