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GDP GNP NDP NNP Class 12 Economics: Formulas and Sums

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EconomicsCBSE Class 12 · National Income Accounting

GDP, GNP, NDP and NNP at Market Price and Factor Cost (Class 12 Economics)

Updated 17 October 2026 · Fact-checked

Three switches link all eight aggregates: domestic to national add net factor income from abroad (NFIA); gross to net subtract depreciation; market price to factor cost subtract net indirect taxes (indirect taxes minus subsidies). National income = NNP at factor cost = NDP at factor cost + NFIA.

Understand GDP, GNP, NDP and NNP at Market Price and Factor Cost

Three switches.

1. Domestic to national: National = Domestic + NFIA. NFIA (net factor income from abroad) = factor income earned by residents abroad - factor income earned by non-residents within the domestic territory. It can be negative.
2. Gross to net: Net = Gross - depreciation (consumption of fixed capital).
3. Market price to factor cost: FC = MP - net indirect taxes, where net indirect taxes (NIT) = indirect taxes - subsidies.

The eight aggregates.

AggregateRelation
GDP at market price (GDPmp)Expenditure method: C + I + G + (X - M)
NDP at market priceGDPmp - depreciation
GDP at factor costGDPmp - NIT
NDP at factor costGDPfc - depreciation = NDPmp - NIT
GNP at market priceGDPmp + NFIA
NNP at market priceGNPmp - depreciation
GNP at factor costGDPfc + NFIA = GNPmp - NIT
NNP at factor cost (National income)NDPfc + NFIA = GNPfc - depreciation

Why factor cost? Factor cost is what factors of production actually earn (wages, rent, interest, profit). Market price includes indirect taxes (such as sales tax or GST) that go to the government, and excludes subsidies that lower the price paid by buyers, so NIT is adjusted.

Why domestic and national differ. Domestic product counts production within the domestic territory, whoever owns the factors. National product counts the income of the normal residents of the country, wherever earned.

Income method link. NDP at factor cost = compensation of employees + operating surplus (rent + interest + profit) + mixed income of the self-employed. Adding NFIA gives national income.

Neighbouring topics. The three methods of measuring GDP, final and intermediate goods, nominal and real GDP and welfare have separate pages.

GDP, GNP, NDP and NNP at Market Price and Factor Cost: key facts

NFIA
NFIA = factor income from abroad - factor income to abroad
Negative if outflows exceed inflows.
GNP at MP
GNPmp = GDPmp + NFIA
Domestic to national.
NDP at MP
NDPmp = GDPmp - depreciation
Gross to net.
Factor cost
GDPfc = GDPmp - NIT; NIT = indirect taxes - subsidies
Market price to factor cost.
National income
NNPfc = GDPmp - depreciation - NIT + NFIA
One-line conversion.
NDP at FC (income method)
NDPfc = compensation of employees + operating surplus + mixed income
Add NFIA for national income.

How to answer GDP, GNP, NDP and NNP at Market Price and Factor Cost questions

Most questions give some items and ask for another aggregate; solve by the three switches in the right order.

  1. 1Write what is given and what is required, with MP or FC and gross or net, domestic or national.
  2. 2Decide which switches are needed: NFIA for domestic/national, depreciation for gross/net, NIT for MP/FC.
  3. 3Compute NFIA and NIT from their components first.
  4. 4Apply the switches one at a time, noting the sign (subtract for MP to FC and for gross to net).
  5. 5Verify by a second route (for example, reach NNPfc through GNPfc - depreciation).

GDP, GNP, NDP and NNP at Market Price and Factor Cost in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

NFIA

Suppose residents of a country earn ₹240 crore from jobs and investments abroad, while foreigners working or investing in the country earn ₹310 crore from it.

Find NFIA and its effect on national product compared with domestic product.

Try it first, then show the solutionSolution
  1. NFIA = 240 - 310 = (-) ₹70 crore.
  2. National product = Domestic product - 70.

Answer: NFIA is (-) ₹70 crore, so GNP is ₹70 crore smaller than GDP.

Memory hook: Money coming in minus money going out.

Net indirect taxes

Imagine the government collects ₹520 crore as indirect taxes and gives ₹160 crore as subsidies on a country's products.

By how much does GDP at market price exceed GDP at factor cost?

Try it first, then show the solutionSolution
  1. NIT = 520 - 160 = ₹360 crore.
  2. GDPmp - GDPfc = ₹360 crore.

Answer: GDP at market price is ₹360 crore more than at factor cost.

Memory hook: Market price carries the taxman's share.

Tricks to remember GDP, GNP, NDP and NNP at Market Price and Factor Cost

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • N-D-F: three switches

    NFIA (domestic to national), Depreciation (gross to net), Factor cost (minus NIT).

    Use it when: All conversions.

  • National income = NNPfc

    Net, National, at Factor cost: N-N-F.

    Use it when: Definition of national income.

  • Subtract down, add NFIA across

    Net and factor cost subtract; national adds NFIA.

    Use it when: Direction of conversion.

GDP, GNP, NDP and NNP at Market Price and Factor Cost: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Domestic to national · 1 mark · MCQBoard level

If net factor income from abroad is positive, then:
(a) GDP > GNP
(b) GNP > GDP
(c) GNP = GDP
(d) NDP > GNP

Try it first, then show the solutionSolution
  1. GNP = GDP + NFIA, so a positive NFIA makes GNP larger.

Answer: (b) GNP > GDP

Example 2: Net indirect taxes and factor cost · 3 marks · Short answerBoard level

Explain why GDP at market price differs from GDP at factor cost. Given indirect taxes ₹520 crore and subsidies ₹160 crore, find the difference. (3 marks)

Try it first, then show the solutionSolution
  1. Market price includes indirect taxes and excludes subsidies.
  2. NIT = 520 - 160 = 360.

Answer: Market price includes indirect taxes and is reduced by subsidies, while factor cost is what factors earn. GDPmp - GDPfc = net indirect taxes = 520 - 160 = ₹360 crore.

Example 3: All eight aggregates · 5 marks · Short answerHarder board level

From the following (₹ crore) find all eight aggregates: GDP at market price 5,400; depreciation 480; indirect taxes 520; subsidies 160; factor income from abroad 240; factor income to abroad 300. (5 marks)

Try it first, then show the solutionSolution
  1. NFIA = 240 - 300 = (-) 60. NIT = 520 - 160 = 360.
  2. GDPmp = 5,400; NDPmp = 5,400 - 480 = 4,920.
  3. GDPfc = 5,400 - 360 = 5,040; NDPfc = 5,040 - 480 = 4,560.
  4. GNPmp = 5,400 - 60 = 5,340; NNPmp = 5,340 - 480 = 4,860.
  5. GNPfc = 5,040 - 60 = 4,980; NNPfc = 4,980 - 480 = 4,500 (check: NDPfc + NFIA = 4,560 - 60 = 4,500).

Answer: GDPmp 5,400; NDPmp 4,920; GDPfc 5,040; NDPfc 4,560; GNPmp 5,340; NNPmp 4,860; GNPfc 4,980; NNPfc (national income) 4,500.

Example 4: Backward conversion · 4 marks · Short answerHarder board level

National income (NNP at factor cost) is ₹7,200 crore. Depreciation is ₹700 crore, net indirect taxes ₹900 crore and NFIA is (+) ₹150 crore. Find (i) GDP at factor cost, (ii) GDP at market price and (iii) GNP at market price. (4 marks)

Try it first, then show the solutionSolution
  1. GNPfc = NNPfc + depreciation = 7,200 + 700 = 7,900.
  2. (i) GDPfc = GNPfc - NFIA = 7,900 - 150 = 7,750.
  3. (ii) GDPmp = GDPfc + NIT = 7,750 + 900 = 8,650.
  4. (iii) GNPmp = GDPmp + NFIA = 8,650 + 150 = 8,800 (check: GNPfc + NIT = 7,900 + 900 = 8,800).

Answer: (i) ₹7,750 crore. (ii) ₹8,650 crore. (iii) ₹8,800 crore.

Example 5: Comparing two economies · 5 marks · Long answerHOTS / competency

Economy A: GDP at factor cost ₹3,000 crore, NFIA (+) ₹200 crore, depreciation ₹300 crore. Economy B: GDP at factor cost ₹3,000 crore, NFIA (-) ₹150 crore, depreciation ₹450 crore. (i) Find the national income of each. (ii) Explain which economy's residents earn more and why GDP alone would mislead. (iii) A's national income is how many times B's national income? (5 marks)

Try it first, then show the solutionSolution
  1. (i) A: NNPfc = 3,000 + 200 - 300 = ₹2,900 crore. B: NNPfc = 3,000 - 150 - 450 = ₹2,400 crore.
  2. (ii) Same GDP, but A's residents earn more because NFIA is positive and depreciation is lower; B loses income to foreigners and wears out more capital.
  3. (iii) 2,900 / 2,400 = 1.21 times.
  4. GDP counts production within the territory, not the income of residents, so it can mislead about income.

Answer: A ₹2,900 crore, B ₹2,400 crore; A's residents earn about 1.21 times as much, because of positive NFIA and lower depreciation.

Where students lose marks in GDP, GNP, NDP and NNP at Market Price and Factor Cost

The slips examiners see most often, and what to write instead.

  • Mistake: Adding net indirect taxes when going to factor cost

    Reversing the direction.

    Wrong working

    GDPfc = 5,400 + 360 = 5,760.

    Right working

    GDPfc = 5,400 - 360 = 5,040.

    Do this: Market price is higher; subtract NIT.

    Usually costs: 1 to 2 marks.

  • Mistake: Mis-signing NFIA

    Subtracting factor income from abroad.

    Wrong working

    NFIA = 300 - 240 = 60, so GNP = GDP + 60.

    Right working

    NFIA = 240 - 300 = (-) 60, so GNP = GDP - 60.

    Do this: Income from abroad minus income to abroad.

    Usually costs: 1 to 2 marks.

  • Mistake: Forgetting depreciation when finding national income

    Stopping at GNPfc.

    Wrong working

    National income = GNPfc = 4,980.

    Right working

    National income = NNPfc = 4,980 - 480 = 4,500.

    Do this: National income is a net, factor cost figure.

    Usually costs: 1 to 2 marks.

Exam tips

  • Label each answer with the full name of the aggregate, such as NDP at factor cost.
  • Do a second route check: compute the answer through two different switch orders.
  • If subsidies are given, always find NIT = indirect taxes - subsidies first.

Practice questions on GDP, GNP, NDP and NNP at Market Price and Factor Cost

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    National income is the same as:
    (a) GDP at market price
    (b) NDP at market price
    (c) NNP at factor cost
    (d) GNP at market price

    Hint

    Net, national, factor cost.

    Answer

    (c) NNP at factor cost

  2. Q2 · 2 marks · Short answerBoard level

    What is meant by net factor income from abroad? State one case in which it is negative. (2 marks)

    Hint

    Compare inflows and outflows.

    Answer

    NFIA is the difference between factor income earned by normal residents from abroad and factor income earned by non-residents within the domestic territory. It is negative when the income paid to foreigners is more than the income earned by residents abroad.

  3. Q3 · 3 marks · Short answerHarder board level

    From the data (₹ crore) find national income: compensation of employees 2,400; rent 300; interest 250; profit 600; mixed income of self-employed 800; NFIA (-) 40. (3 marks)

    Hint

    Operating surplus = rent + interest + profit.

    Answer

    Operating surplus = 300 + 250 + 600 = 1,150. NDPfc = 2,400 + 1,150 + 800 = 4,350. National income = 4,350 + (-40) = ₹4,310 crore.

  4. Q4 · 4 marks · Short answerHarder board level

    Given (₹ crore): NNP at market price 9,360; depreciation 840; indirect taxes 1,100; subsidies 300; NFIA (-) 120. Find (i) national income, (ii) GDP at market price. (4 marks)

    Hint

    NIT = 800.

    Answer

    NIT = 1,100 - 300 = 800. (i) National income = NNPmp - NIT = 9,360 - 800 = ₹8,560 crore. (ii) GNPmp = NNPmp + depreciation = 9,360 + 840 = 10,200; GDPmp = GNPmp - NFIA = 10,200 - (-120) = ₹10,320 crore. Check: GDPmp - dep - NIT + NFIA = 10,320 - 840 - 800 - 120 = 8,560.

  5. Q5 · 1 mark · Assertion-reasonHOTS / competency

    Assertion (A): A country can have GNP greater than GDP.
    Reason (R): GNP includes net factor income from abroad, which can be positive.
    (a) Both A and R are true and R is the correct explanation of A.
    (b) Both A and R are true but R is not the correct explanation of A.
    (c) A is true but R is false.
    (d) A is false but R is true.

    Hint

    GNP = GDP + NFIA.

    Answer

    (a) Both A and R are true and R is the correct explanation of A.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.Write the formula linking GNP and GDP.Show answer

    GNP = GDP + NFIA.

  2. 2.Define net indirect taxes.Show answer

    Indirect taxes minus subsidies.

  3. 3.Which aggregate is national income?Show answer

    Net national product at factor cost.

  4. 4.What is subtracted to go from gross to net?Show answer

    Depreciation.

  5. 5.What is subtracted to go from market price to factor cost?Show answer

    Net indirect taxes.

GDP, GNP, NDP and NNP at Market Price and Factor Cost: frequently asked questions

What is the difference between GDP and GNP?

GDP counts output within the domestic territory; GNP counts the income of normal residents wherever earned, so GNP = GDP + NFIA.

Why is national income measured at factor cost?

Because it should show what factors of production earn, without indirect taxes and subsidies.

Can NFIA be negative?

Yes, when income paid to foreigners exceeds income earned by residents abroad.

Are the figures in the sums from official data?

No. All rupee figures are assumed for practice.