Economics • Economic BasicsMedium
What is the primary distinction between 'Gross Domestic Product (GDP) at factor cost' and 'Gross Domestic Product at market prices'?
A. The inclusion of net factor income from abroad in the calculation of national aggregates
B. The adjustment for indirect taxes minus subsidies levied on production and commodities✓ Correct Answer
C. The deduction of depreciation allowances from gross capital formation figures
D. The adjustment for inflation using a constant base year price index
💡 Solution & Explanation
GDP at market prices includes indirect taxes and excludes subsidies, whereas GDP at factor cost measures the actual earnings received by the factors of production before tax adjustments. Net factor income from abroad distinguishes gross domestic product from gross national product rather than market price adjustments. Capital consumption allowance is subtracted from gross figures to arrive at net domestic product equivalents.
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