If GDP at factor cost is ₹9,700 crore, indirect taxes are ₹850 crore and subsidies are ₹250 crore, what will be GDP at market price?
Answer and explanation
Correct answer: ₹10,300 crore
First calculate net indirect taxes: NIT = indirect taxes − subsidies = ₹850 − ₹250 = ₹600 crore. To convert GDP at factor cost into GDP at market price, add NIT: GDP at market price = ₹9,700 + ₹600 = ₹10,300 crore. Subsidies reduce the net tax burden, so adding the full tax without subtracting subsidies would overstate the answer.
Frequently asked questions
What is the correct answer to this question?
₹10,300 crore
Why is this the correct answer?
First calculate net indirect taxes: NIT = indirect taxes − subsidies = ₹850 − ₹250 = ₹600 crore. To convert GDP at factor cost into GDP at market price, add NIT: GDP at market price = ₹9,700 + ₹600 = ₹10,300 crore. Subsidies reduce the net tax burden, so adding the full tax without subtracting subsidies would overstate the answer.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
