National Income refers

to the money value of all the goods

and services produced in a country
during a financial year. In other word
s, the final outcome of all the econ
omic activities of the nation during
a period of one year, valued in terms
of money is called as a National inc
ome. n the above definition, the eco
nomic activities include all the hum
an activities that produce goods and
services that can be valued at mark
et price. Such as production by farm
ers, production by firms in different
industrial sectors, production of good
s and services by government, service
es produced by business intermediary
es Viz. Wholesalers and retailers, ban
ks and other financial institutions, ed
ucational institutes and professionals
like doctors, teachers, lawyers, etc.

Also, there are non-economic active

ities that include the production of go
ods and services but do not have an
y market value. Such as hobbies, se
rvices of housewives, service to self, a
n exchange of mutual service between
neighbors, etc.
The National Income is a vital macroec
onomic variable which determines the
business level and economic status of
the nation. The level of national inco
me determines the aggregate dema
nd of goods and services while its dis
tribution defines the pattern of aggre
gate demand, i.e., what kinds of goo
ds and services are produced and de
manded.

Inflation is a quantitative measure of the ra

te at which the average price level of a bas
ket of selected goods and services in an ec
onomy increases over a period of time. Often
expressed as a percentage, inflation indicat
es a decrease in the purchasing power of a
nation’s currency. As prices rise, they star
t to impact the general cost of living for the
common public and the appropriate mone
tary authority of the country, like the centr
al bank, then takes the necessary measure
es to keep inflation within permissible limit
s and keep the economy running smoothly
. Inflation is measured in a variety of ways
depending upon the types of goods and s
ervices considered, and is the opposite of
deflation which indicates a general decline
occurring in prices for goods and services
when the inflation rate falls below 0 percent.