Read the following text carefully : "A country's total National Income (NI) at the end of the year is Rs. 80,000 crore. During the same year, the Gross Domestic Product (GDP) increased by Rs. 10,000 crore. The depreciation on capital goods was Rs. 2,000 crore and National savings at the end of year is Rs. 15,000 crore. Additionally, country invested Rs. 8,000 crore in new capital goods industries." In the light of above text, categorise the items as `stock' or `flow' variables with valid arguments. The value of Nominal Gross National Product (GNP) of an economy was Rs. 2,500 crore in a particular year. The value of Gross National Product (GNP) of that country during the same year, estimated at the prices of base year was Rs. 3,000 crore. (i) Estimate the value of Gross National Product (GNP) deflator (in percentage). (ii) "The price level has risen between the base year and the year under consideration." Defend or refute the statement with suitable argument.

Question

Accepted Answer

Analysis of the given data:

Given:
- National Income (NI) = Rs. 80,000 crore
- GDP increase = Rs. 10,000 crore

Analysis:
1. National Income represents NNP_FC (Net National Product at Factor Cost)
2. GDP increase indicates economic growth
3. The relationship between NI and GDP depends on:
   - Depreciation
   - Net Indirect Taxes
   - Net Factor Income from Abroad

Key points:
1. National Income is a measure of income earned by residents
2. GDP is a measure of production within domestic territory
3. The difference arises due to NFIA and NIT
4. Economic growth (GDP increase) may or may not translate to proportional increase in National Income