Because of the word “gross” in GNP, which component remains included?
Answer and explanation
Correct answer: Depreciation
In national-income accounting, gross means that consumption of fixed capital, commonly called depreciation, has not yet been deducted. Therefore, depreciation remains included in GNP. When depreciation is subtracted from GNP, the result is NNP: NNP = GNP − depreciation. Foreign aid, transfer payments, and sales of old goods do not represent current production and are not included merely because the measure is gross.
Frequently asked questions
What is the correct answer to this question?
Depreciation
Why is this the correct answer?
In national-income accounting, gross means that consumption of fixed capital, commonly called depreciation, has not yet been deducted. Therefore, depreciation remains included in GNP. When depreciation is subtracted from GNP, the result is NNP: NNP = GNP − depreciation. Foreign aid, transfer payments, and sales of old goods do not represent current production and are not included merely because the measure is gross.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - GNP.
