Question : Net Domestic Product (NDP) is calculated by subtracting ______ from ______.
Option 1: depreciation, GNP
Option 2: GNP, depreciation
Option 3: depreciation, GDP
Option 4: GDP, depreciation
Correct Answer: depreciation, GDP
Solution : The correct answer is (c) depreciation, GDP.
Net Domestic Product (NDP) is a measure that calculates the value of all final goods and services produced within a country's borders during a specific period, minus the depreciation of capital goods. It is derived from Gross Domestic Product (GDP) by subtracting depreciation.
Depreciation refers to the wear and tear, as well as the obsolescence, of capital goods used in the production process. Over time, capital goods lose value due to factors such as physical deterioration, technological advancements, or changes in market demand. To account for this loss in value, depreciation is deducted from the GDP to arrive at the NDP.
Gross Domestic Product (GDP) represents the total value of all final goods and services produced within a country's borders, including both consumption and investment. It does not take into account the depreciation of capital goods.
By subtracting depreciation from GDP, NDP provides a measure of the net value of goods and services produced, taking into account the wear and tear of capital goods. This adjustment allows for a more accurate assessment of the overall economic output of a country.
