What Is Net National Product (NNP)?

Net national product (NNP) is the monetary value of finished goods and services produced by a country's citizens in a given period. NNP includes any goods and services produced domestically and overseas. It is the equivalent of 澳洲幸运5官方开奖结果体彩网:gross national product (GNP), the total value of a nation's annual output, minus the amount of GNP required to purchase new goods to maintain existing stock, otherwise known as 澳洲幸运5官方开奖结果体彩网:depreciation.

Formula and Calculation of Net National Pr𒊎oduct (NNP)

The formula for NNP is:

 $\begin{aligned} &\text{NNP} = \text{MVFG} + \text{MVFS} - \text{Depreciation} \\ &\textbf{where:} \\ &\text{MVFG} = \text{market value of finished goods} \\ &\text{MVFS} = \text{market value of finished services} \\ \end{aligned}$​NNP=MVFG+MVFS−Depreciationwhere:MVFG=market value💃 of finished goodsMVFS=market value🌃 of finished servꩲices​

Alternatively, NNP can be calculated as:

 $\begin{aligned} &\text{NNP} = \text{Gross National Product} - \text{Depreciation} \\ \end{aligned}$​NNP=Gross National Product−Depreciation​

For example, if Country A produces $1 trillion worth of goods and $3 trillion worth of services in 2018, and the assets used to produce those goods and services are depreciated by $500 billion, using the formula above, Country A's NNP is:

 $\begin{aligned} \text{NNP} &= \$1 \ \text{trillion} + \$3 \ \text{trillion} - \$0.5 \ \text{trillion} \\ &= \$3.5 \ \text{trillion} \\ \end{aligned}$NNP​=$1 trillion+$3 trillion−$0.5 trillion=$3.5 trillion​

Understanding Net National Product (NNP)

Net national product is the total value of finished goods and services produced by a country's citizens within and beyond its borders. NNP is expressed in the currency of the nation it represents. This means that NNP in the U.S. is expressed in U.S. dollars. Countries in the 澳洲幸运5官方开奖结果体彩网:European Union (EU) express their NNP in euros.

The NNP of a country can be extrapolated from the GNP by subtracting the depreciation of any assets. The depreciation figure is determined by assessing the loss of the value of assets attributed ꦬto normal use and aging.

NNP is often examined on an annual basis as a way to measure a nation's success in continuing minimum production standards. It can be a useful method to keep track of an economy as it accounts for all of its citizens, regardless of where they make their money. It also acknowledges the fact that capital must be spent to keep production standards high.

Special Considerations

Depreciation in the overall economy, also referred to as capital consumption allowance (CCA), is a key component when calculating a country's NNP. CCA is an indicator of the need to replace certain assets and resources to maintain a specified level of national 澳洲幸运5官方开奖结果体彩网:productivity. It is divided into two categories: 澳洲幸运5官方开奖结果体彩网:physical capital and 澳洲幸运5官方开奖结果体彩网:human capital.

Physical capital can include 澳洲幸运5官方开奖结果体彩网:real estate, machinery, or any other tangible resource used in the production of goods and services. Human capital, on the other hand, covers the skills, knowledge, and abilities of a workforce to produce goods and services, as well as the necessary training or education that may be required to maintain production standards. 

Physical capital and human capital depreciate in different ways. Physical capital experiences 澳洲幸运5官方开奖结果体彩网:depreciation based on physical 澳洲幸运5官方开奖结果体彩网:wear and tear, while human capital experiences depreciation based on workforce turnover—when staff leave, companies mu♑st spend more of their resources on training andꦑ finding new talent.

Uses for Net National Product (NNP)

There are several key uses for net national product, including in environmental economics and for calculating foreign-made products as explained below.

• Environmental Economics: NNP has particular usefulness in the field of 澳洲幸运5官方开奖结果体彩网:environmental economics. NNP is a model associated with the 澳洲幸运5官方开奖结果体彩网:depletion of natural resources, and it can be used to determine whether certain activities are 澳洲幸运5官方开奖结果体彩网:sustainable within a particular environment.
• Foreign-Made Products: As previously mentioned, NNP also factors in the value of goods and services produced overseas. That means that the activities of U.S. manufacturers in Asia, for example, count toward the NNP in the U.S. That is not the case for GDP and NDP, which limit their interpretation of the economy to the geographical borders of the country.

The Bottom Line

There are different economic indicators that can tell you about how well (or poorly) a nation's economy is faring. Net national product measures the market value of goods and services produced by a country's citizens domestically and abroad. Economists use this figure to determine how much growth a nation's economy experiences and can use it as a comparison tool with the NNP of other countries.