Page 1 - Lesson Note 1

LESSON NOTES

CLASS XII

MODULE 5

MACROECONOMICS

NATIONAL INCOME & RELATED AGGREGATE

Aggregate Of National Income

1. Gross Domestic Product at Market Price (GDP MP ): GDP MP is defined as the gross
market value of the final goods and services produced within the domestic territory of a
country during an accounting year by all production units.
(a) ‘Gross’ in GDP MP signifies that depreciation is included, i.e., no provision has been
made for depreciation.
(b) ‘Domestic’ in GDP MP signifies that it includes all the final goods and services
produced by all the production units located within the economic territory (irrespective of
the fact whether produced by residents or non-residents).
(c) ‘Market Price’ in GDP MP signifies that indirect taxes are included and subsidies are
excluded, i.e., it shows that Net Indirect Taxes (NIT) have been included.
(d) ‘Product’ in GDP MP signifies that only final goods and services have to be included
and intermediate goods should not be included to avoid the double counting.
2. Gross Domestic Product at Factor Cost ( GDP FC): GDP FC is defined as the gross
factor value of the final goods and services produced within the domestic territory of a
country during an accounting year by all production units excluding Net Indirect Tax.
GDP FC = GDP MP – Net Indirect Taxes
3. Net Domestic Product at Market Price (NDP MP ).
NDP MP is defined as the net market value of all the final goods and services produced
within the domestic territory of a country by its normal residents and non-residents
during an accounting year.
NDP MP =GDP MP – Depreciation
4. Net Domestic Product at Factor Cost (NDP FC ).
NDP FC refers to a total factor income earned by the factor of production within the
domestic territory of a country during an accounting year.
NDP FC = GDP MP – Depreciation – Net Indirect Taxes NDP FC is also known as Domestic