If NNP at market price and NNP at factor cost are equal, which conclusion is correct?
Answer and explanation
Correct answer: Net indirect taxes are zero
The conversion relationship is NNP₍FC₎ = NNP₍MP₎ − NIT, where NIT means indirect taxes minus subsidies. If NNP₍MP₎ and NNP₍FC₎ are equal, their difference is zero. Therefore NIT must be zero, meaning indirect taxes equal subsidies. NFIA and depreciation affect other comparisons and are not implied by equality of the two NNP measures.
Frequently asked questions
What is the correct answer to this question?
Net indirect taxes are zero
Why is this the correct answer?
The conversion relationship is NNP₍FC₎ = NNP₍MP₎ − NIT, where NIT means indirect taxes minus subsidies. If NNP₍MP₎ and NNP₍FC₎ are equal, their difference is zero. Therefore NIT must be zero, meaning indirect taxes equal subsidies. NFIA and depreciation affect other comparisons and are not implied by equality of the two NNP measures.
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 - NNP.
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