Pre Engineered Building Manufacturers Hyderabad.pptx
National income concept
1.
2. National income is an
uncertain term which is used
interchangably with national dividend,
national product and national
expenditure. On this basis national
income has been defined in a number of
ways
National income is
the total value of goods and services
produced annually in a country.
3. In otherworld's National Income s the total
amount of income acquiring to a country
from economic activity in a year. It includes
all incomes in the form of wage, interest,
rent
and profit. It refers to the country’s total out
put of final goods and services in real term
rather than money term.
4. The National Income
Committee of India defined “ National
Income
as it measures the volume of
commodities and services turned out
during a given period
and counted without duplication”.
5. Important of the study of National
Income
The study occupies
importance in modern days
It furnishes information about the
existing economic conditions of the
nation.
The study also enables the government
to execute policies and programmers'
through the fiscal and monetary
operations.
vital
6. National income statistics will enable the
government o form guide lines for solving
the current economics problems and for
achieving its economical goals.
National income date are also helpful
for
the research scholars of the
country.
7. NATIONAL ICOME CONCEPT
Economist have distinguished
five
concept of National Income. They are;
Gross National Product {GNP}
Net National Product {NNP}
National Income at Factor Cost
{NI}
Personal Income
Disposable Personal Income
Gross Domestic Product {GDP}
8. (GNP)
Gross National Product
GNP refers to the money value of
final goods
and services
produced by the nationals of the country
during a given period of time, generally a
year. The term final goods used in the
definition means those finished goods
bought for final consumption and not for
resale later.
9. GNP include four types of final goods and
services.
Consumers goods and services to
satisfy the immediate wants of the
people.
Gross private domestic investment in
capital goods consisting of fixed capital
formation, residential construction and
inventories of finished and unfinished
goods.
Goods and services produced by
the government.
10. Net exports of goods and services of
GNP includes the money value of the
goods and services produced by all the
citizens o a country during a year
irrespective of whether they reside inside
the country or outside.
GNP= GDP+ Net Income from abroad.
ie. GNP = GDP +X-M
X= Income earned and received by
nationals within the boundaries of foreign
countries.
11. M= Income received by foreign nationals.
NNP(Net National Product]
The second important concept
of national income is that Net National
Product.
NNP is the net money value of final goods
and
services produced at current prices in the
course of one year in a country. Machinery,
tools, equipment etc are using for using the
12. production of a thing. These equipments
are
subjected to wear and tear. Thus
depreciation is the allowances set apart for
meeting wear and tear expanses. When
charges for depreciation are deducted
from the Gross National Product we get the
Net National Product.
So NNP = GNP-Depreciation
13. NNP can also be estimated both at
market price and at factor cost. NNP at
market price can be obtained by
deducting depreciation from GNP at
market price. There exist a close
interrelation between NNP at market
price is always higher than the NNP at
factor cost. However the NNP at factor
cost equals the cost of production.
14. NI or National Income at Factor Cost
National Income at factor cost
means the sum of all incomes earned by
resource suppliers for their contribution of
land, labour, capital and entrepreneurial
ability which go into years net production.
National Income at factor cost is defined
as the value of all final goods and services
15. produced in a year measured at factor
cost.
It is obtained by deducting the indirect
taxes like excise and sales taxes from the
NNP
at market prices and adding it to
subsidies.
ie, NI= NNP-Indirect Taxes + Subsidies.
16. PERSONAL INCOME
The income actually
received by individuals or households in a
country during one year is known as
personal
income. It consists of wages, profits,
interests
and rents. It also includes transfer
payments
like pensions, unemployment allowances,
relief payments etc. made to those who
17. receive such payments. Generally firms
do not distribute among the factors of
the profit
Is retained by enterprises. In practice,
the
the firms have to pay a part of their
income
to get personal income. Thus
PI = private income – undistributed profit
-corporate taxes .
18. DISPOSABLE PERSONAL INCOME
It is the part of the
personal income which is actually
available to individuals and households
for actual consumption and saving. All
the personal income received by the
households cannot be spend by them all
their will.
19. The individuals for example, have to
pay
personal direct taxes, such as
income tax, education tax, fire tax, etc.
Similarly, they
have also to pay fines and penalties for
violating the rules and regulations
prescribed by the administration. In order to
arrive at the personal disposable income,
direct taxes and penalties paid by the
households should be deducted from the
personal incomes.
20. PDI = Personal income-Personal direct
taxes – fines, fees, etc.
Gross Domestic Product {GDP}
Gross Domestic Product is the
money value of all goods and services
produced in the domestic territory of a
country during a year. The various
production units engaged in the
production of goods and services in a
21. produce certain amount of goods and
services. It is to be noted in this regard
that the production of final goods and
services alone is taken into account for
estimating GDP. Intermediate goods and
services are excluded from gross
domestic product. GDP can be
estimated both at market prices and a
factor costs.
22. GDP at Market Price
GDP at Market Prices
is the money value of all goods and
services produced in the domestic
territory of a country during one year
estimated at the prices prevailing in the
market. Market price is the current
prices prevailing in the market.
23. Gross Domestic Product at
Factor Cost
it is an estimation of gross
domestic product in terms of the earnings
of factors of production. GDP at a factor
cost is the gross value added at factor cost
by the producers in an economy. It is the
sum total
of the earnings received by the factors of
production in terms of wages, rent, interest
24. etc. It is equal to the GDP at market price
minus indirect taxes plus subsidies.
Valuation at factor cost displays the
composition of the gross domestic
product in terms of the factors of
production employed, the contributions
of the factors being measured by the
incomes they received.
25. GDP= GNP – FY
Where FY, stands for net income from
foreign countries. If the value of FY is
positive, it will be subtracted from GNP
and if the value of FY is negative it will be
added to the GNP in order to arrive at
the GDP.