NNP at Factor Cost is equal to

The correct answer is GNP at Factor Cost - Depreciation.

Key Points

• Net National Product (NNP) at Factor Cost is derived by subtracting depreciation (consumption of fixed capital) from Gross National Product (GNP) at Factor Cost.
• It represents the actual income earned by the factors of production (land, labor, capital, and entrepreneurship) within a nation.
• Depreciation refers to the wear and tear or reduction in the value of physical assets over time.
• GNP at Factor Cost accounts for the income generated by the country's residents, both domestically and abroad.

Important Points

• Net National Product (NNP) is a more refined measure of economic output compared to GNP, as it excludes the depreciation of assets.
• It is a critical measure in determining the real standard of living and sustainable income levels within an economy.

Additional Information

• Option 1 - GNP at Market Price - Depreciation: This is incorrect because GNP at Market Price includes indirect taxes and subsidies, which are not directly related to factor costs.
• Option 3 - GDP at Market Price + NFIA: GDP at Market Price measures the economic output within a country, and NFIA (Net Factor Income from Abroad) adjusts it to account for income from foreign sources. However, this doesn't directly relate to NNP at Factor Cost.
• Option 4 - GDP at Factor Cost + NFIA: GDP at Factor Cost accounts for domestic income, and NFIA adds foreign income. While this is closer to GNP, it does not account for depreciation, which is required for NNP.
• Depreciation: This refers to the reduction in value of an asset over time, due to factors like usage, wear and tear, or obsolescence. It is subtracted to calculate NNP from GNP.