"Net national Product or national income at market prices is the net market money value of all the final goods and services produced in a country during a year. It is found out by subtracting the amount of depreciation of the existing capital in a year from the market value of all final goods and services".

For a continuous flow of money payments, 'it is necessary that a certain amount of money should be set aside from the gross national income for meeting the necessary expenditure of wear and tear of ail capital equipment so that there should not be any deterioration in the capital and it should remain intact. If we deduct depreciation allowance from gross national product, we get Net National Product at current market price.

NNP at Market Price = GNP at Market Price - Depreciation.

- Depredation Allowance - and Maintaining Capital

Here a question can be asked as to what we actually mean by depreciation allowance and maintaining capital intact; (the words which we have used1in explaining NNP).

When production is going on, the value of capital equipment does not remain the same. A decrease in value because of wear and tear through, use, rusting, accident or through actions of elements, gradually take place in the building and other equipment of business. A certain sum of money based on the value of the capital equipment and its longevity is set aside every year from the gross annual income so that when machinery is worn out, new capital equipment can be set up from the sum thus accumulated. This fund which is set aside for covering the wear and tear, deterioration and obsolescence of the machinery is named as Depreciation Allowance. We can make this concept more clearly by taking a simple example.