GDP at market price is ₹1,500 crore. Indirect taxes are ₹180 crore and subsidies are ₹30 crore. What is GDP at factor cost?
Answer and explanation
Correct answer: ₹1,350 crore
The governing relationship is GDP at factor cost = GDP at market price − net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹180 crore − ₹30 crore = ₹150 crore. Therefore, GDP at factor cost = ₹1,500 crore − ₹150 crore = ₹1,350 crore, so option B is correct. Option C subtracts only the tax and ignores the subsidy, while option D adds the adjustment instead of subtracting it.
Frequently asked questions
What is the correct answer to this question?
₹1,350 crore
Why is this the correct answer?
The governing relationship is GDP at factor cost = GDP at market price − net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹180 crore − ₹30 crore = ₹150 crore. Therefore, GDP at factor cost = ₹1,500 crore − ₹150 crore = ₹1,350 crore, so option B is correct. Option C subtracts only the tax and ignores the subsidy, while option D adds the adjustment instead of subtracting it.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - Market price and factor cost.
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