Question

Fill in the blank with appropriate alternatives given below

GDP _(FC) = GDP _(MP) – __________ 

Options

• factor cost

• indirect taxes

• depreciation

• subsidy

Answer 1

GDP_FC = GDP_MP ⁻  Net Indirect Taxes

Explanation:
Market price (MP) includes indirect taxes levied by the government on different goods and services and subsidies. These should be deducted from it to get the actual factor price. In other words,when the Gross Domestic Product (GDP) is expressed in terms of factor cost, the impact of subsidies and indirect taxes is not taken into consideration. Thus,
GDP_FC = GDP_MP⁻ Net Indirect Taxes
GDP_FC = GDP_MP⁻ (Indirect Taxes − Subsidies)