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Subsidies mean

  • A.Payment by government for purchase of goods and services
  • B.Payment made by business enterprises to factors of production
  • C.Payment made by companies to shareholders
  • D.Payment made by the government to business enterprises, without buying any goods and services

Answer: D

Subsidies are payments by government to business enterprises without any corresponding purchase of goods or services.

They are transfer payments, made to hold the price of a product below cost or to support a producer. In national income accounting, market prices minus indirect taxes plus subsidies gives factor cost.

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