SSC Economics Sample Paper NCERT Sample Paper-6

  • question_answer
    Net Domestic Product has always been less than the Gross Domestic Product. This is so because

    A)  Capital equipment undergoes wear and tear

    B)  Disguised unemployment does not contribute to Gross Domestic Product

    C)  Capital imports cannot be totally dispensed with

    D)  Capital output ratio in the domestic economy has been low.

    Correct Answer: A

    Solution :

    [a] The Net Domestic Product (NDP) equals the Gross Domestic Product (GDP) minus depreciation on a country's capital goods. Net domestic product accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration. The depreciation accounted for is often referred to as "capital consumption allowance" and represents the amount of capital that would be needed to replace those depreciated assets. Thus, NDP estimates how much the country has to spend to maintain the current GDP. If the country is not able to replace the capital stock lost through depreciation, then GDP will fall. In addition, a growing gap between GDP and NDP indicates increasing obsolescence of capital goods, while a narrowing gap means that the condition of capital stock in the country is improving Net Domestic Product is calculated by NDP = GDP-Depreciation. NDP is the sum total of money value of final goods and services produced in a country on an accounting year excluding depreciation cost.

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