Prelims 2013 · archive
HardThe national income of a country for a given period is equal to the:
Answer & explanation
Answer: (d) money value of final goods and services produced
National income measures the money value of a country's output of final goods and services over a period. Only final goods are counted because their value already includes the intermediate goods used to make them. Counting intermediate goods as well would count the same value twice. Option (d) is the only choice built on final output. Option (a) takes the total value of all goods and services, which brings in that double counting.
- ✓ (d) Without indirect taxes and subsidies, the total value of final goods and services produced in the economy equals National Income. The word 'final' is what keeps the measure free of double counting.
- ✗ (a) The flaw is 'total value of goods and services'. That total includes intermediate goods, such as the flour used to make bread. Counting these separately from the final goods they enter is the error of double counting.
- ✗ (b) Expenditure on final output is C + I + G + X – M: consumption, investment, government expenditure and net exports. Adding only consumption and investment leaves out government spending and net exports.
- ✗ (c) Personal Income is derived from National Income, not equal to it. Undistributed profits and corporate tax are deducted because they do not reach households, and transfer payments are added.
Remember · National income is the money value of final goods and services only, because adding intermediate goods means double counting. In its strict form it is NNP at factor cost.
📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 2 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 2 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 4 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 2 (practise this chapter)
Sources
- NCERT Class 12 · Introductory Macroeconomics, Chapter 2 “the value of the final goods already includes the value of the intermediate goods that have entered into their production as inputs. Counting them separately will lead to the error of double counting.”
- NCERT Class 12 · Introductory Macroeconomics, Chapter 2 “In the product method, to avoid double counting, we need to deduct the value of intermediate goods and take into account only the aggregate value of final goods and services.”
- NCERT Class 12 · Introductory Macroeconomics, Chapter 4 “without the government imposing indirect taxes and subsidies, the total value of final goods and services produced in the economy, GDP, becomes identically equal to the National Income.”
- NCERT Class 12 · Introductory Macroeconomics, Chapter 2 “This is called Undistributed Profits (UP). We have to deduct UP from NI to arrive at PI, since UP does not accrue to the households.”
Question: UPSC Civil Services (Preliminary) 2013, General Studies paper. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). ·