Different Concepts of National Income




Different Concepts of National Income : 
1) Gross Domestic Product (GDP) :
Gross Domestic Product is the gross market value of all final goods and services produced within the domestic territory of a country, during a period of one year.

∴GDP = C + I + G + (X-M) 

C = Private consumption expenditure
I = Domestic Private Investment
G = Government's consumption and Investment Expenditures
X - M = Net export value (Value of Exports - Value of imports

Importance of GDP:

Samuelson and Nordhaus neatly sum up the importance of the national accounts and GDP in their seminal textbook Economics They liken the ability of GDP to give an overall picture of the state of the economy to that of a satellite in space that can survey the weather across an entire continent.

GDP enables policymakers and central banks to judge whether the economy is contracting or expanding, whether it needs a boost or needs to be restrained, and if threats such as a recession or rampant inflation loom on the horizon.

2) Net Domestic Product (NDP) :
Net Domestic Product is the net market value of all final goods and services produced, within the territorial boundaries of a country, during a period of one year. 

∴ NDP = GDP - Depreciation.

Importance of NDP:

If the gap between the GDP and NDP is narrower or smaller, then it is considered good for an economy. Also, it indicates economic balance. However, a wider gap between the GDP and NDP shows an increase in the value of obsolescence. As the NDP takes into account the depreciation of capital assets, it is considered to be superior to the GDP as a measure of well-being of a nation.
3) Gross National Product (GNP) :

Gross National Product means the gross value of final goods and services produced annually in a country, which is estimated according to the price prevailing in the market.
 ∴ GNP = C + I + G + (X-M) + (R-P). 

 ∴ GNP = C + I + G + (X-M) + (R-P). 

(R = receipts from abroad and P = payments made abroad)

Importance of GNP:

The big advantage of the GNP is that it is a single figure which contains a huge load of hints concerning not just the economy but also the general living standard in a country. The GNP per capita is not only the average income in a country - countries with a higher GNP can usually afford a better health care and educational system.

4) Net National Product (NNP) :

Net National Product is the net market value of all final goods and services produced by the residents 
of a country, during a period of one year.

∴ NNP = GNP – Depreciation

Importance of NNP:

To many of us, the net national product may seem an insignificant figure – another number among the many items discussed by economists. However, we would be mistaken to not understand the importance and significance it represents in our daily lives.
A vibrant economy, represented in part by the NNP, can help us to decide if a particular country is worth moving to or if the economy is growing at a pace that we feel comfortable being paid in the local currency. Thus, the NNP can be a useful figure to understand and interpret, especially when making comparisons among locales.

Concept of Green GNP :
It is defined as, “Green GNP is an indicator of sustainable use of natural environment and equitable distribution of benefits of development.”

Following are the characteristics of Green GNP :

1) Sustainable economic development, i.e. development which should not cause environmental degradation (pollution) and depletion of natural resources. 
2) Equitable distribution of benefits of its development. 
3) Promotes economic welfare for a long period of time.

Measurement :
Green GNP = GNP - (Net fall in stock of natural capital + pollution load)

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