Answer to Question #290734 in Macroeconomics for ayan

Question

What is NDP? Is it a better or worse measure of output than GDP? Explain.

Answer 1

Solution:

Net Domestic Product (NDP) measures the economic output of a nation. NDP is the net value of goods and services produced in a country, which is calculated by deducting depreciation from the GDP.

 

NDP is a better measure of output than GDP as it accounts for net investment spent on enhancing obsolete equipment to maintain the production level. The NDP gives a better insight into a nation’s economic health by considering its net investment. When there is a positive net investment, the economy grows, while a negative net investment indicates a decline in economic growth.