Concepts of national income

The concepts of National Income are:- GDP, NDP, GNP, NNP.

1) GDP- It stands for GROSS DOMESTIC PRODUCT.  It is the total value of goods and services produced within the country during a year.

GDP is calculated both at market price and factor cost.

A) GDP AT MARKET PRICE:-
Dernberg defines GDPat market price as, " the market value of the output of final goods and services produced in the domestic territory of a country during an accounting year. "

The formula to calculate GDP at Market price is:
             GDPmp= C+I+G+(X-M)
Where,
             C= Consumption expenditure on goods and services
              I= Investment in fixed capital
              G= Government expenditure on final goods and services
               X= Exports of goods and services of the country
               M= Imports
               X-M= Net export

B) GDP AT FACTOR COST:-
It is the sum of net value added by all producers within the country. Since the net value added gets distributed as income to the owners of factors of production,  GDP is the sum of domestic factor incomes and depreciation.

The formula to calculate GDP at factor cost is:
         GDPfc= GDPmp-Indirect taxes+Subsidies.

2) NDP:- It stands for NET DOMESTIC PRODUCT. It is the value of net output of the economy during the year.

The formula to calculate it is:
         NDP= GDPfc- Depreciation
Where,  depreciation is the wearing out of capital equipment each year during production process,.

3) GNP:- It stands for GROSS NATIONAL PRODUCT.  It is the total measure of the flow of goods and services at market value resulting from current  production during a year in a country, including Net Income From Abroad.

The formula to calculate it is:
 GNP= C+I+(X-M)+G
Where,
      C=Private Consumption Expenditure
       I= Gross Domestic Private Investment
       X-M=Net Foreign Investment
       G=Government Expenditure on goods and services

GNP can also be calculated at market price and factor cost.

A) GNP AT MARKET PRICE:-
When we multiply the total output produced in one year by their market prices prevalent during that year in a country, we get the Gross National Product at market prices.
             GNPmp= GDPmp+Net income from abroad.

B) GNP AT FACTOR COST:
It is the sum of the money value of the income produced by and accruing to the various factors of production in one year in a country.
             GNPfc=GNPmp-Indirect Taxes+Subsidies

4) NNP:- It stands for NET NATIONAL PRODUCT. It includes the value of total output of consumption goods and investment goods. The word 'net' refers to the exclusion of that part of total output which represents depreciation.  Thus,
                     NNP= GNP- Depreciation.

NNP is also measured at market price and factor cost.,

A) NNP AT MARKET PRICE:
NNP at market price is the net value of final goods and services evaluated at market prices in the course of one year in a country.
           NNPmp= GNPmp - Depreciation

B) NNP AT FACTOR COST:
It is the net output evaluated at factor prices. It includes income earned by factors of production through participation in the production process such as wages and salaries, rents, profits etc.
            NNPfc= NNPmp-Indirect Taxes+Subsidies.

NOTE:- NNPfc is also known as National Income.
        NNPfc= NNPmp-Indirect taxes+Subsidies
                   = GNPmp-Depreciation-Indirect taxes+subsidies   
                    =National Income 

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