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    Question

    Given the following data for an economy:

    National Income: $700 billion

    Depreciation: $50 billion

    Indirect taxes minus subsidies: $30 billion

    Net factor income from abroad: $10 billion

    Calculate the GDP at market prices.

    A $690 billion Correct Answer Incorrect Answer
    B $720 billion Correct Answer Incorrect Answer
    C $740 billion Correct Answer Incorrect Answer
    D $770 billion Correct Answer Incorrect Answer

    Solution

    GDP = NNP at factor cost + depreciation + Indirect taxes minus subsidies - Net factor income from abroad = 700+50+30-10 = 770 Note – National income is represented by NNP at factor cost and is therefore used directly in the above equation to calculate GDP.

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