Question

Suppose GDP is \(16 trillion, with \)10 trillion coming from consumption, \(2 trillion coming from gross investment, \)3.5 trillion coming from government expenditures, and \(500 billion coming from net exports. Also suppose that across the whole economy, depreciation (consumption of fixed capital) totals \)1 trillion. From these figures, we see that net domestic product equals:

a. \(17.0 trillion

b. \)16.0 trillion

c. $15.5 trillion

d. none of the above

Short answer

Option (d): None of the above

Step-by-step solution

Meaning of net domestic product 

The Net Domestic Product (NDP) is the total value of goods and services produced within the domestic territory of a nation minus the depreciation (consumption of fixed capital).

NDP = GDP - Depreciation

GDP is the Gross Domestic Product

Explanation for choosing the option ‘d’

Given the GDP is $16 trillion, the Net Domestic Product is calculated as shown below:

NDP = (C + I_g + G + X_n) - Depreciation

= GDP - Depreciation

= $16 trillion - $1 trillion

= $15 trillion

NDP is $15 trillion, and since this does not match the first three options (a,b, and c), option ‘d’ is correct.