If GDP at market price is ₹2,400 crore, indirect taxes are ₹320 crore, and subsidies are ₹80 crore, what is GDP at factor cost?
Answer and explanation
Correct answer: ₹2,160 crore
The governing formula is GDP at factor cost = GDP at market price − net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹320 − ₹80 = ₹240 crore. Therefore, GDP at factor cost = ₹2,400 − ₹240 = ₹2,160 crore. Option B is correct. ₹2,240 crore would reflect an incorrect adjustment, while the other options do not follow the market-price conversion.
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What is the correct answer to this question?
₹2,160 crore
Why is this the correct answer?
The governing formula is GDP at factor cost = GDP at market price − net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹320 − ₹80 = ₹240 crore. Therefore, GDP at factor cost = ₹2,400 − ₹240 = ₹2,160 crore. Option B is correct. ₹2,240 crore would reflect an incorrect adjustment, while the other options do not follow the market-price conversion.
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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