Whenever there is a recession in the economy, the gap between GDP at factor cost and GDP at market price tends to decrease. Which of the following is the most suitable explanation for the above?
- In times of recession, the growth of direct taxes tends to fall and the expenditure on subsidies also reduces
- In times of recession, the growth of indirect taxes tends to fall while the expenditure on subsidies increases
- In time of recession, the factor cost goes up on account of increase in interest payments
- In times of recession, the tax income remains almost the same while the expenditure on subsidies increases
The correct answer for previous question is D i.e. all of the above
The explanation is as follows:
Various types of PTAs:
Partial Scope Agreement (PSA) A PSA is only partial in scope, meaning it allows for trade between countries on a small number of goods. Free Trade Agreement (FTA) A free trade agreement is a preferential arrangement in which members reduce tariffs on trade among themselves, while maintaining their own tariff rates for trade with non-members. Customs Union (CU) A customs union (CU) is a free-trade agreement in which members apply a common external tariff (CET) schedule to imports from non-members. Common Market (CM) A common market is a customs union where movement of factors of production is relatively free amongst member countries. Economic Union (EU) An economic union is a common market where member countries coordinate macro-economic and exchange rate policies.