Post on 21-Apr-2017
NATIONAL INCOME
The foreigner is to have a share in your domestic economy.
By: Vasundhara GhoseB.Tech 3rd year.
TOPICS COVERD:•Definition of national income•Concepts of national income•Methods to calculate national income•Factors effecting national income•Applications of national income•Limitations of national income
DEFINATION:
•National income is the total value of a country’s final output of all new goods and services produced in one year.
CONCEPTS OF NATIONAL INCOME•GROSS DOMESTIC PRODUCT(GDP)•GROSS NATIONAL PRODUCT(GNP)•NET NATIONAL PRODUCT(NNP)•NATIONAL INCOME AT FACTOR
COST(NI)•PERSONAL INCOME(PI)•DISPOSABLE INCOME(DI)•PER CAPTICA INCOME
GROSS DOMESTIC PRODUCT (GDP)
•Gross domestic product is the money value of all final goods and services produced within the domestic territory of a country during a year.
• GDP=(P*Q) where p=price of goods and services q=quantity of goods and
services•Includes:-Goods & services+government exp.
+private domestic investment in capital goods+ exports & imports
GROSS NATIONAL PRODUCT(GNP)
•Total market value of all final goods and services produced annually in a country plus net factor income from aboard.
•GNP=GDP+NFIA(net factor income from aboard)
•Includes: Goods & services government exp.+ private domestic investment in capital goods+ exports & imports+ net factor income from aboard.
NET NATIONAL PRODUCT(NNP)
•Derived by subtracting depreciation allowance from GNP.
• NNP=GNP- depreciation
NATIONAL INCOME AT FACTOR COST(NI)
•Sum of all incomes earned by resouces suppliers for their contribution of land,labour,capital and organization.
• NI=NNP +Subsidies- Interest
OTHER TERMS…• Personal Income (PI)
Personal Income i s the total money income received by individuals and households of a country from all possible sources before direct taxes.
•PI=NI-Corporate Income Taxes-Undistributed Corporate Profits-Social Security Contribution+Transfer Payments
• Disposable Income (DI)
The income left after the payment of direct taxes from personal income is called Disposable Income. Disposable income means actual income which can be spent on consumption by individuals and families.
DI=PI-Direct Taxes
• Per Capita Income (PCI)
Per Capita Income of a country is derived by dividing the national income of the country by the total population of a country. Thus,
PCI=Total National Income/Total National Population
METHODS OF NATIONAL INCOME ACCOUNTING
HOW TO CALCULATE
NATION INCOME??
•Three methods of measuring national income:--
•Value added method•Income method•Expenditure method
NATIONAL INCOME ACCOUNTING
Value added method:--
•Value added is defined as the difference between total value of output of a firm and value of inputs bought from other firms.
GVA MP = Value of output – Intermediate Consumption
Sales + change in stock – Intermediate
Consumption
•The income method measures national income from the side of payments made to the primary factors of production in the form of rent, wages ,interest and profit for their productive services in an accounting year.
•Land: rent Labor :wages Capital : interest Entrepreneur : profit•TOTAL INCOME= NATIONAL INCOME
CALCULATION OF NATIONAL INCOME BY INCOME METHOD
•Total amount spent on goods and services produced in a nation by households, firms, government and foreigners .
I. HOUSEHOLD: CONSUMPTIONII. FIRMS : INVESTMENTIII.GOVERNMENT :GOV’S SPENDINGIV. FOREIGNERS: EXPROT-IMPORT C+I+G+(X-M)= TOTAL EXPENDITURE
Calculation of National income by expenditure method-
FACTORS EFFECTING NATIONAL INCOME:-
FACTORSFOR
NATIONAL INCOME
FACTORS EFFECTING NATIONAL INCOME•Factors of production•Technology•Government•Political stability•Corruption
APPLICATIONS OF NATIONAL INCOME
HOW NATIONA LINCOME HELP NATION??
APPLICATIONS OF NATIONAL INCOME•Living Standard•Policy formation•International comparison•Business decision•Growth of economy•Helpful in removing inequalities in
income distribution
LIMITATIONS OF NATIONAL INCOME
LIMITATIONS OF
NATIONAL INCOME
LIMITALIONS OF NATIONAL INCOME:• In UDC, due to illiteracy
producer don’t keep regular accounts.
• In UDC, lack of adequate statistical data.
• ERROR in measurement(BLACK MARKET etc.)
• Household production is ignored( child-care,laundry etc)
How uniform is the distribution of GDP? It still seems that a majority of the people are poor and only some have benefited.
ANY QUERY??