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SubjectsEconomics
राष्ट्रीय आय से संबंधित समुच्चय: बाजार मूल्य और साधन लागत
In this Class 12 Economics topic from National Income and Related Aggregates, students learn how national income measures are expressed at market price and factor cost. The topic explains the role of net indirect taxes, including indirect taxes and subsidies, in converting one valuation to the other. Students also connect these concepts with aggregates such as GDP, NDP, GNP and NNP, helping them interpret national income data and apply the relevant relationships in numerical questions.
Correct answer: A. Net indirect taxes are subtracted
Explanation: NNPMP is net national product valued at market prices, while NNPFC is valued at factor cost. The difference between market price and factor cost is net indirect tax. Therefore, NNPFC = NNPMP − net indirect taxes. Depreciation, exports and saving are not the required adjustment in this conversion. Hence, option A is correct.
Correct answer: A. Net National Product at Market Price
Explanation: NNPMP means Net National Product at Market Price. NNP expands to Net National Product, while MP means Market Price. The abbreviation for Net National Product at Factor Cost is NNPFC, not NNPMP. The word ‘national’ distinguishes it from a domestic product measure, and ‘net’ indicates that depreciation has already been deducted. Therefore, option A is correct.
Correct answer: B. ₹680 crore
Explanation: The conversion formula is NNPFC = NNPMP − net indirect taxes. Substituting the given values gives NNPFC = ₹750 crore − ₹70 crore = ₹680 crore. Net indirect taxes are removed because market price includes their effect, whereas factor cost measures the income accruing to factors of production. Hence, option B is correct.
Correct answer: C. ₹530 crore
Explanation: To convert NNP at Factor Cost into NNP at Market Price, net indirect taxes are added: NNPMP = NNPFC + net indirect taxes. Therefore, NNPMP = ₹500 crore + ₹30 crore = ₹530 crore. Market price includes the effect of net indirect taxes, while factor cost excludes it. Thus, option C is the correct answer.
Correct answer: A. Net indirect taxes
Explanation: Market price includes indirect taxes paid by buyers and excludes subsidies received by producers, whereas factor cost reflects payments to factors of production. Therefore, the relationship is Market Price = Factor Cost + Net Indirect Taxes, where NIT equals indirect taxes minus subsidies. NFIA and depreciation are different adjustments.
Correct answer: A. ₹60 crore
Explanation: The relationship between market price and factor cost is NNPMP = NNPFC + net indirect taxes. Therefore, net indirect taxes = NNPMP − NNPFC = ₹980 crore − ₹920 crore = ₹60 crore. Option A is correct. The difference arises because market price includes indirect taxes net of subsidies, whereas factor cost reflects payments to factors of production.
Correct answer: A. When NIT is zero
Explanation: The relationship between a national product at market price and at factor cost is NNPMP = NNPFC + net indirect taxes, where NIT equals indirect taxes minus subsidies. Therefore, the two measures are equal exactly when NIT is zero. A high NFIA, a high depreciation amount, or zero exports does not by itself remove the difference between market price and factor cost.
Correct answer: A. NIT
Explanation: Net Indirect Taxes (NIT) equal indirect taxes minus subsidies. Market price includes the effect of indirect taxes and subsidies, whereas factor cost reflects the payments received by factors of production. Thus, Factor Cost = Market Price − NIT. NFIA and depreciation perform different adjustments, so option A is correct.
Correct answer: A. Gross Domestic Product at factor cost
Explanation: GDP at factor cost means Gross Domestic Product valued according to the payments made to the factors of production—such as wages, rent, interest, and profits—for their contribution to domestic production. “Gross” means depreciation has not been deducted, “domestic” refers to territory, and “factor cost” differs from market price by net indirect taxes.
Correct answer: A. Net indirect taxes
Explanation: To convert GDP at market price into GDP at factor cost, net indirect taxes are subtracted: GDPFC = GDPMP − NIT. NIT is indirect taxes minus subsidies, because taxes raise the purchaser’s market price while subsidies lower it. NFIA changes a domestic measure into a national measure, depreciation changes gross into net, and exports are part of expenditure accounting rather than this price adjustment.
Correct answer: A. NIT (Net Indirect Taxes)
Explanation: GDP at factor cost measures the remuneration paid to factors of production, while GDP at market price reflects the prices paid by buyers. The conversion is GDPMP = GDPFC + net indirect taxes, where NIT equals indirect taxes minus subsidies. NFIA is used when converting domestic product into national product, and depreciation is used when moving between gross and net aggregates.
Correct answer: A. Prices prevailing in the current year
Explanation: GDP at current prices is valued using the prices that prevail during the year in which the goods and services are produced. It is also called nominal GDP. Because current prices can change due to inflation or deflation, a rise in current-price GDP may reflect higher prices, greater physical output, or both. This differs from constant-price or real GDP, which uses base-year prices.
Correct answer: A. Prices of the base year
Explanation: GDP at constant prices is valued using the prices of a selected base year rather than the prices prevailing in the current year. It is therefore called real GDP. By keeping prices fixed, the effect of inflation or deflation is removed, allowing changes in real output to be compared more meaningfully across years. Current-price GDP, in contrast, is nominal GDP.
Correct answer: A. Net indirect taxes are added
Explanation: Market price differs from factor cost by net indirect taxes. The conversion formula is GDP_MP = GDP_FC + NIT, where NIT means indirect taxes minus subsidies. Therefore, net indirect taxes must be added when moving from factor cost to market price. Depreciation changes gross and net measures, and NFIA changes domestic and national measures.
Correct answer: C. 4140 crore
Explanation: To convert GDP at factor cost into GDP at market price, net indirect taxes are added. The formula is GDP_MP = GDP_FC + NIT. Substituting the given values gives 3900 + 240 = 4140 crore. Hence, option C is correct. Subtracting NIT would incorrectly produce 3660 crore and would represent the reverse direction of conversion.
Correct answer: A. Deduct NIT
Explanation: The relationship is GDP_MP = GDP_FC + NIT. Rearranging it gives GDP_FC = GDP_MP − NIT, so net indirect taxes must be deducted when converting from market price to factor cost. NFIA concerns domestic-to-national conversion, depreciation concerns gross-to-net conversion, and population is used for per-capita measures.
Correct answer: A. 5100 crore
Explanation: GDP at factor cost is calculated by subtracting net indirect taxes from GDP at market price. Thus, GDP_FC = GDP_MP − NIT = 5600 − 500 = 5100 crore. Option A is therefore correct. Leaving GDP unchanged gives 5600, while adding NIT gives 6100; both ignore the correct direction of conversion.
Correct answer: A. 550 crore
Explanation: Net indirect taxes are calculated by subtracting subsidies from indirect taxes: NIT = indirect taxes − subsidies. Therefore, NIT = 700 − 150 = 550 crore. Option A is correct. The amount 700 ignores the subsidy, whereas 850 adds taxes and subsidies instead of finding their net effect. NIT is used in the market-price and factor-cost relationship.
Correct answer: B. ₹1480 crore
Explanation: To convert GDP at market price into GDP at factor cost, subtract Net Indirect Taxes. Therefore, GDPFC = GDPMP − NIT = ₹1600 crore − ₹120 crore = ₹1480 crore. Adding NIT would move in the opposite direction, from factor cost toward market price, and would give the incorrect amount ₹1720 crore.
Correct answer: C. ₹1490 crore
Explanation: To convert GDP at factor cost into GDP at market price, add Net Indirect Taxes (NIT). The formula is GDPMP = GDPFC + NIT. Therefore, GDPMP = ₹1400 crore + ₹90 crore = ₹1490 crore. NIT represents indirect taxes minus subsidies; it raises the market-price measure when positive. Hence, option C is the only correct answer.
Correct answer: A. Net Indirect Taxes
Explanation: NIT means Net Indirect Taxes. It is calculated as indirect taxes minus subsidies: NIT = Indirect Taxes − Subsidies. This measure explains the adjustment between market price and factor cost in national-income accounting. It does not mean national income tax or international trade.
Correct answer: A. Subtract net indirect taxes
Explanation: Market price includes the effect of indirect taxes after allowing for subsidies, whereas factor cost reflects the amount accruing to factors of production. Therefore, the conversion is GDPFC = GDPMP − net indirect taxes. Adding NFIA changes a domestic aggregate into a national aggregate, and subtracting depreciation changes a gross measure into a net measure.
Correct answer: A. ₹150 crore
Explanation: The relationship between the two valuations is GDPMP = GDPFC + NIT. Rearranging gives NIT = GDPMP − GDPFC. Substituting the figures, NIT = ₹1,800 crore − ₹1,650 crore = ₹150 crore. The answer is positive because market price exceeds factor cost by the amount of net indirect taxes.
Correct answer: A. Increase in prices or output or both
Explanation: Nominal GDP measures the value of final goods and services at current prices. It can therefore rise when prices increase, when physical output increases, or when both prices and output increase. A rise in nominal GDP alone does not prove that real production has grown, because inflation may be responsible. Hence, option A is correct.
Correct answer: A. ₹12300 crore
Explanation: To convert GDP at market price into GDP at factor cost, subtract net indirect taxes because market price includes these taxes after indirect subsidies are deducted. The formula is GDPFC = GDPMP − NIT. Thus GDPFC = ₹13200 crore − ₹900 crore = ₹12300 crore. Therefore, option A is the only correct answer.
