Tag: some macroeconomic identities

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Questions Related to some macroeconomic identities

Multiple choice economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

National product at market prices is higher than national product at factor cost by the amount of ____________.

  1. subsidy

  2. indirect taxes + subsidies

  3. indirect taxes

  4. indirect taxes - subsidies
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

National product at market price includes indirect taxes and excludes subsidies compared to factor cost. Thus, Market Price = Factor Cost + Indirect Taxes - Subsidies.

Multiple choice economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

The difference between values at Market Prices and Factor Cost is attributed to ___________.

  1. net factor income from abroad

  2. depreciation

  3. net indirect taxes

  4. all of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Net indirect taxes (Indirect Taxes - Subsidies) represent the wedge between the market price paid by consumers and the factor cost received by producers.