How Do You Differentiate Between Net National Product And Net National Income?

The Net National Product (NNP) of an economy during a year is equal to the difference between the value added (the value of products going to final uses) and the depreciation cost of capital goods. On the other hand, Net National Income (NNI) is the sum of all incomes earned in the production process less depreciation cost of capital goods. It can be seen that NNP of a country in a year is identically equal to NNI of the country during the same year. This identity between the NNP and the NNI can be shown as follows:

Any production has always two sides – the product side and the income side. When we consider the product side we get the creation of value in the production process. On the other hand, if we consider the income side we get the distribution of the created value among the participants in the production process. Since the total value created is distributed among the participants, both of them represent the same thing looked at from two different angles. The NNP and the NNI represent the two sides of the same coin, the contribution of productive activity of the economy during a year.