NATIONAL INCOME

Group member
Shariq Hussain (Leader) Ali raza
Ifra Shahid Asad Moosa
Shahnawaz Amin Iqbal
 Table of Content
 National income  Basic concept of National income.
 Aggregates of national income  GDP (Gross Domestic Product)
 Domestic territory  GNP (Gross National Product)
 Normal resident  PCI (Per Capita Income)
 Factor income / transfer  NNP (Net National Product)
income  PI (Personal Income)
 Final goods / intermediate
goods
 National Income

National income refers to the factor income earned by normal resident

of a country in an accounting year.

 Pakistan accounting year (1 July of the previous calendar year and

concludes on 30 June).
 (Pakistan Bureau of Statistic) measures the National income of
Pakistan.
 Why need to measure National Income:
 National income enable us to have clear idea about the structure of
the economy.
 It enables us to know the relative importance of the various sectors
of the economy.
 Compare standard of living between two different countries.
 To decide economic policies.
 To decide inflationary or deflationary gate
 Some National Income Aggregates

• Gross territory and Domestic territory

• Factor Income
• Transfer Income
• Final Goods & Services
• Intermediate Goods & services
Gross territory and Domestic territory

Gross territory: Domestic territory:

The total value without any tax It means the political boundaries
or other contributions having of a country
been deducted. (In or outside the country)
 Factor Income

 Earned by doing some production service

 Included in national income.
 Ex: salaries, wages etc.
 Transfer Income

 Earned by without doing any

productive services.
 Not included in national income.
 Ex: scholarship, gifts etc.
 Intermediate Goods & services

 Used as a raw material.

 Further processed.
 Use in a same year but if not
then counted in a final good.
 Final Goods & Services

 Used for final consumption.

 Not further processed.
 Notional income only include
final Goods
BASIC CONCEPT OF NATIONAL INCOME:

• Gross Domestic product (GDP)

• Gross National Product (GNP)
 GROSS DOMESTIC PRODUCT (GDP):

The total market value of all the final goods and services produced

within an economy in a specific time period.

GDP of country is based on:

• Agriculture
• Industry
• Services
 FROMULA TO CALCULATE GDP
GDP = C + I + G + (X-M)
 C = consumer expenditure
 I = Industries investments
 G = Government expenditure
 X = Export
 M = Import

Example:
GDP= 100 + 100 + 100 + (100 – 100)
GDP = 300
 Why GDP important to measure?

• GDP tells us whether the economy is expanding by producing more

goods and services
• Or by contracting due to less outputs.
 HOW TO INCREASE GDP

• Reduce cost of borrowing

• Increase consumer spending and investment.
• Depreciate making exports cheaper and imports more expensive.
 Types of GDP

Real GDP
Nominal GDP
 REAL GDP

Real GDP is a calculation of GDP that is adjusted for inflation.

• National income at constant price.

• It take care of inflation.
• Based on base year.
 Example

YEAR QTY PER TOTA TOTAL

(kg) L GDP
PRIC
E
2018 50 10 500 500

2019 60 10 600 600

According to CEIC (Census and Economic Information Center)
 NOMINAL GDP

Nominal GDP is a calculation of GDP that is not adjusted for inflation 

• National income at current price.

• Includes current prices in its calculation.
• It doesn’t care of inflation or the pace of rising prices.
 Example

YEAR QTY PER TOTAL TOTAL

(kg) PRICE GDP

2018 50 10 500 500

2019 60 30 1800 1800

According to CEIC (Census and Economic Information Center)
GROSS NATIONAL PRODUCT (GNP)

The gross national product (GNP) is the value of all finished goods and
services owned by a country's residents over a period of time.
 FORMULA TO CALCULATE (GNP)
Y = C + I + G + (X-M) + Z
 C = consumer expenditure
 I = Industries investments
 G = Government expenditure
 X = Export
 M = Import
 Z = (net income earned by domestic residents from overseas investments minus
net income earned by foreign residents from domestic investments).
Example:
GNP = 100 + 100 + 100 + (100 – 100) + (100 – 100)

GNP = 300
 Why GNP important to measure?

• GNP gives a sense of how well the country is doing including its

nationals abroad.
• It provides good PR for the country.
 According to Pakistan Bureau of statistics

GNP is expected to be 13787403.51 PKR Million by the end of this

quarter. Pakistan’s Gross National Product is projected to be around
15876088.64 PKR Million in 2020
Net national product (NNP)

 Net national product (NNP) is the monetary value of finished goods

and services produced by a country's citizens in a given period.
 Formula of Calculating Net National
Product (NNP)
NNP=MVFG+MVFS−Depreciation

 MVFG=market value of finished goods
 MVFS=market value of finished services​
Why NNP is important to measure?

 National income is the value of the aggregate output of the different

sectors during a certain time period.
 it is the flow of goods and services produced in an economy in a
particular year.
 Personal income

 Personal income is the total annual gross earnings of an individual

from all income sources such as: salaries, dividends, rent etc.
 Personal income, also known as " Income before-tax ”
Formula to Calculate personal income

 PI = NI – corporation tax – undistributed profit

Example:

 Assume in the National income is $300

 And corporation tax is $100
 Undistributed profit is $100

Personal income = national income – corporation tax – undistributed profit

Personal income = 300 - 100 - 100
Personal income = 100
Personal Income is $100
Why PI is important to measure?

 Taxes is not only in their financial contribution to the public

budgets.
 Taxes are the second most important source of tax revenues.
 Their impact on other government policies and goals
 PER CAPITA INCOME

Per capita income is measures the average income earned per person in
a given area in a specified Time period.
 It is the mean income of the people in an economic unit
 Per capita income is also called average income
Formula to Calculate per capita income:

Per capita income is the average income of the normal residents of a

country in a particular Time.

Per capita income = National income

population
Example:

 Assume in the state total population is 100

 And the national income is $15000

National income = $15000

Total population = $100

Per capital income / average income is $150

Why PCI is important to measure?

 Measure an area`s average income

 To see the wealth of population with those of others
 Measure a countries standard of living
 Help to find a countries developments status
 Measure for calculation the human development index of a country
According to CEIC (Census and Economic Information Center)
 Conclusion

 In conclusion, measuring how much income, expenditure and

product has been brought about over a certain period of time
requires the use of national income accounts.
 As previously mentioned, national income measures the monetary
value of the circulation of goods produced in a country within a
certain period of time.
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