Concept of National Income, GDP & GNP, Real vs nominal GNP, NNP, fiscal policy
National income, GDP (Gross Domestic Product), and GNP (Gross National Product) are key concepts in economics used to measure the economic performance of a country.
National Income:
National income refers to the total value of goods and
services produced within a country's borders in a specific time period,
typically a year. It includes all incomes earned by individuals and businesses,
including wages, profits, and taxes, minus subsidies. National income is a
broader concept than GDP or GNP and includes factors such as depreciation and
net foreign income.
Gross Domestic Product (GDP):
GDP measures the total value of all goods and
services produced within a country's borders regardless of who owns the
productive assets. It is the most commonly used measure of a country's economic
output and is often used to gauge the size and health of an economy. GDP can be
calculated using three approaches: the production approach, the expenditure
approach, and the income approach.
Gross National Product (GNP):
GNP measures the total value of all goods and
services produced by a country's residents, regardless of where they are
located. It includes the value of production by domestic residents and
businesses both domestically and abroad, minus the value of production by
foreign residents and businesses within the country's borders.
Real vs. Nominal GNP:
Nominal GNP is measured using current prices, while
real GNP is adjusted for inflation, reflecting changes in purchasing power over
time. Real GNP provides a more accurate measure of economic growth because it
accounts for changes in the price level.
NNP (Net National Product):
NNP is derived by subtracting depreciation (the
value of capital that wears out during the production process) from GNP. It
represents the net value of goods and services produced by a country's
residents over a specific period after accounting for the depreciation of
capital.
Fiscal Policy:
