Answer :
To determine the consumption of fixed capital, also known as depreciation, let's understand the relevant economic concepts and perform the mathematical operations appropriately:
1. Gross Domestic Product (GDP): This is the total value of all goods and services produced within a country over a specific time period.
2. Net Domestic Product (NDP): This is the GDP minus depreciation. It represents the value of goods and services produced minus the value lost as a result of depreciation of capital.
The relationship between GDP and NDP can be written as:
[tex]\[ \text{NDP} = \text{GDP} - \text{Depreciation} \][/tex]
3. Consumption of Fixed Capital (Depreciation): This term refers to the wear and tear or reduction in value of capital goods like buildings, machinery, and equipment.
Rearranging the above equation to solve for depreciation, we get:
[tex]\[ \text{Depreciation} = \text{GDP} - \text{NDP} \][/tex]
Given the options:
1. Adding net investment to gross investment:
[tex]\[ \text{This does not directly relate to depreciation}. \][/tex]
2. Adding taxes on production and imports to NDP:
[tex]\[ \text{This operation does not relate to calculating depreciation}. \][/tex]
3. Subtracting NDP from GDP:
[tex]\[ \text{This matches our derived formula for depreciation}. \][/tex]
4. Subtracting net investment from GDP:
[tex]\[ \text{This does not provide us with the value of depreciation}. \][/tex]
Based on the breakdown and the correct understanding of economic concepts, the correct answer is:
[tex]\[ \text{Subtracting NDP from GDP} \][/tex]
So, the correct choice is:
O subtracting NDP from GDP.
1. Gross Domestic Product (GDP): This is the total value of all goods and services produced within a country over a specific time period.
2. Net Domestic Product (NDP): This is the GDP minus depreciation. It represents the value of goods and services produced minus the value lost as a result of depreciation of capital.
The relationship between GDP and NDP can be written as:
[tex]\[ \text{NDP} = \text{GDP} - \text{Depreciation} \][/tex]
3. Consumption of Fixed Capital (Depreciation): This term refers to the wear and tear or reduction in value of capital goods like buildings, machinery, and equipment.
Rearranging the above equation to solve for depreciation, we get:
[tex]\[ \text{Depreciation} = \text{GDP} - \text{NDP} \][/tex]
Given the options:
1. Adding net investment to gross investment:
[tex]\[ \text{This does not directly relate to depreciation}. \][/tex]
2. Adding taxes on production and imports to NDP:
[tex]\[ \text{This operation does not relate to calculating depreciation}. \][/tex]
3. Subtracting NDP from GDP:
[tex]\[ \text{This matches our derived formula for depreciation}. \][/tex]
4. Subtracting net investment from GDP:
[tex]\[ \text{This does not provide us with the value of depreciation}. \][/tex]
Based on the breakdown and the correct understanding of economic concepts, the correct answer is:
[tex]\[ \text{Subtracting NDP from GDP} \][/tex]
So, the correct choice is:
O subtracting NDP from GDP.
