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Market Distortions

To adjust GDP...

Question

To adjust GDP from market prices to factor cost

A

Add indirect taxes

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B

Subtract subsidies

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C

Deduct indirect taxes and deduct subsidies

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D

Deduct indirect taxes and add subsidies

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Solution

The correct option is D
Deduct indirect taxes and add subsidies

To adjust GDP from market prices to factor cost, indirect taxes need to be removed and subsidies added back on.

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Similar questions

Q. To convert GDP at market prices into factor cost we need to __________.

Q. GDP at factor cost is equal to GDP at market price minus indirect taxes plus __________.

There is no difference between GDP at market price and GDP at factor cost in a two sector economy including household sector and producer sector.

Q. GNP at market price minus ________ is equal to GDP at market price.

Q. 94. Output of an economy is worked out both at market prices as well as factor cost, but for growth purposes, output at factor cost is considered. Consider the following statements in this regards.
1.If output measured at market prices increases it does not necessarily imply that more goods and services have been produced in the economy.
2.Output measured at factor cost is more useful for cross-country comparison.
3.Output at market price and factor cost can never be the same.
4. Output at factor cost in terms of constant prices reflects inflation adjusted growth in output.
Which of the above statement(s) is/are correct?

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