Use the following information given to answer this question Total of all expenditure incurred during the year…

Analyze the question: We are given total expenditure (GNE at market price), indirect taxes, and capital consumption. We must find GNE at factor cost.

Concept:

• Total expenditure on goods and services = Gross National Expenditure (GNE) at market prices.
• Market prices include indirect taxes, so to get to factor cost we subtract indirect taxes (and add subsidies, if any).
• Capital consumption (depreciation) is subtracted only when moving from a gross figure to a net figure. Since the question asks for the gross national expenditure, we do not subtract it.

Solution:

GNE at factor cost = GNE at market price − Indirect taxes

= ₤80,000m − ₤8,000m

= ₤72,000m

Capital consumption (₤6,000m) is a distractor here. Subtracting it as well would give ₤66,000m, which is Net National Expenditure at factor cost and is not among the options. Option C (₤74,000m) would come from wrongly subtracting both and adding something back, which has no basis.

Answer: D. ₤72,000m

Exam tip: Remember "Gross" = before depreciation, "Net" = after depreciation. Market price → factor cost means minus indirect taxes, plus subsidies. Always check whether the question asks for gross or net, since extra figures are often included as distractors.