Depreciation is subtracted from GDP to get NDP.Depreciation
A)represents the value of leisure goods
B)measures changes in exchange rates
C)represents income that we earn but do not receive
D)represents investment undertaken merely to replace worn-out capital
E)measures the effects of government subsidy programs

Question

Quizplus · Accepted Answer

Depreciation represents the decline in value of capital goods due to wear and tear or obsolescence. When calculating NDP (Net Domestic Product), it is necessary to subtract depreciation from GDP (Gross Domestic Product) because GDP includes investment in new capital goods, while NDP only accounts for the production of new goods and services. Depreciation is, therefore, an estimate of the amount of investment that is undertaken merely to replace worn-out capital.

Depreciation Is Subtracted from GDP to Get NDP.Depreciation