Net National Product
Net national product (NNP) is the monetary value of finished goods and services produced by a country’s citizens, overseas and domestically, in a given period. It is the equivalent of gross national product (GNP), the total value of a nation’s annual output, minus the amount of GNP required to purchase new goods to maintain existing stock, otherwise known as depreciation.
- Net national product (NNP) is gross national product (GNP), the total value of finished goods and services produced by a country’s citizens overseas and domestically, minus depreciation.
- NNP is often examined on an annual basis as a way to measure a nation’s success in continuing minimum production standards.
- Gross Domestic Product (GDP) is the most popular method to measure national income and economic prosperity, although NNP is prominently used in environmental economics.
NNP is often examined on an annual basis as a way to measure a nation’s success in continuing minimum production standards. It can be a useful method to keep track of an economy, as it takes into account all its citizens, regardless of where they make their money, and acknowledges the fact that capital must be spent to keep production standards high.
The NNP can be extrapolated from the GNP by subtracting the depreciation of any assets. The depreciation figure is determined by assessing the loss of the value of assets attributed to normal use and aging.
Calculating Net National Product (NNP)
The formula for NNP is:
Through the expression given above, we get the value of NNP evaluated at
market prices. But market price includes indirect taxes. When indirect taxes
are imposed on goods and services, their prices go up. Indirect taxes accrue to
the government. We have to deduct them from NNP evaluated at market prices in order to calculate that part of NNP which actually accrues to the factors of production. Similarly, there may be subsidies granted by the government on the prices of some commodities (in India petrol is heavily taxed by the government, whereas cooking gas is subsidised). So we need to add subsidies to the NNP evaluated at market prices. The measure that we obtain by doing so is called Net National Product at factor cost or National Income.
(Indirect taxes – Subsidies) = NNP at market prices – Net indirect taxes (Net
indirect taxes = Indirect taxes – Subsidies)
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