Answer to Question #66027 in Macroeconomics for Summaiya

Question

Two economic indicators are Gross Domestic Product at market prices and Net National Income at factor cost. Explain what is meant by economic indicator and the differences between the two indicators mentioned.

Answer 1

GDP is the aggregate value of all final goods and services produced within the domestic territory of a country during a year.

GDP at market price – is the money value of all domestic final gross output or product of a nation. The aggregate values of goods and services are calculated at market price.

Important: GDP at market price never includes depreciation of capital goods in course of production

Net national product/National income at market prices is the net money value of all the final goods and services produced in a country during year.

NNP at market price = GDP at market price – Depreciation

When national income is measured by adding together all income payments made to the factors of production in a year, it is called national income at factor cost. National income at factor cost is the aggregate earnings of the four factors such as land, labour, capital and organization which arise from the current production of goods and services by the nations so called economy.