To compute national income, which of the following items are added to net domestic product (NDP)? I. business income adjustments net of indirect business taxes and transfers
II) capital consumption allowance
III) U.S. net income earned abroad
A) I only
B) II only
C) both I and III
D) both II and III

Question

Quizplus · Accepted Answer

To compute national income, indirect business taxes and subsidies must be subtracted from GDP to arrive at NDP. Business income adjustments (such as undistributed corporate profits) must then be added back in to arrive at national income. Additionally, U.S. net income earned abroad must also be added to national income. Therefore, both I and III must be added to NDP to arrive at national income. Capital consumption allowance is already accounted for in NDP, so II should not be added again.

To Compute National Income, Which of the Following Items Are