The NNP can be further subdivided into national income , which includes all income to businesses and individuals, and personal income , which includes only income to people. To get an idea of how these calculations work, follow the steps in the following feature.
Step 2. To calculate net exports, subtract imports from exports. Practice until you feel comfortable doing the questions. Improve this page Learn More. Skip to main content. Search for:. Try It. Glossary depreciation: the process by which capital ages and loses value gross domestic product GDP : the value of the output of all final goods and services produced within a country in a year gross national product GNP : includes what is produced domestically and what is produced by domestic labor and business abroad in a year national income: all income to businesses and individuals net national product NNP : GDP minus depreciation personal income: income made by individuals.
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List of Partners vendors. 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.
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 is expressed in the currency of the nation it represents. The depreciation figure is determined by assessing the loss of the value of assets attributed to normal use and aging. The formula for NNP is:.
Alternatively, NNP can be calculated as:. Depreciation in the overall economy, also referred to as capital consumption allowance CCA , is a key component when calculating a country's NNP. CCA is an indicator of the need to replace certain assets and resources to maintain a specified level of national productivity.
It is divided into two categories: physical capital and human capital. Physical capital can include real estate , machinery, or any other tangible resource used in the production of goods and services. Human capital, on the other hand, covers the skills, knowledge, and abilities of a workforce to produce goods and services, as well as the necessary training or education that may be required to maintain production standards.
Physical capital and human capital depreciate in different ways. Physical capital experiences depreciation based on physical wear and tear , while human capital experiences depreciation based on workforce turnover—when staff leave, companies must spend more of their resources on training and finding new talent.
NNP has particular usefulness for the field of environmental economics. NNP is a model associated with the depletion of natural resources, and it can be used to determine whether certain activities are sustainable within a particular environment.
As previously mentioned, NNP also factors in the value of goods and services produced overseas. That means that the activities of U. That is not the case for GDP and NDP, which limit their interpretation of the economy to the geographical borders of the country. International Markets. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.
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