In the estimation of national income, which of the following items will be subtracted from NNP at market price?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Net indirect taxes.
In national income accounting, NNP at market price includes the effect of indirect taxes (which increase market prices) and subsidies (which decrease market prices). To arrive at national income (NNP at factor cost), which represents the actual earnings of factors of production, we need to remove the impact of these indirect taxes and subsidies. This is done by subtracting Net Indirect Taxes (Indirect Taxes - Subsidies) from NNP at market price, effectively bringing the valuation down to the cost incurred by the factors.