1. NATIONAL INCOME
AND
ITS AGGREGATES
Chapter - 3

2. DEPRECIATION
It is the fall in the value of fixed assets due to:
→ wear and tear (usage)
→ passage of time
→ expected obsolescence (change in technology)
It is also known as:-
• Consumption of fixed capital.
• Replacement cost of fixed assets.
• Current replacement cost.
• Capital consumption allowance.

3. FORMULA
Gross Value (G) – Depreciation = Net Value (N)

4. NET FACTOR INCOME FROM ABROAD
(NFIA)
• It refers to the difference between factor income received from the rest of
the world and factor income paid to the rest of the world.
• NFIA = Factor income earned from abroad – factor income paid to
abroad
• NFIA = FIFA –FITA
Domestic Product + NFIA = National Product

5. COMPONENTS OF NFIA
• NFIA = Net compensation to employees from abroad
+
Net income from property and entrepreneurship from abroad
+
Net retained earnings from Rest of the World (ROW).

6. NET INDIRECT TAXES
It is the difference between indirect taxes and subsidies.
NIT = Indirect Taxes – Subsidies
Factor Cost + NIT = Market Price

7. REMEMBER
• Domestic Income – NDPFC
• National Income – NNPFC

8. QUESTION PRACTICE

9. QUESTION PRACTICE

10. QUESTION PRACTICE

11. QUESTION PRACTICE

12. QUESTION PRACTICE

13. QUESTION PRACTICE

14. TERMS
• G – Gross
• N – Net
• DP – Domestic Territory
• NP – Normal Resident
• MP – Market Value
• FC – Money Value

15. DEFINITIONS
→ GDPMP
→ It refers to the gross market value of all the final goods and services produced
within the domestic territory in a year.
→ GDPFC
→ It refers to the gross money value of all the final goods and services produced
within the domestic territory in a year.
→ GNPMP
→ It refers to the gross market value of all the final goods and services produced
by the normal residents of the country in a year.
→ GNPFC
→ It refers to the gross money value of all the final goods and services produced
by the normal residents of the country in a year.

16. DEFINITIONS
→ NDPMP
→ It refers to the net market value of all the final goods and services produced
within the domestic territory in a year.
→ NDPFC
→ It refers to the net money value of all the final goods and services produced
within the domestic territory in a year.
→ NNPMP
→ It refers to the net market value of all the final goods and services produced
by the normal residents of the country in a year.
→ NNPFC
→ It refers to the net money value of all the final goods and services produced
by the normal residents of the country in a year.

17. QUESTION PRACTICE

18. QUESTION PRACTICE

19. QUESTION PRACTICE

20. QUESTION PRACTICE