NATIONAL INCOME AND ITS MEASURE:

Qno1: Define National Income and explain various concept of National Income.

Ans: NATIONAL INCOME:

The labour and capital of a country, acting on its natural resources, produce annually a certain
net aggregate of all kinds of goods and services. This is the national income of that country.

VARIOUS CONCEPT OF NATIONAL INCOME:

1. GROSS DOMESTIC PRODUCT (GDP):

GDP is that total market value of final goods and services which are produced within the country
during a specific period usually a year.

2. GROSS NATIONAL PRODUCT (GNP):

GNP is the total market value of final goods and services a nation or a country produces during a
certain year. The remittances sent by national working abroad are also included in the GNP.

GNP = GDP+ Income from abroad

3. NET NATIONAL PRODUCT (NNP-NI at market price):

NNP is the total net market value of final goods and services a nation or a country produces
during a year. In other words, it is a GNP minus the value of depreciation allowances of capital
goods.

NNP or NIMP = GNP-depreciation allowances

4. NATIONAL INCOME (NI- NI at factor cost):

National Income is the total sum of all the income payments received by the factor of production
(land, labour, capital, and organization) with in a certain year.

NI or NIFC= NNP- Indirect taxes + Subsidies

 5. NATIONAL INCOME:

NI is the total money value of final goods and services produced in a country during a certain
year.

6. PERSONAL INCOME:

Personal Income is the income which is actually received by individuals or households of a

country during a year.

7. DISPOSIBLE INCOME (DI):

Disposable personal income is that income which is actually available to individuals or

households for spending or consumption excluded personal direct taxes.

8. PER CAPITA INCOME:

Per capita means per head or person income. It is usually used as an average income of the entire
population.

Per capita Income = NI/Population

Qno:2 Why is the study of National Income essential for us?

OR
Write the advantages of study of National Income.

Ans: Study of National Income is essential for us due to its following advantages.

1. Study of national income makes us aware about the necessary facts and figure of our
economy.
2. The study of national income provides necessary data of all the sectors of the economy.
3. Such study tells us which sector of the economy is not performing according to the
requirements of the country.
4. Study of national income reveals all the strong as well as weak aspects of the economy
during any particular year.
5. Study of national income gives a clear picture about the economic performance of
various sectors of the economy.
Qno:3 Distinguish between GNP and NNP.
Ans: GROSS NATIONAL PRODUCT (GNP):

GNP is the total market value of final goods and services a nation or a country produces during a
certain year. The remittances sent by national working abroad are also included in the GNP of
that country which they belong.

GNP = GDP+ Income from abroad

NET NATIONAL PRODUCT (NNP-NI at market price):

NNP is the total net market value of final goods and services a nation or a country produces
during a year. In other words, it is a GNP minus the value of depreciation allowances of capital
goods. NNP is also called National Income at Market Prices.

NNP or NIMP = GNP-depreciation allowances

Qno:4 Distinguish between Personal Income and Disposable Personal Income.

Ans: PERSONAL INCOME:

Personal Income is the income which is actually received by individuals or households of a

country during a year.

PI = NI – Social Security Contribution – Corporate Income Taxes – Undistributed

Corporate Income Taxes + Transfer Payments

DISPOSIBLE INCOME (DI):

Disposable personal income is that income which is actually available to individuals or

households for spending or consumption excluded personal direct taxes.

PDI = PI – Direct Taxes