Aggregates related to national income - Market price and factor cost

Correct answer: B. Negative ₹400 crore

Explanation: The governing relation is Market Price = Factor Cost + Net Indirect Taxes, so NIT = MP − FC. Since FC:MP = 19:18, factor cost is 7,200 × 19/18 = ₹7,600 crore. Therefore, NIT = 7,200 − 7,600 = −₹400 crore. The negative sign means subsidies exceed indirect taxes. Thus option B is correct; option A ignores the sign, while ₹380 crore results from an incorrect ratio calculation.

Correct answer: C. ₹4,500 crore

Explanation: Use Market Price = Factor Cost + Net Indirect Taxes. Let factor cost be x. Since NIT = 2x/9, 5,500 = x + 2x/9 = 11x/9. Thus x = 5,500 × 9/11 = ₹4,500 crore. Option C is correct. The other options do not satisfy the equation: adding 2/9 of each proposed factor cost must give exactly ₹5,500 crore, which only happens for ₹4,500 crore.

Correct answer: B. Negative ₹600 crore

Explanation: First find factor cost from MP = 7/8 of FC. Thus FC = 4,200 × 8/7 = ₹4,800 crore. Using NIT = MP − FC, NIT = 4,200 − 4,800 = −₹600 crore. The negative value indicates that subsidies exceed indirect taxes. Therefore option B is correct. Option A has the wrong sign, while options C and D use an incorrect difference or ratio.

Correct answer: B. Market price will be ₹25 crore lower than factor cost

Explanation: Since NIT = market price − factor cost, the initial excess of factor cost by ₹90 crore means NIT was −₹90 crore. An increase of ₹65 crore changes NIT to −90 + 65 = −₹25 crore. Thus market price remains ₹25 crore below factor cost. Option B is correct; it is not ₹155 crore because the increase reduces the gap, and it does not reverse the relationship completely.

Correct answer: C. ₹600 crore

Explanation: Use MP = FC + NIT, so the reduced net indirect taxes equal ₹9,000 − ₹8,550 = ₹450 crore. A 25% fall leaves 75% of the original amount. Therefore, 0.75 × original NIT = ₹450 crore, giving original NIT = ₹450 ÷ 0.75 = ₹600 crore. Option A is only the post-fall amount, while the other values do not satisfy the 25% reduction condition.

Correct answer: B. ₹600 crore

Explanation: The governing relation is MP = FC + NIT. After the rise, NIT = ₹7,120 − ₹6,400 = ₹720 crore. This is 120% of the original tax because the tax rose by 20%. Hence original NIT = ₹720 ÷ 1.20 = ₹600 crore. Option C is the post-rise amount, not the original amount; the other choices do not reverse the 20% increase correctly.

Correct answer: B. ₹4,000 crore

Explanation: The governing equation is MP = FC + NIT. Since FC = x and NIT = 25% of x, market price = x + 0.25x = 1.25x. Thus, 1.25x = ₹5,000 crore, so x = ₹5,000 ÷ 1.25 = ₹4,000 crore. Option B is correct. A value of ₹3,750 crore would produce a market price of only ₹4,687.5 crore, not ₹5,000 crore.

Correct answer: B. ₹4,000 crore

Explanation: Use FC = MP − NIT. Since NIT is negative 12.5% of MP, NIT = −0.125x. Therefore, ₹4,500 = x − (−0.125x) = 1.125x. Solving gives x = ₹4,500 ÷ 1.125 = ₹4,000 crore. The negative net tax raises factor cost above market price, which is why the multiplier is 1.125. Hence option B is correct.

Correct answer: C. ₹7,080 crore

Explanation: First remove depreciation: NDP at market price = ₹7,500 − ₹600 = ₹6,900 crore. The conversion rule is NDP at factor cost = NDP at market price − net indirect taxes. Because net indirect taxes are negative ₹180 crore, subtracting them means adding ₹180 crore: ₹6,900 − (−₹180) = ₹7,080 crore. Therefore C is correct; treating the negative figure as positive would incorrectly produce ₹6,720 crore.

Correct answer: B. About 5.4 percent

Explanation: Because nominal GDP equals the price index multiplied by real GDP, the price-level factor is the nominal-growth factor divided by the real-growth factor. Thus it is 1.18 ÷ 1.12 = 1.053571 approximately. The implied price increase is 1.053571 − 1 = 0.053571, or about 5.4 percent. Directly subtracting 12 from 18 gives only a rough estimate and is not exact.