Economics Part A

GDP vs. NDP

GDP (Gross Domestic Product) vs. NDP (Net Domestic Product)

When gross investment is included in domestic product, the term GDP (Gross Domestic Product) is used. When depreciation is taken into account and deducted from gross investments (i.e. net investment is used in national accounts, instead of gross investment), then the term NDP (Net Domestic Product) is used. The difference between the two is depreciation. 

The following table shows a sources and uses report for Country D, which is similar to the previous Sources and uses report for Country D table.  

The following table presents another sources and uses report for Country D, this time using NDP and surplus imports. In this case, annual depreciation for Country D is $2 million. 

When depreciation is subtracted from gross investment, then a net investment of $2 million is left. As a result NDP is $2 million less than GDP. The total amount of sources and uses is also $2 million less.

GDP vs NDP: a comparison

Sources and uses report based on GDP (in millions of dollars) Sources and uses report based on NDP (in millions of dollars)

GDP vs. NDP587GDP  vs. NDP