Query

[Ansh malhotra]

[Mauli]

Let me know , if its not readable.

[Ansh malhotra]

 I have problem with equation 1 please explain thank you for your response

[Mauli]

GNP and NI are necessarily equal. Their equality is an identity.
There are 2 adjustments made in GNP , for the identity to hold.

GNP does not take into account of wear and tear caused by machinery. That is the consumption of fixed capital or machinery depreciation.

GNP does not include gifts from residents of foreign countries, called unilateral transfers (transfer payments)
Eg : pension payments
       remittances
       reparation payments.
However, net unilateral transfers are a part of a country's income but not a part of its product , therefore they must be added while calculating NNP.
 

[Mauli]

Refer Paul Krugman , Pg 291-292 if you must . That will clear your doubt!