Answer to Question #236646 in Economics of Enterprise for Likenaw

Question

Which one of the following is the correct formula?

A. NDP = GDP + Depreciation

B. NI = NDP + NFI – IBT

C. PI = NI –Social Security contribution + Subsidy - Net Interest on Government Bond

D. DI = PI + Personal Taxes

Answer 1

The correct option is

A)NDP = GDP + Depreciation

Net domestic product (NDP) refer to annual measure of the economic output adjusted to account for depreciation and is calculated by subtracting depreciation from the gross domestic product (GDP).

The others are incorrect because

b)NI can be derived from NDP by subtracting income earned by foreigners(NFI) minus the income earned by Americans abroad.

C) PI is given by NI minus payroll taxes (social security contributions), minus corporate profits taxes, minus undistributed corporate profits, and add transfer payments

d)DI = PI - Personal Income Taxes