National Income · 1 min read
Concepts of National Income
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National Income Concepts
GDP is the total money value of everything made inside a country's borders, no matter who made it. Gross Domestic Product (GDP): This is the monetary value of all goods and services produced in a country within a given year, including those of indigenes and foreigners. This means it counts what both Nigerians and foreigners produce within Nigeria.
GDP = C + G + I
GNP is the total money value of everything made by citizens of a country, even if they are working abroad. Gross National Product (GNP): Monetary value of all goods and services produced in a country within a given year plus net income from abroad. This means we add the money Nigerians send home from abroad and subtract the money foreigners send out of Nigeria.
GNP = GDP plus net income from abroad.
NNP is what is left from the Gross National Product after we remove the cost of fixing broken machines. Net National Product (NNP): This can be calculated as Gross National Product less depreciation on fixed assets. It shows the real value of what a nation produced after covering the cost of wear and tear.
NNP = GNP - depreciation.
Depreciation is the amount of money lost because machines and buildings get old or break down. Depreciation: Monetary value of wear and tear on fixed assets such as buildings, machinery, etc within a given year. It is also called capital consumption allowance. It is simply the money set aside to replace old tools and equipment.
Key points
- •Gross Domestic Product (GDP) measures the total monetary value of goods and services produced within a country's borders in a year, by both indigenes and foreigners.
- •Gross National Product (GNP) includes GDP plus net income from abroad, representing income earned by a country's residents and businesses.
- •Net National Product (NNP) is derived by subtracting depreciation (wear and tear on fixed assets) from the Gross National Product.
- •Depreciation, also known as capital consumption allowance, accounts for the monetary value of the wear and tear on fixed assets like buildings and machinery.