Output of an Economy: GDP , GNP & NDP , NNP

In every economy, Goods are always produced (example: Cement, steel, mobile etc.) & Services are always rendered (example: banking, insurance etc.). Good are tangible in nature but services are intangible. All these consist a monetary value with it.

Output of any economy comprises all the goods & services (either produced or rendered) which are exchanged for money in a given period of time. Output includes all the goods & services exchanged for money.

Remember one thing, second hand goods are not counted while computing the output. Such goods are already counted while they were manufactured. 

Therefore, we can say that only the final goods are considered.

What is Domestic output?

All the monetary value of final goods & services within the geographical boundary of a country. Remember one thing, while computing domestic output, we include all the goods & services produced by all the people in the boundary of a country. 

Example: It will include all the individuals, public, private & foreign companies 

It is also called as Gross Domestic Product (GDP)

Gross Domestic Product GDP [ (+) incomes of Indian abroad (–) Income of foreigners in India ]     

                                      = Gross National Product GNP

 

If GDP is greater than GNP, then it can be said that the income of Indians abroad is less than incomes of foreigners in India 
 If GDP is lesser than GNP, then it can be said that income of Indians abroad is more than the incomes of foreigners in India.

Now we have understood the concept of GDP & GNP

What is NDP (Net Domestic Product) & NNP (Net National Product)?

If an economy ignores ‘depreciation’ of its machine stocks then it is called as “gross” concept. However, when an economy considers ‘depreciation’ then it is called as “net” concept.

 

 GDP – depreciation = NDP (Net Domestic Product)

GNP – depreciation = NNP (Net National Product)

 

What is the best method to measure growth of an economy?

Out of GDP, NDP, GNP, NNP the best method to measure economic growth is NNP (net National Product) because it covers incomes of all the nationals of a country after depreciation.

 

Problem with NNP in measuring growth

·         Now a day’s countries are having high external debts which one the one hand increased GDP, but on the other side decreases GNP.

·         Even a sale of a particular assets to a foreign entity would result into increase GDP but decreased GNP.

 

Therefore, most of the economies (including USA, India etc.) have switched over to GDP to measure economic growth.