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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: C. ₹9,280 crore
Explanation: When one value is 16% higher than the base, multiply the base by 1.16. The increase is 16% of ₹8,000 = ₹1,280 crore. Therefore, market price = ₹8,000 + ₹1,280 = ₹9,280 crore, or ₹8,000 × 1.16. Option A adds only 2%, B adds 10%, and D adds 20%, so none of those matches the stated increase.
Correct answer: C. ₹13,080 crore
Explanation: The given market price is the base, and factor cost is stated to be 9% higher. The increase is ₹12,000 × 9/100 = ₹1,080 crore. Therefore, factor cost = ₹12,000 + ₹1,080 = ₹13,080 crore, equivalently ₹12,000 × 1.09. Option A subtracts 9%, B shows no increase, and D represents a 15% increase rather than 9%.
Correct answer: C. ₹22,320 crore
Explanation: The relationship is market price = factor cost + net indirect taxes, so factor cost = market price − net indirect taxes. Net indirect taxes are 7% of ₹24,000 = ₹1,680 crore. Hence factor cost = ₹24,000 − ₹1,680 = ₹22,320 crore. Option D subtracts only 3%, option B uses an incorrect amount, and option A subtracts 10%, so option C is correct.
Correct answer: C. Net indirect taxes are zero
Explanation: The governing identity is Market Price − Factor Cost = Net Indirect Taxes. If market price equals factor cost, their difference is zero; therefore net indirect taxes must be zero. This does not prove that indirect taxes or subsidies are individually zero, because they may both exist in equal amounts. Direct taxes are not part of this identity. Hence option C is correct.
Correct answer: A. Market price will change from higher to equal
Explanation: The relationship is Market Price = Factor Cost + Net Indirect Taxes. When net indirect taxes are positive, market price is higher than factor cost. When they become zero, the added amount disappears, so market price equals factor cost. Thus option A is correct. Factor cost does not automatically become higher, and the values do not become negative merely because the tax component becomes zero.
Correct answer: A. Initial indirect taxes and subsidies
Explanation: Net indirect taxes are calculated as indirect taxes minus subsidies. Since the question gives only percentage changes, each change must be applied to its own original base: new taxes = initial taxes × 1.18, while new subsidies = initial subsidies × 0.88. Therefore, both initial indirect taxes and initial subsidies are necessary. Market price, factor cost, and national income alone do not provide these two bases.
Correct answer: C. ₹1,140 crore
Explanation: Use the definition of net indirect taxes: NIT = indirect taxes − subsidies. The revised tax is ₹1,500 × 1.20 = ₹1,800 crore, and the revised subsidy is ₹600 × 1.10 = ₹660 crore. Hence, new NIT = ₹1,800 − ₹660 = ₹1,140 crore. The other choices result from changing only one amount or subtracting the percentages incorrectly.
Correct answer: B. It will fall by ₹450 crore
Explanation: The governing identity is market price = factor cost + net indirect taxes. Net indirect taxes change from ₹1,300 crore to ₹850 crore, a decrease of ₹450 crore. Because factor cost does not change, the entire change passes to market price. Thus market price falls by ₹450 crore. Option A reverses the direction, option C uses the final amount rather than the change, and option D ignores the identity.
Correct answer: B. Increase of ₹650 crore
Explanation: Start with the identity MP = FC + NIT, so FC = MP − NIT. For changes, ΔFC = ΔMP − ΔNIT. Substituting the given values gives ΔFC = ₹1,050 crore − ₹400 crore = ₹650 crore. Therefore factor cost increases by ₹650 crore. Option A copies the tax change, option C copies the market-price change, and option D incorrectly adds both changes.
Correct answer: A. Decrease of ₹550 crore
Explanation: Market price equals factor cost plus net indirect taxes: MP = FC + NIT. Represent the changes with signs: ΔFC = −₹850 crore and ΔNIT = +₹300 crore. Therefore ΔMP = −850 + 300 = −₹550 crore. The negative sign means a decrease of ₹550 crore. The ₹1,150 choices incorrectly add magnitudes without considering the opposite directions.
Correct answer: B. Subsidies exceed indirect taxes by ₹460 crore
Explanation: The governing relationship is Market Price = Factor Cost + Net Indirect Taxes, where net indirect taxes equal indirect taxes minus subsidies. If factor cost exceeds market price by ₹460 crore, then net indirect taxes must be negative ₹460 crore. Therefore, subsidies exceed indirect taxes by ₹460 crore, making option B correct. Direct taxes and depreciation do not determine this valuation difference.
Correct answer: A. Because depreciation is the difference between gross and net
Explanation: Depreciation, or consumption of fixed capital, changes a gross aggregate into a net aggregate: Net = Gross − Depreciation. By contrast, conversion from market price to factor cost changes valuation and uses net indirect taxes: Factor Cost = Market Price − Net Indirect Taxes. Since the question keeps GNP gross and only changes valuation, depreciation must not be subtracted. Therefore option A is correct.
Correct answer: A. It explains the difference between domestic and national aggregates
Explanation: Net factor income from abroad, or NFIA, is used to convert domestic aggregates into national aggregates: National Income = Domestic Income + NFIA. It does not change the valuation basis from market price to factor cost. That conversion is made through net indirect taxes, because market prices include taxes and subsidies while factor cost reflects factor payments. Thus option A is correct; the other choices confuse domestic-national and valuation adjustments.
Correct answer: B. ₹3,720 crore
Explanation: To convert GDP at market price into GDP at factor cost, subtract net indirect taxes. Net indirect taxes = indirect taxes − subsidies = 520 − 140 = ₹380 crore. Therefore, GDP at factor cost = 4,100 − 380 = ₹3,720 crore. Option B is correct. ₹3,580 crore would result from incorrectly subtracting subsidies instead of adding them back.
Correct answer: C. ₹2,825 crore
Explanation: The governing relation is NNP at market price = NNP at factor cost + net indirect taxes. Net indirect taxes are ₹340 − ₹115 = ₹225 crore. Hence, NNP at market price = ₹2,600 + ₹225 = ₹2,825 crore. Option C is correct. ₹2,375 crore incorrectly subtracts the net tax, while ₹2,600 crore ignores the price adjustment.
Correct answer: D. ₹5,380 crore
Explanation: Because subsidies exceed indirect taxes by ₹180 crore, net indirect taxes equal −₹180 crore. The conversion formula is output at factor cost = output at market price − net indirect taxes. Thus, factor-cost output = 5,200 − (−180) = ₹5,380 crore. Option D is correct. The negative net tax raises factor-cost valuation above market-price valuation.
Correct answer: C. ₹390 crore
Explanation: The difference between GDP at market price and factor cost gives net indirect taxes: ₹4,350 − ₹4,080 = ₹270 crore. Since net indirect taxes = indirect taxes − subsidies, indirect taxes = net indirect taxes + subsidies = 270 + 120 = ₹390 crore. Therefore, option C is correct. ₹270 crore is only the net indirect tax, not the gross indirect tax.
Correct answer: C. Subsidies exceed indirect taxes
Explanation: The governing relation is net indirect taxes = indirect taxes − subsidies, and market price = factor cost + net indirect taxes. If net indirect taxes are below zero, subsidies must be greater than indirect taxes. Consequently, market price is lower than factor cost. Option A gives the opposite relationship, B contradicts the valuation formula, and D is impossible because two zero amounts would produce a zero net value.
Correct answer: B. ₹100 crore
Explanation: Apply the definition: net indirect taxes = indirect taxes − subsidies. Let indirect taxes be T. Then T − ₹155 = −₹55, so T = ₹155 − ₹55 = ₹100 crore. Therefore option B is correct. Option A confuses the magnitude of the negative net amount with the tax amount; C is the subsidy itself, and D incorrectly adds the two figures instead of using the signed equation.
Correct answer: C. ₹3,115 crore
Explanation: The conversion formula is NNP at factor cost = NNP at market price − net indirect taxes. First calculate net indirect taxes: ₹390 − ₹105 = ₹285 crore. Therefore NNP at factor cost = ₹3,400 − ₹285 = ₹3,115 crore, so C is correct. A subtracts the gross tax, B uses an incorrect difference, and D adds net taxes instead of removing them.
Correct answer: B. ₹3,710 crore
Explanation: National income is NNP at factor cost. The relation is NNP at market price = NNP at factor cost + net indirect taxes. Substituting the signed value gives ₹3,800 + (−₹90) = ₹3,710 crore. Thus B is correct. The answer ₹3,890 crore incorrectly treats the negative tax as positive; ₹3,800 ignores the adjustment, and ₹3,620 subtracts ₹180 instead of ₹90.
Correct answer: D. Subsidies are zero
Explanation: Positive net indirect taxes mean indirect taxes exceed subsidies, because NIT = indirect taxes − subsidies. They also imply market price exceeds factor cost through MP = FC + NIT. Indirect taxes must be positive if subsidies are non-negative and their difference is positive. However, subsidies may be positive rather than zero—for example, taxes of ₹100 and subsidies of ₹40 give positive NIT—so D is not necessary.
Correct answer: C. Increase of ₹100 crore
Explanation: Market price equals factor cost plus net indirect taxes. A ₹70 crore rise in indirect taxes raises net indirect taxes by ₹70 crore, while a ₹30 crore fall in subsidies raises net indirect taxes by another ₹30 crore. The total increase is ₹100 crore. Since factor cost is constant, market price also rises by ₹100 crore. Therefore C is correct; A wrongly subtracts the subsidy change.
Correct answer: B. Indirect taxes ₹110 crore and subsidies ₹260 crore
Explanation: The governing relation is MP − FC = net indirect taxes = indirect taxes − subsidies. The required value is −₹150 crore. In option B, ₹110 − ₹260 = −₹150 crore, so the combination exactly satisfies the condition. Options A and D produce +₹150 crore, while option C produces +₹150 crore because subsidies are zero. A negative difference means subsidies exceed indirect taxes.
Correct answer: B. ₹675 crore
Explanation: The governing concept is that GDP at market price minus GDP at factor cost equals net indirect taxes. Since market price is 9% above factor cost, the difference is 9% of ₹7,500 crore: 0.09 × 7,500 = ₹675 crore. Therefore option B is correct. ₹8,175 crore is the GDP at market price, while the other numerical choices do not equal the required difference.
