If a country's GDP at market price (GDPₘₚ) is 3000 and GDP at factor cost (GDP𝒇𝒄) is 2850, what are its net indirect taxes?
Answer and explanation
Correct answer: 150
The relationship between GDP at market price and GDP at factor cost is: GDPₘₚ = GDP𝒇𝒄 + net indirect taxes. Therefore, net indirect taxes = GDPₘₚ − GDP𝒇𝒄 = 3000 − 2850 = 150. Thus, option A is correct. Market price includes the effect of indirect taxes after deducting subsidies, whereas factor cost reflects the payments received by factors of production.
Frequently asked questions
What is the correct answer to this question?
150
Why is this the correct answer?
The relationship between GDP at market price and GDP at factor cost is: GDPₘₚ = GDP𝒇𝒄 + net indirect taxes. Therefore, net indirect taxes = GDPₘₚ − GDP𝒇𝒄 = 3000 − 2850 = 150. Thus, option A is correct. Market price includes the effect of indirect taxes after deducting subsidies, whereas factor cost reflects the payments received by factors of production.
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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