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National Income Aggregates

National income aggregates — Gross National Product at Market Price (GNPMP), Gross National Product at Factor Cost (GNPFC), Net National Product at Market Price (NNPMP), and Net National Product at Factor Cost (NNPFC). CBSE Class 12 Macroeconomics.

Notes

Gross National Product at Market Price (GNP_MP)

GNP at Market Price
The gross market value of all final goods and services produced by the normal residents of a country during a period of one year.

GNP at Market Price

$$GNP_{MP} = GDP_{MP} + NFIA$$
NFIA = Net Factor Income from Abroad = Factor Income from Abroad − Factor Income to Abroad. The difference between domestic and national concepts is entirely captured by NFIA.
GNP_MP can be less than GDP_MPif NFIA is negative — meaning more income flows out of the country to foreign factors than flows in. For example, if India's residents earn ₹5,000 crore abroad but foreign companies earn ₹8,000 crore in India, NFIA = −₹3,000 crore, and GNP_MP < GDP_MP.
Think of GDP as your household's income from work done inside the house (cooking, cleaning, repairs). GNP includes work done anywhere by family members — including your cousin who sends money home from a job abroad, minus the outsider you hired to paint the house.

The Four National Conversions

From GNP_MP, we can derive three other national aggregates — mirroring the domestic pattern exactly.

GNP at Market Price

GNP_MP

−NIT → GNP_FC
−Dep → NNP_MP
−NIT−Dep → NNP_FC

Inputs

₹1,00,000
₹2,000
₹8,000
₹5,000

Results

GNP_FC₹94,000
NNP_MP₹97,000
NNP_FC (National Income)₹89,000

Relationship Between Four National Concepts

GNP_MP, GNP_FC, NNP_MP, and NNP_FC are the four national concepts. The term ‘National’ signifies that the production of only normal residents of the country is included, even if they are located outside the domestic territory.

Key Takeaways

  • 'National' means produced by normal residents — includes income earned abroad, excludes income earned by non-residents domestically.
  • NNP_FC (National Income) is the most important aggregate — it is the true measure of a country's income.
  • The only difference between domestic and national aggregates is NFIA.
  • Moving from GDP to GNP requires adding NFIA.
  • Moving from Gross to Net requires subtracting Depreciation (same as domestic).
  • Moving from Market Price to Factor Cost requires subtracting NIT (same as domestic).
  • In a closed economy (NFIA = 0), domestic income equals national income.