Question

Q. With reference to the Gross Domestic Product (GDP) and Gross Value Added (GVA), consider the following statements:

Which of the above statements is/are correct?

• A.
  1 only
• B.
  2 only
• C.
  Both 1 and 2
• D.
  Neither 1 nor 2

Answer 1

The correct option is B

2 only
Explanation:

Gross Domestic Product (GDP) is the market value of all final goods and services produced within a domestic territory of a country measured in a year. Gross Value Added (GVA) is the value of output less the value of intermediate consumption.

Statement 1 is incorrect: Since GDP is taking into account the taxes and subsidies, it will not show clearly the actual contribution of different sectors in the production process. Whereas, the GVA shows the production contribution of a particular sector.

Statement 2 is correct: We have that the GDP at Market Prices $=$ Sum of the GVA at basic prices from all the sectors $+$ product taxes – product subsidies.