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Economics is a complicated subject, which requires excellent cognitive skills to excel. Every student studying at school or university receive the task of writing economics homework, for which they have to choose an interesting topic and conduct effective research to make the content informative.
Choosing ‘Top 8 Aggregates of National Income’ as a topic for economics homework is a great idea, as it is one of the major chapters of the subject.
Are you worried because you lack knowledge of this particular topic? Don’t worry; our economics homework help experts have explained every aggregate in detail in this blog. Before you start learning about aggregates, you must first know what do they mean.
Let’s get started.
What Are the Aggregates of National Income?
The total amount of income generated by all the national residents individually, different businesses, and the government by the collection of direct and indirect taxes are called as national income. All the factors that help in the calculation of national income are termed as national income aggregates. It includes GDPmp, GDPfc, NDPmp, NDPfc, GNPmp, GNPfc, NNPmp, and NNPfc. Know more about these factors in the succeeding section of this blog.
1. Gross Domestic Product at Market Price (GDPmp)
It can be defined as the total market value of the final goods and services produced in the domestic territory of any country during an accounting year (April 01 to March 31) by all production units of any business.
Let’s bifurcate GDPmp.
G: G stands for Gross
D: D stands for Domestic
P: P stands for Product
MP: MP stands for Market Price
- ‘Gross’ in GDPmp means that there is no provision related to depreciation; hence, it is included while calculating the national income as a whole.
- ‘Domestic’ in GDPmp means that all the goods and services should be included while measuring the national aggregate as a whole. Apart from the fact that the goods and services are produced by a resident or non-resident.
- ‘Product’ in GDPmp means that the final goods and services related to national income must be included correctly.
- ‘Market Price’ in GDPmp denotes that every indirect tax paid should be included in the national income, and whatever subsidy is received should be excluded from the national income.
By making all the required adjustments in the gross domestic product at market price, you can easily derive all the other related aggregates.
2. Gross Domestic Product at Factor Cost (GDPfc)
When all the final goods and services produced within the domestic territory determine the gross money in an accounting year, it is termed as GDPfc.
Formula: GDPfc = GDPmp – Net Indirect Taxes.
To calculate GDPfc, you need to deduct all the net indirect taxes paid by the country's residents from GDPmp.
3. Net Domestic Product at Market Price (NDPmp)
The final goods and services produced within the domestic territory that signify net market value is termed as NDPmp.
Formula: NDPmp = GDPmp – Depreciation.
To calculate NDPmp, you need to subtract depreciation from GDPmp.
4. Net Domestic Product at Factor Cost (NDPfc)
The final goods and services produced within the domestic territory that signify net money value is termed as NDPmp.
Formula: NDPfc = GDPmp - Net Indirect Taxes - Depreciation.
NDPfc = GDPfc - Depreciation.
To calculate NDPfc, you need to subtract all the net indirect taxes paid by the country's residents and depreciation from GDPmp. Other than this, you can deduct depreciation from GDPfc to extract correct NDPfc.
These are the four types of domestic products related to the gross and monetary value that can be calculated by different formulas mentioned above. You can use them to solve any question effectively in your economics homework. After knowing it, you need to understand the relationship between four domestic concepts.
What Is the Relationship Between Four Domestic Concepts?
Domestic concepts include GDPmp, GDPfc, NDPmp, and NDPfc. Here the term ‘Domestic’ refers to the contribution of both residents and non-residents in the national income that belongs within the national boundary.
The relationship between all the four domestic concepts can be understood by the image mentioned-below.
5. Gross National Product at Market Price (GNPmp)
When the residents of a country produce all the goods and services within the accounting period to state the gross market value, it is termed as GNPmp.
Formula: GNPmp = Net factor income from abroad (NFIA) + GDPmp.
In this, sometimes, you will find that the GNPmp is less than GDPmp. It could happen when the NFIA is negative. However, if NFIA is positive, then GNPmp will always be greater than GDPmp.
6. Gross National Product at Factor Cost (GNPfc)
When the residents of a country produce all the goods and services within the accounting period to state gross money value, it is termed as GNPfc.
Formula: GNPfc = GNPmp – Net Indirect Taxes
For calculating GNPfc, you need to deduct all the net indirect taxes paid only by the residents of a country from GNPmp.
7. Net National Product at Market Price (NNPmp)
When all the goods and services that are produced by the normal residents of a country within an accounting period to determine net market value, it is known as NNPmp.
Formula: NNPmp = GNPmp – Depreciation.
For calculating NNPmp, you need to subtract all the depreciation collected by the country from the residents from GNPmp.
8. Net National Product at Factor Cost (NNPfc)
When all the goods and services produced by the normal residents of a country within the financial year determine net money value, it is known as NNPfc.
Formula: NNPfc = GNPmp – Net Indirect Taxes (NIT) – Depreciation.
To calculate NNPfc, you should deduct all the net indirect taxes paid by the residents of a country and depreciation from GNPmp.
What Is the Relationship Between Four National Concepts?
National concepts include GNPmp, GNPfc, NNPmp, and NNPfc. Here the term ‘National’ refers to the production that are carried by residents of the country.
The relationship between all the four national concepts can be understood by the image mentioned-below.
These are the eight aggregates of national income that you can choose as a topic for your economics homework.
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