Often in the economic literature and on TV screens such definitions as net national product and gross national income are heard. All of them are indicators of the well-being of society, and it would not hurt to know what they are composed of.
In order to obtain an indicator of that part of the gross national product (GNP) that the country's population could consume without taking into account the depreciation of structures, buildings, machinery and equipment, depreciation deductions must be deducted from the GNP. As a result, this part will be the net national product (NNP).
Thus, the net national product represents the total volume of final goods and services that were produced and consumed by the population for a specific period of time (within a year). In addition, the CNP does not include the funds that were used to replace obsolete fixed assets.
This indicator measures the total annual volume of goods and services produced in the entire economy, which includes various industries, firms, households, foreign companies, whose activities will not further reduce the production capacity of the state.
The net national product can be determined by several methods. The first is to deduct depreciation from the gross national product. This is done by separating from the GNP those costs that went to reimburse the already consumed fixed capital:
NNP = GNP - depreciation
The second way to calculate the NNP is to determine the cost of acquiring its main parts. This may include: government spending on the purchase of goods and raw materials, including net exports, general consumer spending of all citizens.
The last method is to calculate the NNP based on total wages, indirect taxes, company profits, rents, or simply income.
The net national product reflects the full value of the gross national product, which is used by the population. However, the PNP consists of various taxes that do not fall directly into the consumption of the population. These are mainly indirect taxes - customs duties and excise taxes. With the deduction of these indirect taxes from the entire volume of the net national product, the resulting aggregate will determine the value of the national income:
ND = CNP - indirect taxes.
