This document defines various measures of national income and production. It explains that national income is the total value of final goods and services produced in a country in one year. It also discusses the importance of national income as a key economic indicator. The document then describes Gross Domestic Product (GDP), Gross National Product (GNP), Net National Product (NNP), Net Domestic Product (NDP), personal income, disposable income, per capita income, real vs nominal GDP, the GDP deflator, and real vs nominal income.

1. National Income

Definition : It is the money value of all final goods
and services produced in a country during a
period of one year.

Economic activities generate a large number of
goods and services and make net addition to the
national stock of capital
*Economic activities and non economic activities

2. Importance of NI



It is the most important macro economic
variable and determinant of the business
level and economic status of a country .
The level of national income determines the
level of aggregate demand for goods and
services .
It is considered as an indispensable variable
in economic forecasting

3. III.The Circular-Flow Diagram – methods
of estimating GDP
Revenue
Market for
Goods
Goods &
Services sold and Services
Firms
Inputs for
production
Wages, rent,
and profit
Spending
Goods &
Services
bought
Households
Market for
Factors
of Production
Labor, land,
and capital
Income

4. Measures of National Income

GDP: Gross Domestic Product

GNP :Gross National Product

NNP :Net National Product

NDP :Net Domestic Product

5. 
Gross domestic product (GDP) is
the total market value of final output
produced within a nation’s borders in
a given time period plus the income
earned locally by the foreigners minus
income earned abroad by the
nationals

6. GNP

Gross National Product (GNP) It is value of
all final goods and services produced during
a specific period in a country, Plus income
earned abroad by the nationals minus
income earned locally by the foreigners

7. GDP Verses GNP




Gross National Product (GNP) refers to
output produced by the citizens-owned
factors regardless of location.
GDP refers to output produced within the
borders of the nation borders.
GDP per capita is total GDP divided by total
population–average GDP.
GDP per capita is commonly used as a
measure of a country’s standard of living

8. Net National Product



NNP = GNP – Depreciation
It is the measure of net output available for
consumption by the society
Depreciation is the consumption of capital in
the production process — the wearing out of
plant and equipment

9. 
Net domestic product is the amount of
output we could consume without reducing
our stock of capital.
NDP = GDP – depreciation
 Personal income (PI) is the income received by
households before payment of personal taxes.
Personal income = National income – (corporate taxes
+ retained earnings + Social Security taxes)
+ (transfer payments + net interest)

10. 

Disposable income (DI) is the after-tax
income of households.
It is personal income less personal taxes
Disposable income =
personal income – personal taxes

11. Disposable Personal Income


Disposable personal income is the income
that household and noncorporate
businesses have left after satisfying all
their obligations to the government.
It equals personal income minus personal
taxes and certain nontax payments.

12. Per capita Income
National Income
Per capita Income = ------------------------Population

13. Real versus Nominal GDP
Nominal GDP values the production
of goods and services at current
prices.
 Real GDP values the production of
goods and services at constant
prices.


14. GDP Deflator
The GDP deflator is calculated as follows:
Nominal GDP
GDP deflator =
× 100
Real GDP

15. Real and Nominal Income


Real Income: Nominal Income
It is the value at the current prices

Nominal Income:

It is value at constant prices
(Prices prevailing in the chosen base year)


by Manjushree Naidu.