Tricks in National income Calculations
National income is a measure of the total goods and services produced, total income accrued and the total expenditure incurred in a given country at a period of time. There are several ways to calculate national income, such as Gross Domestic Product (GDP), Net Domestic Product (NDP), and Net National Product (NNP). Here are the tricks and steps to convert between these different measures.
1. Gross Domestic Product (GDP): The total value of all goods and services produced within a country in a specific period, regardless of ownership (i.e., both by residents and non-residents).
GDP at market price = Gross output - Intermediate goods
Gross output= GDP at market price + intermediate goods
2. Net Domestic Product (NDP) at market price: NDP at market price is the GDP at market price minus depreciation.
Depreciation( consumption of fixed capital) represents the wear and tear on capital goods (machinery, buildings, etc.) during the production process.
To convert GDP at market price to NDP at market price:
NDP at market price = GDP at the market price - Depreciation
3. Net National Product (NNP) at market price: NNP at market price is the value of the total goods and services produced by a country's citizens r residents, regardless of the location of production. To convert NDP at market price to NNP at market price or vice versa, you need to consider the net factor income from abroad (NFIA)
which is the variance or the difference between factor payments earned by residents abroad and factor payments earned by non-residents within the country:
NNP at market price = NDP at the market price + Net Factor Income from Abroad (NFIA)
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