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CH - 8 NATIONAL INCOME ACCOUNTING - FINAL
CH - 8 NATIONAL INCOME ACCOUNTING - FINAL
CH - 8 NATIONAL INCOME ACCOUNTING - FINAL
ACCOUNTING
Prof. (Dr) Vandana Bhavsar
Real Wealth or Real Income
Thus,
NNP = NDP + Net foreign income earned
from abroad
National Income at Market Price and
Factor Cost
National Income (GDP) at Market Price
It is defined as the market value of the output of
final goods & services produced in the domestic
territory of a country during an accounting year.
GDP = P x Q
This includes taxes, subsidies, profits.
National Income (GDP) at Factor cost
It is sum total of all factors of production for
their contribution in the production i.e.
Land, Labour, Capital, raw materials etc.
This includes only costs and not taxes, duties,
profits etc.
Thus
NIfc = NImp – Indirect taxes + subsidies
or
NIfc = W + i + R + Profits – TPs
where,
W= wages, salaries and supplementary incomes
i = interest paid/earned
R = rent of all goods and services
Profits = of all business (farmers, partnerships,
professionals, joint stock companies etc.
TPs = Transfer payments e.g. old age pensions,
unemployment benefits, interest on public debt.
Personal Income [PI] – PI NI
PI is the total income received by individuals
whether it is earned or unearned before the
payment of personal taxes.
OR
Income Method
Compensation Of Employees
Includes wages, salaries, and various
supplements viz employer contributions to social
insurance and retirement pension, paid to
households by firms and by the government.
Mixed Income
The income of unincorporated businesses. (the
profits of partnerships and solely owned
businesses, like a family restaurant)
Operating Surplus
Thus,
NI = W+ I + R + Profits
GDP = NI +Indirect taxes + Depreciation
NI by Income method
NDPfc =
Compensatio
n of GNPfc = GNPmp =
NNPfc =
employees + GNPfc + Net
NDPfc + NNPfc +
Operating Indirect
surplus + NFIA Depreciation Taxes
mixed
income
What is not included in Income
method?
Transfer payments – scholarships, old age
pensions, etc.
Nominal GDP
measures these values using current
prices
2010f
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