Aggregates related to national income - Market price and factor cost

Correct answer: B. Goods and Services Tax

Explanation: Goods and Services Tax, or GST, is an indirect tax because it is levied on the supply of goods and services and is collected through sellers, although the burden can be passed to consumers. Therefore, option B is correct. Income tax and corporation tax are direct taxes on income or profits. Property tax is also generally imposed directly on property ownership.

Correct answer: C. Income tax

Explanation: Income tax is a direct tax because it is imposed directly on the income of an individual or entity, and the legal burden generally remains with the person or organisation assessed. Thus, option C is correct. GST, customs duty and excise duty are indirect taxes associated with goods, services or transactions; their burden can generally be shifted to consumers through prices.

Correct answer: A. Net indirect taxes

Explanation: The governing concept is the relationship between market price and factor cost. Market price is obtained by adding net indirect taxes to factor cost: Market Price = Factor Cost + Net Indirect Taxes. Wages, rent, interest and profit are factor payments, so they belong to factor cost. Therefore, net indirect taxes are included in market price but not in factor cost, making option A correct.

Correct answer: C. Wages

Explanation: Factor cost measures the payments received by factors of production for providing their services. Wages are the reward for labour and are therefore included in factor cost. Goods and Services Tax and customs duty are indirect taxes, while a product subsidy is a price adjustment rather than a factor payment. Hence option C is the only factor-cost component.

Correct answer: A. Factor cost

Explanation: The governing idea is factor remuneration. Labour receives wages, land receives rent, capital receives interest, and entrepreneurship receives profit. Adding these factor payments gives the total income earned by factors of production, which is represented by factor cost. Market price additionally reflects net indirect taxes, while net exports and depreciation are separate aggregates. Thus option A is correct.

Correct answer: B. Market price

Explanation: The price paid by a consumer in the market is generally called the market price. It is the amount at which the good is sold and may include the effect of indirect taxes and product subsidies. Factor cost instead records payments to factors of production. Depreciation measures loss of fixed capital value, and mixed income is a factor-income concept. Therefore option B is correct.

Correct answer: B. Factor cost

Explanation: The governing concept is factor cost, which represents the total payment made to factors of production for their services. It includes wages for labour, rent for land, interest for capital and profit for entrepreneurship. Market price is the buyer-facing value after price adjustments such as net indirect taxes. Net exports and final consumption are expenditure-related concepts, so option B is correct.

Correct answer: C. ₹4,250 crore

Explanation: Use the governing conversion formula: Output at Market Price = Output at Factor Cost + Net Indirect Taxes. Substituting the data gives ₹4,000 crore + ₹250 crore = ₹4,250 crore. Therefore option C is correct. Option A subtracts the tax, option B ignores it, and option D adds an incorrect amount; all three violate the stated conversion rule.

Correct answer: B. ₹4,800 crore

Explanation: The governing formula is Output at Factor Cost = Output at Market Price − Net Indirect Taxes. Therefore, ₹5,500 crore − ₹700 crore = ₹4,800 crore. Option B is correct. Option A subtracts too much, option C subtracts too little, and option D adds the tax instead of removing it. The calculation confirms the required conversion from market price to factor cost.

Correct answer: B. ₹500 crore

Explanation: The difference between market price and factor cost equals net indirect taxes. Net Indirect Taxes = Indirect Taxes − Subsidies = ₹900 crore − ₹400 crore = ₹500 crore. Hence market price exceeds factor cost by ₹500 crore, making option B correct. Option C ignores the subsidy, while options A and D use only one component or add both amounts incorrectly.

Correct answer: B. Minus ₹200 crore

Explanation: Net indirect taxes are calculated as Indirect Taxes − Subsidies. Here, ₹400 crore − ₹600 crore = −₹200 crore. Because the subsidy is ₹200 crore larger than the tax, net indirect taxes are negative, so option B is correct. Option A gives the magnitude but misses the negative sign; option C adds the figures, and option D ignores the difference.

Correct answer: B. ₹2,800 crore

Explanation: Use Market Price = Factor Cost + Net Indirect Taxes. Since net indirect taxes are −₹200 crore, the calculation is ₹3,000 crore + (−₹200 crore) = ₹2,800 crore. Thus option B is correct. The negative net tax lowers market price below factor cost; option C ignores it, option D adds ₹200 crore, and option A subtracts an incorrect amount.

Correct answer: C. ₹3,000 crore

Explanation: The governing relationship is Factor Cost = Market Price − Net Indirect Taxes. Since net indirect taxes are negative ₹300 crore, the calculation is ₹2,700 − (−₹300) = ₹2,700 + ₹300 = ₹3,000 crore. Therefore, option C is correct. Option A would apply if taxes were positive ₹300 crore, while options B and D ignore or overstate the adjustment.

Correct answer: B. Net indirect taxes

Explanation: To convert GDP at market price into GDP at factor cost, net indirect taxes are subtracted: GDP at factor cost = GDP at market price − net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies. Depreciation changes a gross measure into a net measure, net factor income changes domestic to national income, and net exports are not the relevant adjustment here. Thus option B is correct.

Correct answer: B. Net indirect taxes

Explanation: The governing identity is NDP at market price = NDP at factor cost + net indirect taxes. Therefore, moving from factor cost to market price requires adding indirect taxes and subtracting subsidies, together called net indirect taxes. Depreciation is already excluded from NDP, NFIA changes domestic to national measures, and direct taxes are not the valuation adjustment. Hence option B is correct.

Correct answer: B. ₹7,400 crore

Explanation: The conversion formula is GDP at factor cost = GDP at market price − net indirect taxes. Substituting the given values gives ₹8,000 crore − ₹600 crore = ₹7,400 crore. Therefore, option B is correct. Option D incorrectly adds the taxes, option C leaves the market-price value unchanged, and option A subtracts an incorrect amount of ₹1,000 crore.

Correct answer: C. ₹10,000 crore

Explanation: To move from factor cost to market price, add net indirect taxes. The formula is GDP at market price = GDP at factor cost + net indirect taxes. Thus, ₹9,200 crore + ₹800 crore = ₹10,000 crore, so option C is correct. Option A subtracts the taxes, option B ignores them, and option D adds too much by treating the adjustment as ₹1,600 crore.

Correct answer: B. ₹6,000 crore

Explanation: The same valuation rule applies to NNP: NNP at factor cost = NNP at market price − net indirect taxes. Therefore, ₹6,500 crore − ₹500 crore = ₹6,000 crore. Option B is correct. Option A subtracts ₹1,000 crore instead of ₹500 crore, option C makes no adjustment, and option D adds the taxes, which would be appropriate only for conversion in the opposite direction.

Correct answer: B. At factor cost

Explanation: National income is defined as Net National Product at factor cost, written as National Income = NNP at factor cost. Factor cost measures the income accruing to factors of production after the relevant valuation adjustment. NNP at market price is not identical because it includes net indirect taxes. Current and constant prices describe price bases, not the required factor-cost identity. Thus option B is correct.

Correct answer: C. ₹10,700 crore

Explanation: National income equals NNP at factor cost. To obtain NNP at market price, add net indirect taxes: NNP at market price = NNP at factor cost + net indirect taxes. Hence, ₹10,000 crore + ₹700 crore = ₹10,700 crore, making option C correct. Option B omits the adjustment, A subtracts it, and D adds an incorrect extra ₹700 crore.

Correct answer: A. When net indirect taxes are positive

Explanation: The governing relationship is Market Price = Factor Cost + Net Indirect Taxes. Therefore, market price is higher than factor cost when net indirect taxes are positive, meaning indirect taxes exceed subsidies. A negative net indirect tax would make factor cost higher, while equal taxes and subsidies would make the two valuations equal. Output being zero does not determine their relative valuation. Hence option A is correct.

Correct answer: B. When subsidies exceed indirect taxes

Explanation: Using Market Price = Factor Cost + Net Indirect Taxes, factor cost exceeds market price when net indirect taxes are negative. Net indirect taxes are negative when subsidies exceed indirect taxes. In that case, the subtraction of the larger subsidy adjustment makes market price lower than factor cost. If taxes exceed subsidies, market price is higher; if they are equal, both values are equal. Thus option B is correct.

Correct answer: C. ₹560

Explanation: The governing relation is Market Price = Factor Cost + Net Indirect Taxes. Net indirect taxes equal indirect tax minus subsidy: ₹80 − ₹20 = ₹60. Therefore, market price = ₹500 + ₹60 = ₹560, so option C is correct. Option B ignores the net tax, while A and D apply the adjustment incorrectly.

Correct answer: B. ₹800

Explanation: Factor Cost = Market Price − Net Indirect Taxes. First calculate net indirect taxes: ₹120 − ₹20 = ₹100. Thus, factor cost = ₹900 − ₹100 = ₹800, making option B correct. Option C fails to adjust the market price, while A and D result from subtracting or adding the tax and subsidy incorrectly.

Correct answer: C. Market price and factor cost will be equal

Explanation: Market Price = Factor Cost + Net Indirect Taxes, and Net Indirect Taxes = Indirect Taxes − Subsidies. If both the tax and subsidy are zero, net indirect taxes are also zero. Hence market price equals factor cost. Option D is wrong because zero taxes do not make the price or factor cost zero.