National Income & Various Concept Of National Income

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National Income

Just like individuals a country also generates certain net value during a year which is called national income. In other words a country with the help of its labor and capital, produces annually a certain amount of goods & services, this flow of goods and services which become available to a country during a year is called national income of that country.


DEFINITION

Professor Marshall

“The labor and capital of a country, acting on its natural resources, produce annually a certain net aggregate of all kinds of goods and services. This is the national income of that country”.

Simon Kuznets
The aggregate of all goods & services produces in a flowing during one year from productive system in the hand of ultimate consumer

CONCEPTS OF NATIONAL INCOME

there are six concepts  of national income

1) GROSS DOMESTIC PRODUCT (GDP)

Gross domestic’s product (GDP) is the market value of final goods and services, which are produced within the country during a year. What is produced or earned outside the country by a country’s workers is not included in (GDP) of the country to which they belong. Its means the remittances earned from overseas workers are excluding from GDP.

Sector of economy	Values of goods & services produced in a year
Total agricultural production	Rs. 60000
Total Industries production	Rs. 40000
Total Mineral production	Rs. 20000
Total Services	Rs. 30000
	G D P Rs. 150000

NOMINAL GDP

When all the components of GDP are valued at their current prices in the market it is called nominal GDP. Calculation of nominal GDP given below

2001 Rs. l per pen, production of pen 100 (1 x l00 =100)

2002 Rs. 2 per pen, production of pen 150 (2 x 150 =300)

REAL GDP

When all the components GPD used at their constant prices in the Market it is called real GDP calculation of real GDP given below

2001 Rs. l per pen, production of pen 100 (l x l00 =100)

2002 Rs. 2 per pen, production of pen 150 (1x150 =150)

2) GROSS NATIONAL PRODUCT (GNP) (GROSS NATIONAL INCOME)

Gross National product is the total market value of final goods and services a nation or a country produces during a year. The remittances sent by the national workers abroad are also included in the GNP of that country which they belong. Its means GNP include domestic production as well as foreign remittances.
GNP = GDP + remittances sent by the nationals workers abroad b

3) NET NATIONAL PRODUCT (NNP) (NET NATIONAL INCOME)

Net National product-NNP is the total net market value of final goods and services a nation or a country produces during a year. If we deduct the value allowances for deprecation of capital goods from GNP get NNP. Since in the process of production of GNP during a year, we have to use various capital goods, these are subjected to wear & tear being used. Thus, while computing NNP, allowances for depreciation are deducted.

NNP = GNP - allowances for deprecation


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4) NATIONAL INCOME (NI) (NATIONAL INCOME AT FACTORS COST)

National income means the money value of the total flow of goods and services produced in an economy in a year. Or in other words national income at factors cost means aggregation of four factors of production that is land labor capital and organization. If indirect taxes like sales tax are deducted & subsidies added in NNP it becomes national income.

NI = NNP — Indirect taxes + subsidies

Or

NI = rent + wages + interest + profit

5) PERSONAL INCOME (PI)

Personal income is the income, which is actually received by individuals of a country from all the resources during a year. Several deductions are made from national income before it distribution to the individuals like social security contributions; corporate income taxes etc.

Personal income is different than the national income, if we deduct Social security contribution, corporate income taxes, and undistributed corporate profits and add Transfer payments in national income it becomes personal income.

Personal income = National Income - Social security contribution - Corporate income taxes - Undistributed corporate profits — Transfer payments.

(6) DISPOSABLE PERSONAL INCOME (DPI)

A certain part of personal income is paid to government in the form of direct taxes (personal taxes) like Income tax, property tax etc. if we deduct these amount from the personal Income it become Disposable Income. It is an income to which an individual can save or consumed therefore it is called disposable personal income DPI.
Disposable personal income = Personal income — direct taxes

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