NDP = GDP - capital depreciation

I tried to understand how to measure NDP but above identity doesn't seem to explain how to do it. How to measure NDP, can anyone give me some explanation with a concrete example?

My thought: Assume a carpenter buy an electric saw for 100\$ and use it for 5 years, then that year GDP would be 100\$ and NDP 80\$(100\$ - 20\$) next four year GDP will be 0\$, 0\$, 0\$, 0\$ and NDP will be -20\$, -20\$, -20\$, -20\$.

My conclusion: If I understand correctly, NDP regards the value of an investment in productive assets as 0. Moreover, there is the imbalance through 5 years(80\$, -20\$, -20\$, -20\$, -20\$). This doesn't look good.

  • 1
    $\begingroup$ The carpenter is not in the electric saw business, and presumably is using it to generate an income from woodworking of hundreds or thousands of dollars a year, the difference between the cost of raw wood and the sales of worked wood. The depreciation just counts as an additional cost of $\$20$ a year for the five years $\endgroup$
    – Henry
    Nov 8 '21 at 16:00

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