Suppose the GDP at market price of a country in a particular year was Rs 1,100 crores. Net Factor Income from Abroad was Rs 100 crores. The value of Indirect taxes – Subsidies was Rs 150 crores and National Income was Rs 850 crores. Calculate the aggregate value of depreciation.
The aggregate value of depreciation is Rs 200 crores.
Explanation
This numerical problem tests the student's understanding of the relationship between various national income aggregates. The key formulas needed are: (1) GNP at market price = GDP at market price + Net Factor Income from Abroad, (2) NNP at market price = GNP at market price - Depreciation, and (3) National Income = NNP at factor cost = NNP at market price - (Indirect taxes - Subsidies). By working backwards from National Income to find NNP at market price, then relating it to GNP at market price, we can isolate and calculate the depreciation value.
Solution Steps
Step 1: Calculate GNP at market price = GDP at market price + Net Factor Income from Abroad = Rs 1,100 crores + Rs 100 crores = Rs 1,200 crores.
Step 2: Use the formula: National Income = NNP at factor cost = NNP at market price - (Indirect taxes - Subsidies).
Step 3: Substitute values: Rs 850 crores = NNP at market price - Rs 150 crores. Therefore, NNP at market price = Rs 850 crores + Rs 150 crores = Rs 1,000 crores.
Step 4: Apply the formula: NNP at market price = GNP at market price - Depreciation. So, Rs 1,000 crores = Rs 1,200 crores - Depreciation.
Step 5: Solve for Depreciation = Rs 1,200 crores - Rs 1,000 crores = Rs 200 crores.