GNP is the total measure of the flow of final goods and services at market value resulting from current production in a country during a year, including net income from abroad.
GNP includes five types of final goods and services:
1. Value of final consumer goods and services produced in a year to satisfying the immediate wants of the people. It is referred as C.
2. Gross private domestic investment in capital goods by fixed capital formation, residential construction and inventories of finished and unfinished goods. It is referred as I.
3. Goods and services produced or purchased by the government. It is referred as G.
4. Net exports of goods and services, i.e., the difference between value of exports and imports of goods and services. It is refered as X - M.
5. Net factor incomes from abroad refers to the difference between factor incomes received from abroad by normal residents of India and factor incomes paid to the foreign residents for factor services rendered by them in India. It is referred as R- P.
GNP at market prices : C + I + G + (X - M) + (R - P)
GNP at market prices = GDP at market prices + Net factor incomes from abroad. 

Factor cost (FC) 
1. There are a number of inputs that are included in a production process. 
2. These inputs (land labour, capital and organisation ) are known as factors of production. 
3. Producers of goods and services incur a cost for using these factors of production. 
4. These costs are added onto the price of the product.
5. Factor cost refer to the cost of production that is incurred by firm when producing goods and a services.
6. Examples cost of renting machines, purchasing machinery and land, paying salaries and wages, cost of obtaining capital, and profit margin for the entrepreneur.
7. Taxes are not added since taxes are not directly involved in the production process
8. Subsiclies are included as they are direct inputs into the production.
Market Price (MP)
1. Produced goods and services are sold in the market at a set price.
2. Market price is the price consumers will pay for the product when they purchase it from the sellers.
3. Taxes charged by the government will be added onto the factor price while subsidies provided will be reduced from the factor price to arrive at the market price.
4. Taxes are costs that increase the price, subsidies are already included in the factor cost, and cannot be double counted when market price is calculated.
MP = FC + Indirect Taxes - Subsidies
FC = MP - Indirect Taxes + Subsidies

(A) GNP_MP = Sum of net value added by all the industries
(i) value - added by industry A.
= Sale of goods to industry B + Sale of goods to industry C − Value of imports
Sale of goods to consumers = Rs. 400 + Rs. 200 + Rs. 1,000 − Rs. 100
= Rs. 1,590.
(ii) Value - added by industry B
= Sale of goods to industry C + Sale of goods to consumers.− Purchase of goods from industry  A
= Rs. 500 + Rs. 800 − Rs. 400
= Rs. 900.
(iii) Value - added by industry C
= Sale of goods to consumers + Exports − (purchase of goods from industry A+purchase of goods from industry B)
= Rs. 600 + Rs. 500 - Rs. 200 - Rs. 500
= Rs. 400.
Gross National Product at market prices, or
GNP_MP equals
Rs. 1,500 + Rs. 900 + Rs. 400
= Rs. 2,800
Gross National Product at factor cost or GNP_FC equals
GNP_MP − Indirect taxes + Subsidies
= Rs. 2,800 − Rs.100 + Rs. 50
= Rs. 2,750.
Net National Product at market prices, or NNP_MP equals.
GNP_MP − Depreciation
= Rs. 2,800 − Rs. 100
= Rs. 2,700.
Net National Product at factor cost or NNP_FC equals
NNP_MP - Indirect.taxes + Subsidies
= Rs. 2,700-Rs. 100 + Rs. 50
= 2,650.
as factors of production and include things such as land, labour, capital and entrepreneurship.
1. Producers of goods and services incur a cost for using these factors of production. These costs are ultimately added onto the price of the product.
2. The factor cost refer to the cost of production that is incurred by a firm when producing  goods and services.
3. Examples of such production costs include the cost of renting machines, purchasing machinery and land, paying salaries and wages, cost of obtaining capital, and the profit margins that are added by the entrepreneur.
4. The factor cost does not include the taxes that are paid to the government since taxes are not directly involved in the production process and, therefore, are not part of the direct production cost.
5. However, subsidies received are included in the factor cost as subsidies are direct inputs into the production.

GNP = 8000 + 250 – 300 = 7950
NNP = 7950 – 900 = 7050
NI = 7050 – 500 = 6550
PI = 6550 – 500 – 700 + 300 + 1100
= 6750
DI = 6750 – 1000
= 5750

1. There are a number of inputs that are included into a production process when producing goods and services. These inputs are commonly known as factors of production and include things such as land, labour, capital and entrepreneurship.
2. Producers of goods and services incur a cost for using these factors of production. These costs are ultimately added onto the price of the product.
3. The factor cost refer to the cost of production that is incurred by a firm when producing goods and services.
4. Examples of such production costs include the cost of renting machines, purchasing machinery and land, paying salaries and wages, cost of obtaining capital, and the profit margins that are added by the entrepreneur.
5. The factor cost does not include the taxes that are paid to the government since taxes are not directly involved in the production process and, therefore, are not part of the direct production cost.
6. However, subsidies received are included in the factor cost as subsidies are direct inputs into the production.

The following are some of the concepts used in measuring national income.
1. GDP
2. NNP
3. NNP at factor cost
4. Personal Income
5. Disposable Income
6. Per capita Income
7. Real Income
8. GDP deflator
Gross Domestic Product (GDP)
GDP is the total market value of final and services produced within the country during a year. This is calculated at market prices and is known as GDP at market prices.
Net Domestic Product (NDP)
1. NDP is the value of net output of the economy during the year. Some of the country’s capital equipment wears out or becomes outdated each year during the production process. Gross National Product (GNP)
2. GNP is the total measure of the flow of final goods and services at market value resulting from current production in a country during a year, including net income from abroad.
Net National Product (NNP)(at Market price)
Net National Product refers to the value of the net output of the economy during the year. NNP is obtained by deducting the value of depreciation, or replacement allowance of the capital assets from the GNP.
NNP at Factor cost
NNP refers to the market value of output. Whereas NNP at factor cost is the total of income payment made to factors of production.
Personal Income
Personal income is the total income received by the individuals of a country from all sources before payment of direct taxes in a year. Personal income is never equal to the national income, because the former includes the transfer payments whereas they are not included in national income
Disposable Income
1. Disposable Income is also known as Disposable personal income. It is the individuals income after the payment of income tax. This is the amount available for households for consumption. Per Capita Income.
2. The average income of a person of a country in a particular year is called Per Capita Income. Per capita income is obtained by dividing national income by population.
Real Income
Nominal income is national income expressed in terms of a general price level of a particular year in other words, real income is the buying power of nominal income.
GDP deflator
GDP deflator is an index of price changes of goods and services included in GDP. It is a price index which is calculated by dividing the nominal GDP in a given year by the real GDP for the same year and multiplying it by 100.

(i) The economic welfare depends upon the composition of a goods and services provided.
(ii) Higher GDP with greater environmental hazards such as air, water and soil pollution will be little economic welfare.
(iii) The production of war goods will show the increase in national output but not welfare.
(iv) An increase in per capita income may be due to. employment of women and children Dr forcing workers to. work for long hours. But it will not promote economic welfare.
(v) Therefore the physical quality of life index (PQLI) is considered a better indicator of economic welfare.

Product Method:
(i) Product method measures the output of the country. It is also called inventory method.
(ii) It is obtained for the entire economy during a year.
(iii) The value obtained is actually the GNP at market prices.
(iv) Care must be taken to avoid double counting.
(v) The value of the final product is derived by the summation of all the values added in the productive process.
(vi) To avoid double counting either the value of the final output should be taken in to the estimate of GNP.
(vii) In India the gross value of the farm output is obtained as follows.
(1) The output of each crop is measured by multiplying the area shown by the average yield per hectare.
(2) The total output of each commodity is valued at market prices.
(3) The net value of the agriculture output is measured by making deductions for the cost of seed, manures and fertilisers etc.,
(4) Net value of the output in these sectors is derived by making deductions for cost of materials used in the process of production and depreciation allowances etc., from gross value of output,
(5) For example, value of cotton enters value of yarn as cost and value of yarn in cloth and that of cloth in garments at every stage value added only should be calculated.

(i) Income by Income Method. Income method approaches National Income from the distribution side.
(ii) National income is calculated by adding up all the incomes generated in the course of producing national product.
(iii) Factor incomes are grouped under labour income, capital income and mixed income.
(iv) national income is calculated as domestic factor income plus net factor incomes from abroad. In short,
Y = w + r + i + π + (R-P)
w = wages
r = rent
i = interest
π = profits
R = Exports
P = Imports
(v) This method is adopted for estimating the contributions of the remaining sector, viz.
(vi) Data on income from abroad (the rest of) the world sector or foreign sector are obtained from the account of the balance of payment of the country.
Items no to be included:
(1) Transfer payments are not to be included in estimation of national income.
(2) The receipts from the sale of second hand goods should not be treated as part of national income.
Item to be included:
(1) Imputed value of rent for self occupied house or offices is to be included.
(2) Imputed value of services provided by owners of production unit (family labour) is to be included.