Aggregates related to national income - Market price and factor cost

Correct answer: C. ₹7,310 crore

Explanation: The governing calculation is to add 7.5% of the given market-price output because factor cost is stated to be higher than market price. 7.5% of ₹6,800 crore = 0.075 × 6,800 = ₹510 crore. Hence factor cost = ₹6,800 + ₹510 = ₹7,310 crore, so option C is correct. The lower figure reverses the stated direction, and the other figures use incorrect additions.

Correct answer: B. ₹90 crore

Explanation: The governing relation is MP − FC = net indirect taxes = indirect taxes − subsidies. First, net indirect taxes = ₹4,600 − ₹4,310 = ₹290 crore. Therefore subsidies = indirect taxes − net indirect taxes = ₹380 − ₹290 = ₹90 crore. Option B is correct. ₹290 crore is the net indirect tax, not the subsidy; the other options do not satisfy the relation.

Correct answer: B. ₹1,376

Explanation: The governing formula is market price = factor cost + indirect taxes − subsidies. Indirect tax equals 18% of ₹1,200, or 0.18 × 1,200 = ₹216. Thus market price = ₹1,200 + ₹216 − ₹40 = ₹1,376. Option B is correct. Adding the subsidy instead would give an incorrect higher amount, while the other options result from arithmetic or sign errors.

Correct answer: B. ₹3,400 crore

Explanation: The governing identity is factor cost = market price − net indirect taxes. Net indirect taxes are 15% of ₹4,000 crore: 0.15 × 4,000 = ₹600 crore. Therefore factor cost = ₹4,000 − ₹600 = ₹3,400 crore, making option B correct. ₹600 crore is the tax amount, not factor cost, and ₹4,600 crore incorrectly adds the tax to market price.

Correct answer: C. ₹4,270 crore

Explanation: The governing relation is market price = factor cost + net indirect taxes. Net indirect taxes equal 22% of ₹3,500 crore: 0.22 × 3,500 = ₹770 crore. Hence market price = ₹3,500 + ₹770 = ₹4,270 crore, so option C is correct. The smaller options use an incorrect percentage or addition, while ₹4,500 crore exceeds the correctly calculated amount.

Correct answer: C. ₹390 crore

Explanation: The governing concept is net indirect taxes = indirect taxes − subsidies. Subsidies are 35% of ₹600 crore, so subsidies = 0.35 × 600 = ₹210 crore. Therefore net indirect taxes = ₹600 − ₹210 = ₹390 crore, making option C correct. ₹210 crore is only the subsidy amount; adding the two amounts, as in option D, violates the definition of net indirect taxes.

Correct answer: B. ₹70 crore

Explanation: The governing relation is net indirect taxes = indirect taxes − subsidies. Since ₹280 crore represents 80% of indirect taxes, indirect taxes = ₹280 ÷ 0.80 = ₹350 crore. Therefore net indirect taxes = ₹350 − ₹280 = ₹70 crore, so option B is correct. ₹280 crore is the subsidy, and ₹350 crore is the indirect-tax amount; neither is the required net figure.

Correct answer: B. ₹400 crore

Explanation: The governing concept is that the difference between market price and factor cost equals net indirect taxes. In the ratio 15:14, the 14 parts representing factor cost equal ₹5,600 crore, so one part is ₹400 crore. Market price is 15 parts, or ₹6,000 crore. Thus net indirect taxes = ₹6,000 − ₹5,600 = ₹400 crore, making option B correct.

Correct answer: B. ₹4,000 crore

Explanation: The statement means market price = 112% of factor cost, or 4,480 = 1.12 × factor cost. Hence factor cost = 4,480 ÷ 1.12 = ₹4,000 crore, equivalently 4,480 × 100/112. Option D incorrectly multiplies by 1.12 instead of reversing the percentage. Options A and C do not satisfy the stated 112% relationship, because 112% of either amount is not ₹4,480 crore.

Correct answer: B. ₹3,900 crore

Explanation: Here factor cost is 125% of market price. Let market price be x. Then 1.25x = 4,875, so x = 4,875 ÷ 1.25 = 4,875 × 100/125 = ₹3,900 crore. Therefore option B is correct. Option D comes from multiplying by 1.25 rather than finding the original base. Options A and C fail when multiplied by 125%, since they do not produce ₹4,875 crore.

Correct answer: B. ₹5,100 crore

Explanation: The governing identity is GDP at factor cost = GDP at market price − net indirect taxes. Net indirect taxes equal 3/20 × 6,000 = ₹900 crore. Therefore GDP at factor cost = 6,000 − 900 = ₹5,100 crore. Option C subtracts an incorrect amount, while option D adds taxes instead of removing them. Option A is also inconsistent with the stated fraction. Hence option B is unambiguous.

Correct answer: C. ₹630 crore

Explanation: Net indirect taxes equal indirect taxes minus subsidies. Let indirect taxes and subsidies be 9x and 4x respectively. Then 9x − 4x = 350, so 5x = 350 and x = ₹70 crore. Indirect taxes are therefore 9x = 9 × 70 = ₹630 crore. Option C is correct. ₹280 crore represents the subsidy amount, while the other values do not preserve the given ratio and net difference.

Correct answer: D. ₹540 crore

Explanation: Because net indirect taxes = indirect taxes − subsidies, the negative value means subsidies are larger. Let taxes = 5x and subsidies = 9x. Then 5x − 9x = −240, so −4x = −240 and x = ₹60 crore. Subsidies are 9x = 9 × 60 = ₹540 crore. Option D is correct; ₹300, ₹420 and ₹480 crore do not produce the required ratio and negative difference.

Correct answer: C. Decrease of ₹280 crore

Explanation: The governing concept is change in value, calculated as new value minus old value. Here, change = (−₹60 crore) − ₹220 crore = −₹280 crore. The negative sign indicates a decrease, so net indirect taxes have fallen by ₹280 crore. Option A ignores the movement through zero, while option B treats the final negative value incorrectly. Therefore, option C is correct.

Correct answer: D. Increase of ₹180 crore

Explanation: The governing identity is MP − FC = net indirect taxes, so the gap between market price and factor cost changes by the same amount as net indirect taxes. The change is ₹70 − (−₹110) = ₹180 crore. Because a negative amount is subtracted, the magnitudes add. Thus the gap increases by ₹180 crore. The other choices fail to account correctly for the initial negative value.

Correct answer: C. Decrease of ₹350 crore

Explanation: Since market price equals factor cost plus net indirect taxes, and factor cost is unchanged, any change in market price equals the change in net indirect taxes. The change is (−₹50) − ₹300 = −₹350 crore. Therefore, market price decreases by ₹350 crore. A ₹250 crore decrease would ignore the movement from a positive value to a negative one, so option C is correct.

Correct answer: B. Second is higher by ₹240 crore

Explanation: The governing identity is FC = MP − NIT. With the same market price, the economy having the lower net indirect tax must have the higher factor cost. The second economy has taxes of ₹170 crore rather than ₹410 crore, a difference of ₹240 crore. Consequently, its factor cost is ₹240 crore higher. Therefore, option B is correct; the first economy’s larger tax reduces its factor cost relative to market price.

Correct answer: B. Second is higher by ₹10

Explanation: Net indirect taxes equal indirect taxes minus subsidies, and MP = FC + NIT. For the first firm, NIT = ₹150 − ₹45 = ₹105. For the second, NIT = ₹125 − ₹10 = ₹115. Since both firms have the same factor cost, the second firm’s market price is ₹115 − ₹105 = ₹10 higher. Therefore, option B is correct.

Correct answer: A. Market price will be ₹25 crore higher than factor cost

Explanation: The governing relation is MP = FC + net indirect taxes, where net indirect taxes equal indirect taxes minus subsidies. Initially MP and FC are equal, so net indirect taxes are zero. Since indirect taxes rise by ₹25 crore and subsidies do not change, net indirect taxes become ₹25 crore. Therefore MP becomes ₹25 crore greater than FC, making option A correct; the other options reverse, ignore, or double the difference.

Correct answer: B. ₹4,870 crore

Explanation: Use the aggregate-conversion sequence. First subtract depreciation from GDP at market price: NDP at market price = ₹5,600 − ₹420 = ₹5,180 crore. Next subtract net indirect taxes to move from market price to factor cost: NDP at factor cost = ₹5,180 − ₹310 = ₹4,870 crore. Thus option B is correct. ₹5,180 crore stops at NDP at market price, while the other values use an incorrect adjustment.

Correct answer: C. ₹6,190 crore

Explanation: To convert GNP at factor cost into NNP at market price, first deduct depreciation to change gross into net: ₹6,400 − ₹480 = ₹5,920 crore, which is NNP at factor cost. Then add net indirect taxes to change factor cost into market price: ₹5,920 + ₹270 = ₹6,190 crore. Hence option C is correct. Option B omits the price-basis conversion, while A and D use incorrect arithmetic.

Correct answer: A. Current price level is 15 percent below the base year

Explanation: The GDP deflator compares the current-price value of domestic output with its value at base-year prices: Deflator = (Nominal GDP ÷ Real GDP) × 100. A value of 85 means the price level is 85% of the base-year level, so it is 15% lower. It does not directly mean that output fell or that nominal GDP is zero.