It is gross money value of Goods and Services Produced by normal residents of a country after Depreciation
It is also called Net National Product at Factor Price (NDPFC)
NNP FC = GNP FC - Depreciation
Suppose total value of goods and services produced by Normal Residents of a country is 140
Depreciation on Maintaining Fixed assets is 20
What is National Income?
|NNP FC (National Income)||120|
Why is this depreciation Reduced?
It is reduced to account for wear and tear of capital goods
A part of Income which a country earned is consumed in maintaining existing capital goods (fixed assets)
So we reduce it to get correct Net National Product
In above case
Country earned income of Rs 140 but out of this, Rs 20 was spent towards Depreciation
Hence, country actually earned Domestic Income of Rs 120