Following table contains some national income related facts about an economy Wages 235 Rent 110 Interest 140 Profit 135 Consumption 345 Government Spending (excluding Transfer Payments) 215 Investment 330 Exports 95 Imports 115 Net factor Income from abroad 120 Depreciation 50 Calculate value of Net Indirect Taxes (Indirect Taxes – Subsidies). My point is wages+rent+interest +profit will gives GVA at basic prices and C+G+I+NX would give GDP at market prices. Substracting both these should give the answer. But the solution says wages+rent+interest +profit =Net domestic product at factor prices so they subtracted depreciation to get net indirect taxes. Can anyone explain why wages+rent+interest +profit =net domestic product at factor prices rather than GDP at factor prices?
I agree with you. GDP at market prices (using the expenditure method) is 870. GDP at factor cost or basic prices (using the income method) is 620. So therefore net indirect taxes should be 250.
