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We now recognize that assets wear out in the production process either physically or become obsolete. This process is known as depreciation. There has to be part of the economy's gross output to replace existing capital, and this part of gross output is not available for consumption, investment, government spending, or exports. So we subtract depreciation from the GNP to arrive at national income.
National income measures the amount of money the economy has available for spending on goods and services after setting aside enough money[18] to replace resources used up in the production process.