Answer to Question #92803 in Macroeconomics for Nand

Question

GDP at factor cost= Net value added + Depreciation. Here my question is why depreciation added to Net value added? I am confused here: Net value added = Gross value added - depreciation; so the above formula becomes GDP at factor cost= Gross value added - depreciation + Depreciation. Here depreciation get cancelled and finally becomes GDP at factor cost= Gross value added.

Answer 1

Actually depreciation is very difficult to actual estimate, that's why we generally opt the term GDP for knowing economic growth which already included depreciation in it.Though conceptually we'd prefer to use NDP over GDP.