What must be done to move from Gross National Product to Net National Product?
Answer and explanation
Correct answer: Deduct depreciation
The net version of a national product measure is obtained after removing the value of capital consumed during production. Therefore, Net National Product = Gross National Product − depreciation. Adding depreciation would restore the gross measure rather than produce the net one. Consumption and exports are not the adjustment used for this gross-to-net conversion.
Frequently asked questions
What is the correct answer to this question?
Deduct depreciation
Why is this the correct answer?
The net version of a national product measure is obtained after removing the value of capital consumed during production. Therefore, Net National Product = Gross National Product − depreciation. Adding depreciation would restore the gross measure rather than produce the net one. Consumption and exports are not the adjustment used for this gross-to-net conversion.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
