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National Income Accounting

Question
CBSEENEC12013183
Wired Faculty App

Why are subsidies added and indirect tax deducted from domestic product at MP to arrive at domestic product at FC? 

Solution

Significance of Net Indirect Taxes. It is used to make distinction between MP and FC. To find out market prices (MP), indirect taxes are added and subsidies are subtracted from factor cost (FC). Algebraically:
MP = FC + Net indirect taxes

Some More Questions From National Income Accounting Chapter

Briefly explain the following basic concepts related to NI:
 National Income (NI).

Briefly explain the following basic concepts related to NI:
Final Goods and Intermediate Goods. 

Briefly explain the following basic concepts related to NI:
Consumption Goods and Capital Goods

Briefly explain the following basic concepts related to NI:
Flow and Stock Concepts

Briefly explain the following basic concepts related to NI:
Gross Investment and Net Investment

Briefly explain the following basic concepts related to NI:
Domestic (Economic) Territory

Briefly explain the following basic concepts related to NI:
Normal Residents

Briefly explain the following basic concepts related to NI:
National Income at Current and Constant Prices (Nominal and Real NI).

Briefly explain the following basic concepts related to NI:
Consumption of Fixed Capital (Depreciation).

Briefly explain the following basic concepts related to NI:
Factor Cost vs. Market Price (or Net Indirect Taxes)

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