Why NNP at factor cost is national income?

Thus, NNP at market price is gross national product at market price minus depreciation. Net National Product at factor cost is also called as national income. Net National Product at factor cost is equal to sum total of value added at factor cost or net domestic product at factor cost and net factor income from abroad.

Is NNP and national income are same?

In national income accounting, net national income (NNI) is net national product (NNP) minus indirect taxes. Net national income encompasses the income of households, businesses, and the government.

Which method is used in India to calculate national income?

In using the output method in India, the “value added” approach has been adopted. We know that the “value added” is equal to the value of goods minus the cost of production. In other words, this concept measures the net contribution to national income of a producing unit.

Why subsidies are added in national income?

Value of output must equal the value of all incomes. So, subsidies are to be added. Thus, by subtracting taxes and adding subsidies from GDP at market price, one obtains GDP at factor cost.

What do you mean by NNP in national income accounting?

Net national product
Net national product (NNP) is the monetary value of finished goods and services produced by a country’s citizens, overseas and domestically, in a given period.

How do you calculate national income at factor cost?

NNI at Factor Cost = NNI at MP plus Subsidies minus Indirect Taxes.

Why do we measure national income?

National income accounting refers to the government bookkeeping system that measures the health of an economy, projected growth, economic activity. Economic indicators, and development during a certain period of time. It helps in assessing the performance of an economy and the flow of money in an economy.

Why do we have different methods of measuring national income?

It’s Importance: The value added method for measuring national income is more realistic than the product and income methods because it avoids the problem of double counting by excluding the value of intermediate products. Thus this method establishes the importance of intermediate products in the national economy.

What is national income at factor cost?

Factor cost or national income by type of income is a measure of national income or output based on the cost of factors of production, instead of market prices. This allows the effect of any subsidy or indirect tax to be removed from the final measure.