If GDP at factor cost (GDP_FC) is 2500 and net indirect taxes are -100, what is GDP at market price (GDP_MP)?
Answer and explanation
Correct answer: 2400
The relationship between GDP at market price and GDP at factor cost is GDP_MP = GDP_FC + net indirect taxes. Substituting the given values gives GDP_MP = 2500 + (-100) = 2400. A negative value of net indirect taxes means that subsidies exceed indirect taxes, so the market-price measure is lower than the factor-cost measure. Therefore, option A is correct.
Frequently asked questions
What is the correct answer to this question?
2400
Why is this the correct answer?
The relationship between GDP at market price and GDP at factor cost is GDP_MP = GDP_FC + net indirect taxes. Substituting the given values gives GDP_MP = 2500 + (-100) = 2400. A negative value of net indirect taxes means that subsidies exceed indirect taxes, so the market-price measure is lower than the factor-cost measure. Therefore, option A is correct.
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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