Gives the idea of aggregate production in the country.
Increasing national Income is an indicator of economic progress.
Economic welfare is closely connected with the magnitude of National income
Contribution from various sectors can be known.
Gives a picture about distribution of income among the various sections.
Volume of consumption, savings and investment in the country.
Formulation of economic policies and planning.
Relation between Economic Welfare and National Income
The effect of National income on economic welfare an be studied in two ways
The change in the size of National Income: Positive change in NI increases its volume, as a result people consume more of goods and services, which leads to increase in economic welfare and vice versa. This relationship depends on various factors.
Only real increase in national income increases economic welfare.
NI cannot be a reliable index if per capita income is not taken into account.
Sometimes even with increase in NI and Per capita income economic welfare decreases due to unequal distribution of economic wealth.
Influence of increase in National Income on economic welfare also depends on the spending habit of the consumers.
The change in distribution of National Income
Change can be from rich to poor and from poor to rich and economic welfare is said to increase when former situation is implemented.