National income is the total value of all final goods and services produced in a nation in a year. It is the most important macroeconomic indicator, as it determines the level of aggregate demand. National income includes only income generated through legal economic activity and received by individuals, excluding undistributed corporate profits. It is measured using indicators like GDP, GNP, NNP, personal income, and disposable income. Developing countries face additional challenges in accurately measuring national income due to large non-monetized sectors, lack of specialization, non-market transactions, and limited data availability.

1. National Income
-By Suvarna Kamble.

2. • National income is the final outcome of all
economic activities of a nation valued in
terms of money.
• It is most important macroeconomic variable.
• The level of national income determines the
pattern which determines the level of
aggregate demand for goods and services.
• Its distribution pattern determines the Pattern
of demand for goods & Services.
• It means how much of what kinds of goods
and services are demanded and produced.

3.  It is the most comprehensive measure of the
level of the aggregate economic activity in an
economy.
 It is the total income of a nation as against the
income of an individual
 But not all the income received by individuals
during a given period can be included in the
national income
 Lly , not all the income that is generated in
the Process of Production in an economy
during a given Period is received by the
individuals in the economy.

4.  “National Income as the aggregate of money
value of the annual flow of final goods and
services In the national economy during a
given Period”
 “National Income is both a flow of goods and
services and a flow of money incomes.”
-Paul studenski

5. Measures of National Income:
 GDP
 GNP
 NNP
 Personal Income
 Disposable Income
 Value added

6. Personal Income:
 personal Income is calculated by subtracting
from national income those types of incomes
which are earned but not received and adding
those types that are received but not currently
earned. So;
 Personal Income=NNP at factor cost –
undistributed Profits-corporate Taxes +
Transfer Payments

7. Disposable Income:
 Disposable income is the total income that
actually remains with individuals to dispose
off as they wish.
 It differs from Personal Income by the amount
of direct taxes Paid by individuals.
 Disposable Income =Personal Income –
Personal direct taxes.

8. Value Added:
 It is useful device to find out the exact
amount that is added at each stage of
Production to the value of final Product.
 It is the difference between the value of
output Produced by that firm and the total
expenditure incurred by it on the materials
and the intermediate Products Purchased from
other business firm
 Thus , value added is obtained by deducting
the value of material inputs or intermediate
products from the corresponding value of
output.

9. Value added= Total sales + closing
stock of finished goods & semi finished
goods-total Expenditure on raw
materials and intermediate Products –
Opening stock of finished and semi
finished goods.

10. Difficulties in Measurement of National
Income:
 NI is always measured in money , but there
are a number of goods and services ; which
are difficult to assessed in terms of money.
 NI is of double counting ;which arises from
the failure to distinguish Properly between a
final and an intermediate Product.
 Income earned through illegal activities such
as gambling or illicit extraction of liquor is
not included in national income.

11.  Difficulty of Transfer Payments in NI
 Capital gains or losses which accrue to
Property owners by increases or decreases in
the market value of their capital assets due to
changes in their demands .
 Price changes.

12. Problems of Measurement in developing
countries:
 Non monetised sector
 Lack of occupational specialization
 Non market transactions
 Illiteracy
 Non availability of data