The document discusses different concepts and methods of calculating national income: 1. Gross National Product (GNP) is defined as the total market value of all final goods and services produced in a year. GNP includes agricultural products, industrial products, and mineral products. 2. Net National Product (NNP) is calculated by deducting depreciation charges from GNP. 3. Personal Income is the sum of all incomes received by individuals or households, while Disposable Income is personal income remaining after deducting personal taxes. The three main methods of calculating national income are the net output method, income method, and expenditure method.

1. National Income:
The term national income has been differently defined by different authors. A very simple
definition of national income can be given as :
"The National Income for any period consists of the money value of the goods and services
becoming available for consumption during the period."
Concepts of National Income:
The various concepts of national income are given below:
Gross National Product (G.N.P):
Gross national product is defined as:
“ The total market value of all final goods and services produced in a year”
Two things are important with respect to this definition:
Firstly, it measures the market value of amount output. Therefore it is a monetary measure.
Secondly, for calculating national product accurately all goods and services produced during a
year must be counted only once.
G.N.P generally includes the following:
(i) Agricultural Product
In agricultural product wheat, rice, cotton, tobacco, jute all types of vegetables pulses, fruits etc
are included.
(ii) Industrial Product
By industrial products we mean all types of machineries, means of transportation, furniture,
electronic items and other electric equipments.
(iii) Mineral Product
Equalization of G.N.P can be written as:
G.N.P = consumer goods + capital goods + depreciation + indirect taxes
2. Net National Product (N.N.P):
During a year the production of gross nation al product some capital goods are consumed
i.e. the plants, machinery, and other equipments are brought in use. The se capital goods due to
utilization in the production expire its value, commodity known as depreciation allowances are
deducted from the gross national product (G.N.P) we get the net national product (N.N.P). Its
equation can be given as:
N.N.P = G.N.P – depreciation
Thus the definition of the N.N.P can be properly written as, “The market value of final
goods and services after deducting the depreciation charges is called net national product.
3. Personal Income (P.I):
The some of all incomes actually received by all individuals or households during a given
financial year is called personal income. Personal income is different from national income for
the simple reason that some incomes such as social security contribution co-operates income
taxes and distributed profits which are included in national income are not actually received by
the house holds. The equation of personal income thus can be written as:
Personal Income(P.I)= national income – social security contribution - cooperate income tax –
undistributed profits

2. 4. Disposable Income (D.I):
After payment of personal taxes like income tax, property tax etc. What party of personal
income is left for others consumption is called disposable personal income. Its equation is:
Disposable Income = personal income - personal taxes
Methods of Calculating National Income:
To calculate national income the following three methods are generally used:
1.Net output Method or Production Method:
For calculating national income under this method the net output or the production of
various commodities is estimated and evaluated at the market prices. For this purpose we take
two steps,
Firstly we estimate the monetary value of the commodities that are produced internally .The
production or output of different sections of the economy i.e. agricultural, manufacturing, trade,
commerce, transport etc is analyzed after deducting the depreciation charges.
Secondly; we consider the foreign business transactions that were performed during the financial
year. In this regards in this regard we only consider the difference between exports and imports.
These two aggregate are then summoned up to get the gross domestic product which in turn is
deducted from the total revenue earned to arrive at national income. In very simple words the
contribution, which each enterprise makes to total output, is equal to its total revenue minus what
is paid out to other enterprises and the depreciation of equipment used in the process of
production. The production method is the most direct method for calculating national income. It
s equation can be written as:
National Income = G.N.P – cost of capital – depreciation – indirect taxes
2. Income Method
Under this method the various factors of production are classified in a few broad categories. The
incomes of various and sectors are obtained from there financial statements. Under this method
the national income is also estimated by summing up the income that arrives to the factors of
production provided by the national residents. Thus the rate at which the national income is
distributed among the various factors of production is estimated. This method of calculating
national income is quite complex. Usually the undeveloped countries where most of the people
are not directly covered by direct taxation. Equation wise the method can represent
national income as:
National Incomer = rental income + wages + interest + profit
3. Expenditure or outlay Method:
This method gives national income by adding up all public and private expenditures made
on goods and services during a year. It is obtained by:
 Personal consumption expenditure of goods and services.
 Gross domestic private investment.
 Government purchase of goods and services.
 Net Foreign investment.

3. It must however be recognized that it is the final expenditure only which must be counted
and not the immediate expenditure.