The correct answer is A. NNP = GNP – Depreciation.
Net national product (NNP) is the total market value of all final goods and services produced by a country’s economy in a given year, minus depreciation. It is calculated by taking the gross national product (GNP) and subtracting the value of capital that has been used up in the production process.
Depreciation is the decrease in the value of an asset over time due to wear and tear or obsolescence. It is an important factor in calculating NNP because it reflects the fact that some of the output produced in a given year is used up to maintain the existing capital stock.
GNP is calculated by taking the total value of all final goods and services produced by a country’s economy in a given year and adding the value of net factor income from abroad. Net factor income from abroad is the difference between the income that residents of a country earn from investments abroad and the income that foreigners earn from investments in the country.
NNP is a more accurate measure of a country’s economic output than GNP because it takes into account the depreciation of capital. However, it is important to note that NNP does not include the value of goods and services that are produced but not sold, such as home production and volunteer work.
Here is a brief explanation of each option:
- Option A: NNP = GNP – Depreciation. This is the correct answer. NNP is calculated by taking the GNP and subtracting the value of depreciation.
- Option B: NNP = GNP + Depreciation. This is incorrect. NNP is calculated by taking the GNP and subtracting the value of depreciation, not adding it.
- Option C: NNP = GNP + Direct Tax. This is incorrect. Direct taxes are taxes that are levied directly on individuals or businesses, such as income tax and corporate tax. NNP is not affected by direct taxes.
- Option D: NNP = GNP + Indirect Tax. This is incorrect. Indirect taxes are taxes that are levied on goods and services, such as sales tax and value-added tax. NNP is not affected by indirect taxes.