Which of the following statements is NOT correct?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Factor cost is equal to market prices plus net indirect taxes.
Market prices include net indirect taxes; factor cost is what producers receive. So factor cost is market prices minus net indirect taxes, not plus.
Option (1) Factor cost is equal to market prices plus net indirect taxes. — False. Factor cost = market prices minus net indirect taxes.
Option (2) GDP at factor cost measures the money value of output produced by the firms within the domestic boundaries of a country in a year. — True. GDP at factor cost is the value of output of firms within the domestic boundaries.
Option (3) Market prices are the prices as paid by the consumers. — True. Market prices are the prices paid by consumers.
Option (4) Factor cost refers to the prices of products as received by the producers. — True. Factor cost is the price received by producers.
NCERT (2026-27): “Table 2.4: Basic National Income Aggregates … Market prices are the prices as paid by the consumers Market prices also include product taxes and subsides. The term factor cost refers to the prices of products as received by the producers. Thus, factor cost is equal to market prices, minus net indirect taxes. GDP at factor cost measures money value of output produced by the firms within the domestic boundaries of a country in a year.” |