Final answer:
An increase in the depreciation expense for company Grace will reduce its net income on the financial statements, as depreciation is an operating expense subtracted from revenues to determine profits.
Step-by-step explanation:
If the company Grace is planning for an increase in the depreciation expense next year, on the financial statements of Grace this will reduce the net income because depreciation is an operating expense that is subtracted from revenues to calculate profits. For example, if the Gross Domestic Product (GDP) and income receipts from the rest of the world are considered along with income payments to the rest of the world, a simplified formula to understand the impact might look like this:
NNP = GDP + Income receipts from the rest of the world - Income payments to the rest of the world - Depreciation = $560 + $10 - $8 - $40 = $522 billion.
In this context, an increase in Grace's depreciation expense would similarly reduce its net income or net national product (NNP), assuming all other factors remain constant.