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NATIONAL INCOME
NATIONAL INCOME : It is the sum of factor incomes- wages, interest, rent and profit received by the owners of factors of production - labour, capital, land and entrepreneurs of a nation during one year.

 GROSS DOMESTIC PRODUCT(GDP)  GROSS NATIONAL PRODUCT AT MARKET PRICES  NET DOMESTIC PRODUCTS AT MARKET PRICES  NET NATIONAL PRODUCT AT MARKET PRICES  NET NATIONAL PRODUCT AT FACTOR COST .

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New production . ` Measures of GDP : A.GDP is the market value of all the final goods and services produced within the domestic territory of the country during a year. Market value C. Gross measure B.

` Gross national product at market prices is the monetary value of all final goods and services produced in the domestic territory of a country during a year plus net factor income from abroad (NFIA) . .

` Formula : Net Domestic Product at Market Price = Gross Domestic Product at Market Price less Depriciation .` NET DOMESTIC PRODUCT AT MARKET PRICE is the net market value of all the final goods and services produced in the domestic territory of the country.

` NET NATIONAL PRODUCT AT MARKET PRICES is the net market value of all the final goods and services produced by the normal residents of a country during a year. ` Formula : Net National Product at MP = GNP at MP less Depreciation .

` Formula : NNP AT FACTOR COST = GNP AT FC LESS DEPRCITION .` NET NATIONAL PRODUCT AT FACTOR COST is the sum total of net value added at factor cost by all the normal resident producer enterprises of a country during a year.

8.Depreciation NNP at mp = GNP at mp .Depreciation GNP at fc = GNP at mp . 6.Net Indirect Taxes NDP at fc = GDP at fc . 7.NFIA .Net Indirect Taxes GDP at fc = GDP at mp .Net Indirect Taxes GDP at fc = GNP at fc . 4.1. 2. 3. 5.Depreciation NDP at mp = NNP at mp .NFIA NDP at fc = NDP at mp . GNP at mp = GDP at mp + NFIA NDP at mp = GDP at mp . 9.

PERSONAL DISPOSABLE INCOME : It is the sum of income available to persons from all the sources to dispose them off as they like. .` ` ` PRIVATE INCOME : It refers to the income earned by private enterprises and workers (both within the domestic territory and abroad) and current transfers from government and rest of the world. PERSONAL INCOME : It is sum of all kinds of income received by the individuals from all resources.

CIRCULAR FLOW OF INCOME .

TWO-SECTOR MODEL .

FOUR-SECTOR MODEL .

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THREE CONTINUOUS PHASES OF ECONOMY PRODUCTION EXPENDITURE INCOME .

THREE METHODS OF MEASURING ³NATIONAL INCOME´ 1) PRODUCTION METHOD OR VALUE ADDED METHOD 2) INCOME METHOD 3) EXPENDITURE METHOD .

Final Product Method ‡ It measures Contribution of each Individual Enterprise at a particular stage of production ‡ The value of Intermediate goods is not calculated .VALUE ADDED METHOD ‡Also known as ´Production Methodµ ‡To avoid the problem of ´DOUBLE COUNTINGµ 1.1.

.1.VALUE ADDED METHOD Country·s Gross Value added = Total Value of gross output (™ Pn x Qn) Total Value of Intermediate Consumption * * Goods which are used for further production.

Concepts related to Value Added Method Net value Added at Factor Cost = Value of Gross Output ² Intermediate Consumption .Depreciation ² Net Indirect Taxes NNPFC = Net value added by Primary Sector + Net value added by Secondary Sector + Net value added at Tertiary Sector .

sector .PRECAUTIONS OF VALUE ADDED METHOD: INCLUDE ` DON¶T INCLUDE ` ` Imputed rent values of self-occupied houses Net increase in stocks ` ` ` Non²marketed goods and services produced for self-consumption Sale and purchase of second-hand goods Trading of stocks and bonds Goods and services produced in Govt.

.2. ‡ Value added at factor cost or domestic factor income is the sum of payments received by all the factors of production during a year and within the domestic boundaries. NI is estimated by adding Incomes earned by all the factors of production.INCOME METHOD: ‡ Here.

INCOME METHOD:  Steps of Income Method To identify and classify the enterprises which employ factors of production Classification of Factor Incomes Measure factor payments Adding up of factor payments .2.

Compensation to employees .INCOME METHOD:  Components of Domestic Factor Income1.2. .The payment made by producers to their employees in the form of: ‡ Wages and Salaries in cash ‡ Compensation in Kind ‡ Employers· contribution to Social Security Scheme.

 Compensation received by an employee from INSURANCE COMPANY is not included .Key points to be remembered while estimating compensation to employees  It is a DOMESTIC CONCEPT  REIMBURSABLE expenses are not included  Employee·s OWN CONTRIBUTIONS to ´Social Security Schemesµ are not included  INTEREST-FREE LOANS are not included. but the imputed interest is included.

.INCOME METHOD: 2. net indirect taxes and consumption of fixed capital. Operating Surplus ² The excess of Gross value added by the producer over the sum of compensation to employees .2.

2.INCOME METHOD: COMPONENTS OF OPERATING SURPLUS Income from Property Income from Entrepreneurship Rent Royalty Interest Profit .

2.INCOME METHOD: 3. Mixed Income of the self-employedIncome generated by unincorporated enterprises owned by the members of the household.  Components of Mixed Income ‡ Income of own account worker ‡ Profits and dividends of unincorporated enterprises. .

PRECAUTIONS OF INCOME METHOD: INCLUDE  Imputed Value of factor services DON¶T INCLUDE  Transfer Payments  Illegal Money Corporate Profit Tax and Income Tax  Windfall Gains  Receipt from the sale of second-hand goods  Death duties. wealth tax and tax on windfall gains . gift tax.

EXPENDITURE METHOD: ‡ NI is calculated by adding up all expenditures made on goods and services during a year GDPMP = C + I + G +(X-M) .3.

EXPENDITURE METHOD: ` COMPONENTS OF GdP MP Final Private Consumption Expenditure (C) Investment Expenditure (I) Final Government Expenditure (G) Net Exports (X-M) .3.

Final Private Consumption Expenditure (C) ² Includes expenditure on    Durable Goods Non-Durables Goods Services or Intangible Goods 2.Investment Expenditure (I) ² Includes     Business Fixed Investment Inventory investment Residential Construction Investment Public Investment .3.EXPENDITURE METHOD: 1.

Goods and Services produced by the Govt. Net Exports (NE) ² It is equal to Merchandise Exports (X) minus Merchandise Imports (I) ‡ NE = X ² M .EXPENDITURE METHOD: 3.3. (G) ² ‡ Public Investment goods 4.

ITEMS TO BE EXCLUDED IN THE ESTIMATION OF GNP o Sale and Purchase of securities o Govt. Transfer Payments o Private Transfer Payments o Sale and Purchase of Second-hand goods o Non-marketed Goods and Services o Illegal Activities .

ECONOMIC WELFARE AND NATIONAL INCOME Is GNP a real indicator of GROWTH and DEVELOPMENT ????? Not necessarily«« What about the issues such as :  Distribution of Income in Society  Sustainable Development  Standard of Living  Employment Scenario  Types of Goods being produced in the economy .

To counter these problems New concepts are emerging«« GREEN GNP HUMAN DEVELOPMENT INDEX NET ECONOMIC WELFARE OR ´NEWµ .

THANK YOU !!! PRESENTED BY: TUSHAR SAINI URVASHI KOLI SHIVANGI AGARWAL .

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