Q. GDP minus the total value of the ‘wear and tear’ (depreciation) is equal to?

[A] Net Domestic Product

[B] Net National Product

[C] Gross National Product

[D] Base effect

Answer: A

Explanation: Net Domestic Product (NDP) is the GDP calculated after adjusting the weight of the value of ‘depreciation’.

  • This is, basically, net form of the GDP, i.e., GDP minus the total value of the ‘wear and tear’ (depreciation) that happened in the assets whiles the goods and services were being produced.
  • Every asset (except human beings) goes for depreciation in the process of their uses, which means them ‘wear and tear’.
  • The governments of the economies decide and announce the rates by which assets depreciate (done in India by the Ministry of Commerce and Industry) and a list is published, which is used by different sections of the economy to determine the real levels of depreciations in different assets.

Source: Ramesh Singh