Civil Services Exam 2016: Know Your GS (Inf.4) 4 KEY CONCEPTS OF NATIONAL INCOME

Civil Services Exam

Civil Services Exam 2016: You will be tested on your knowledge the basic concepts in economics , the foremost of which are – GDP, GNP, NDP and NNP

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Subject: Economics

Civil Services Exam
Created by Logical Nerd

National income accounting is a set of measures used to gauge the health of a nation’s economy for a given period. National Income is the total amount of income accruing to a country from economic activities in a year’s time is known as national income. It includes payments made to all resources in the form of wages, interest, rent and profits.

Gross Domestic Product (GDP)

GDP is the total value of goods and services produced within the country during a year. This is calculated at market prices and is known as GDP at market prices. Dernberg defines GDP at market price as “the market value of the output of final goods and services produced in the domestic territory of a country during an accounting year.”

GDP= Value of gross domestic output- value of intermediate consumption

Net Domestic Product (NDP)

NDP is the value of net output of the economy during the year. Some of the country’s capital equipment wears out or becomes obsolete each year during the production process. The value of this capital consumption is some percentage of gross investment which is deducted from GDP.

Thus Net Domestic Product = GDP at Factor Cost – Depreciation.

Gross National Product (GNP)

GNP is the total measure of the flow of goods and services at market value resulting from current production during a year in a country, including net income from abroad.

GNP= GDP + Income from Abroad
GNP = GDP – Income from abroad

Income from abroad= trade balance + interest on External Loans+ Private Remittance

Net National Product (NNP)

NNP includes the value of total output of consumption goods and investment goods. But the process of production uses up a certain amount of fixed capital. Some fixed equipment wears out, its other components are damaged or destroyed, and still others are rendered obsolete through technological changes.

All this process is termed depreciation or capital consumption allowance. In order to arrive at NNP, we deduct depreciation from GNP. The word ‘net’ refers to the exclusion of that part of total output which represents depreciation.

So NNP = GNP—Depreciation


NNP= GDP+ income from abroad- depreciation


1. Consider the following statement and identify the right one.i. Personal income refers to the income of individuals of a country.
ii. The income at their disposal after paying direct taxes is called disposable income

Question 1 of 5

2. Which of the following is added to national income while calculating personal income?

Question 2 of 5

3. The national income estimation is the responsibility of _____________.

Question 3 of 5

4. National Income is ___________.

Question 4 of 5

5. Which statement is true ???

Question 5 of 5


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