Is depreciation deducted in GDP?
Answer and explanation
Correct answer: No, GDP is a gross measure
GDP is a gross domestic measure, so it is calculated before deducting depreciation, also called consumption of fixed capital. Depreciation represents the loss of value of fixed assets caused by use, wear, or obsolescence. When depreciation is deducted from GDP, the result is Net Domestic Product: NDP = GDP − depreciation. Thus, the word ‘gross’ is the key reason for option A.
Frequently asked questions
What is the correct answer to this question?
No, GDP is a gross measure
Why is this the correct answer?
GDP is a gross domestic measure, so it is calculated before deducting depreciation, also called consumption of fixed capital. Depreciation represents the loss of value of fixed assets caused by use, wear, or obsolescence. When depreciation is deducted from GDP, the result is Net Domestic Product: NDP = GDP − depreciation. Thus, the word ‘gross’ is the key reason for option A.
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 - GDP.
