Final answer:
Gross National Product (GNP) measures the total value of goods produced by residents of a country, including overseas production, whereas Net National Product (NNP) is GNP adjusted for depreciation. GDP measures domestic economic output. The main differences lie in the inclusion of international activities in GNP and the accounting for depreciation in NNP.
Step-by-step explanation:
The concepts of Gross National Product (GNP) and Net National Product (NNP) are crucial in understanding the economic output and income of a nation. GNP measures the total value of all final goods and services produced by a country's residents, whether production occurs domestically or abroad. It includes investments made by a country's residents overseas and excludes any income earned in the country by foreign residents. Conversely, GDP only accounts for the economic activity within the geographical boundaries of a country, without considering the nationalities of the producers.
Net National Product (NNP), on the other hand, is derived by subtracting the value of depreciation from GNP. Depreciation, or the wear and tear on physical capital over time, is considered in calculating NNP to account for the decrease in the value of an economy's stock of capital goods due to its use in the production process. Therefore, while GNP gives us a gross measure of national income, NNP provides a net value after accounting for the capital consumed during production.
The calculation of GDP and GNP is interrelated as both measure economic activity and output, but GNP extends the scope to include the economic activities of a country's residents abroad. In contrast, GDP focuses on domestic production. NNP further refines the concept of national income by considering the nation's depreciation costs.