If GNP and NNP are equal, which conclusion is most accurate?
Answer and explanation
Correct answer: Depreciation is zero
The defining relationship is NNP = GNP − depreciation. If GNP and NNP have the same value, the amount deducted from GNP must be zero; therefore depreciation is zero. NFIA determines the difference between GDP and GNP, while NIT determines the difference between market price and factor cost. Neither of those conditions follows from GNP equalling NNP.
Frequently asked questions
What is the correct answer to this question?
Depreciation is zero
Why is this the correct answer?
The defining relationship is NNP = GNP − depreciation. If GNP and NNP have the same value, the amount deducted from GNP must be zero; therefore depreciation is zero. NFIA determines the difference between GDP and GNP, while NIT determines the difference between market price and factor cost. Neither of those conditions follows from GNP equalling NNP.
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 - NNP.
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