Asked by Jordan Pollock on Jul 20, 2024
Verified
An increase in depreciation will do which of the following?
A) Increase GDP and leave NDP unchanged
B) Decrease NDP and leave GDP unchanged
C) Decrease GDP and leave NDP unchanged
D) Increase both GDP and NDP
Depreciation
The gradual reduction of the recorded cost of a fixed asset over its useful life, reflecting the asset's wear and tear, obsolescence, or decline in value.
NDP
Net Domestic Product (NDP) refers to the total value of all goods and services produced within a country in a specific time period, minus the total value of the goods and services used up in production.
- Comprehend the concept of net investment and its relation to gross investment and depreciation.
Verified Answer
VL
Vanessa LopezJul 26, 2024
Final Answer :
B
Explanation :
Depreciation is a measure of the wearing out, consumption, or other loss of value of a fixed asset. An increase in depreciation reduces Net Domestic Product (NDP) because NDP is calculated by subtracting depreciation from Gross Domestic Product (GDP). However, an increase in depreciation does not affect GDP itself, as GDP measures the total value of all goods and services produced over a specific time period without adjustments for depreciation.
Learning Objectives
- Comprehend the concept of net investment and its relation to gross investment and depreciation.