Question
Are the following a part of country's net domestic product at market? Explain.
(i) Net indirect taxes, (ii) Net exports, (iii) Net factor income from abroad, (iv) Consumption of fixed capital.
Solution
(i) Yes, net indirect tax is included in NDP at MP because MP = FC + Net indirect tax.
(ii) Yes, net exports is included in NDP at MP because it is one of the components of NDP when measured by expenditure method.
(iii) Net factor income from abroad is not included because NDP measures domestic product only.
(iv) Consumption of fixed capital (depreciation) is not included because Net product is equal to Gross product - Depreciation.
