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1 mark

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

  1. A
    Direct Taxes
  2. B
    Indirect taxes
  3. C
    Transfer payments
  4. D
    Subsidies

Solution & Step-by-step Explanation

Gross Domestic Product at Market Prices () accounts for market valuations, which include indirect taxes levied by government bodies and exclude any product subsidies granted. The mathematical relationship is:


Rearranging the expression to find the difference:



Among the provided separate components, indirect taxes represent the positive value added to factor costs to arrive at market prices.

Practice this question

Try it yourself before checking the explanation above.

The difference between GDP at market prices and GDP at factor cost is:
A
Direct Taxes
B
Indirect taxes
C
Transfer payments
D
Subsidies

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