Given the Gross Domestic Product at market price if the country is not able to replace the capital stock lost through depreciation then the value of GDP will ________ .
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Fall
Machines, buildings and equipment wear out as they are used; the part of the capital stock used up in this way is depreciation. A country must spend at least this much just to keep its capital stock, and so its present level of GDP, intact. If the worn-out capital is not replaced, there is less equipment to produce with, the capacity to produce shrinks, and GDP will fall.
This is why net domestic product deducts depreciation from GDP:
NDPMP = GDPMP − Depreciation
NCERT: Introductory Macroeconomics — Chapter 2: National Income Accounting, Table 2.4: Basic National Income Aggregates (2025-26)
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