# What is Net National Product (NNP)? Explained with Formula and Examples

![Net National Product](https://www.investopedia.com/thmb/m6afKzFm5FRrsvIjdAFM_QZJon4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Net_National_Product-final-98ec49d108914781a06f3548eff644a7.png)

*— Investopedia / Lara Antal*

> **Definition**
>
> An country's Net National Product is the total market value of goods and services produced by people and property within the country less the amount of fixed capital used up in production.

## What Is Net National Product (NNP)?

Net National Product (NNP) is a key economic indicator that measures the value of finished goods and services produced by a country's citizens domestically and abroad. To arrive at NNP, subtract depreciation from [gross national product (GNP)](https://www.investopedia.com/terms/g/gnp.asp). NNP plays an important role in evaluating economic sustainability and growth.

NNP is crucial in economic analysis, particularly when compared to other metrics like GDP and in the area of environmental economics. There are few key components to consider: the market value of goods and services, [depreciation](https://www.investopedia.com/terms/d/depreciation.asp), and comparison to GNP.

### Key Takeaways

*   Net National Product (NNP) measures the total value of finished goods and services produced by a country’s citizens, both domestically and overseas, minus depreciation.
*   NNP helps gauge a country's economic health by factoring in depreciation to indicate how well it maintains production standards.
*   Depreciation, known as capital consumption allowance, is crucial for calculating NNP and reflects asset replacements needed to maintain productivity.
*   NNP is more inclusive than GDP as it considers the value of goods and services produced by a nation's citizens regardless of location.

## How to Calculate Net National Product (NNP)

The formula for NNP is:

﻿ $\begin{aligned} &\text{NNP} = \text{MVFG} + \text{MVFS} - \text{Depreciation} \\ &\textbf{where:} \\ &\text{MVFG} = \text{market value of finished goods} \\ &\text{MVFS} = \text{market value of finished services} \\ \end{aligned}$﻿

Alternatively, NNP can be calculated as:

﻿ $\begin{aligned} &\text{NNP} = \text{Gross National Product} - \text{Depreciation} \\ \end{aligned}$﻿

For example, if Country A produces $1 trillion worth of goods and $3 trillion worth of services in 2018, and the assets used to produce those goods and services are depreciated by $500 billion, using the formula above, Country A's NNP is:

﻿ $\begin{aligned} \text{NNP} &= \$1 \ \text{trillion} + \$3 \ \text{trillion} - \$0.5 \ \text{trillion} \\ &= \$3.5 \ \text{trillion} \\ \end{aligned}$﻿

## In-Depth Look at Net National Product (NNP)

Net national product, or NNP, is the value of goods and services made by a country's citizens, locally and abroad. It is shown in the nation's [currency](https://www.investopedia.com/terms/c/currency.asp), like U.S. dollars for the United States and euros for [European Union countries](https://www.investopedia.com/terms/e/europeanunion.asp).

To find a country's NNP, subtract [asset](https://www.investopedia.com/terms/a/asset.asp) depreciation from its GNP. Depreciation is the loss in asset value due to use and aging.

NNP is checked yearly to measure a nation's production success. It accounts for all citizens' output, no matter where they earn, highlighting the necessary spending on [capital](https://www.investopedia.com/terms/c/capital.asp) to maintain production.  

> **Important**
>
> The relationship between a nation's GNP and NNP is like the relationship between GDP and NDP.

## Key Factors When Evaluating Net National Product (NNP)

Depreciation, or [capital consumption allowance (CCA)](https://www.investopedia.com/terms/c/capital-consumption-allowance-cca.asp), is crucial for calculating NNP. It shows the need to replace assets to keep [productivity](https://www.investopedia.com/terms/p/productivity.asp). CCA includes [physical](https://www.investopedia.com/terms/p/physical-capital.asp) and [human capital](https://www.investopedia.com/terms/h/humancapital.asp).

Physical capital can include [real estate](https://www.investopedia.com/terms/r/realestate.asp), machinery, or any other [tangible](https://www.investopedia.com/terms/t/tangibleasset.asp) resource used in the production of goods and services. Human capital, on the other hand, covers the skills, knowledge, and abilities of a workforce to produce goods and services, as well as the necessary training or education that may be required to maintain production standards. 

Physical capital and human capital depreciate in different ways. Physical capital experiences [depreciation](https://www.investopedia.com/terms/d/depreciation.asp) based on physical [wear and tear](https://www.investopedia.com/terms/w/wear-and-tear-exclusion.asp), while human capital experiences depreciation based on workforce turnover—when staff leave, companies must spend more of their resources on training and finding new talent.

## Applications of Net National Product (NNP) in Economics

There are several key uses for net national product, including in environmental economics and for calculating foreign-made products, as explained below.  

*   **Environmental Economics:** NNP has particular usefulness in the field of [environmental economics](https://www.investopedia.com/terms/e/environmental-economics.asp). NNP is a model associated with the [depletion](https://www.investopedia.com/terms/d/depletion.asp) of natural resources, and it can be used to determine whether certain activities are [sustainable](https://www.investopedia.com/terms/s/sustainability.asp) within a particular environment.
*   **Foreign-Made Products:** As previously mentioned, NNP also factors in the value of goods and services produced overseas. That means that the activities of U.S. manufacturers in Asia, for example, count toward the NNP in the U.S. That is not the case for GDP and NDP, which limit their interpretation of the economy to the geographical borders of the country.

## What Is the National Net Product for the United States?

Net national product in the United States amounted to just over $24 trillion in the second quarter of 2024, according to Federal Reserve data. This figure is seasonally adjusted.

## What's the Relationship Between Net National Product and Gross National Product?

Gross national product is the total value of the goods and services produced by a country in a certain period. Net national product is closely related to GNP and is derived from that figure. It is the total value of goods produced by a nation's economy minus depreciation.

## How Do You Calculate Net National Product?

To calculate the net national product, subtract the total amount of depreciation from the gross national product. Remember that GNP is the total market value of goods and services produced.

## The Bottom Line

Net National Product (NNP) is the market value of finished goods and services produced by a country's citizens, adjusted for depreciation, both domestically and overseas. The usefulness of NNP includes tracking a nation’s economic growth and production standards over time.

NNP serves not only as an economic indicator but also as a measure in environmental economics to assess sustainability. Differences between NNP and GDP or NDP exist due to the inclusion of international production activities. NNP can be a tool for comparison between different nations’ economic performances.  

> **Article Sources**
>
> 1.  FRED Economic Data, St. Louis Fed. "[Net national product (A027RC1Q027SBEA)](https://fred.stlouisfed.org/series/A027RC1Q027SBEA)."