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Financial Definition of NET NATIONAL PRODUCT
What It Is
How It Works
The formula for NNP is:
Alternatively, NNP can be calculated as:
NNP = Gross National Product - Depreciation
Let's assume Country XYZ's companies, citizens and entities produce $1 trillion worth of goods and $3 trillion worth of services this year. The assets used to produce those goods and services depreciated by $500 billion. Using the formula above, Country XYZ's NNP is:
NNP = $1 trillion + $3 trillion - $0.5 trillion = $3.5 trillion
Why It Matters
NNP is a measure of how much a country can consume in a given period. Note that NNP measures output regardless of where that production takes place (in other words, it includes the value of goods and services that American companies produce, supply or create abroad).
In the 1990s, net domestic product replaced NNP as "the" macroeconomic measure of output, much as "gross domestic product" replaced "gross national product." The Bureau of Economic Analysis (BEA) still releases all four measures, however.
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