What happens to the gross and net status when converting market price into factor cost?
Answer and explanation
Correct answer: The status remains unchanged
Market-price to factor-cost conversion changes only the valuation basis. Net indirect taxes are deducted from market price, or added in reverse, while depreciation is not involved. Since gross and net status depends on depreciation, that status remains unchanged. A and B confuse two separate conversions, and D incorrectly changes the domestic-national classification.
Frequently asked questions
What is the correct answer to this question?
The status remains unchanged
Why is this the correct answer?
Market-price to factor-cost conversion changes only the valuation basis. Net indirect taxes are deducted from market price, or added in reverse, while depreciation is not involved. Since gross and net status depends on depreciation, that status remains unchanged. A and B confuse two separate conversions, and D incorrectly changes the domestic-national classification.
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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