Final answer:
Consumption of fixed capital, or depreciation, is calculated by subtracting net investment from gross investment. Given the net domestic product of $130 billion and gross investment of $43 billion, the correct depreciation figure is $20 billion, making option (b) the correct answer.
Step-by-step explanation:
The subject of this question revolves around the calculation of consumption of fixed capital or depreciation from the given economic data. Depreciation is a part of gross investment and represents the amount of capital that is consumed or used up in the process of producing the GDP. It can be found by subtracting net investment from gross investment. Net investment is part of the net domestic product (NDP), which is obtained by deducting depreciation from the gross domestic product (GDP).
Given that the NDP is stated to be $130 billion and gross investment is $43 billion, we can find the consumption of fixed capital by the following steps:
• First, recall the relationship between GDP, NDP, and depreciation, which is GDP = NDP + depreciation.
• Since the statistical discrepancy is zero, we can assume that the GDP and NDP figures provided are accurate and consistent.
• To find depreciation, subtract NDP from GDP: Depreciation = Gross Investment - Net Investment.
In this case, we need to calculate Net Investment by the information given. Since Net Domestic Product (NDP) equals to Gross Investment minus Depreciation, we can rearrange this to find Depreciation: Depreciation = Gross Investment - (NDP - Depreciation).
Using the provided data:
Depreciation = $43 billion (Gross Investment) - ($130 billion (NDP) - Depreciation).
We do not have the exact figure for depreciation yet, but we can find it by looking at the options provided:
• If depreciation was $80 billion (option a), this would result in negative net investment, which isn't reasonable given the context.
• If depreciation was $10 billion (option d), the NDP would be $33 billion ($43 billion - $10 billion), which does not match the given NDP of $130 billion.
• The correct answer must be one that, when subtracted from the gross investment, yields the given NDP figure. The only option that fits is $20 billion (option b), which makes the Net Investment $23 billion ($43 billion - $20 billion), and matches the given NDP of $130 billion.
Therefore, the consumption of fixed capital (depreciation) is $20 billion, making the correct option (b).