Concepts Of National Income

                       CONCEPTS OF NATIONAL INCOME

Ø Gross Domestic Product:

Total value or money value of all the final goods and services produced by nation in one financial year with in the boundaries in a country is called gross domestic product.

GDP = Consumption + Investment + Govt. Spending + (Export – Import)

Ø  Gross National Product:

Total value or money value of all the final goods and services produced by nation in one financial year is called gross national product. If we add net factor income from abroad or net foreign remittances into GDP, we will get GNP.

GNP = GDP + Net Factor From Abroad

Ø  Net National Product:

Total value or money value of net national output value after compensating depreciation or capital consumption allowance is called net national product. It is also called national income at market price.

NNP = GNP –­ Capital Consumption

Ø  National Income At Factor Cost:

Net income received by all the factors of production in an economy after factor cost adjustment is called national income or national income at factor cost.

NI = NNP – Indirect Taxes + Subsidies

Ø  Personal Income:

Total income received by all the legal residents of an economy in one financial year is called personal income.

PI = NI – Retained Earnings + Transfer Payments

Ø  Disposable Income:

Income which remains for onward economic activities (savings or consumption) after the adjustment of direct taxes is called disposable income or disposable personal income.

DPI = PI – Direct Taxes (personal taxes)