National Income

This is the total money value of all goods and services produced by the country
over the period of a year.
Terms associated with National Income
Gross Domestic Product (GDP) – is the total money value of goods and services
produced by the resources within the country.
Gross Domestic Product (GDP) – the total value of output produced within the
borders of a country in one year, using resources within the country.
Gross National Product (GNP) – the total money value of all goods and services
produced using resources only owned by residents of the country, whenever these
sources are located.
Net income from foreign assets- also called net properly income from abroad this
is found by subtracting payments to foreigners owning local assets from income
received from assets held abroad by citizens. This figure may be negative or
positive.
Capital consumption (depreciation) – the value of capital used up by a country
during a year.
Transfer Income- income that was earned in a previous period but is now being
transferred in the current period, there is no real contribution made to the national
income. Examples include a gift from a relative, pension payments or insurance
benefits.
Income from government activities – for example, from a public corporation, such
as the water company and other government agencies, such as a passport office
Subsidies – government payment for a portion of the cost of production
Market prices and factor costs – GDP at market prices reflect the value of the
money that is actually spent, but this figure is considered misleading because it
includes taxes and subsidies.
Methods used to calculate national income
1. Income method
+ Income from abroad
+ Profits and rents
+ Net property income from abroad
= GDP
- Depreciation
= National Income
2. Expenditure method
+ Consumer expenditure
+ Government expenditure
+ Investments
+ Exports
- Imports
= GDP (at market prices)
- Taxes
+ Subsidies
= GDP (at factor cost)
+ Net property income from abroad
- Depreciation
= National Income
3. Output method
+ GDP
+ Exports
- Imports
= GDP
- Depreciation
= National Income
Calculate National Income using the Expenditure Method
Consumer Expenditure $400
Public sector expenditure $120
Exports $250 770
Imports $280 490
Taxes $100 390
Subsidies $ 40 430
Net property income from abroad $ 85 515
Depreciation $115 400

GDP (at market prices) =400+120+250-280=490

GDP (at factor cost) =490-100+40=430
National Income=430+85-115=400

UNEMPLOYMENT
Definition of unemployment
1. Any person who is actively seeking employment and is willing and able to
work but unable to find work.
2. Persons who are able to work but have no job

Definition of unemployment rate

This is the number of unemployed persons measured as a percentage of the labour
force.

Formula for unemployment rate

Unemployment rate= Number of unemployed x 100
Labour force

Types of unemployment
1. Frictional unemployment- The frictionally unemployed are occupationally or
geographically immobile. This occurs when persons may not have the skills
to match the job or they are unwilling or unable to move to the part of the
 country where the job is. Those persons who leave a job and awaiting to start
another job is termed frictionally unemployed.
2. Search employment- This occurs when someone who is unemployed does
not take the first job he or she is offered. The unemployed person opts to
search for a better paying or more suitable job.
3. Seasonal unemployment- This occurs when workers are employed certain
times during the year, when there is demand for certain products or when a
particular crop might be in “season”. The workers employed in that industry
might be seasonally employed. Workers who worked in the construction or
agriculture industry might be seasonally unemployed.
4. Cyclical unemployment- This type of unemployment is called Keynesian
unemployment or demand-deficient unemployment. Unemployment
resulting from a down swing in the levels of economic activity in a given
area. For example the fall of prices of rice on the world market will create
unemployment in the rice producing countries.
5. Structural unemployment can be due to improvements in technology causing
capital (machinery) to replace labor. This type of structural unemployment is
also called technological unemployment. This occurs mainly when there is a
change for one kind of product or service as opposed to another. For
example, the railway industry shrinking as road transport increases.

THE EFFECTS OF UNEMPLOYMENT

Possible benefits of unemployment
 The unemployed have an opportunity to do extra training or to
pursue hobbies. This is only true if they have the money to pursue
these activities. The unemployed