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Difficulty: HardBasic National Income Aggregates (GDP, GNP, NNP, NDP)

An economy recorded a Gross Domestic Product (GDP\text{GDP}) of N3,500 million\text{N}3,500\text{ million} and a Capital Consumption Allowance of N250 million\text{N}250\text{ million} in a given year. During the same period, factor income earned by citizens residing abroad was N180 million\text{N}180\text{ million}, while factor income earned by foreign residents within the country was N240 million\text{N}240\text{ million}. What is the Net National Product (NNP\text{NNP}) of this economy?

  1. N3,190 million\text{N}3,190\text{ million}Answer
  2. B
    N3,310 million\text{N}3,310\text{ million}
  3. C
    N3,440 million\text{N}3,440\text{ million}
  4. D
    N3,250 million\text{N}3,250\text{ million}

Answer

The Net National Product (NNP) of the economy is N3,190 million\text{N}3,190\text{ million}.
Net National Product (NNP) is obtained by taking Gross Domestic Product (GDP\text{GDP}), adjusting for Net Factor Income from Abroad (NFIA\text{NFIA}), and subtracting Capital Consumption Allowance (depreciation). Here, NFIA=N180m−N240m=−N60m\text{NFIA} = \text{N}180\text{m} - \text{N}240\text{m} = -\text{N}60\text{m}. Thus, GNP=N3,500m+(−N60m)=N3,440m\text{GNP} = \text{N}3,500\text{m} + (-\text{N}60\text{m}) = \text{N}3,440\text{m}. Subtracting depreciation of N250m\text{N}250\text{m} yields an NNP\text{NNP} of N3,190 million\text{N}3,190\text{ million}.

Step-by-Step Solution

1
Calculate Net Factor Income from Abroad (NFIA)
NFIA=Factor Income from Abroad−Factor Income Paid to Abroad=180−240=−N60 million\text{NFIA} = \text{Factor Income from Abroad} - \text{Factor Income Paid to Abroad} = 180 - 240 = -\text{N}60\text{ million}
NFIA represents the net difference between inflow of factor payments from abroad and outflow of factor payments to foreigners.
2
Calculate Gross National Product (GNP)
GNP=GDP+NFIA=3,500+(−60)=N3,440 million\text{GNP} = \text{GDP} + \text{NFIA} = 3,500 + (-60) = \text{N}3,440\text{ million}
GNP measures total output produced by a nation's residents, combining GDP with net external income.
3
Calculate Net National Product (NNP)
NNP=GNP−Capital Consumption Allowance=3,440−250=N3,190 million\text{NNP} = \text{GNP} - \text{Capital Consumption Allowance} = 3,440 - 250 = \text{N}3,190\text{ million}
NNP reflects the net aggregate income available after accounting for capital depreciation.

Key Concept

Derivation of Net National Product (NNP) from GDP, Net Factor Income from Abroad (NFIA), and Depreciation
Estimated Time:2m 0s
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Topics

Basic National Income Aggregates (GDP, GNP, NNP, NDP)

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