Multiple choice

Gross Domestic Product (GDP) is called ‘gross’ because its computation does not exclude

  1. depreciation of capital (consumption of capital in production process)

  2. subsidies on consumption of goods

  3. earnings of foreign factors in host country

  4. impact of price rise
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A Correct answer
Explanation

GDP is 'gross' because it does not account for the wear and tear of capital assets used in production, known as depreciation. Net Domestic Product (NDP) is calculated by subtracting depreciation from GDP.

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