The Measurement of National Income, GDP, GNP, Personal Income, Disposable Personal Income, GDP Per capita. The following presentation depicts different measures and concepts of National Income from the book titled: Macroeconomics by George Mankiw, 9th edition.

1. Measurement of National
Income
Presented by: MUHAMMAD HUSNAIN

2. WHAT IS NATIONAL INCOME?
 The money value of all goods and services produced in a
country during a year.
 It includes income from all the productive sectors.
 The term “Money value” means the value estimated at
the current price of the goods and services.

3. BASIC CONCEPTS OF NATIONAL INCOME
 GDP: Gross Domestic Product: C+I+G+NX
 GNP: Gross National Product: GDP + Income received from
abroad – Income paid to abroad
 NDP: Net Domestic Product: GDP – Depreciation
 NNP: Net National Product: GNP – Depreciation
 PI: Personal Income: National Income + Transfer Payments –
Undistributed Corporate Profits – Corporate Tax – Social
Security Contribution
 DPI: Disposable Personal Income: PI – Direct Taxes
 Per Capita Income: National Income / Population

6. METHODS FOR MEASURING NATIONAL
INCOME
 Production Method (Value-Added Method)
 Income Method
 Expenditure Method

7. Production Method (Value-Added
Method)
 Gross Value Added = Value of Output – Intermediate consumption
 Net value added = Gross Value Added – Depreciation – Net Indirect Taxes
 National Income = Net Value Added + Net Factor Income earned from abroad
 Advantages:
1. Tells us the contribution of each sector in the economy, which is important for
public policy
2. Avoidance of double counting
 Problems:
1. Imputed value of factors owned by production unit (especially in unorganized
economy)
2. Valuation of output that is not marketed.

8. INCOME METHOD
 Factors of Production: Land, Labor, Capital, Entrepreneur
 National Income: Rent + Wages + Interest + Profit
Advantage:
1. Gives a picture of income distribution among different sectors
Disadvantages:
1. Ignores non-monetary transactions such as unpaid housework, volunteer work etc.
EXPENDITURE METHOD
 National Income: C + I + G + NX
Advantage:
1. Simple, easy to calculate
2. Can be used universally to make a comparison with other nations
Disadvantages:
1. Quality of product is ignored
2. Inflation is ignored
3. Environmental sustainability is ignored

9. THANK YOU