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Understanding which Index is the Best Index?
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In this lesson we discussed about the various indices used to calculate the income. And we made the comparison that which one to choose.

Samridhi Goyal
Engineer, MBA , Appeared in CSE interview

U
Unacademy user
sir , does number system course is in english medium also???
Bharat Gupta
4 months ago
Yes it is there in English medium as well
  1. On the basis of Domestic Product GDP(at Factor Cost) GDP(at Market Price) NDP(at Factor Cost) NDP (at Market Price)


  2. On the basis of National Product GNP(at Factor Cost) GNP(at Market Price) NNP(at Factor Cost) NNP (at Market Price)


  3. Which is a better index? Comparison of GDP and GNP: GDP takes into account the income earned within the territory which may not always be the right income. Example: What Chris Gayle earns in India through IPL is not India's national income as he will take it back to his home country. What Virat Kohli makes in India is of our concern GDP would include both of the above


  4. Which is a better index? Comparison of GDP and GNP: GNP takes into account the income earned by an Indiarn citizen whether in India or abroad Example: What Dhoni earns in Australia is of importance for lndia's national income as he will get it back to his home country. GNP would include the above but GDP would not include the above.


  5. Which is a better index? Comparison of GDP and GNP: Looking at the earlier analysis it can be said that GNP is a better measure as compared to GDP, reason being GNP takes into account income earned over here but GDP takes into account income earned in India whether or not it stays in India.


  6. Which is a better index? Comparison Of Factor Cost and Market Price? FC is the actual cost incurred for producing a product or providing a service Example: Cost of growing rice is Rs 25/kg with payment for raw materials, land rent, labour wages Factor cost takes into account Rs 25 per kg


  7. Which is a better index? Comparison Of Factor Cost and Market Price? MP is the cost incurred for producing a product. Actual Cost for buying a product. Example: Cost of growing rice is Rs 25/kg with payment for raw materials, land rent, labour wages.But under NFSA GOI provides it for Rs2/kg Market Price takes into account Rs 2 per kg


  8. Which is a better index? Comparison Of Factor Cost and Market Price? Looking at above example Market Price may not give a true picture of the economy as the entire cost and earning by factors of production is not accounted Whereas in factor cost we take the actual cost of production which gives the truer picture of econmy producing goods at a particular cost. Hence FC is an accurate measure.


  9. WHICH IS A BETTER INDEX? So again we have 4 Indices: NDP(at factor Cost) NDP(at Market Price) NNP(at Factor Cost) NNP(at Market Price)


  10. BETTER MEASURE OF INDEX The better measure out of the above 4 is GNP (FC).