What is GDP, GNP, NDP, NNP? – Basic economics

Economics is a subject that deals with the production, distribution, and consumption of goods and services in a country. 

There are 2 main streams of economics. They are Microeconomics and Macroeconomics.

Microeconomics : “micro” is used to deal with something specific rather than a general subject.

Example: economy of an individual or a smaller group of people or a firm.

Macroeconomics : “macro” is used to deal with something in general rather than a specific subject.

Example : economy of the nation as a whole. 

Now , let’s see about National income and  methods to measure national income. 

National income : Total value of the final goods and services produced in the country in a particular period. The growth of national income helps to know the progress of the country.

Measuring the national income is very important to get to know the standard of living of the people. Its also a key factor in deciding various economic policies ( tax rates , interest rates etc ).

Various measures of National Income:

  1. GDP – Gross Domestic Products

“Domestic” is the keyword which means the geographical area. GDP is the total value of goods and services produced in a definite area i.e within the boundaries of the country during a given period by both the residents and foreign nationals inside the boundaries of the country. 

GDP = Q*P

Q- Total quantity of goods and services produced inside the boundaries of the country by local residents and foreign nationals.

P – Price of the final goods and services.

  1. Net Domestic Products

NDP = GDP – Depreciation on capital goods 

NDP is adjusted to account of depreciation. Its calculated by subtracting depreciation of capital goods i.e buildings/cars/machines etc from the gross domestic product (GDP).

  1. GNP – Gross National Product 

“National” is the keyword here which denotes the citizens of a specific country irrespective of where they live. GNP is the total value of goods and services produced by the citizens ( residents and non residents )  of the country. Income of all foreign nationals who reside within the country is excluded.

GNP can be calculated from GDP.

GNP = GDP + NFIA

NFIA – Net factor Income from Abroad.

(Income from the goods and services produced outside the country by the citizens of the country) – ( income from the goods and services produced inside the country by the foreign nationals) 

  1. NNP – Net National Product. 

Its similar to NDP. NNP is  also calculated by subtracting depreciation on the capital goods from the gross national product (GNP). 

These are the very basic concept of the economics. Next time when you come across these in news hope u can relate to it. 

Until next time 🙂 

Tags:

Leave a Reply