If GDP at market price is ₹3,250 crore, indirect taxes are ₹410 crore, and subsidies are ₹90 crore, what is GDP at factor cost?
Answer and explanation
Correct answer: ₹2,930 crore
The governing formula is GDP at factor cost = GDP at market price − net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹410 − ₹90 = ₹320 crore. Therefore, GDP at factor cost = ₹3,250 − ₹320 = ₹2,930 crore. Option B is correct. Option C would result from adding the net tax instead of subtracting it, while option A subtracts the gross tax and ignores the subsidy.
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What is the correct answer to this question?
₹2,930 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: ₹410 − ₹90 = ₹320 crore. Therefore, GDP at factor cost = ₹3,250 − ₹320 = ₹2,930 crore. Option B is correct. Option C would result from adding the net tax instead of subtracting it, while option A subtracts the gross tax and ignores the subsidy.
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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