What is Depreciation?
Factors of production under go wear and tear. This wear and tear is called Depreciation.
For Ex : Consider a water bottle manufacturer who has a bottle-cap manufacturing machine. By producing water bottle cap all over the year the machine may face any failure due to repairs and the manufacturer might service the machine and changed the repaired part. This is called wear and tear.
A part of capital is used for this wear and tear which is not used in production of goods and services.
What is Net National Product?
NNP is the total value of finished goods and services produced by a country’s citizens overseas and domestically over a time period without considering the depreciation
If we deduct depreciation from the GNP, we get is NNP
Net National Product (@Market Price) = Gross National Product – Depreciation