By how much is gross domestic product greater than net domestic income at factor cost?
A)by net imports and direct business taxes
B)by direct business taxes and appreciation
C)by net exports and indirect business taxes
D)by indirect business taxes and depreciation

Question

Quizplus · Accepted Answer

Gross domestic product (GDP) is calculated by adding up all the final goods and services produced in an economy, while net domestic income at factor cost is calculated by deducting all the production costs from the GDP. The difference between these two measures is due to indirect business taxes (such as sales taxes) and depreciation (which deducts the decrease in value of fixed assets like machinery and buildings). Net exports (choice C) and net imports do not affect this calculation since they are already accounted for in the GDP. Appreciation, while it affects national income accounting, is not included in the calculation of GDP or net domestic income at factor cost. Similarly, direct business taxes (choice A) affect national income accounting but are not included in this calculation.

By How Much Is Gross Domestic Product Greater Than Net