Aggregates related to national income - Market price and factor cost

Correct answer: B. ₹1,800 crore

Explanation: The governing relationship is Market Price = Factor Cost + Net Indirect Taxes. Rearranging gives Factor Cost = Market Price − Net Indirect Taxes. Therefore, factor cost = ₹2,000 crore − ₹200 crore = ₹1,800 crore, so option B is correct. Option C repeats the market price, whereas option D adds the tax and option A subtracts too much.

Correct answer: C. ₹2,800 crore

Explanation: The governing formula is Market Price = Factor Cost + Net Indirect Taxes. Substituting the given values gives ₹2,500 crore + ₹300 crore = ₹2,800 crore. Hence, option C is correct. Option B is only the factor cost, option A subtracts the tax instead of adding it, and option D adds an excessive amount. Positive net indirect taxes raise market price above factor cost.

Correct answer: B. ₹300 crore

Explanation: The governing concept is that Market Price − Factor Cost equals Net Indirect Taxes. Net indirect taxes are calculated as indirect taxes minus subsidies: ₹450 crore − ₹150 crore = ₹300 crore. Therefore, option B is correct. Option C ignores the subsidy, option D adds the two amounts, and option A does not follow the required subtraction. The positive result means market price exceeds factor cost.

Correct answer: B. Minus ₹150 crore

Explanation: Net indirect taxes are defined as indirect taxes minus subsidies. Therefore, net indirect taxes = ₹350 crore − ₹500 crore = −₹150 crore. Option B is correct because subsidies exceed indirect taxes by ₹150 crore, producing a negative net value. Option A gives only the absolute difference without its sign, option C ignores subsidies, and option D adds both amounts instead of subtracting them.

Correct answer: B. Subsidies exceed indirect taxes

Explanation: Net indirect taxes = Indirect Taxes − Subsidies. If the result is −₹100 crore, subsidies are ₹100 crore greater than indirect taxes. Thus, option B is correct. A negative net amount can also make factor cost higher than market price because Market Price = Factor Cost + Net Indirect Taxes. Option A describes a positive result, option C gives zero, and option D concerns direct taxes, not this concept.

Correct answer: B. ₹1,400

Explanation: The governing formula is Market Price = Factor Cost + Net Indirect Taxes. Here net indirect taxes are −₹100, so market price = ₹1,500 + (−₹100) = ₹1,400. Equivalently, ₹100 is subtracted because subsidies exceed taxes. Therefore, option B is correct. Option D incorrectly adds ₹100 as a positive amount, while option C ignores the adjustment and option A subtracts too much.

Correct answer: C. ₹2,000

Explanation: The governing formula is Factor Cost = Market Price − Net Indirect Taxes. Since net indirect taxes are negative ₹200, factor cost = ₹1,800 − (−₹200) = ₹2,000. Hence, option C is correct. A negative adjustment increases factor cost above market price. Option A would apply to a positive ₹200 tax, option B ignores the adjustment, and option D adds ₹400 instead of ₹200.

Correct answer: C. Goods and Services Tax

Explanation: An indirect tax is generally imposed on the sale or consumption of goods and services, and its burden may be passed on to consumers through prices. Goods and Services Tax, or GST, is therefore an indirect tax, making option C correct. Income tax, corporation tax and wealth tax are direct taxes because they are imposed directly on the income, profits or wealth of the taxpayer.

Correct answer: A. Wages

Explanation: A factor payment is income paid to the owners of factors of production for their productive services. Wages are paid to labour, so option A is correct. Goods and Services Tax and customs duty are indirect taxes, while a subsidy is a transfer or financial support from the government rather than payment for a factor service. Factor payments contribute to factor cost through rewards such as wages, rent, interest and profit.

Correct answer: B. Land

Explanation: Rent is the factor income earned by the owner of land or other natural resources for allowing them to be used in production. Therefore, land is the correct answer, option B. Labour receives wages, capital receives interest, and entrepreneurship receives profit. These standard factor-reward relationships help distinguish the other options.

Correct answer: C. Capital

Explanation: Interest is the return earned by capital when financial funds, machinery, equipment, or other produced resources are used in production. Hence, option C, capital, is correct. Land earns rent, labour earns wages, and entrepreneurship earns profit. The question uses the standard classification of factor incomes, so the other three options represent different rewards.

Correct answer: B. Labour

Explanation: Wages are the payment received by workers for supplying physical or mental labour during production. Therefore, option B, labour, is correct. The other factor-reward pairs are also important: land receives rent, capital receives interest, and entrepreneurship receives profit. Thus, wages cannot correctly be matched with land, capital, or entrepreneurship.

Correct answer: C. ₹4,500 crore

Explanation: The governing relationship is Market Price = Factor Cost + Net Indirect Taxes. Substituting the given values gives ₹4,000 crore + ₹500 crore = ₹4,500 crore. Therefore, consumers pay ₹4,500 crore and option C is correct. ₹4,000 crore is only factor cost, while ₹3,500 crore subtracts tax and ₹5,000 crore adds too much.

Correct answer: B. ₹4,400 crore

Explanation: To convert market price into factor cost, subtract net indirect taxes because market price includes this tax component. Factor Cost = Market Price − Net Indirect Taxes = ₹5,000 crore − ₹600 crore = ₹4,400 crore. Thus, option B is correct. ₹5,000 crore ignores the tax adjustment, while ₹5,600 crore incorrectly adds the taxes.

Correct answer: B. Net indirect taxes

Explanation: The conversion formula is GDP at Market Price = GDP at Factor Cost + Net Indirect Taxes. Net indirect taxes are indirect taxes minus subsidies, and they create the difference between the two valuation bases. Therefore, option B is correct. Depreciation converts gross and net measures, net factor income converts domestic and national measures, and transfers are not added here.

Correct answer: B. ₹6,100 crore

Explanation: When moving from GDP at market price to GDP at factor cost, net indirect taxes must be subtracted. Using GDP at factor cost = GDP at market price − Net Indirect Taxes, we get ₹6,500 crore − ₹400 crore = ₹6,100 crore. Hence, option B is correct. Adding the tax would produce ₹6,900 crore, which reverses the required conversion.

Correct answer: C. ₹7,700 crore

Explanation: To convert GDP at factor cost into GDP at market price, add net indirect taxes. The formula is GDP at Market Price = GDP at Factor Cost + Net Indirect Taxes. Therefore, ₹7,200 crore + ₹500 crore = ₹7,700 crore, so option C is correct. ₹6,700 crore subtracts the tax, while ₹7,200 crore leaves the conversion incomplete.

Correct answer: B. Net indirect taxes are subtracted

Explanation: NDP at factor cost is obtained from NDP at market price by subtracting net indirect taxes. The relationship is NDP at Factor Cost = NDP at Market Price − Net Indirect Taxes. Therefore, option B is correct. Depreciation is already reflected in the distinction between gross and net measures, while net factor income is used to move from domestic to national aggregates.

Correct answer: B. ₹5,500 crore

Explanation: The conversion from NDP at market price to NDP at factor cost requires subtraction of net indirect taxes. Thus, NDP at Factor Cost = ₹5,800 crore − ₹300 crore = ₹5,500 crore. Option B is correct. ₹5,800 crore ignores the tax adjustment, ₹6,100 crore adds the tax, and ₹5,200 crore subtracts an amount larger than the one given.

Correct answer: C. ₹6,450 crore

Explanation: The governing relationship is NDP at market price = NDP at factor cost + net indirect taxes. Net indirect taxes represent the excess of indirect taxes over subsidies, so they are added when moving from factor cost to market price. Calculation: ₹6,000 crore + ₹450 crore = ₹6,450 crore. Hence option C is correct; option B merely repeats the factor-cost value, while A subtracts the tax and D adds it incorrectly.

Correct answer: B. NNP at factor cost

Explanation: In national-income accounting, national income is defined as Net National Product at factor cost, written as NNPFC. The word “net” allows for depreciation, “national” includes net factor income from abroad, and “factor cost” excludes the effect of net indirect taxes. Therefore option B is correct. GDP, GNP, and NDP at market price use different domestic, gross, or valuation bases and are not identical to national income.

Correct answer: B. ₹7,500 crore

Explanation: National income is NNP at factor cost. To convert NNP at market price into NNP at factor cost, subtract net indirect taxes: NNPFC = NNPMP − net indirect taxes. Therefore, ₹8,000 crore − ₹500 crore = ₹7,500 crore. Option B is correct. Option C ignores the adjustment, option D adds the tax instead of subtracting it, and option A subtracts too much.

Correct answer: C. ₹9,600 crore

Explanation: National income equals NNP at factor cost. When moving from factor cost to market price, net indirect taxes must be added: NNPMP = NNPFC + net indirect taxes. Thus, ₹9,000 crore + ₹600 crore = ₹9,600 crore. Option C is correct. Option B is only the given factor-cost amount, while A subtracts the tax and D adds an incorrect extra amount.

Correct answer: B. ₹250 crore

Explanation: The governing identity is market price = factor cost + net indirect taxes. Rearranging gives net indirect taxes = market price − factor cost. Since market price is ₹250 crore higher than factor cost, the difference is +₹250 crore. Therefore option B is correct. A would apply when factor cost exceeds market price, C ignores the stated difference, and D doubles it without justification.

Correct answer: B. Minus ₹180 crore

Explanation: Use the identity net indirect taxes = market price − factor cost. If factor cost is ₹180 crore higher than market price, then market price − factor cost equals −₹180 crore. Thus net indirect taxes are negative ₹180 crore, and option B is correct. A reverses the sign, C doubles the difference, and D incorrectly treats the negative amount as zero.