The national income of a country is the total income earned by that country from the production of goods and the provision of services in a given year after deducting depreciation. It therefore measures the level of economic activity of a country within a year. Note depreciation of assets is taken into account when measuring national income.
Gross Domestic Product (GDP)
GDP is the total money value of all output produced within a country over a year. The word ‘domestic’ refers to income earned from local production only.
Gross National Product (GNP)
GNP is the total money value of all output produced over one year, both within a country and from its overseas investments.
Therefore GNP = GDP + overseas earnings by nationals
Net National Product (NNP) or National Income (NI)
NB: The definition for national income includes adjustments for depreciation.
National Income (NI) = GNP- depreciation
Since GNP figures do not accurately measure the standard of living, the following indices may be used.
Per capita GNP
This is calculated by dividing a country’s GNP by its total population. That is,
Thus if a country’s GNP is $40,000,000 and its total population is 5,000, its per capita GNP would be $8,000.
40,000,000 = 8,000
Thus each citizen enjoys on an average $8,000 worth of goods and services.