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      Question

      Which of the following statements correctly

      differentiates between GDP at factor cost and GDP at market prices?  
      A GDP at factor cost excludes depreciation, while GDP at market prices includes it. Correct Answer Incorrect Answer
      B GDP at market prices = GDP at factor cost + (Indirect Taxes – Subsidies). Correct Answer Incorrect Answer
      C GDP at factor cost = GDP at market prices + Net Exports. Correct Answer Incorrect Answer
      D GDP at market prices excludes net indirect taxes. Correct Answer Incorrect Answer
      E GDP at factor cost includes only government income. Correct Answer Incorrect Answer

      Solution

      Explanation: GDP at factor cost represents the income earned by factors of production within domestic territory, while GDP at market prices captures value at consumer level. The bridge is Net Indirect Taxes (Indirect Taxes – Subsidies). This adjustment converts producers’ cost-based output into market-valued output, as used in international comparisons.  

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