Economic Awareness - Sectors of Indian Economy
Which of the following is the most appropriate reason why Net National Income (NNI) at factor cost is preferred over Gross Domestic Product (GDP) for calculating Per Capita Income?
Which of the following is the most appropriate reason why Net National Income (NNI) at factor cost is preferred over Gross Domestic Product (GDP) for calculating Per Capita Income?
medium Q6 of 15
Step-by-Step Solution
Step 1: Understand definitions
NNI at factor cost is GDP adjusted for depreciation and net income from abroad.Step 2: Analyze options
NNI excludes depreciation and includes net income from abroad correctly states NNI excludes depreciation and includes net income from abroad; NNI includes depreciation while GDP does not is wrong as NNI excludes depreciation; GDP includes net income from abroad while NNI does not reverses the inclusion of net income from abroad; GDP is calculated at factor cost while NNI is at market price incorrectly states calculation bases.Final Answer:
NNI excludes depreciation and includes net income from abroad → Option AQuick Check:
NNI = GDP - Depreciation + Net income from abroad ✅
Quick Trick: NNI adjusts GDP for depreciation and net foreign income.
Common Mistakes:
- Confusing GDP and NNI definitions and components.
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