What is the purpose of deducting depreciation as a charge?
Answer and explanation
Correct answer: To separate worn-out capital cost and find a net measure
Depreciation represents the value of capital used up during production. Deducting it from a gross measure removes the amount needed merely to maintain the existing capital stock and produces a net measure such as net product or net investment. It does not double output, change consumption into investment, or transform tax into income; those are unrelated claims.
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What is the correct answer to this question?
To separate worn-out capital cost and find a net measure
Why is this the correct answer?
Depreciation represents the value of capital used up during production. Deducting it from a gross measure removes the amount needed merely to maintain the existing capital stock and produces a net measure such as net product or net investment. It does not double output, change consumption into investment, or transform tax into income; those are unrelated claims.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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