Q. With reference gross value added(GVA) and gross domestic product (GDP), consider the following statements;
1.If the government earned more from taxes than it spent on subsidies, GDP will be higher than GVA.
2.GDP provides the demand side of the economy and GVA the supply side.
Which of the statements given above is/are correct?
Answer: C
Notes:
Both statements are correct.
GDP = GVA + Taxes earned by the government — subsidies provided by the government
For instance, if the government earned more from taxes than it spent on subsidies, GDP will be higher than GVA.
But if the government provided subsidies in excess of its tax revenues, the absolute level of GVA would be higher than that of GDP.
Hence, simply put, GDP provides the demand side of the economy and GVA the supply side.
Source: Livemint
