Net National Product

Topics: Economics, Capital accumulation, Capital Pages: 1 (299 words) Published: October 3, 2011
Net National Product
Net National Product (NNP) is the total market value of all final goods and services produced by citizens of an economy during a given period of time (Gross National Product or GNP) minus depreciation.

Depreciation (also known as consumption of fixed capital) measures the amount of GNP that must be spent on new capital goods to maintain the existing physical capital stock.

NNP is the amount of goods in a given year which can be consumed without reducing the amount which can be consumed in the future. Setting part of NNP aside for investment permits the growth of the capital stock (see economic growth and capital formation), and the consumption of more goods in the future.

NNP can also be expressed as total compensation of employees + net indirect tax paid on current production + operating surplus.

3. Net National Product (NNP) at Market Price: NNP is the market value of all final goods and services after providing for depreciation. That is, when charges for depreciation are deducted from the GNP we get NNP at market price. Therefore’ NNP = GNP – Depreciation

Depreciation is the consumption of fixed capital or fall in the value of fixed capital due to wear and tear. 4.Net National Product (NNP) at Factor Cost (National Income): NNP at factor cost or National Income is the sum of wages, rent, interest and profits paid to factors for their contribution to the production of goods and services in a year. It may be noted that: NNP at Factor Cost = NNP at Market Price – Indirect Taxes + Subsidies.

From a theoretical stance, this is probably the best measure of economic activity. However, from a practical sense, depreciation would be very difficult to measure, so most economists find GNP or GDP to be the most useful.
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