URVIN PATEL
urvinpatel18@gmail.com
According to Samuelson ,
“National Income or product is the final figure you arrive at
when you apply the measuring rod of...
• The national income is defined as the money value of
all the final goods and services produced in an
economy during an a...
Concepts of National Income includes:
 Gross Domestic Product (GDP).
 Gross National Product (GNP).
 Net Domestic Produ...
1. Gross Domestic Product
(GDP):
• Gross Domestic Product (GDP): GDP is the sum
of money values of all final goods and ser...
• Gross National Product (GNP): GNP is the aggregate
final output of citizens and businesses of an economy in
a year.
• GN...
3. Net National Product (NNP) AND Net Domestic
Product (NDP)
• Net Domestic Product (NDP)
= GDP-Depreciation
• Net Nationa...
Real and Nominal National Income
• National income estimated at the prevailing prices, is called
national income at curren...
Per Capital Income and Personal Income
• Per capita income is the average income of the people of a
country in a particula...
Methods of measuring national income
• In equilibrium
Output=Income=expenditure
• Hence there are three approaches to the ...
Product (or Output) Method
• The market value of all the goods and services
produced in the country by all the firms acros...
Limitations of Product Method
• Problem of Double Counting:
– unclear distinction between a final and an
intermediate prod...
• Exclusion of Non Marketed Products
– E.g. outcome of hobby or self
consumption.
• Self Consumption of Output
– Producer ...
Income Method
• The net income received by all citizens of a country in a particular
year, i.e. total of net rents, net wa...
Limitations of Income
Method
• Exclusion of non monetary income: Ignores the non-
monetized section of economic activities...
Expenditure Method of Measuring National
Income
• The total expenditure incurred by the society in a
particular year is ad...
Uses of National Income Data
• National income is the most dependable
indicator of a country’s economic health.
• Differen...
• A measure of economic welfare.
higher aggregate production implies more and
more goods and services being available to
p...
Difficulties in Measurement of
National Income
• Non monetized transactions: Exchange of
goods and services which have no ...
• Categorization of goods and services: In
many cases categorization of goods and
services as intermediate and final produ...
THANK YOU
URVIN PATEL
urvinpatel18@gmail.com
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National income21 by urvin

Give more definations and Concepts of National Income it includes: Gross Domestic Product (GDP). Gross National Product (GNP). Net Domestic Product (NDP). Net National Product (NNP). and many more...
Published on: Mar 3, 2016
Published in: Economy & Finance      
Source: www.slideshare.net


Transcripts - National income21 by urvin

  • 1. URVIN PATEL urvinpatel18@gmail.com
  • 2. According to Samuelson , “National Income or product is the final figure you arrive at when you apply the measuring rod of money to the diverse apples, oranges, battleships and machines that any society produces with its land, labour and capital resources.”
  • 3. • The national income is defined as the money value of all the final goods and services produced in an economy during an accounting period of time, generally one year. National Income is the flow of goods and services of a nation during a year National income is the aggregate money value of all final goods and services in a country during a year.
  • 4. Concepts of National Income includes:  Gross Domestic Product (GDP).  Gross National Product (GNP).  Net Domestic Product (NDP).  Net National Product (NNP).
  • 5. 1. Gross Domestic Product (GDP): • Gross Domestic Product (GDP): GDP is the sum of money values of all final goods and services produced within the domestic territories of a country during an accounting year. GDP= C+I+G+(X-M) • GDP at market price: includes the final value of goods and services also includes indirect taxes and excludes the subsidies given by the government. • GDP at factor cost is the money value of final goods and services based on the cost involved in the process of production. Gross Domestic Product at factor cost = GDP at Market Prices –Indirect Taxes+ Subsidies
  • 6. • Gross National Product (GNP): GNP is the aggregate final output of citizens and businesses of an economy in a year. • GNP may be defined as the sum of Gross Domestic Product and Net Factor Income from Abroad (NFIA). GNP = GDP + NFIA GNP = C+I+G+(X-M)+NFIA • Net Factor Income from Abroad: difference between income received from abroad for rendering factor services and income paid towards services rendered by foreign nationals in the domestic territory of a country.
  • 7. 3. Net National Product (NNP) AND Net Domestic Product (NDP) • Net Domestic Product (NDP) = GDP-Depreciation • Net National Product (NNP) = GDP–Depreciation +NFIA Or =GNP–Depreciation • Thus NNP is the actual addition to a year’s wealth and is the sum of consumption expenditure, government expenditure, net foreign expenditure, and investment, less depreciation, plus net income earned from abroad. = C+I+G+(X–M)–Depreciation + NFIA • NNP at Factor Cost is the sum total of income earned by all the people of the nation, within the national boundaries or abroad • It is also called National Income. • NNP at Factor Cost = NNP at Market Prices –Indirect Taxes+ Subsidies
  • 8. Real and Nominal National Income • National income estimated at the prevailing prices, is called national income at current prices or Nominal National Income, or Money National Income or national income at current prices. • National income measured on the basis of some fixed price, say price prevailing at a particular point of time, or by taking a base year, is known as national income at constant prices, or Real National Income or national income at constant prices. deflatorGDP GDPNominal =GDPReal •GDP deflator is the ratio of nominal GDP in a year to real GDP of that year •GDP deflator measures the change in prices between the base year and the current year.
  • 9. Per Capital Income and Personal Income • Per capita income is the average income of the people of a country in a particular year. PopulationTotal IncomeNational =IncomeCapitaPer Personal income is the total income received by the individuals of a country from all sources before direct taxes in one year. Personal Income = National Income –Undistributed Corporate Profits – Corporate Taxes – Social Security Contributions + Transfer Payments + Interest on Public Debt Personal Disposable Income is the income which can be spent on consumption by individuals and families. Personal Disposable Income = Personal Income – Personal Taxes
  • 10. Methods of measuring national income • In equilibrium Output=Income=expenditure • Hence there are three approaches to the measurement of GDP: • Product (or Output) Method: National Income by Industry of Origin – Final Product Method – Value Added Method • Income Method or National Income by Distributive Shares • Expenditure Method
  • 11. Product (or Output) Method • The market value of all the goods and services produced in the country by all the firms across all industries are added up together. • Process – The economy is divided on basis of industries, such as agriculture, fishing, mining and quarrying, large scale manufacturing, small scale manufacturing, electricity, gas, etc. – The physical units of output are interpreted in money terms – The total values added up. (GDP at market price) – The indirect taxes are subtracted and the subsidies are added. (GDP at factor cost) – Net value is calculated by subtracting depreciation from the total value (NDP at factor cost).
  • 12. Limitations of Product Method • Problem of Double Counting: – unclear distinction between a final and an intermediate product. • Not Applicable to Tertiary Sector: – This method is useful only when output can be measured in physical terms
  • 13. • Exclusion of Non Marketed Products – E.g. outcome of hobby or self consumption. • Self Consumption of Output – Producer may consume a part of his production.
  • 14. Income Method • The net income received by all citizens of a country in a particular year, i.e. total of net rents, net wages, net interest and net profits. (GDP at factor cost). • It is the income earned by the factors of production of a country. • Add the money sent by the citizens of the nation from abroad and deduct the payments made to foreign nationals (individuals and firms) (GNP at factor cost) or Gross National Income (GNI). Process: • Economy is divided on basis of income groups, such as wage/salary earners, rent earners, profit earners etc. • Income of all the groups is added, including income from abroad and undistributed profits. • The income earned by foreigners and transfer payments made in the year are subtracted. GNI = Rent + Wage + Interest +Profit + Net Income from Abroad- Transfer payments
  • 15. Limitations of Income Method • Exclusion of non monetary income: Ignores the non- monetized section of economic activities. – Economic activities that contribute to national income, but due to their non monetary nature, they go unrecorded. For e.g. a farmer and family working in their own field. • Exclusion of Non Marketed Services: People undertake a particular activity that are difficult to ascertain in money value. E.g. mother’s services to the family.
  • 16. Expenditure Method of Measuring National Income • The total expenditure incurred by the society in a particular year is added together to get that year’s national income. • Components of Expenditure: – personal consumption expenditure – net domestic investment – government expenditure on goods and services, and – net foreign investment Limitations • Ignores Barter System • Ignores Own Consumption • Affected by Inflation
  • 17. Uses of National Income Data • National income is the most dependable indicator of a country’s economic health. • Difference between GDP and GNP indicates the contribution of net income earned abroad • Necessary for Economic planning: useful aid in judging which sectors should be given more emphasis
  • 18. • A measure of economic welfare. higher aggregate production implies more and more goods and services being available to people • Helps in determining the regional disparities, income inequality and level of poverty in a country. • Helps in comparing the situations of economic growth in two different countries.
  • 19. Difficulties in Measurement of National Income • Non monetized transactions: Exchange of goods and services which have no monetary payments, like services rendered out of love, courtesy or kindness are difficult to include in the computation of national income. • Unorganized sector: Contribution of unorganized sector are unrecorded. It is very difficult to identify income of those who do not pay income tax. • Multiple sources of earnings: Part time activity goes unrecognized and such income is not included in national income.
  • 20. • Categorization of goods and services: In many cases categorization of goods and services as intermediate and final product is not very clear. • Inadequate data: Lack of adequate and reliable data is a major hurdle to the measurement of national income of underdeveloped countries.
  • 21. THANK YOU URVIN PATEL urvinpatel18@gmail.com

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