# What is National Income?

National income of a country means total income of a country of total population

living in the country or native people living in abroad.

According to Marshall,
“The labour & capital of a country acting on
its natural resources, produce annually a certain net aggregate of commodities,
material & immaterial including services of all kinds is called national income.”

According to Samuleson,
“National income is the money measure of the
overall annual flow of goods & services in an economy.”

According to Pigou,
“National income is that part of objective income of
the community, including income from abroad which can be measured in money.”

According to Lipsey,
“National income refers to the total market value of
all the goods & services produced in the economy during some specific period of
time & to the total of all incomes earned over the same period of time.”

# Discuss various methods of computing national income

.
It is very essential to measure national income. There are three methods by which
national income can be measured:

1. Production/Output method
2. Income method
3. Expenditure method
Production/Output method:
According to this method, the sum total of goods
and services produced by the people living at a certain time during a year,
constitute national income. Incomes originate from different sectors such as
agriculture, mining, manufacturing, small enterprises, transport, Communication
& other services. These incomes are added to determine total national income. By
subtracting the total amount of depreciation (D.C.) from the figure of gross
national product (G.N.P.), we get the net national product (N.N.P.), or national
income.

This method enables us to trace the origin of national income aggregate to

different sources of economy & this method can be used where there exists a
census of production for the year. This method indicates the importance of the
different sources of economy by showing their respective contribution to the
national income.

Income method:
This method measures the national income after it has been
distributed & appears as income earned or received by individuals of the country.
Thus, according to this method, national income is obtained by summing up of the
incomes of all individuals in the country. Therefore, national income is calculated
by adding up the rent of land, wages & salaries of employees, interest on capital,
profit from production and income of self- employed people. This method
indicates the distribution of national income among different income groups such
as landlords, workers etc.

Expenditure method:
This method measures the national income by adding up all
the expenditure made on goods & services during a year. Thus, according to this
method, we can get national income by summing up all consumption expenditure
& investment expenditure made by all individuals as well as the government of a
country during a year.

# What is G.N.P.?

G.N.P.:
The full expansion of G.N.P. is “Gross National Product”. G.N.P. may be
defined as the sum total of the money value of all goods & services produced
during a year including income derived from abroad. It measures the current
output of economic activity in the country.

Two things must be noted in regard to G.N.P.:

1) G.N.P. at market price:

It measures the market value of the annual output i.e.
it is a monetary measure. There is no other way of adding up the different sorts of
goods & services produced in a year except with their money prices. So, G.N.P. is
a must.

2) G.N.P. at factor price:

In order to calculate the G.N.P. accurately, all goods
& services produced in a year must be counted once, but not more than once. The
term “G.N.P.” only includes the market value of final goods & services. In the eye
of “G.N.P.”, the “final goods” refer to those goods which are purchased for final
use & not for resale or other processing.
However,
G.N.P. =C+I+G+(X-M)

Here,
C= Consumption
I = Investment
G= Government expenditure
X = export
M = import

# What is G.D.P.?

G.D.P.:
The full expansion of G.D.P. is “Gross Domestic Product”. G.D.P. may be
defined as the sum total of the money value of all goods & services produced
during a year in the particular geographical boundary of a country. It measures the
current output of economic activity in the particular geographical boundary of a
country. Like G.N.P., G.D.P. also measures the market value of goods & services.
But it is confined only in the country. In order to calculate the G.D.P. accurately,
only the domestic goods & services produced in a year must be counted once, but
not more than once. The term “G.D.P.” only includes the market value of domestic
goods & services.

However,
G.D.P. =C+I+G

Here,
C= Consumption
I = Investment
G= Government expenditure

# Distinguish between G.N.P. & G.D.P.

The full expansion of G.N.P. is “Gross National Product”.

On the other hand, the full expansion of G.D.P. is “Gross Domestic Product”.

G.N.P. is the sum total of the money value of all goods & services produced
during a year including income derived from abroad.
While, G.D.P. is the sum total of the money value of all goods & services
produced during a year in the particular geographical boundary of a country.
G.N.P. measures the current output of economic activity in the country.
While, G.D.P. measures the current output of economic activity particular in the
geographical boundary of a country.

G.N.P. measures the market value of goods & services produced in a year.
G.D.P. also measures the market value of goods & services. But it is confined only
in the country.

In order to calculate the G.N.P. accurately, all goods & services produced in a year
must be counted once, but not more than once.
While, In order to calculate the G.D.P. accurately, only the domestic goods &
services produced in a year must be counted once, but not more than once.

The term “G.N.P.” only includes the market value of final goods & services.
The term “G.D.P.” only includes the market value of domestic goods & services.

G.N.P =C+I+G+(X-M)
While, G.D.P. =C+I+G

Here,
C= Consumption
I = Investment
G= Government expenditure
X = export
M = import

G.N.P. can be equal to G.D.P. when X=M

# What is net national product (N.N.P.)?

The net national product is net money value of the final goods & services
produced during a year including income derived from abroad. The word “net”
means that in calculating N.N.P. we must deduct from the G.N.P., a certain
amount to compensate for the using up or depreciation of the assets of business i.e.
N.N.P.= G.N.P.-D.C.

# What is net domestic product (N.D.P.)?

The net domestic product is net money value of the domestic goods & services
produced during a year in the particular geographical boundary of a country. The
word “net” means that in calculating N.D.P. we must deduct from the G.D.P., a
certain amount to compensate for the using up or depreciation of the assets of
business i.e.
N.D.P.= G.D.P.-D.C.
# Discuss the Role/Importance/Necessity of national income.

Role/Importance/Necessity of national income:

1. Measuring rod of the economic condition of the country

2. Indicator of the rate of economic development
3. Indicator of standard of living
4. Indicator of the distribution of the income
5. Concept about the contribution of different sectors
6. To measure changes in the price level
7. To determine monetary commercial policies
8. To formulate budget
9. To formulate economic planning
10.To compare economic condition

We can asses the importance of national income by putting/mentioning the

quotation of some economists:

In the words of Samuleson,

“By means of statistics of national income we
can chart the movements of a country from depression to prosperity, its steady
long rate of economic growth & development & finally its material standard of
living in comparison with other nations.”

In the words of Benham,

“The best way to get a general picture of the
economic life of a country is to study to detail estimate of its national income.”

# Discuss the problems of computing of national income.

1. Lack of proper information & data

2. Lack of specialization
3. Problems of double counting
4. Determining cost of depreciation
5. Changes in price level
6. Undeclared income
7. Account of foreign income
8. Disadvantages of indirect taxes
9. Evasion of taxes
(‡KŠk‡j cwinvi)