What is Net National Product ?

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Net national product (NNP) is the monetary value of finished goods and services produced by a country's citizens, overseas and domestically, in a given period. It is the equivalent of 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 depreciation.

Definition

Net National Product (NNP) refers to the monetary value of finished goods and services produced by a country's citizens, both domestically and abroad, during a specific period. It is equivalent to the Gross National Product (GNP), which is the total value of a nation's annual output, minus the GNP amount spent on purchasing new goods to maintain existing stock, also known as depreciation.

Origin

The concept of Net National Product originated in the early 20th century as economists delved deeper into national economic accounting. It was introduced to more accurately reflect a country's economic strength, especially when considering the wear and tear and depreciation of capital equipment.

Categories and Features

Net National Product is primarily divided into nominal NNP and real NNP. Nominal NNP is calculated at current market prices, while real NNP is adjusted for inflation. Nominal NNP can reflect the monetary value of current economic activities, whereas real NNP better indicates the true growth of the economy. A notable feature of NNP is that it accounts for depreciation, making it a better indicator of a country's net economic output compared to GNP.

Case Studies

A typical case is the economic analysis of the United States in the 1970s. At that time, American economists, by calculating NNP, discovered that although GNP was growing, the increase in depreciation meant that NNP was growing at a slower rate, highlighting issues with the quality of economic growth. Another case is Japan during its economic stagnation in the 1990s, where analysis of NNP helped economists better understand the impact of aging capital equipment on the economy.

Common Issues

Common issues investors face when applying NNP include accurately calculating depreciation and using NNP in international comparisons. A frequent misconception is confusing NNP with GDP; in fact, NNP considers the depreciation part of the Gross National Product, while GDP is the Gross Domestic Product, not accounting for international production activities by nationals.

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