Other measures of Income

GNP = GDP + (Factor Payments from Abroad − Factor Payments to

Abroad.)……… (1)
GNP=Gross National Product
NFP = Factor Payments from Abroad − Factor Payments to Abroad.

GNP = GDP+ Net factor payment , GNP = GDP+ NFP………( III)

Under what circumstances GNP would be larger than / smaller than / or
equals to GDP?
Net National Product
• NNP = GNP − Depreciation ……… (a)
• Depreciation is expressed as a fixed percentage of GNP, usually from 8
to 10%.
• Class work: If GNP = 3.5 Million BDT and depreciation is about 8.5% of
GNP. Calculate NNP.
• Depreciation = Consumption of fixed capital.
• Classwork: If GNP = 3.5 Million BDT of Bangladesh in 2017 and
Depreciation is 8.5% of GNP. Calculate NNP for 2017.
• NNP = ( 3.5 -3.5 × ) million BDT = 3.205 million BDT
 Components of NNP

1. Compensation of employees (64%) = Wages + Fringe Benefits

2. Proprietor’s Income (8.6%) = Income of Non corporate small
Business house
3. Rental Income(0.3%) = Imputed rent of landlords and house owners
4. Corporate Profits (13.4%) = Income of pure corporate business
5. Net Interest (5.4%) = Interest paid by bus. – interest earned by bus
6. Indirect Business Taxes (8.6%) = Income taxes+ sales taxes
Estimating Personal income from National
Income
National Income = NNP – Indirect Business taxes
• Personal Income = National Income − Corporate Profits − Social
Insurance Contributions − Net Interest + Dividends+ Government
Transfers to Individuals + Personal Interest Income

• Disposable Personal Income

• = Personal Income − Personal Tax and Nontax Payments.
 Consumer Price Index

The CPI is the price of the fixed basket of goods and services relative to
the price of the same basket in some base year.

CPI =

Fixed combination of goods = 5 Apples and 2 Oranges and 3 pineapples

CPI does not have any units. CPI includes necessary goods.
Comparison of CPI and GDP Deflator
• 1. Deflator includes All final goods and services but CPI includes
certain goods and services.
• 2. The CPI assigns fixed weights to the prices of different goods,
whereas the GDP deflator assigns changing weights.
• 3. Deflator includes only domestically produced goods but CPI may
include imported goods.

• END of Chap-2
• Solved Problems: 2 and 6.