Question

The total output produced in a year multiplied with the market prices prevalent during the same year gives:

• A. GNP at market prices
• B. NNP at factor prices
• C. NNP at market prices
• D. GNP at factor prices

Hint:

Exam Tip:
Market Prices = Factor Prices + Indirect Taxes - Subsidies.
Gross = Net + Depreciation.
So, when you see "total output multiplied by market prices," think "GNP at Market Prices."

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
This question tests the definition of key national income aggregates. We need to identify which aggregate is calculated by multiplying the total output with market prices.

Step 2: Defining National Income Aggregates:
Let's define each term:

• GDP (Gross Domestic Product): The total value of all final goods and services produced within the geographical boundaries of a country during a given period, valued at market prices.
• GNP (Gross National Product): GDP plus net factor income from abroad. It is the total value of all final goods and services produced by the residents of a country in a given period.
• NNP (Net National Product): GNP minus depreciation (capital consumption allowance).
• Market Prices: The prices at which goods and services are sold in the market. This includes indirect taxes and excludes subsidies.
• Factor Prices: The prices paid for the factors of production (land, labor, capital, entrepreneurship). It is the cost of production, excluding indirect taxes and including subsidies.

Step 3: Analyzing the Definition:
The question states: "Total output produced in a year multiplied with the market prices."
This means we are valuing all output at market prices, giving us Gross National Product at Market Prices.
The word "gross" indicates that depreciation has not been subtracted.
The phrase "market prices" indicates we are using market prices, not factor prices.

Step 4: Final Answer:
The total output valued at market prices gives GNP at market prices. Therefore, option (A) is correct.