Question

Explain the following term.

Net domestic product at market price.

Answer 1

Simply stated, net domestic product at market price is the difference between the consumption of fixed capital and the market value of finished products and services produced within a nation's borders within an accounting year.

Net Domestic Product at Market Price (abbreviated as NDP at MP) is the monetary value of all final goods and services produced within the domestic territory of a country in an accounting year, after deducting depreciation, and valued at market prices.

It refers to the actual value of domestic production available for use or consumption in the economy, after accounting for wear and tear (depreciation) of capital goods and including indirect taxes and subsidies.

NDP at MP = GDP at MP − Depreciation

NDP at MP = Net Domestic Product at Factor Cost (NDP at FC) + Net Indirect Taxes (NIT)

Net Domestic Product at Market Price is a core concept in national income accounting. It tells us the net market value of all final goods and services produced within a country, making it a better indicator of the economy’s available resources for current use than GDP. It plays an essential role in understanding the real strength of domestic production and in framing fiscal and economic policies.