The term ‘Gross’ is being used for Gross Domestic Product (GDP) because its computation does NOT exclude which of the following factors?

Solution

Gross Domestic Product ( GDP ) is the monetary value of all finished goods and services made within a country during a specific period. GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rate. · "Gross" (in " Gross Domestic Product") indicates that products are counted regardless of their subsequent use. A product can be used for consumption, for investment, or to replace an asset. In all cases, the product's final "sales receipt" will be added to the total GDP figure. · In contrast, "Net” in the Net Domestic Product (NDP) takes into account the depreciation of the asset used. NDP = GDP – Depreciation During production process fixed capital assets like machines, building etc. get depreciated and their value goes down. This is known as normal wear and tear of machinery or consumption of fixed capital or depreciation.