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National Income Accounting

National Income= National Product=National Expenditure 1. The sum of values of all final goods and services produced 2. The sum of all incomes, in cash and kind, accruing to factors of production in a year 3. The sum of consumers expenditure, net investment expenditure and government expenditure on goods and services

Households and Firms. What are the firms required to do?? How do they meet their requirement?? What are the rewards given to those requirements?? What arises next????

The sales value of net production must equal the sum total of payments made by the firms to the factors of production in the form of .. Wages, Rent , Interests and Profits

Two Sector Economy Firms and Households Then we introduce Government Then finally Foreign Trade

Concepts of National Income

Gross National Product (GNP) Defined as the total market value of all final goods and services produced in a year in a country.

Concepts of GNP
Final Goods Goods which are purchased for final use and not for resale or further processing.

Intermediate Goods Goods purchased for further processing or resale.

Counted or not counted? Ford buys Goodyear tyres for a car in production? Not counted

Basic Concepts Contd..

Flow measure of output of goods and services per time period. Time period Particular year Market transactions involving goods produced in previous periods are not included in GNP calculation.

Net Factor Income from abroad

Factor Incomes received and Factor Incomes paid.

Individuals and Firms

GNP= GDP + Net Factor Income from abroad


GNP = C+I+G+Xn+Net factor income from abroad

Gross Domestic Product (GDP)

Money value of all final goods and services produced by normal residents as well as non residents in the domestic territory of a country but does not include net factor income earned from abroad


Net National Product (NNP)

Also called National Income at Market prices In the production of GNP of a year , we consume or use up some fixed capital , that is equipment and macinery.

NNP= GNP- Depreciation