CDS 2024 · PYQ · Economy / National Income Accounting · medium
Which one of the following statements is not correct for National Income Accounting for India?
Answer
The correct answer is B: Net factor payments earned from abroad are included in Gross Domestic Product.. Option (b) is incorrect. Net Factor Income from Abroad (NFIA) is NOT included in GDP; instead, it is added to GDP to arrive at Gross National Product (GNP).
A.Imports are subtracted in calculating Gross Domestic Product.
B.Net factor payments earned from abroad are included in Gross Domestic Product.✓ Correct
C.Purchase and sale of second-hand goods are not included in Gross Domestic Product.
D.Inventories are included in Gross Domestic Capital Formation.
Explanation
Option (b) is incorrect. Net Factor Income from Abroad (NFIA) is NOT included in GDP; instead, it is added to GDP to arrive at Gross National Product (GNP). By definition, GDP measures output produced within the domestic territory, irrespective of nationality of factor owners. (a) is correct: in GDP measured by the expenditure method (C+I+G+X−M), imports are subtracted. (c) is correct: second-hand goods are excluded since they were counted in the year of original production. (d) is correct: change in inventories (stocks) is part of Gross Capital Formation.
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