The national income of a country for a given period is equal to the

Q: What is UPSC Prelims?

UPSC Prelims is a competitive examination conducted in India. This question is from the 2013 UPSC Prelims Economy paper.

Q: How can I prepare for UPSC Prelims Economy?

To prepare for UPSC Prelims Economy, practice previous year questions (PYQs), understand concepts thoroughly, and solve mock tests regularly. This 2013 question covers National Income – GDP, GNP, NNP & Measurement topic.

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This UPSC Prelims 2013 Economy question has a medium difficulty level and is marked as an important question.

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Question

The national income of a country for a given period is equal to the

Accepted Answer

Correct Answer: A — total value of goods and services produced by the nationalsStep-by-step Solution:This question requires precise understanding of national income accounting terminology:National Income (NI) is formally defined as Net National Product at Factor Cost (NNP at FC). The key distinction in this definition is the word 'nationals' — national income measures output produced by the residents/nationals of a country, regardless of whether they are physically located inside or outside the country during the period.Option A — Total value of goods and services produced by nationals: This is correct. National income = NNP at FC = Net value added by all nationals (residents) of a country in a given period. It includes income earned by Indian nationals working abroad and excludes income earned by foreign nationals within India. This is the 'national' (vs 'domestic') concept in national income accounting. ✓Why other options are incorrect:Option B — Sum of total consumption and investment expenditure (C + I): This is the expenditure on the domestic product from only two components (private consumption + investment) — it excludes government expenditure (G) and net exports (X-M). The complete expenditure approach is GDP = C + I + G + (X - M). Moreover, this gives domestic product, not national income. ✗Option C — Sum of personal income of all individuals: Personal income is different from national income — it includes transfer payments (which national income excludes) and excludes retained corporate earnings (which national income includes via corporate income). ✗Option D — Money value of final goods and services produced: This comes closest to GDP (Gross Domestic Product at Market Prices) — but GDP is territorial/domestic (based on geographic boundary) not national. Also, 'gross' means depreciation hasn't been deducted — national income is NET of depreciation. ✗Key Concept: National income accounting terms: GDP (Gross Domestic Product) = market value of all final goods and services produced WITHIN the territory of a country; GNP (Gross National Product) = GDP + Net Factor Income from Abroad (NFIA); NNP (Net National Product) = GNP - Depreciation; NI (National Income) = NNP at Factor Cost = NNP at Market Prices - Net Indirect Taxes (= NNP MP - Indirect Taxes + Subsidies). The 'national' concept includes income of residents abroad and excludes income of foreigners within the country (captured by NFIA). India switched from GDP to GVA (Gross Value Added) as the primary measure in 2015 base year revision (2011-12 base); GVA + (Taxes on products - Subsidies on products) = GDP. National Income for India: published by National Statistical Office (NSO) under MoSPI annually.

The national income of a country for a given period is equal to the

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The national income of a country for a given period is equal to the

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