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UNFAVORABLE BALANCE OF PAYMENTS: An imbalance in a nation's balance of payments in which payments made by the country exceed payments received by the country. This is also termed a balance of payments deficit. It's considered unfavorable because more currency is flowing out of the country than is flowing in. Such an unequal flow of currency will reduce the supply of money in the nation and subsequently cause an increase in the exchange rate relative to the currencies of other nations. This then has implications for inflation, unemployment, production, and other facets of the domestic economy. A balance of trade deficit is often the source of a balance of payments deficit, but other payments can turn a balance of trade deficit into a balance of payments surplus.
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                           NET DOMESTIC PRODUCT: The total market value of all final goods and services produced within the political boundaries of an economy during a given period of time, usually a year, after adjusting for the depreciation of capital. Net domestic product, usually abbreviated NDP, is one of five key National Income and Product Accounts measures reported regularly (every three months) by the Bureau of Economic Analysis. The other four measures are gross domestic product, national income, personal income, and disposable income. Net domestic product has largely replaced a comparable term, net national production. Net domestic product (NDP) results from adjusting gross domestic product (GDP) for the amount of capital depreciation that occurs during production. As the term "gross" implies, "gross" domestic product is the grand total of all production in the economy. In contrast, as the term "net" indicates, "net" domestic product subtracts or "nets out" the wear and tear on capital goods from the gross value.A Little Wear and TearBy adjusting for depreciated capital, net domestic product provides a measure of the economy's overall amount of current production that contributes to progress. The problem with gross domestic product is that it IS, in fact, an aggregate measure and includes ALL production. However, to the extent that a portion of this production includes new capital goods that are used merely to replace worn out, broken down, or otherwise depreciated capital, then all production measured by gross domestic product does not ADD to the economy.- Suppose for example, that the economy's gross domestic product is a grand total of $10 trillion, with $2 trillion of this total consisting of investment expenditures for capital goods. A $2 trillion total for capital goods production suggests that the economy is likely to achieve significant economic growth in the year to come.
- However, economic growth is likely to be less substantial if a portion of this capital investment is merely used to replace capital depreciated over of the year in the course of production. If, for example, $1 trillion worth of capital wears out, breaks down, or becomes technologically obsolete during the year, then the economy ONLY has $1 trillion worth of ADDITIONAL capital that can be used to promote economic growth. In fact, if capital depreciation is a full $2 trillion, then there is NO new capital available for economic growth. There is NO capital-inducing economic growth.
- It could be even worse. Should capital depreciation exceed $2 trillion, then not only is the economy NOT expanding, it is actually shrinking. The production of new capital is not enough to replace the depreciated capital, let alone add extra growth-promoting capital. The capital stock is actually smaller at the end of the year than at the beginning.
While capital depreciation rarely exceeds capital investment, in a given year, a sizeable portion of capital goods are used to replace depreciated capital. During the 1960s and 1970s, capital depreciation was in the range 40-60 percent of capital investment. Into the 1990s and beyond, this fraction was in the 80-90 percent range. Doing a Little Adjustment| Net Domestic Product |  |
The following equation symbolically illustrates how net domestic product (NDP) is related to gross domestic product (GDP):The CCA in this equation stands for capital consumption adjustment, the official term for capital depreciation. A simple rearrangement of terms provides an alternative way to express the relation between GDP and NDP: In essence, both equations indicated that gross domestic product can be separated into two components--net domestic product and capital depreciation. This separation is graphically illustrated in this diagram. The two-toned column on the left represents gross domestic product. This column is two-toned because it can be separated into capital consumption adjustment, which is the top red portion, and net domestic production, which is the lower blue portion. The center column then indicates that portion of gross domestic product going to the capital consumption adjustment. The right column then indicates the portion of gross domestic product that remains for net domestic product. A Little Bit About Net National ProductNet domestic product replaced an old standard that had existed for several decades--net national product. The relation between net domestic product and net national product is the same as that between gross domestic product and gross national product.Net domestic product is the (net) value of final goods and services produced within the political boundaries of the domestic economy, regardless of the citizenship of the resource owners. Net national product, in contrast, is the (net) value of final goods and services produced citizens of the domestic economy, regardless of geographic location. The difference between these two is net foreign factor income.
Recommended Citation:NET DOMESTIC PRODUCT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: May 2, 2024].
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Today, you are likely to spend a great deal of time at a dollar discount store seeking to buy either a birthday gift for your grandfather or a pleather CD case. Be on the lookout for bottles of barbeque sauce that act TOO innocent.
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Post WWI induced hyperinflation in German in the early 1900s raised prices by 726 million times from 1918 to 1923.
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"Leadership is based on inspiration, not domination; on cooperation, not intimidation. " -- William A. Ward
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GDI
Gross Domestic Income
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