If GNP at market price is ₹3,850 crore and GNP at factor cost is ₹3,620 crore, while indirect taxes are ₹310 crore, what are subsidies?
Answer and explanation
Correct answer: ₹80 crore
Use the identity GNP at market price = GNP at factor cost + indirect taxes − subsidies. The difference between the two GNP measures is ₹3,850 − ₹3,620 = ₹230 crore, which is net indirect taxes. Since net indirect taxes = indirect taxes − subsidies, subsidies = ₹310 − ₹230 = ₹80 crore. Therefore option B is correct; ₹230 crore is the net tax, not the subsidy.
Frequently asked questions
What is the correct answer to this question?
₹80 crore
Why is this the correct answer?
Use the identity GNP at market price = GNP at factor cost + indirect taxes − subsidies. The difference between the two GNP measures is ₹3,850 − ₹3,620 = ₹230 crore, which is net indirect taxes. Since net indirect taxes = indirect taxes − subsidies, subsidies = ₹310 − ₹230 = ₹80 crore. Therefore option B is correct; ₹230 crore is the net tax, not 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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