Net National Product (NNP)

-

NNP

 Net National Product (NNP)

 Net National Product (NNP) of an economy is the GNP after deducting the loss due to ‘depreciation’. The formula to derive it may be written like this:

NNP = GNP – Depreciation

or,

NNP = GDP + Income from Abroad – Depreciation.

The different uses of the concept of NNP are as given below:

(i) This is the ‘National Income’ (NI) of an economy. Though, the GDP, NDP, and GNP, all are ‘national income’ they are not written with capitalized ‘N’ and ‘I’.

(ii) This is the purest form of the income of a nation.

(iii) When we divide NNP by the total population of a nation we get the ‘per capita income’ (PCI) of that nation, i.e., ‘income per head per year’. A very basic point should be noted here that this is the point where the rates of depreciation followed by different nations make a difference. Higher the rates of depreciation lower the PCI of the nation (whatever be the reason for it logical or artificial as in the case of depreciation being used as a tool of policymaking). Though economies are free to fix any rate of depreciation for different assets, the rates fixed by them make difference when the NI of the nations are compared by the international financial institutions like the IMF, WB, ADB, etc.


Comments

Post a Comment

Popular posts from this blog

Net Domestic Product (NDP)

-
Image
 NDP Net Domestic Product Net Domestic Product (NDP) is the GDP calculated after adjusting the weight of the value of ‘depreciation’. This is, basically, net form of the GDP, i.e., GDP minus the total value of the ‘wear and tear’ (depreciation) that happened in the assets while the goods and services were being produced. Every asset (except human beings) go for depreciation in the process of their uses, which means they ‘wear and tear’. The governments of the economies decide and announce the rates by which assets depreciate (done in India by the Ministry of Commerce and Industry) and a list is published, which is used by different sections of the economy to determine the real levels of depreciation in different assets. For example, a residential house in India has a rate of 1 percent per annum depreciation, an electric fan has 10 percent per annum, etc., which is calculated in terms of the asset’s price. This is one way how depreciation is used in economics. The other way it is us...
Read more

Non-Market Economy

-
Image
 Non-Market Economy Rooted (immediately) in the ideas of Karl Marx (1818-83), it had two variants—socialist and communist. While in the socialist model (ex-USSR, 1917-89) state was having ownership control on only natural resources, in the communist model (China, 1949-85) the state used to have ownership control over labour also. It got also known by its other names such as State Economy, Command Economy, Centrally Planned Economy. Basically, this system evolved in ‘reaction’ to the market economy and was based on the following main beliefs— ■ Resources of a country should be used for the wellbeing of all. ■ Resources are best used once they are under the ownership of society/community (Socialism/Communism). Thus, all economic roles will be played by the state only. ■ No property rights given to individuals guided by the belief that it promotes exploitation of the labourers (i.e., proletariat) and helps a small minority (i.e., bourgeoisie) to get richer over time—resulting into inc...
Read more

MICRO AND MACRO ECONOMICS

-
Image
 MICRO AND MACRO ECONOMICS After the Great Depression (during the 1930s) the domain of economics got divided into two broad branches—the micro- and macro-economics. John Maynard Keynes is considered the father of macroeconomics (the branch came into being after the publication of his seminal work, The General Theory of Employment, Interest and Money, in 1936). Simply put, if macroeconomics (macro) is about the forest, microeconomics (micro) is about the trees. While the former deals with the big picture (the forest) the latter deals with the details (the trees) that make up the forest. Micro and macro are the Greek words which mean ‘small’ and ‘big’, respectively. While micro takes a bottoms-up approach to analyse economy, macro takes a top-down approach. Taking an example, while micro tries to understand the choices which consumers make and the income they earn, macro tries to understand the dynamics of inflation and growth. Though, they appear to be different, they are actually i...
Read more