Q55
Indian EconomyNational Income, Sectors & Growth
The difference between Gross Domestic Product and Net Domestic Product is
- a.Government Revenue
- b.Net Indirect Tax
- c.Depreciation
- d.Foreign Aid
Answer: (C) Depreciation
Net Domestic Product is Gross Domestic Product minus depreciation, i.e. the consumption of fixed capital (wear and tear of machinery and buildings): $NDP = GDP - \text{Depreciation}$. The same gap separates GNP and NNP. The other adjustments in national income accounting are different: net factor income from abroad converts 'domestic' to 'national' ($GNP = GDP + NFIA$), and net indirect taxes (indirect taxes minus subsidies, option B) convert market price to factor cost. NNP at factor cost is what is called National Income. Government revenue and foreign aid do not enter these identities.