WAEC Economics 2020 Paper

Concept:NNP at factor cost is obtained by subtracting depreciation and net indirect taxes from GNP at market prices.Explanation:Start with GNP at market prices.First, subtract depreciation to obtain NNP at market prices:$$NNP_{\text{market prices}} = GNP_{\text{market prices}} - \text{Depreciation}$$To convert market prices to factor cost, subtract indirect taxes and add subsidies:$$NNP_{\text{factor cost}} = NNP_{\text{market prices}} - \text{Indirect taxes} + \text{Subsidies}$$Substitute the first expression into the second:$$NNP_{\text{factor cost}} = GNP_{\text{market prices}} - \text{Depreciation} - \text{Indirect taxes} + \text{Subsidies}$$So, from GNP at market prices, subtract depreciation and indirect taxes, then add subsidies.Answer:Option B