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Difficulty: MediumBasic National Income Aggregates (GDP, GNP, NNP, NDP)

An economy records a Gross National Product at market prices (GNPmp\text{GNP}_{mp}) of N950 million\text{N}950\text{ million}. If the capital consumption allowance is N85 million\text{N}85\text{ million}, indirect taxes are N60 million\text{N}60\text{ million}, and subsidies are N15 million\text{N}15\text{ million}, what is the value of the Net National Product at factor cost (NNPfc\text{NNP}_{fc}) in millions of Naira?

Answer: 820 million Naira

Answer

820 million Naira
Net National Product at factor cost (NNP_fc) is calculated by subtracting depreciation from GNP at market prices to get NNP at market prices (950 - 85 = 865 million Naira), then subtracting indirect taxes and adding subsidies (865 - 60 + 15 = 820 million Naira).

Step-by-Step Solution

1
Calculate Net National Product at market prices (NNP_mp)
865 million Naira
Subtract capital consumption allowance (depreciation) from GNP at market prices: 950 - 85 = 865.
2
Adjust for indirect taxes and subsidies to derive NNP at factor cost (NNP_fc)
820 million Naira
Subtract indirect taxes and add subsidies to NNP at market prices: 865 - 60 + 15 = 820.

Key Concept

Relationship between Gross National Product at Market Prices and Net National Product at Factor Cost
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Topics

Basic National Income Aggregates (GDP, GNP, NNP, NDP)

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