RAS question
Which of the following correctly describes Net National Product (NNP)?
Correct answer: (D) GNP – Depreciation.
Net National Product is Gross National Product minus depreciation, or the consumption of fixed capital.
Explanation
Net National Product measures national output after deducting depreciation from Gross National Product. The cited national income accounting unit defines GNP as GDP plus net factor income from abroad, because it tracks income accruing to a country's residents whether earned at home or abroad. NNP then adjusts that national total for depreciation, described as the consumption of fixed capital. This is why the correct expression is GNP minus depreciation, not a GDP-only measure. The same framework also notes that National Income is NNP at factor cost, which explains why NNP is a recurring bridge concept between production aggregates and income aggregates in Indian economy questions.
Why the other options are wrong
- (A) Adding depreciation to GNP moves in the wrong direction because NNP is obtained after excluding depreciation from GNP.
- (B) GDP minus depreciation gives Net Domestic Product, so it misses the national adjustment for net factor income from abroad.
- (C) GDP plus net factor income from abroad defines GNP, before depreciation has been deducted.
Concept
This tests national income accounting, especially the distinction between domestic and national aggregates and between gross and net measures. RAS asks it often because these formula links are the base for interpreting GDP, GNP, NDP, NNP and National Income.