National Income is the financial health of a nation and its citizens. It is measured in terms of Gross National Income (GNP), Net National Income (NNP), Gross Domestic Product (GDP), Net Domestic Product (NDP).
Value of produced goods and services may be calculated at either the ‘factor cost’ or the ‘market cost’.
Factor cost is the ‘input cost’ the producer has to incur in the process of producing goods or service.
Market cost is the cost at which goods reach the market after adding the indirect taxes to the factor cost of the product.
Gross Domestic Product:
Gross domestic product is the total value of goods and services produced in the country irrespective of it being produced by citizens or foreign-owned companies in a financial year.
The Gross domestic product includes income from taxes, wages, salaries, rents, interest, dividend, self-employed persons, partnerships, etc. GDP does not include income earned from abroad.
Net Domestic Product:
Net National Product = Gross Domestic Product – Depreciation
Depreciation is the ‘wear and tear’ of goods in the process of their use.
Gross National Income:
Gross National Income = Gross Domestic Product + Income coming from abroad – Income going to abroad.
Net Income from abroad means the difference between value of exports and imports of goods and services. In this concept of GNP there are certain factors that have to be taken into consideration.
The income earned through illegal activities is not included in GNP.
GNP is frequently used as it expresses the actual condition of production and employment in a country during a specific period and also provides an idea of the performance of the economy.
Net National Product
Net National Product = Gross National Product – Depreciation
Cost
Factor cost is the ‘input cost’ the producer has to incur in the process of producing goods or service.
Market cost is the cost at which goods reach the market after adding the indirect taxes to the factor cost of the product.
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