Topic: GDP, GNP, NNP, N.I, P.I, D.P.

I Subject: Introduction to Economics

Theory (Macro) Submitted to: Sir. Ali Asghar Ghayour Submitted by: Wajahat Ali Ghulam Class: Roll No. BBA-I (Morning) 2010-14 01

FASK FACULTY OF ADMINISTRATIVE SCIENCES AND DEPARTMENT OF BUSINESS ADMINISTRATION

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UNIVERSITY OF AZAD JAMMU AND KASHMIR

In a beautiful and

aesthetic, but

subtle, way the Quran guides us toward acquisition of knowledge observing and studying the elements of nature regards as the signs of Allah, thinking, reflection and researching in his sign and eventually realizing coquets over the elements of nature for the service of mankind as well as for an upward spiritual movement. In this assignment I have discussed the company form of a business and I also have discussed the characteristics of company and its existence in the world of Business. I am also thankful to my Honorable Sir. Ali Asghar

Ghayour

Preliminary thanking, bow my head before Almighty Allah who given me wisdom and an opportunity to undertake this exploring work. Also to m y parents whose prayers always do a miracle for me. Infect I was not able to prepare this assignment individually; definitely there are many supports who have provided me information and encouraged to complete this assignment. I am also thankful to

Sir. Ali Asghar Ghayour that he

assigned this assignment; it is our training towards our upcoming life and future.

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Net national product (NNP) Definition Net national product. Gross domestic product (GDP) Determining GDP Example: the expenditure method:
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Gross Domestic Product (GDP) GDP=(P*Q) GDP=C+I+G+(X-M) Gross National Product (GNP) GNP vs. GDP Concepts of National Income National Income (NI) NI=NNP + Subsidies-Interest Taxes Personal Income and Disposable Personal Income Personal Income (PI) Personal Income (PI) Disposable Income (DI) PCI=Total National Income/Total National Population References

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Net national product (NNP) Definition Gross national product (GNP) less allowances for capital consumption Net National Product - NNP What Does Net National Product - NNP Mean? The monetary value of finished goods and services produced by a country's citizens, whether overseas or resident, in the time period being measured (i.e., the gross national product, or GNP) minus the amount of GNP required to purchase new goods to maintain existing stock (i.e., depreciation). Alternatively, net national product (NNP) can be calculated as total payroll compensation + net indirect tax on current production + operating surpluses. Net national product. (NNP) is the total market value of all final goods and services produced by residents in a country or other polity during a given period (gross national product or GNP) minus depreciation. The net domestic product (NDP) is the equivalent application of NNP within 4

macroeconomics, and NDP is equal to gross domestic product (GDP) minus depreciation: NDP = GDP - depreciation. Depreciation (also known as consumption of fixed capital) measures the amount of GNP that must be spent on new capital goods to maintain the existing physical capital stock. NNP is the amount of goods in a given year which can be consumed without reducing future consumption. Setting part of NNP aside for investment permits capital stock growth (see economic growth and capital formation), and greater future consumption. Gross domestic product (GDP) refers to the market value of all final goods and services produced within a country in a given period. It is often considered an indicator of a country's standard of living. Gross domestic product is related to national accounts, a subject in macroeconomics. Determining GDP GDP can be determined in three ways, all of which should, in principle, give the same result. They are the product (or output) approach, the income approach, and the expenditure approach. The most direct of the three is the product approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures in buying things. The income approach works on the principle that the incomes of the productive factors ("producers," colloquially) must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes. Example: the expenditure method: GDP = private consumption + gross investment + government spending + (exports imports), or

Note: "Gross" means that GDP measures production regardless of the various uses to which that production can be put. Production can be used for immediate consumption, for investment in new fixed assets or inventories, or for replacing depreciated fixed assets. "Domestic" means that GDP measures production that takes place within the country's borders. In the expenditure-method equation given above, the exports-minusimports term is necessary in order to null out expenditures on things not produced in the country (imports) and add in things produced but not sold in the country (exports). Gross Domestic Product (GDP) The most important concept of national income is Gross Domestic Product. Gross domestic product is the money value of all final goods and services produced within the domestic territory of a country during a year. Algebraic expression under product method is, GDP=(P*Q) where, 5

GDP=Gross Domestic Product P=Price of goods and service Q=Quantity of goods and service denotes the summation of all values. According to expenditure approach, GDP is the sum of consumption, investment, government expenditure, net foreign exports of a country during a year. Algebraic expression under expenditure approach is, GDP=C+I+G+(X-M) Where, C=Consumption I=Investment G=Government expenditure (X-M)=Export minus import GDP includes the following types of final goods and services. They are: 1. 2. 3. 4. 5. 6. Consumer goods and services. Gross private domestic investment in capital goods. Government expenditure. Net exports (exports-imports). Net factor income from abroad. Exports and imports.

Gross National Product (GNP) is the market value of all products and services produced in one year by labor and property supplied by the residents of a country. Unlike Gross Domestic Product (GDP), which defines production based on the geographical location of production, GNP allocates production based on ownership. GNP does not distinguish between qualitative improvements in the state of the technical arts (e.g., increasing computer processing speeds), and quantitative increases in goods (e.g., number of computers produced), and considers both to be forms of "economic growth". GNP=GDP+NFIA (Net Factor Income from Abroad) or, GNP=C+I+G+(X-M) +NFIA GNP vs. GDP Gross National Product (GNP) is often contrasted with Gross Domestic Product (GDP). While GNP measures the output generated by a country's enterprises - whether physically located domestically or abroad - GDP measures the total output produced within a country's borders - whether produced by that country's own firms or not. When a country's capital or labor resources are employed outside its borders, or when a foreign firm is operating in its territory, GDP and GNP can produce different measures of total output. In 2009 for instance, the United States estimated its GDP at $14.119 trillion, and its GNP at $14.265 trillion.

Concepts of National Income There are various concepts of National Income. The main concepts of NI are: GDP, GNP, NNP, NI, PI, DI, and PCI. These different concepts explain about the phenomenon of economic activities of the various sectors of the various sectors of the economy. National Income (NI) National Income is also known as National Income at factor cost. National income at factor cost means the sum of all incomes earned by resources suppliers for their contribution of land, labor, capital and organizational ability which go into the years net production. Hence, the sum of the income received by factors of production in the form of rent, wages, interest and profit is called National Income. Symbolically, NI=NNP + Subsidies-Interest Taxes or, GNP Depreciation + Subsidies-Indirect Taxes or, NI=C+G+I+(X-M)+NFIA-Depreciation-Indirect Taxes + Subsidies Personal Income and Disposable Personal Income Personal Income (PI): This measures all of the income that is received by individuals, but not necessarily earned. Examples of this include social security benefits, unemployment compensation, welfare payments, benefits for veterans, and food stamps. Individuals also contribute income which they do not receive. This includes corporate profits that are undistributed, indirect business taxes, and the contribution of employers to Social Security. PI = NI + income received but not earned - income earned but not received Disposable Personal Income (DI): There are other personal taxes which are not considered when calculating personal income. In order to derive disposable personal income we must subtract these personal taxes from personal income. DI = PI - Personal Income Taxes Disposable personal income represents what people actually have that they can spend. It is also a result of consumer spending as well as private saving. Net national product. Personal Income (PI) Personal Income is s the total money income received by individuals and households of a country from all possible sources before direct taxes. Therefore, personal income can be expressed as follows: PI=NI-Corporate Income Taxes-Undistributed Corporate Profits-Social Security Contribution + Transfer Payments Disposable Income (DI) 7

The income left after the payment of direct taxes from personal income is called Disposable Income. Disposable income means actual income which can be spent on consumption by individuals and families. Thus, it can be expressed as: DI=PI - Direct Taxes From consumption approach, DI=Consumption Expenditure + Savings Per Capita Income (PCI) Per Capita Income of a country is derived by dividing the national income of the country by the total population of a country. Thus, PCI=Total National Income/Total National Population