If GDP at factor cost is ₹5,000 crore and market price is 8 percent higher than factor cost, what are net indirect taxes?
Answer and explanation
Correct answer: ₹400 crore
The governing identity is GDP at market price = GDP at factor cost + net indirect taxes. Since market price is 8% higher than factor cost, calculate 8% of the given base: 0.08 × ₹5,000 crore = ₹400 crore. Thus net indirect taxes are ₹400 crore. ₹320 crore uses an incorrect percentage, ₹540 crore adds an unrelated amount, and ₹5,400 crore is the resulting market-price GDP rather than the tax difference.
Frequently asked questions
What is the correct answer to this question?
₹400 crore
Why is this the correct answer?
The governing identity is GDP at market price = GDP at factor cost + net indirect taxes. Since market price is 8% higher than factor cost, calculate 8% of the given base: 0.08 × ₹5,000 crore = ₹400 crore. Thus net indirect taxes are ₹400 crore. ₹320 crore uses an incorrect percentage, ₹540 crore adds an unrelated amount, and ₹5,400 crore is the resulting market-price GDP rather than the tax difference.
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.
