Multiple Choice Questions on If indirect taxes in an economy are increased then which of the following can occur 1 GDP at f........... for UPSC Civil Services Examination (General Studies) Preparation

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Multiple Choice Questions

If indirect taxes in an economy are increased then which of the following can occur 1 GDP at f...........

Economic Affairs Tax System
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     If indirect taxes in an economy are increased, then which of the following can occur?

    1. GDP at factor cost increases

    2. GDP at factor cost decreases

    3. GDP at market price increases

    4. GDP at market price decreases

    Select the correct answer using the codes given below.

     1 only

    Incorrect Answer

     2 and 3 only

    Correct Answer

     3 only

    Incorrect Answer

     4 only

    Incorrect Answer
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    Explanation:

     GDP (market price) = GDP (factor cost) + indirect taxes – subsidies. This equation makes it clear that any increase in indirect taxes will increase the GDP at market prices.

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    Siddharth Jena

    Re arrange the same formula, keeping other things constant, GDP factor cost also decreases. Please check.

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