Which statement correctly differentiates Gross National Product (GNP) from Net National Product (NNP)?
Answer and explanation
Correct answer: NNP is obtained by subtracting depreciation from GNP
GNP is a gross measure because it includes the value of depreciation, or the wear and tear of fixed capital. NNP is the corresponding net measure, so depreciation must be deducted from GNP: NNP = GNP − depreciation. Subtracting NFIA from GNP gives GDP, while taxes and exports do not create the gross-to-net distinction.
Frequently asked questions
What is the correct answer to this question?
NNP is obtained by subtracting depreciation from GNP
Why is this the correct answer?
GNP is a gross measure because it includes the value of depreciation, or the wear and tear of fixed capital. NNP is the corresponding net measure, so depreciation must be deducted from GNP: NNP = GNP − depreciation. Subtracting NFIA from GNP gives GDP, while taxes and exports do not create the gross-to-net distinction.
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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