SSC Economics Sample Paper NCERT Sample Paper-2

  • question_answer
    The difference between the GNP and NNP is equal to the:

    A) Consumer expenditure on durable goods

    B) Direct tax revenue

    C) Indirect tax revenue

    D) Capital depreciation

    Correct Answer: D

    Solution :

    The investment expenditure of the firms is made up of two parts. One part is to buy new capital goods and machinery for production. It is called net investment because the production capacity of the firms can be expanded. Another part- consumption allowance or depreciation- is spent on replacing the used-up capital goods or the maintenance of existing capital goods will face wear and tear out over time. Depreciation refers to all noncash provision charged against profit each year to replace the fixed assets due to wear and tear, obsolescence, destruction and accidental loss etc. The sum of these two amounts is called Gross Investment in economics. Gross Investment = Net investment + Depreciation Net investment will increase the production capacity and output of a nation, but not by depreciation expenditure. So we have, NNP = GNP -Depreciation

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