Multiple choice

Net domestic product at factor cost equals net domestic product at market price

  1. plus subsidies

  2. minus {subsidies add indirect taxes}

  3. minus indirect taxes

  4. plus {subsidies less indirect taxes}
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net Domestic Product at Factor Cost (NDP@FC) is derived from Net Domestic Product at Market Price (NDP@MP) by adjusting for net indirect taxes. Specifically, we subtract indirect taxes (which make market prices higher than factor costs) and add subsidies (which make market prices lower than factor costs). Thus: NDP@FC = NDP@MP - Indirect Taxes + Subsidies.

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