Basic Concepts of Macroeconomics: Gross vs Net, Domestic vs National, Nominal vs Real, Factor Cost vs Market Price

1. Gross vs Net Gross: Refers to the total value without deducting depreciation (wear and tear of capital goods). Includes the full value of goods and services produced in an economy. Key term: Depreciation (also called capital consumption). Net: Refers to the value obtained after deducting depreciation from the gross value. Net value gives a more accurate picture of an economy’s productive capacity. Formula: Net Value = Gross Value − Depreciation \text{Net Value} = \text{Gross Value} - \text{Depreciation} Example: If Gross Domestic Product (GDP) is ₹100 lakh and depreciation is ₹10 lakh: Net Domestic Product (NDP) = 100 − 10 = ₹ 90  lakh \text{Net Domestic Product (NDP)} = 100 - 10 = ₹90 \text{ lakh} 2. Domestic vs National Domestic: Refers to the value of goods and services produced within the geographical boundaries of a country, irrespective of who owns the resources (domestic or foreign entities). Example: A factory in India owned by a foreign company contributes to Domestic Product . National: Refers to the va…