In national income accounting, the term ''net'' is used to indicate that a value-----

Analyze the question: The question asks what the word "net" means in national income accounting, for example in Net National Product (NNP) or Net Domestic Product (NDP).

Explain the concept:

• Gross figures, such as GDP and GNP, measure total output before any allowance for the wearing out of capital goods.
• Net figures are obtained after subtracting depreciation, also called capital consumption allowance. This is the value of capital that has been used up during production.

The key formulas are:

• NNP = GNP − Depreciation
• NDP = GDP − Depreciation

Check each option:

• A. Includes income of foreigners: This relates to domestic measures (GDP). It has nothing to do with "net".
• B. Includes income of citizens: This relates to national measures (GNP). It also has nothing to do with "net".
• C. Includes depreciation: This describes a gross value, which is the opposite of net.
• D. Excludes depreciation: Correct. A net value has had depreciation deducted from it.

Exam tip: Remember "Gross = Gives no allowance for wear and tear; Net = No depreciation included." Also, the words domestic and national concern whose income is counted (within the country or by citizens), while gross and net concern depreciation. Do not mix up the two pairs.