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Q30 (CDS-I/2024) Economy › Basic Concepts & National Income › GDP measurement methodology Answer Verified

Which one of the following statements is not correct for National Income Accounting for India?

Result
Your answer: —  Â·  Correct: B
Explanation

Statement 2 is incorrect because Net Factor Income from Abroad (NFIA) is included in Gross National Product (GNP), not Gross Domestic Product (GDP). GDP measures the aggregate value of goods and services produced strictly within the domestic territory of a country [3]. To derive GNP, NFIA is added to GDP [4]. Statement 1 is correct as imports are subtracted in the expenditure method to ensure only domestic production is counted [5]. Statement 3 is correct because GDP only includes the value of current production; second-hand goods were already counted in the year they were produced [1]. Statement 4 is correct as Gross Domestic Capital Formation (GDCF) consists of gross fixed capital formation and inventory investment (changes in stocks).

Sources

  1. [3] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 2: National Income Accounting > 2.3 SOME MACROECONOMIC IDENTITIES > p. 25
  2. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 1: Fundamentals of Macro Economy > 1.11 Macroeconomic Variables > p. 16
  3. [4] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 1: National Income > Eight (08) Measures or Aggregates of National Income: 1. GDP extsubscript{MP} = Gross Domestic Product at Market Price. 2. GDP_ extsubscript{FC} = Gross Domestic Product at Factor Cost = GDP_ extsubscript{MP} – Indirect taxes + Subsidies 3. NDP extsubscript{MP} = Net Domestic Product at Market Price = GDP_ extsubscript{MP} – Depreciation 4. NDP_ extsubscript{FC} = Net Domestic Product at Factor Cost = NDP_ extsubscript{MP} – Indirect taxes + Subsidies 5. GNP extsubscript{MP} = Gross National Product at Market Price = GDP_ extsubscript{MP} + NFIA 6 > p. 9
  4. [5] https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/economic-iondicators-and-the-business-cycle/21/a/the-circular-flow-and-gdp
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