What is subtracted from GDP to arrive at NDP?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Depreciation.
To arrive at Net Domestic Product (NDP) from Gross Domestic Product (GDP), Depreciation (Consumption of Fixed Capital) is subtracted.
NDP=GDP−Depreciation
Depreciation represents the wear and tear of capital assets like machinery, buildings, and infrastructure over time. GDP measures the total economic output of a country, while NDP reflects a more realistic economic value by accounting for the loss of asset value. It helps in understanding the sustainable level of economic production.