Discussion

Answer: A

Correct answer: The money value of all final goods and services produced annually in the economy, less depreciation on capital

Net National Product is Gross National Product with depreciation taken out: \[ \text{NNP} = \text{GNP} - \text{depreciation}. \] The reasoning is that some of a year’s output merely replaces machinery, buildings and vehicles that wore out during that year. That part is not a genuine addition to national wealth, so subtracting it leaves what the country can consume without running its capital stock down - which is why NNP at factor cost is also called national income. Two features of the definition deserve care. It counts only final goods and services, so the value of intermediate inputs is not added again - the flour in a loaf is counted once, in the loaf. And it is national rather than domestic, so it covers output attributable to a country’s residents wherever they earn it, adding net factor income from abroad to the domestic figure. The remaining options each shrink the definition wrongly: two restrict it to tangible goods, dropping services altogether, and one does the reverse. The keyed option in this record omitted the deduction for depreciation, which is the whole of what makes the product net; its text has been corrected.