ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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**6. Gross Private Domestic Investment (Ig) vs. Net Private Domestic Investment (In)**

Gross private domestic investment (Ig) *minus* depreciation is net private domestic investment (In). That is, In = Ig – Depreciation. **Depreciation** is the value of all the physical capital—machines, equipment, buildings—used up in producing the year’s output.

The difference between gross domestic product (GDP) and net domestic product (NDP) is the value of the consumption of fixed capital or depreciation allowance. GDP includes **gross** private investment expenditures. NDP includes **net** private investment expenditures after the depreciation allowance has been subtracted from gross investment. NDP is simply GDP adjusted for depreciation. If you were to determine net domestic product (NDP) through the expenditures approach, net private domestic investment (In) measures of investment spending would be appropriate.
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Transcribed Image Text:**6. Gross Private Domestic Investment (Ig) vs. Net Private Domestic Investment (In)** Gross private domestic investment (Ig) *minus* depreciation is net private domestic investment (In). That is, In = Ig – Depreciation. **Depreciation** is the value of all the physical capital—machines, equipment, buildings—used up in producing the year’s output. The difference between gross domestic product (GDP) and net domestic product (NDP) is the value of the consumption of fixed capital or depreciation allowance. GDP includes **gross** private investment expenditures. NDP includes **net** private investment expenditures after the depreciation allowance has been subtracted from gross investment. NDP is simply GDP adjusted for depreciation. If you were to determine net domestic product (NDP) through the expenditures approach, net private domestic investment (In) measures of investment spending would be appropriate.
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