WBCS.LIVE practice question

The difference between GDP at market prices and GDP at factor cost is

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. Direct Taxes
  2. Indirect Taxes
  3. Transfer payments
  4. Subsidies

Correct answer and explanation

Correct answer: Indirect Taxes

Explanation: āœ… Correct Answer: B) Indirect Taxes šŸ“š Explanation: GDP at market prices includes the taxes paid by consumers, while GDP at factor cost reflects the actual production cost. To find the difference, we look at the net impact of 'Indirect Taxes' and subsidies. Specifically, GDP (Market Price) minus Net Indirect Taxes equals GDP (Factor Cost). Therefore, indirect taxes are the primary factor that creates the gap between these two measures of economic activity.