Question : The net domestic product at the market price of an economy is INR 3500 crores. The capital stock is worth INR 3000 crores and it depreciates at the rate of 10% per annum. Indirect taxes amount to INR 50 crores, subsidies amount to INR 10 crores, factor income from the rest of the world is INR 300 crores, and to the rest of the world is INR 500 crores. Find out the gross national product at factor cost.
Option 1: 3670
Option 2: 3760
Option 3: 3570
Option 4: 3530
Correct Answer: 3760
Solution : The correct answer is (b) 3760
To find the gross national product at factor cost, we need to add factor income from the rest of the world to the net domestic product at market price and subtract indirect taxes while adding subsidies.
Net Domestic Product at market price = INR 3500 crores
Capital stock = INR 3000 crores
Depreciation rate = 10%
Indirect taxes = INR 50 crores
Subsidies = INR 10 crores
Factor income from the rest of the world = INR 300 crores
Factor income to the rest of the world = INR 500 crores
First, we need to calculate depreciation:
Depreciation = Depreciation rate * Capital stock
Depreciation = 0.1 * 3000 crores = INR 300 crores
Next, we calculate the gross national product at market price:
Gross National Product at market price = Net Domestic Product at market price + Factor income from the rest of the world
Gross National Product at market price = 3500 crores + 300 crores = INR 3800 crores
Finally, we calculate the gross national product at factor cost:
Gross National Product at factor cost = Gross National Product at market price - Indirect taxes + Subsidies
Gross National Product at factor cost = 3800 crores - 50 crores + 10 crores = INR 3760 crores.
