National income is defined as the total factor incomes earned by residents of a country in a year. It can be expressed as the sum of final goods and services or the sum of factor incomes. There are several ways to measure national income, including GDP, GNP, NDP and NNP, which take into account production within a country or by its residents, as well as depreciation. Personal income refers to income received by individuals and households from factors and transfers, while personal disposable income is personal income remaining after taxes.

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. 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. 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. • 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. 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. 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. 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. 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. 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. 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. • 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. 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. 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. 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. • 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. 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. 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. 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. 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. 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. 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. 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