Q. Consider the following statement:

1. Net National Product at market price = Gross Domestic Product - Depreciation
2. Net National Income at factor cost = Personal Income

Which of the above is / are correct?
Answer: Only 1
Notes: We have already noted that a part of the capital gets consumed during the year due to wear and tear. This wear and tear is called depreciation. Naturally, depreciation does not become part of anybody's income. If we deduct depreciation from GNP the measure of aggregate income that we obtain is called Net National Product (NNP). NNP = GNP - Depreciation It is to be noted that all these variables are evaluated at market prices. Through the expression given above, we get the value of NNP evaluated at market prices. Thus, NNP at factor cost = National Income (NI) = NNP at market prices - (Indirect taxes - Subsidies) = NNP at market prices - Net indirect taxes (Net indirect taxes = Indirect taxes - Subsidies)