Aspirant Academy
ENHI

RAS question

If GDP is ₹100, Depreciation is ₹10, and NFIA is Rs -5, what is NNP?

Correct answer: (B) ₹85.

When GDP is Rs 100, NFIA is Rs -5 and depreciation is Rs 10, NNP is Rs 85.

  1. (A)

    ₹105

  2. (B)

    ₹85

  3. (C)

    ₹95

  4. (D)

    ₹90

Explanation

NCERT's national income accounting framework first converts GDP into GNP by adding net factor income from abroad, and then converts GNP into NNP by deducting depreciation. Here, NFIA is negative, so GNP is not Rs 105 but Rs 95: GDP plus NFIA equals 100 + (-5). Depreciation is then subtracted because NNP is the net measure after accounting for wear and tear of capital. Therefore, NNP = GNP - Depreciation = 95 - 10 = Rs 85. Written in one line, the same calculation is NNP = GDP + NFIA - Depreciation = 100 + (-5) - 10 = Rs 85.

Why the other options are wrong

  • (A) Rs 105 wrongly treats the negative NFIA as an addition and also fails to deduct depreciation from the gross measure.
  • (C) Rs 95 stops at GNP, because GDP plus NFIA is 100 + (-5), but NNP still requires subtracting depreciation.
  • (D) Rs 90 subtracts depreciation from GDP but ignores the negative NFIA that must be included before arriving at NNP.

Concept

This tests the national income aggregates chain: GDP to GNP through NFIA, and GNP to NNP through depreciation. RAS repeatedly asks such formula-based economy questions because small sign errors change the answer.

Source

Related questions