If for a hypothetical economy, the Net National Product at Factor cost is Rs 3580 crore, Net Indirect Taxes are Rs 35 crore and Net Current Transfers from the Rest of the World are Rs 240 crore, then what will be the value of National Disposable Income?
If for a hypothetical economy, the Net National Product at Factor cost is Rs 3580 crore, Net Indirect Taxes are Rs 35 crore and Net Current Transfers from the Rest of the World are Rs 240 crore, then what will be the value of National Disposable Income?
Solution
Option 1 -> This is NNP at Market Prices (3580 + 35 = 3615) but excludes net current transfers from abroad.
Option 2 -> This value doesn't match the correct calculation for National Disposable Income.
Option 3 -> NDI = NNP at FC + Net Indirect Taxes + Net Current Transfers = 3580 + 35 + 240 = 3855 crore.
Option 4 -> This would result from incorrectly subtracting values instead of adding them.
Hence, Rs 3855 crore -> National Disposable Income (NDI) is calculated as: NDI = NNP at Market Prices + Net Current Transfers from Rest of the World. First, convert NNP at Factor Cost to Market Prices by adding Net Indirect Taxes: 3580 + 35 = 3615 crore. Then add Net Current Transfers: 3615 + 240 = 3855 crore. This represents the total income available to the nation for consumption and saving after accounting for market prices and international transfers. -> correct
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