If GDP at market price is ₹4,100 crore, indirect taxes are ₹520 crore, and subsidies are ₹140 crore, then what is GDP at factor cost?
Answer and explanation
Correct answer: ₹3,720 crore
To convert GDP at market price into GDP at factor cost, subtract net indirect taxes. Net indirect taxes = indirect taxes − subsidies = 520 − 140 = ₹380 crore. Therefore, GDP at factor cost = 4,100 − 380 = ₹3,720 crore. Option B is correct. ₹3,580 crore would result from incorrectly subtracting subsidies instead of adding them back.
Frequently asked questions
What is the correct answer to this question?
₹3,720 crore
Why is this the correct answer?
To convert GDP at market price into GDP at factor cost, subtract net indirect taxes. Net indirect taxes = indirect taxes − subsidies = 520 − 140 = ₹380 crore. Therefore, GDP at factor cost = 4,100 − 380 = ₹3,720 crore. Option B is correct. ₹3,580 crore would result from incorrectly subtracting subsidies instead of adding them back.
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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