out of depreciation and change in stock which one would be added toNET CAPITAL FORMATION while calculating national income by expenditure method?
Hey Shruti, change in stock is included in net capital formation, thus only depreciation will be added to net domestic capital formation.
That is,
Gross Domestic Capital Formation (GDCF)= Net Capital Formation (NDFCF) + Depreciation
But, in case net domestic fixed capital formation is given in the question then both depreciation and change in stock are added to net domestic capital formation.
That is,
Gross Domestic Capital Formation (GDCF)= Net Domestic Fixed Capital Formation (NDFCF) + Depreciation + Change in Stock
That is,
Gross Domestic Capital Formation (GDCF)= Net Capital Formation (NDFCF) + Depreciation
But, in case net domestic fixed capital formation is given in the question then both depreciation and change in stock are added to net domestic capital formation.
That is,
Gross Domestic Capital Formation (GDCF)= Net Domestic Fixed Capital Formation (NDFCF) + Depreciation + Change in Stock