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What is the difference between Gross Vs Net Terms used in economy?
Production factors such as machines, equipment, tools, factory buildings, tractors etc. depreciate over a period of time during the process of production. It may be the case that after certain time these capital goods needs replacement.
The capital used for the this wear and tear and is not part of any body’s income.
Thus we subtract depreciation from the gross then the remaining Value is called Net
Net = Gross – Depreciation
For Ex, If we need to calculate Net GDP, then we need to subtract depreciation from the GDP
Net GDP = GDP – Depreciation
Similarly, Net National Product (NNP) = GNP – depreciation
