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What is national income

Will clear all ur doubt in national economise.

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What is national income

  1. 1. What is National Income? • National Income is the sum-total of factor- incomes earned by normal residents of a country during the period of one year. • National Income is also defined as the sum-total of market-value of final goods and services, produced by normal residents of a country in one year.
  2. 2. Three expressions of National Income • NY = M.V. of final goods and services • NY = sum-total of factor-incomes • NY = C+I (consumption+expenditure)
  3. 3. Gross Domestic Product at M.P. • GDP is the market-value of final goods and services produced within domestic territory of a country during 1 year inclusive of depriciation • There are both resident as well as foreign producers within domestic territory of a country • GDP= P*Q (Here P=Market Price and Q=final goods and services)
  4. 4. • The term “gross” indicates that the latter includes depriciation • Only M.V. of final goods and services is taken into account, not intermediate goods and services • Price of goods and services refers to their prevailing M.P.
  5. 5. GDP does not include: • Income from illegal activities • Black-money • Transfer-Payments • Income from monetary transactions like from shares and debentures • Value of second hand goods • Self-consumption services
  6. 6. Gross National Product at M.P. • GNPmp is the market price is the M.V. of final goods and services produced within domestic territory of a country by normal residents during a period of one year. • GNP is a broader concept than GDP. • It includes NFYA (Net Factor Income earned from Abroad) • NFYA= Factor-Income earned by our residents in ROW – Factor-Income earned by non-residents in our country • GNP = GDP+NFYA • If NFYA is positive, GNP>GDP • If NFYA is negative, GNP<GDP
  7. 7. Relation between GDP and GNP • Domestic Product is concerned with a given geographical territory whereas National Product can accrue in any part of the world where normal residents of country render their services. • Therefore, National Product includes NFYA while Gross Product does not include NFYA
  8. 8. Net National Product at M.P • Concept of National Product is more practical than that of Gross National Product because during the process of production of final goods and services there is some consumption of fixed- capital, also called depriciation. • N.N.P at M.P. = G.N.P. - Depriciation
  9. 9. Net Domestic Product at M.P • Net Domestic Product at M.P. is the market-value of final goods and services produced within the domestic territory of a country, exclusive of depriciation. • NDP at M.P. = GDP – Depriciation • NDP at M.P. = NNP at M.P – NFYA
  10. 10. Domestic Income Or N.D.P. at F.C • Net Domestic Income is the sum-total of factor-incomes generated within the domestic territory of a country during a period of one-year. (Domestic Income) • NDP at F.C. = NDP at M.P – Indirect taxes + subsidies (or) • NDP at F.C. = NDP at M.P – Net Indirect Taxes
  11. 11. • GDP at F.C. = NDP at F.C + Depreciation • NNP at F.C. or NATIONAL INCOME. It is the total earning of all factors in the form of interest, wages, rent and profits and NFYA. • NNP at F.C. = NDP at F.C. + NFYA
  12. 12. Gross National Product at F.C. • GNP at F.C. is the sum total of factor incomes earned by normal residents of a country, along with consumption of fixed capital, during a year. • GNP at F.C. = NNP at F.C. + Depriciation
  13. 13. National Disposable Income • National Disposable Income refers to the Net Income at M.P. available to a country for disposal. It is the sum-total of national income NNP at F.C., Net Indirect Taxes and Net Current Transfers from the rest of the world. • NDI= N.I.(NNP at F.C.) + Net Indirect Taxes + Net Current Transfers from ROW • National Disposable Income is the income from all sources (earned income as well as transfer payments from abroad) available to residents of a country for consumption expenditure or for saving during a year.
  14. 14. Gross and Net concepts of National disposable Income • Gross National Disposable Income includes current replacement cost, while Net National Disposable Income does not. • Net National Disposable Income= Gross National Disposable Income – Current replacement cost (which is depriciation at the level of economy as a whole).
  15. 15. • Factor Income from Net Domestic Product accruing to Private Sector = Net Domestic Product at Factor Cost – Income from Property and Entrepreneurship accruing to the Government departmental enterprises – Savings of Non-departmental enterprises.
  16. 16. Private Income • Private Income is the income of private- sector obtained from any source, productive or otherwise, and retained income of corporations. • Private-Income= Factor Income from NDP accruing to pvt. Sector + NFYA + Interest on National Debt + Current transfers from Govt + Current transfers from ROW
  17. 17. National Income Private Income 1. It includes income both in public and private sectors of economy. 2. It includes only factor- incomes. It does not include transfers. 3. Interest on National Debt is not included in NI 1. It includes the income of only private sector. 2. It includes both factor- incomes as well as current transfers from Govt. and ROW 3. Interest on National debt is included in Pvt. Income
  18. 18. Personal Income • Personal Income is the income actually received by individuals and households from all sources in the form of factor- income and current-transfers. • Personal Income includes the income actually received by house-holds. • Personal Income = Private Income – Undistributed Profits (or corporate saving) – corporation tax.
  19. 19. Private Income Personal Income 1) It is a broader concept. 2) Private Income includes corporate taxes and corporate saving. 1) It is a narrow concept. 2) Personal Income does not include corporate taxes and corporate saving.
  20. 20. Personal Income National Income 1) It is a concept related to receipt of income. 2) Income from domestic product accruing to Govt. constitutes a part of National Income, but not of Personal Income. 1. It is a concept related to generation of income. 2. Income from domestic product accruing to Govt does not constitute a part of National Income
  21. 21. Personal Income National Income 3. Personal Income includes both factor- incomes as well as transfer-payments. 4. Corporate savings and tax are not a part of personal income 3. National Income comprises of factor- incomes only 4. Corporate savings as well as corporation tax are integral components of NI
  22. 22. Personal Disposable Income • Personal Disposable Income is the income remaining with individuals and households after deduction of all taxes levied against their income and their property by Govt. • PDI = Personal Income – Direct Personal Tax – Miscellaneous receipts of Govt. Administrative Dept or miscellaneous fees and fines paid by households

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