Which formula correctly derives NDP from GDP?
Answer and explanation
Correct answer: NDP = GDP − Depreciation
GDP is a gross domestic measure because it includes the value required to replace worn-out or used fixed capital. To obtain the net domestic product, this depreciation, or consumption of fixed capital, must be subtracted: NDP = GDP − Depreciation. NFIA changes a domestic aggregate into a national aggregate, while exports are not subtracted in this conversion. Thus option A is correct.
Frequently asked questions
What is the correct answer to this question?
NDP = GDP − Depreciation
Why is this the correct answer?
GDP is a gross domestic measure because it includes the value required to replace worn-out or used fixed capital. To obtain the net domestic product, this depreciation, or consumption of fixed capital, must be subtracted: NDP = GDP − Depreciation. NFIA changes a domestic aggregate into a national aggregate, while exports are not subtracted in this conversion. Thus option A is correct.
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 - NDP.
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