Aggregates related to national income - Market price and factor cost

Correct answer: C. ₹25,000 crore

Explanation: Use the valuation identity MP = FC + NIT. Since net indirect taxes equal 18% of factor cost, let FC = x; then NIT = 0.18x. Therefore 29,500 = x + 0.18x = 1.18x, so x = 29,500 ÷ 1.18 = ₹25,000 crore. The percentage is applied to factor cost, not directly to market price.

Correct answer: C. ₹24,000 crore

Explanation: The governing relation is FC = MP − NIT. Let market price be x. Since net indirect taxes equal 25% of market price, NIT = 0.25x. Therefore, FC = x − 0.25x = 0.75x. Substituting FC = ₹18,000 crore gives 0.75x = 18,000, so x = 18,000 ÷ 0.75 = ₹24,000 crore. Hence option C is correct; the other values do not satisfy the equation.

Correct answer: B. ₹4,800 crore

Explanation: Net indirect taxes are calculated as indirect taxes minus subsidies. Let indirect taxes be 4k and subsidies be 3k, because their ratio is 4:3. Their difference is therefore k. Given net indirect taxes of ₹1,200 crore, k = ₹1,200 crore. Indirect taxes equal 4k = 4 × ₹1,200 = ₹4,800 crore, so option B is correct. The other options do not preserve the stated ratio and difference.

Correct answer: C. ₹1,400 crore

Explanation: Net indirect taxes are calculated as indirect taxes minus subsidies. The ratio 4:7 gives a difference of 3 parts, and the negative value means subsidies are larger by ₹600 crore. Thus 3 parts = ₹600 crore, so 1 part = ₹200 crore. Subsidies equal 7 parts, or 7 × ₹200 = ₹1,400 crore. Therefore option C is correct.

Correct answer: A. Because depreciation is the difference between gross and net

Explanation: GDP is already a gross aggregate, and converting market price to factor cost changes valuation rather than the gross or net status. The required adjustment is net indirect taxes: GDP at FC = GDP at MP − NIT. Depreciation is subtracted only when converting a gross measure into a net measure, such as GDP into NDP. Therefore option A states the relevant distinction.

Correct answer: A. It is the difference between domestic and national aggregates

Explanation: Net factor income from abroad, or NFIA, changes the territorial basis of an aggregate: adding NFIA converts a domestic measure into a national measure. Market price versus factor cost is a valuation distinction and is adjusted through net indirect taxes, not NFIA. Gross versus net is adjusted through depreciation. Therefore option A correctly identifies NFIA’s role.

Correct answer: B. ₹30,600 crore

Explanation: National income is NNP at factor cost. First remove depreciation from GDP to obtain NDP: ₹34,000 − ₹2,800 = ₹31,200 crore. Convert market price to factor cost by subtracting NIT: ₹31,200 − ₹1,500 = ₹29,700 crore. Then add NFIA to convert domestic to national: ₹29,700 + ₹900 = ₹30,600 crore. Thus option B is correct.

Correct answer: C. ₹1,050 crore

Explanation: The governing conversion rule is: NNP at market price = national income (NNP at factor cost) + net indirect taxes. Therefore, net indirect taxes = ₹20,700 − ₹19,950 = ₹750 crore. Since net indirect taxes equal indirect taxes minus subsidies, indirect taxes = ₹750 + ₹300 = ₹1,050 crore. Thus, option C is correct; ₹750 crore is only the net tax amount, while the other values do not satisfy the identity.

Correct answer: B. ₹800 crore

Explanation: The governing identity is output at market price = output at factor cost + net indirect taxes, where net indirect taxes equal indirect taxes minus subsidies. The difference between the two output measures is ₹45,000 − ₹42,200 = ₹2,800 crore. Hence, ₹3,600 − subsidies = ₹2,800, so subsidies = ₹800 crore. Option B is correct; ₹2,800 crore is net indirect tax, not the subsidy.

Correct answer: B. ₹23,300 crore

Explanation: Initially, net indirect taxes are ₹23,500 − ₹22,400 = ₹1,100 crore. When subsidies increase by ₹200 crore and indirect taxes do not change, net indirect taxes fall by ₹200 crore, becoming ₹900 crore. The new NDP at market price is therefore ₹22,400 + ₹900 = ₹23,300 crore. Option B is correct; simply retaining ₹23,500 ignores the subsidy change.

Correct answer: A. ₹31,950 crore and ₹32,400 crore

Explanation: First convert GDP to NDP by subtracting depreciation: ₹36,000 − ₹2,600 = ₹33,400 crore. Net indirect taxes are ₹2,000 − ₹550 = ₹1,450 crore, so NDP at factor cost is ₹33,400 − ₹1,450 = ₹31,950 crore. Add net factor income from abroad to obtain national income: ₹31,950 + ₹450 = ₹32,400 crore. Thus, option A is correct.

Correct answer: D. ₹160 crore

Explanation: Because market price is ₹95 crore below factor cost, net indirect taxes are negative ₹95 crore: MP − FC = NIT = −₹95 crore. Using NIT = indirect taxes − subsidies, we get ₹65 − subsidies = −₹95. Hence subsidies = ₹65 + ₹95 = ₹160 crore. Option D is correct. The negative net tax means subsidies exceed indirect taxes by ₹95 crore.

Correct answer: D. ₹4,640 crore

Explanation: When subsidies exceed indirect taxes by ₹140 crore, net indirect taxes are −₹140 crore. The conversion formula is output at factor cost = output at market price − net indirect taxes. Thus, factor-cost output = ₹4,500 − (−₹140) = ₹4,640 crore. Option D is correct. The negative adjustment raises factor-cost valuation above market-price valuation; subtracting ₹140 would reverse the economic relationship.

Correct answer: C. ₹5,705 crore

Explanation: Initially, net indirect taxes are ₹260 crore. Their change equals the increase in indirect taxes minus the increase in subsidies: ₹80 − ₹35 = ₹45 crore. Therefore, new net indirect taxes are ₹260 + ₹45 = ₹305 crore. Converting GNP at factor cost to market price, add this amount: ₹5,400 + ₹305 = ₹5,705 crore. Hence, option C is correct.

Correct answer: B. ₹180 crore

Explanation: The difference between market price and factor cost equals net indirect taxes. A ₹45 crore fall in indirect taxes lowers net indirect taxes by ₹45 crore, while a ₹15 crore fall in subsidies raises net indirect taxes by ₹15 crore. The net change is −₹45 + ₹15 = −₹30 crore. Therefore, the new difference is ₹210 − ₹30 = ₹180 crore, so option B is correct.

Correct answer: B. Increase of ₹55 crore

Explanation: Since market price = factor cost + indirect taxes − subsidies, a ₹40 crore rise in subsidies and a ₹15 crore fall in indirect taxes reduce net indirect taxes by ₹55 crore in total. With market price fixed, factor cost must move oppositely to preserve the identity. Therefore, factor cost increases by ₹55 crore. Option B is correct; ₹25 crore ignores that both changes lower net indirect taxes.

Correct answer: B. Negative ₹400 crore

Explanation: The governing relationship is Market Price = Factor Cost + Net Indirect Taxes, so Net Indirect Taxes = Market Price − Factor Cost. From FC:MP = 17:16, factor cost = 6,400 × 17/16 = ₹6,800 crore. Therefore, NIT = 6,400 − 6,800 = −₹400 crore. The negative sign means subsidies exceed indirect taxes; hence option B is correct, not the positive distractors.

Correct answer: C. ₹3,600 crore

Explanation: Let factor cost be x crore. The governing identity is Market Price = Factor Cost + Net Indirect Taxes. Since NIT = x/6, 4,200 = x + x/6 = 7x/6. Multiplying by 6/7 gives x = 4,200 × 6/7 = ₹3,600 crore. Therefore option C is correct. The other options fail to produce ₹4,200 crore after adding one-sixth of factor cost.

Correct answer: B. Negative ₹400 crore

Explanation: Since market price = 8/9 of factor cost, factor cost = 3,200 × 9/8 = ₹3,600 crore. Using NIT = Market Price − Factor Cost, NIT = 3,200 − 3,600 = −₹400 crore. The negative value indicates that subsidies exceed indirect taxes. Therefore option B is correct; option A has the wrong sign, and options C and D use an incorrect magnitude.

Correct answer: B. Increase of ₹80 crore

Explanation: Net indirect taxes equal market price minus factor cost. Initially, NIT = 3,400 − 3,150 = ₹250 crore. Later, market price is ₹3,540 crore and factor cost is ₹3,210 crore, so NIT = 3,540 − 3,210 = ₹330 crore. The change is 330 − 250 = ₹80 crore increase. Therefore option B is correct; the individual rises cannot be used as the final NIT change without subtraction.

Correct answer: D. ₹135 crore increase

Explanation: The governing concept is MP − FC = net indirect taxes, so the gap between market price and factor cost is exactly the net indirect tax amount. Its change is final minus initial: ₹55 crore − (-₹80 crore) = ₹135 crore. Therefore, the gap increases by ₹135 crore and option D is correct. ₹55 crore is only the final gap, not the increase.

Correct answer: C. ₹500 crore

Explanation: Use MP = FC + NIT, so the reduced net indirect taxes are ₹7,500 − ₹7,100 = ₹400 crore. After a 20% fall, the remaining amount is 80% of the original amount. If the original amount is x, then 0.80x = ₹400 crore, giving x = ₹400 ÷ 0.80 = ₹500 crore. Thus option C is correct; ₹400 crore is the post-fall amount.

Correct answer: B. ₹500 crore

Explanation: First find the increased net indirect taxes using MP = FC + NIT: ₹5,625 − ₹5,000 = ₹625 crore. This increased amount equals 125% of the original because it rose by 25%. If the original amount is x, then 1.25x = ₹625 crore, so x = ₹625 ÷ 1.25 = ₹500 crore. Hence option B is correct; ₹625 crore is the amount after the rise.

Correct answer: B. ₹500 crore

Explanation: The relevant concept is the valuation adjustment from factor cost to market price: MP = FC + NIT. Thus, the new NIT is ₹5,625 − ₹5,000 = ₹625 crore. Since this is after a 25% increase, it represents 125% of the original. Original NIT = ₹625 ÷ 1.25 = ₹500 crore, so option B is correct. The other amounts do not satisfy both the price difference and the stated percentage.

Correct answer: C. ₹275 crore decrease

Explanation: Since factor cost is unchanged, any change in market price must equal the change in net indirect taxes under MP = FC + NIT. The change in NIT is (-₹35 crore) − ₹240 crore = -₹275 crore. Therefore, market price decreases by ₹275 crore, making option C correct. ₹205 crore incorrectly subtracts magnitudes instead of accounting for the negative second-year value.