Question

Which one is true?

• A. GNP = GDP + Depreciation
• B. NNP = GNP + Depreciation
• C. NNP = GNP - Depreciation
• D. GNP = NNP - Depreciation

Hint:

The rule is simple: To get from Gross to Net, you always subtract depreciation.

Answer 1

The Correct Option is C

The relationship between "Gross" and "Net" concepts in national income accounting is defined by depreciation (also called consumption of fixed capital).

Gross refers to the total value before accounting for the wear and tear of capital goods.
Net refers to the value after subtracting depreciation.
Therefore, the correct formula is: \[ \text{Net National Product (NNP)} = \text{Gross National Product (GNP)} - \text{Depreciation} \] Let's check the other options: (A) is incorrect. (B) is incorrect; adding depreciation to Net would give Gross. (D) is incorrect; it should be GNP = NNP + Depreciation.