Net National Product (NNP)
What Is Net National Product (NNP)?
Net national product (NNP) is the monetary value of completed goods and services created by a country's residents, overseas and domestically, in a given period. It is the equivalent of gross national product (GNP), the total value of a nation's annual result, minus the amount of GNP required to purchase new goods to keep up with existing stock, also called depreciation.
Figuring out Net National Product (NNP)
NNP is much of the time analyzed on an annual basis as a method for estimating a nation's progress in continuing least production standards. It very well may be a valuable method to keep track of a economy as it considers every one of its residents, paying little mind to where they bring in their money, and recognizes the way that capital must be spent to keep production standards high.
The NNP is communicated in the currency of the nation it addresses. That means that in the United States the NNP is communicated in dollars (USD), while for European Union (EU) member nations the NNP is communicated in euros (EUR).
The NNP can be extrapolated from the GNP by taking away the depreciation of any assets. The depreciation not set in stone by surveying the loss of the value of assets ascribed to normal use and aging.
The relationship between a nation's GNP and NNP is like the relationship between its gross domestic product (GDP) and net domestic product (NDP).
Working out Net National Product (NNP)
The formula for NNP is:
Then again, NNP can be calculated as:
For instance, if Country A produces $1 trillion worth of goods and $3 trillion worth of services in 2018, and the assets used to create those goods and services are depreciated by $500 billion, utilizing the formula above, Country A's NNP is:
Recording Depreciation
Depreciation in the overall economy, likewise alluded to as capital consumption allowance (CCA), is a key part while computing a country's NNP. CCA is an indicator of the need to supplant certain assets and resources to keep a predetermined level of national productivity. It is partitioned into two categories: physical capital and human capital.
Physical capital can incorporate real estate, machinery, or some other tangible resource utilized in the production of goods and services. Human capital, then again, covers the skills, information, and capacities of a labor force to deliver goods and services, as well as the essential training or education that might be required to keep up with production standards.
Physical capital and human capital deteriorate in various ways. Physical capital encounters depreciation in view of physical wear and tear, while human capital encounters depreciation in light of labor force turnover — when staff leave, companies must spend a greater amount of their resources on training and finding new ability.
Special Considerations
Environmental Economics
NNP has specific value for the field of environmental economics. NNP is a model associated with the depletion of natural resources, and it very well may be utilized to decide if certain activities are sustainable inside a specific environment.
Unfamiliar Made Products
As recently referenced, NNP likewise factors in the value of goods and services delivered overseas. That means that the activities of U.S. manufacturers in Asia, for instance, count toward the U.S.' NNP.
That isn't the case for GDP and NDP, which limit their interpretation of the economy to the geographical lines of the country.
Highlights
- Net national product (NNP) is gross national product (GNP), the total value of completed goods and services created by a country's residents overseas and domestically, minus depreciation.
- NNP is in many cases inspected on an annual basis as a method for estimating a nation's outcome in continuing least production standards.
- Gross Domestic Product (GDP) is the most well known method to measure national income and economic thriving, despite the fact that NNP is noticeably utilized in environmental economics.
