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)
