The correct option is 2 only
Explanation
National Income Accounting involves various aggregates such as GDP, GNP, and NNP calculated at either Market Price (MP) or Factor Cost (FC). The distinction lies in the treatment of indirect taxes, subsidies, and depreciation.
Statement 1 is Incorrect: Net National Product (NNP) at Factor Cost represents the total income earned by the factors of production (land, labor, capital, and entrepreneurship) in the form of rent, wages, interest, and profit. In standard economic accounting, NNP at Factor Cost is technically defined as the National Income (NI) of a country.
Statement 2 is Correct: Market prices include indirect taxes and exclude subsidies. To arrive at Factor Cost (the actual cost of production) from Market Prices, one must remove the effect of taxes and add back subsidies. Therefore, NNP at Factor Cost is derived by subtracting Net Indirect Taxes (Indirect Taxes - Subsidies) from NNP at Market Prices, not by adding them.
Formula: NNPFC = NNPMP - Net Indirect Taxes.
Statement 3 is Incorrect: The distinction between "Gross" and "Net" aggregates lies in the treatment of depreciation (consumption of fixed capital). "Net" aggregates are obtained by subtracting depreciation from "Gross" aggregates. Consequently, NNP excludes the value of depreciation.
Key Takeaway: National Income is synonymous with NNP at Factor Cost. It is the purest form of income measurement available to residents after accounting for capital wear and tear (depreciation) and government fiscal intervention (indirect taxes and subsidies).