Which effect is included in GDP at market price?
Answer and explanation
Correct answer: The net effect of indirect taxes and subsidies
GDP at market price reflects the prices paid by buyers in the market. Compared with factor cost, it includes the net effect of indirect taxes and subsidies, expressed as NIT = indirect taxes − subsidies. NFIA is not part of GDP because GDP is domestic, transfer payments are not payments for current production, and direct taxes are not the relevant adjustment.
Frequently asked questions
What is the correct answer to this question?
The net effect of indirect taxes and subsidies
Why is this the correct answer?
GDP at market price reflects the prices paid by buyers in the market. Compared with factor cost, it includes the net effect of indirect taxes and subsidies, expressed as NIT = indirect taxes − subsidies. NFIA is not part of GDP because GDP is domestic, transfer payments are not payments for current production, and direct taxes are not the relevant adjustment.
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.
