GDP at market price is ₹1,800 crore. Indirect taxes are ₹240 crore and subsidies are ₹60 crore. What is GDP at factor cost?
Answer and explanation
Correct answer: ₹1,620 crore
The governing relation is GDP at factor cost = GDP at market price − net indirect taxes, where net indirect taxes = indirect taxes − subsidies. Thus, net indirect taxes = ₹240 − ₹60 = ₹180 crore. GDP at factor cost = ₹1,800 − ₹180 = ₹1,620 crore, so option B is correct. Option A wrongly subtracts the subsidy, while C and D use an incorrect adjustment.
Frequently asked questions
What is the correct answer to this question?
₹1,620 crore
Why is this the correct answer?
The governing relation is GDP at factor cost = GDP at market price − net indirect taxes, where net indirect taxes = indirect taxes − subsidies. Thus, net indirect taxes = ₹240 − ₹60 = ₹180 crore. GDP at factor cost = ₹1,800 − ₹180 = ₹1,620 crore, so option B is correct. Option A wrongly subtracts the subsidy, while C and D use an incorrect adjustment.
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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