Basic Aggregates of National Income

A number of goods and services are produced in a year by different production units within an economy. It is not possible to add those goods and services in terms of their quantity; therefore, these are added in terms of money. There are eight aggregates in National Income for measuring the value of goods and services in terms of money. These are as follows:

1. Gross Domestic Product at Market Price (GDP_MP)

GDP_MP refers to the gross market value of all the final goods and services produced during a year within the domestic territory of a country. 

Gross in GDP_MP means that the total value of final goods and services includes depreciation, i.e., no provision has been made for it. 

Domestic in GDP_MP means that the final goods and services produced are located within the domestic boundaries of the country. 

Product in GDP_MP indicates that only final goods and services are included. 

Market Price in GDP_MP means that the amount of indirect taxes paid is included in GDP; however, the subsidies are excluded from it.

The rest of the aggregates are determined by making some adjustments in GDP_MP.

2. Gross Domestic Product at Factor Cost (GDP_FC)

GDP_FC refers to the gross money value of all the final goods and services produced during a year within the domestic territory of a country. It can be determined as:

GDP_FC = GDP_MP – Net Indirect Taxes

3. Net Domestic Product at Market Price (NDP_MP)

NDP_MP refers to the net market value of all the final goods and services produced during a year within the domestic territory of a country. It can be determined as:

NDP_MP = GDP_MP – Depreciation

4. Net Domestic Product at Factor Cost (NDP_FC)

NDP_FC refers to the net money value of all the final goods and services produced during a year within the domestic territory of a country. It can be determined as:

NDP_FC = GDP_MP – Net Indirect Taxes – Depreciation

NDP_FC is also known as Domestic Factor Income or Domestic Income. 

Relationship between the four Domestic Aggregates (GDP_MP GDP_FC NDP_MP and NDP_FC)

Domestic in each of these aggregates states that the contribution of only those producers whether they are resident or non-resident will be included who are producing within the domestic territory of the country. 

5. Gross National Product at Market Price (GNP_MP)

GNP_MP refers to the gross market value of all the final goods and services produced during a year by the normal residents of a country. It can be determined as:

GNP_MP = GDP_MP + Net Factor Income from Abroad

GNP_MP of a country can be less than its GDP_MP if NFIA is negative. However, it can be more than GDP_MP if NFIA is positive.

6. Gross National Product at Factor Cost (GNP_FC)

GNP_FC refers to the gross money value of all the final goods and services produced during a year by the normal residents of a country. It can be determined as:

GNP_FC = GNP_MP – Net Indirect Taxes

7. Net National Product at Market Price (NNP_MP)

NNP_MP refers to the net market value of all the final goods and services produced during a year by the normal residents of a country. It can be determined as:

NNP_MP = GNP_MP – Depreciation

8. Net National Product at Factor Cost (NNP_FC)

NNP_FC refers to the net money value of all the final goods and services produced during a year by the normal residents of a country. It can be determined as:

NNP_FC = GNP_MP – Net Indirect Taxes – Depreciation

NNP_FC is also known as National Income.

Relationship between the four Domestic Aggregates (GNP_MP GNP_FC NNP_MP and NNP_FC)

National in each of these aggregates states that the contribution of only those producers who are normal residents of a country will be included. It does not matter if the production is being held outside the domestic territory of the country. 

National Income is the aggregate value of all goods and services produced by firms in a given financial year. It can be stated that when the aggregate revenue generated by the firms is paid out to factors of production, it equals aggregate income or National Income. There are different variants or aggregates of National Income and each of the aggregates has a specific meaning, use, and method of measurement. These aggregates are as follows:

1. Gross Domestic Product at Market Price (GDP_MP)
2. Gross Domestic Product at Factor Cost (GDP_FC)
3. Net Domestic Product at Market Price (NDP_MP)
4. Net Domestic Product at Factor Cost (NDP_FC)
5. Gross National Product at Market Price (GNP_MP)
6. Gross National Product at Factor Cost (GNP_FC)
7. Net National Product at Market Price (NNP_MP)
8. Net National Product at Factor Cost (NNP_FC)