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Answer» Net Domestic Product (NDP): - When factors of production such as machines, building, equipment, etc. are used for producing goods and services, they undergo wear and tear and their value decreases. This is called capital depreciation.
- After sometimes, these factors of production become useless and they need to be replaced. Capital is needed to repair these factors of production or replace them in case they become obsolete with the arrival of new technology.
- Thus, during the process of production within a given year, when the depreciation of domestic or foreign factor of production is deducted from gross domestic product, we get net domestic product i.e. NDP.
- After deducting depreciation of factor of production from the domestic (or foreign factors used in the country) during a year is called net domestic product (NDP).
∴ NDP = GDP – Depreciation
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