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Domestic Income Aggregates

Domestic income aggregates — Gross Domestic Product at Market Price (GDPMP), Gross Domestic Product at Factor Cost (GDPFC), Net Domestic Product at Market Price (NDPMP), and Net Domestic Product at Factor Cost (NDPFC). CBSE Class 12 Macroeconomics.

Notes

Gross Domestic Product at Market Price (GDP_MP)

GDP at Market Price
The gross market value of all final goods and services produced within the domestic territory of a country during a period of one year.

Gross

Depreciation is included — not yet subtracted

Domestic

Produced within the country's borders, regardless of who produces it

Market Price

Includes net indirect taxes (NIT) — the price consumers pay

Product

Only final goods and services are counted

GDP at Market Price

$$GDP_{MP} = \sum \text{Value of all final goods \& services produced within domestic territory}$$
GDP_MP is the starting point for deriving all other aggregates. Every other domestic or national concept can be obtained by making adjustments to GDP_MP.
Think of GDP_MP like a shopkeeper's total daily sales (revenue). Just as a shopkeeper earns ₹1,00,000 in sales but keeps less after expenses, GDP_MP is the “gross sales” of the entire economy. The other aggregates strip away layers to find the “true income.”

The Three Domestic Conversions

From GDP_MP, we can derive three other domestic aggregates by applying adjustments:

GDP at Market Price

GDP_MP

−NIT → GDP_FC
−Dep → NDP_MP
−NIT−Dep → NDP_FC

Inputs

₹1,00,000
₹8,000
₹5,000

Results

GDP_FC₹92,000
NDP_MP₹95,000
NDP_FC (Domestic Income)₹87,000

Relationship Between Four Domestic Concepts

GDP_MP, GDP_FC, NDP_MP, and NDP_FC are the four domestic concepts. The term ‘Domestic’indicates that the contribution of producers within the country's domestic territory is included, irrespective of their residency status.

Key Takeaways

  • 'Domestic' means produced within the country's borders — includes both residents and non-residents operating domestically.
  • GDP_MP is the base from which all other domestic aggregates are derived.
  • NDP_FC (Domestic Income) is the most adjusted domestic aggregate — it excludes both depreciation and net indirect taxes.
  • Moving from Market Price to Factor Cost requires subtracting NIT.
  • Moving from Gross to Net requires subtracting Depreciation.
  • NDP_FC = GDP_MP − NIT − Depreciation is the master formula for domestic income.