Which of the following statements correctly describes the relationship between Net Domestic Product (NDP) and Net National Product (NNP)?

medium MCQ 2 marks Class 12 · Economics · National Income and Related Aggregates

NDP is obtained by adding depreciation to NNP
NDP is converted to NNP by adding depreciation and subtracting net factor income from abroad
NNP equals GNP at market price
NDP is equal to GNP at factor cost

Answer

NDP is converted to NNP by adding depreciation and subtracting net factor income from abroad

The correct answer is NDP is converted to NNP by adding depreciation and subtracting net factor income from abroad — $S t e p, 4 :$ Conclude that the correct statement is option (b).

Step-by-step solution

$S t e p, 1 :$ Recognise the correct formula for converting NDP to NNP: $N N P = N D P + D e p r ec ia t i o n - N F I_{ab r o a d}$
$S t e p, 2 :$ Compare each option to this formula.
$S t e p, 3 :$ Identify that option (b) correctly matches the formula, while the others misplace signs or omit components.
$S t e p, 4 :$ Conclude that the correct statement is option (b).

Common mistake: Confusing depreciation with indirect taxes

Concept tested: NDP to NNP conversion

Published 13 October 2026 · How this solution was prepared and checked

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