Q.Distinguish between Gross National Product (GNP) and Net National Product (NNP).

GNP and NNP both measure output attributable to a country's normal residents; they differ only in whether the wear-and-tear on capital used in producing that output is deducted.

Gross National Product (GNP) is the money value of all final goods and services produced by the normal residents of a country during a year, wherever in the world they are produced — it includes replacement of worn-out capital as part of total output (hence "gross").

Net National Product (NNP) is GNP after deducting depreciation — the estimated value of plant, machinery and buildings used up (consumption of fixed capital) in producing that year's output:

The distinction matters because GNP overstates how much additional wealth an economy has actually created — part of gross output merely replaces capital that wore out during the year and adds nothing new. NNP, by netting this out, is the more economically meaningful measure of a country's real productive achievement in the year, and it is NNP (specifically, NNP at factor cost) that is refined further into the strict definition of "National Income".

Treating GNP and NNP as interchangeable; forgetting that only NNP (not GNP) feeds into the strict definition of National Income.