Question
Which statement correctly describes Net National Product
(NNP)?Solution
Net National Product (NNP) is calculated by subtracting depreciation expenses from the Gross National Product (GNP). Depreciation represents the cost incurred in repairing or replacing machinery and equipment used in the production process. The formula NNP = GNP - Depreciation reflects that NNP accounts for the wear and tear of capital goods, providing a more accurate measure of a country's economic output by excluding the portion needed to maintain existing capital stock.
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