In order to calculate national income, depreciation is deducted from GDP.

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Quizplus · Accepted Answer

Depreciation refers to the decrease in the value of capital goods due to wear and tear over time. Since GDP includes the production of goods and services using capital goods, it is necessary to deduct depreciation from GDP to arrive at the net value added by economic activity. This resulting value is known as net domestic product (NDP), which is one measure of national income.

In Order to Calculate National Income, Depreciation Is Deducted from GDP