If GNP at market price (GNP₍MP₎) is 14,400 and GNP at factor cost (GNP₍FC₎) is 15,000, what is Net Indirect Tax (NIT)?
Answer and explanation
Correct answer: −600
The relationship between GNP at market price and GNP at factor cost is: GNP₍MP₎ = GNP₍FC₎ + NIT. Rearranging gives NIT = GNP₍MP₎ − GNP₍FC₎. Substituting the values, NIT = 14,400 − 15,000 = −600. Therefore, the correct answer is option B, −600. The negative value means that subsidies exceed indirect taxes by 600, so factor cost is higher than market price.
Frequently asked questions
What is the correct answer to this question?
−600
Why is this the correct answer?
The relationship between GNP at market price and GNP at factor cost is: GNP₍MP₎ = GNP₍FC₎ + NIT. Rearranging gives NIT = GNP₍MP₎ − GNP₍FC₎. Substituting the values, NIT = 14,400 − 15,000 = −600. Therefore, the correct answer is option B, −600. The negative value means that subsidies exceed indirect taxes by 600, so factor cost is higher than market price.
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 - GNP.
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