what is the role of depreciation in GDP MP

Dear Student,

Understanding Depreciation : 
Every business acquires fixed assets for its use in the business over a period of time. As the benefits of these assets can be availed over a long period of time, thus, due to their regular use, there occurs continuous wear and tear and consequently fall in their value. This fall in the value of fixed assets, due to their regular use or expiry of time is termed as depreciation.

A machinery costing Rs 1,00,000 and its useful life is 10 years; so, depreciation is calculated as:

Role of Depreciation in GDP at M.P. calculation.

GNP at market price is defined as “the market value of all the final goods and services produced in the domestic territory of a country by normal residents during an accounting year including net factor income from abroad. Being gross it includes depreciation

GDP (gross domestic product) at market price = NDP at market price + Depreciation


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Gdp means final value of goods and services produced within the domestic territory of a country at market price including depreciation. If depreciation is removed then the gross value will be converted into net value ok. GDP at MP - DEPRECIATION =NDP at MP.
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