Question

Given below are two statements:
Statement I: Gross Domestic Product (GDP) is the final value of the goods and services produced with in the geographical boundaries of a country during a year.
Statement II: GDP equals the Net Domestic Product (NDP) plus depreciation (Value of loss of an asset) on country's capital goods.
In the light of the above statements, choose the most appropriate answer from the options given below

• A. Both Statement I and Statement II are correct
• B. Both Statement I and Statement II are incorrect
• C. Statement I is correct but Statement II is incorrect
• D. Statement I is incorrect but Statement II is correct

Answer 1

The Correct Option is A

To determine the correctness of the statements related to Gross Domestic Product (GDP), we will evaluate each statement individually:

1. Statement I: "Gross Domestic Product (GDP) is the final value of the goods and services produced within the geographical boundaries of a country during a year."
   • This definition aligns with the widely accepted definition of GDP. It is indeed the total market value of all goods and services produced within a country's borders within a specific time period, typically a year. This includes all sectors of the economy such as agriculture, manufacturing, and services.
   • Hence, Statement I is correct.
2. Statement II: "GDP equals the Net Domestic Product (NDP) plus depreciation (Value of loss of an asset) on the country's capital goods."
   • Net Domestic Product (NDP) is derived from GDP by subtracting depreciation. Therefore, GDP can indeed be expressed as: GDP = NDP + \text{Depreciation}
   • Depreciation accounts for the wear and tear on capital goods over time. Thus, this formula reflects how GDP can be calculated by adding back depreciation to NDP.
   • Therefore, Statement II is also correct.

Thus, in conclusion: Both Statement I and Statement II are correct.

This validates the provided correct answer: Both Statement I and Statement II are correct.