Which deduction is necessary to convert GNP into NNP?
Answer and explanation
Correct answer: Depreciation
NNP is obtained by deducting consumption of fixed capital, commonly called depreciation, from GNP: NNP = GNP − depreciation. Depreciation represents the loss in value of machines, buildings, and other fixed assets because of wear and tear, accidental damage, or obsolescence. NFIA is used to move from GDP to GNP, while indirect taxes are relevant when converting between market-price and factor-cost measures.
Frequently asked questions
What is the correct answer to this question?
Depreciation
Why is this the correct answer?
NNP is obtained by deducting consumption of fixed capital, commonly called depreciation, from GNP: NNP = GNP − depreciation. Depreciation represents the loss in value of machines, buildings, and other fixed assets because of wear and tear, accidental damage, or obsolescence. NFIA is used to move from GDP to GNP, while indirect taxes are relevant when converting between market-price and factor-cost measures.
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.
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