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This diagram is a very simple model of the economy. Note that it ignores the
roles of government and international trade.
Gross domestic product (GDP) is the total value of all final goods and services
produced within a country over a given year. Final goods are goods that are
consumed and used as is (e.g. loaf of bread), as opposed to intermediate goods which
are sold and used for some further stage of production (e.g. wheat, flour to make loaf
of bread). Intermediate goods, which are goods that go into the production of other
goods, are excluded from GDP calculations.
Gross national product (GNP) is the total value of income acquired by a
country’s citizens both domestically and abroad in a given year, no matter where
business production occurs. GNP measures economic wellbeing of a country’s
citizens.

The circular flow model tells us that an economy’s total spending will be equal
to the income earned by its citizens. Because of this reason, GDP can be calculated
two ways.
The income approach measures GDP by summing the incomes that firms pay
households for the factors of production they hire.
GDP income=S+R+I+P+SA, (3.1)
S – salary (wages),
R – rents,
I – interests,
P – profits,
SA – statistical adjustments (corporate income taxes).

The expenditure approach measures GDP as the sum of consumption
expenditure, investment, government purchases of goods and services, and net
exports:
GDP cost = C + I + G + NX, (3.2)
C - consumption ,
I – investment,
G - government purchases,
NX - net exports.
Net exports are the value of goods and services sold to other countries
(exports) minus the value of goods and services that foreigners sell us (imports). Net
exports are positive when the value of our exports is greater than the value of our
imports and negative when the value of our imports is greater than the value of our
exports. Net exports represent the net expenditure from abroad on our goods and
services, which provides income for domestic producers.

Net national product (NNP) is calculated by taking GNP and then subtracting
what is called depreciation or the consumption of fixed capital. This subtracted
amount represents the wear and tear on the country's capital equipment of buildings,
machinery, and tools.
NNP = GNP − Depreciation. (3.3)

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