In which situation will GDP at market price (GDPₘₚ) and GDP at factor cost (GDP_fc) be equal?
Answer and explanation
Correct answer: When net indirect taxes are zero
The relationship is GDP at market price = GDP at factor cost + net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies. Therefore, if net indirect taxes are zero, the addition becomes zero and both measures have the same value. Depreciation concerns gross versus net aggregates, while imports and exports do not determine the MP–FC difference.
Frequently asked questions
What is the correct answer to this question?
When net indirect taxes are zero
Why is this the correct answer?
The relationship is GDP at market price = GDP at factor cost + net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies. Therefore, if net indirect taxes are zero, the addition becomes zero and both measures have the same value. Depreciation concerns gross versus net aggregates, while imports and exports do not determine the MP–FC difference.
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.
