Option 1 states that national product at factor cost is equal to domestic product plus net factor income from abroad. This option is incorrect. National product at factor cost refers to the total income earned by all factors of production within a country, including labor, capital, and land. Net factor income from abroad, on the other hand, refers to the income earned by domestic factors of production from foreign sources, minus the income earned by foreign factors of production within the domestic economy. These two concepts are not the same.
Option 2 states that national product at factor cost is equal to national product at market prices minus indirect taxes and plus subsidies. This is the correct answer. National product at market prices refers to the total value of goods and services produced within a country, including indirect taxes and subsidies. By subtracting the indirect taxes and adding the subsidies, we arrive at the national product at factor cost, which represents the actual income earned by factors of production within the country.
Option 3 states that national product at factor cost is equal to gross domestic product minus depreciation. This option is incorrect. Depreciation refers to the decrease in value of fixed assets over time, and it is not directly related to the concept of national product at factor cost.
Option 4 states that national product at