National Income

Topics: Gross domestic product, Economics, Measures of national income and output Pages: 9 (2265 words) Published: February 14, 2013
National income

The total income of a nation is called national income. The aggregrate economic performance of the whole economy is measured by the national income data, In fact ,national income data provide a summary statement of a country’s aggregate economic activity. In real term ,national income is the flow of goods and services produced in an economy in a particular period—a year. Moden economy is a money economy. Thus, national income is expressed in money terms. A National sample survey has, thefore, defined national income as :”Money measures of the net aggregates of all commodities and services accruing to the inhabitants of a community during a specific period” The most important point about National Income is that it is always expressed with reference to a time interval. It is meaningless to speak of the national income of an individual without mentioning the period over which it is earned , say per week, per month or per year. Like many other terms in common use, the concept “national income “ has various cannotations. For inistance , national income is variously described. Sometimes, it is known as “national income”,or “natiomal product”, or “ national dividend”. As a matter of fact, all these terms mean one and the same thing. In national income accounting , thus the concept of national income has been interpreted in three ways , as: 1)National Product,

2)National Dividend,
3)National expenditure.

It consist of all the goods and services producedby the commodity and exchanged for money during a year. It does not include goods and services which are not paid for, such as hobbies, house wifes, services, charitable work, etc. NATIONAL INCOME:

It consist of all the income, in cash and kind, accruing to the factors of production in the course of generating the national product. It represents the total of income flow which will exactly equal the value of the national product turned out by the community during the year.

This represents the total spending or outlay of the community on the goods and services produced during a year. Since income is the source of expenditure, national expenditure constitutes the disposal of national income, which is evidently equal to it in value or in other words, National Expenditure equals National Income.

When a person buys some things, it is expenditure , but every expenditure is the income of a some other person .and these process goes on and on and it continuous. Briefly, thus , the identity of the three factors of the flow of national income may be expressed as follows: NATIONAL INCOME = NATIONAL PRODUCT = NATIONAL EXPENDITURE

When we analyze, the above three concepts, we find national income is nothing but “the total flow of wealth produced , distributed and consumed”.

There are, thus, three alternative definition of national income. THE FIRST DEFINATION is that it is the money value of goods and services produced by agent of production during the cource of year, we might call this “total production approach” THE SECOND DEFINATION is that it is the sum of incomes of agent of production , profits of public enterprise, income from government companies. This we might describe as “income approach”

THE THIRD DEFINATION is that national income is the sum of total expenditure of agents of production. We might call it “total expenditure approach”



In calculating national income ,we add up all the goods and services produced in a country. Such a total represents the gross value of final products turned out by the whole economy in a year,which is technically called “ gross national prouct”. The word gross indicates the inclusion of the provision for the consumotion of capital assets, i.e, deperication or replacement allowances. GNP, thus ,may be defined as the aggregate market...
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