Gross Domestic Product (GDP) and Net Domestic Product
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Question 1
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Consider the following statements:
1. Gross Domestic Product (GDP) includes Net Factor Income from abroad.
2. Net Domestic Product accounts for depreciation.
Which of the following statements is/are correct?
(a). 1 only
(b). 2 only
(c). Both 1 and 2
(d). Neither 1 nor 2
Statement 1 is not correct:GDP is the final value of all goods and services produced by the factor of production within the domestic boundary of the country within a period of one financial year. It does not include Net Factor Income from abroad which may include income from NRIs. Gross National Product (GNP) includes Net Factor Income from abroad.
. GDP = Indians and Foreigners producing and earning in India
. GNP = Indians producing and earning in India and abroad.
Statement 2 is correct:Net Domestic Product accounts for depreciation in capital goods due to wear and tear and passage of time.
NDP = GDP - Depreciation
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