Net National Product
Encyclopedia
Net national product is the total market value
of all final goods
and services produced by residents in a country or other polity during a given time period (gross national product or GNP) minus depreciation
. The net domestic product
(NDP) is the equivalent application of NNP within macroeconomics, and NDP is equal to gross domestic product
(GDP) minus depreciation: NDP = GDP - depreciation.
Depreciation (also known as consumption of fixed capital
) measures the amount of GNP that must be spent on new capital good
s to maintain the existing physical capital stock.
NNP is the amount of goods in a given year which can be consumed without reducing future consumption. Setting part of NNP aside for investment
permits capital stock growth (see economic growth
and capital formation
), and greater future consumption
.
NNP also equals total compensation of employees
+ net indirect tax paid on current production + operating surplus
.
Market value
Market value is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with open market value, fair value or fair market value, although these terms have distinct definitions in different standards, and may differ in some...
of all final goods
Good (economics and accounting)
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. It is normally used in the plural form—goods—to denote tangible commodities such as products and materials....
and services produced by residents in a country or other polity during a given time period (gross national product or GNP) minus depreciation
Depreciation
Depreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....
. The net domestic product
Net domestic product
The net domestic product equals the gross domestic product minus depreciation on a country's capital goods.Net domestic product accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration...
(NDP) is the equivalent application of NNP within macroeconomics, and NDP is equal to gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
(GDP) minus depreciation: NDP = GDP - depreciation.
Depreciation (also known as consumption of fixed capital
Consumption of fixed capital
Consumption of fixed capital is a term used in business accounts, tax assessments and national accounts for depreciation of fixed assets...
) measures the amount of GNP that must be spent on new capital good
Capital good
A capital good, or simply capital in economics, is a manufactured means of production. Capital goods are acquired by a society by saving wealth which can be invested in the means of production....
s to maintain the existing physical capital stock.
NNP is the amount of goods in a given year which can be consumed without reducing future consumption. Setting part of NNP aside for investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
permits capital stock growth (see economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
and capital formation
Capital formation
Capital formation is a concept used in macroeconomics, national accounts and financial economics. Occasionally it is also used in corporate accounts. It can be defined in three ways:...
), and greater future consumption
Consumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
.
NNP also equals total compensation of employees
Compensation of employees
Compensation of employees is a statistical term used in national accounts, balance of payments statistics and sometimes in corporate accounts as well...
+ net indirect tax paid on current production + operating surplus
Operating surplus
Operating surplus is an accounting concept used in national accounts statistics Operating surplus is an accounting concept used in national accounts statistics Operating surplus is an accounting concept used in national accounts statistics (such as United Nations System of National Accounts (UNSNA)...
.
See also
- Genuine progress indicatorGenuine Progress IndicatorThe genuine progress indicator is an alternative metric system which is an addition to the national system of accounts that has been suggested to replace, or supplement, gross domestic product as a metric of economic growth...
(GPI) - Value addedValue addedIn economics, the difference between the sale price and the production cost of a product is the value added per unit. Summing value added per unit over all units sold is total value added. Total value added is equivalent to Revenue less Outside Purchases...
- Value productValue productThe value product is an economic concept formulated by Karl Marx in his critique of political economy during the 1860s, and used in Marxian social accounting theory for capitalist economies...
- Net domestic productNet domestic productThe net domestic product equals the gross domestic product minus depreciation on a country's capital goods.Net domestic product accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration...
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