Gross National Product (GNP) less the provision for the wear and tear of assets is the

Step 1: Analyze the question The question asks for the term used when we take GNP and subtract the provision for wear and tear of assets. "Wear and tear" is another way of saying depreciation (also called capital consumption allowance).

Step 2: The concept

• GNP is the total value of final goods and services produced by a country's citizens, at home and abroad, in a year. It is measured before allowing for the fall in value of capital goods.
• Depreciation is the loss in value of machines, buildings and equipment through use and age.
• When we remove depreciation from GNP, we get the net figure:

NNP = GNP − Depreciation (Capital Consumption Allowance)

Step 3: Check each option

• A. Net present value: a investment appraisal concept (discounting future cash flows). It has nothing to do with national income.
• B. Net national product: GNP minus depreciation. ✔
• C. Net factor income: this is income earned by citizens abroad minus income earned by foreigners at home. It is the link between GDP and GNP (GNP = GDP + net factor income from abroad).
• D. Net indirect taxes: indirect taxes minus subsidies. It is used to convert between market prices and factor cost.

Step 4: Answer The correct option is B. Net national product.

Exam tip Remember the word "net" means "after deduction of depreciation":

• GDP − Depreciation = NDP
• GNP − Depreciation = NNP

Whenever you see "wear and tear", "capital consumption" or "depreciation" in a national income question, think "net".