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National Income (Basics)
National income is about a little financial....it is useful if you take a cou...
From Rizva9
Chapter 11
From cisya
gnp
From Daya Sharma
Topic 1: National IncomeNational Income
can be defined as the total value of final goods and services produced by the nationals of a country, regardless of territorial boundary, less depreciation, over a period of time usually a year. National income can be measured in a number of different ways:
Gross Domestic Product (GDP)
is the value of all the goods and services produced over a period of time within a country.
Gross National Product (GNP)
is GDP plus what is called ‘net property income fromabroad’
National Income
is GNP minus an allowance for depreciation.*For Additional Information Refer to Pg 120 Anderton
Calculation of National Income
There are
three
methods of calculating national income. They are:
•
Income Method
•
Output Method
•
Expenditure MethodIncome Method
Using the income method, we calculate the national income by adding the followingitems:
•
Wages and salaries
•
Rent from tenants
•
Interest earned from banks and dividends
•
Undistributed Profits
•
Income of self-employed people, e.g doctors, hawkersProblems encountered in using this method is that there are certain types of incomes thatshould not be included in the calculation of national income as there is no increase in the production of goods and services. They are known as transfer payments. Examples of transfer payments are pensions, social security benefits, unemployment benefits,scholarships and allowances to housewives.
Output Method
Using the output method, we calculate the national income by adding the totals value of goods and services from the following three sectors in the economy:
•
The primary sector, which consists of agriculture, fishery and mining industries
•
The secondary sector, which consists of manufacturing and constructionindustries.
•
The tertiary sector, which consists of service industries such as financial, retailand tourism industries.
Expenditure methodNational Income = C+I+G+(X-M)
Using the expenditure method, we calculate the national income by adding the followinggive items as shown below:
•
Consumer expenditure (C) _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___
•
Gross Investment (I) _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___
•
Government expenditure on goods and services (G) _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___
•
Exports (X) _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___
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Topic 1-National Income
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