Group 1

MEANING
 Measures of national income and output
are used in economics to estimate the
total value of production in an economy.
 In India, the Central Statistical
Organization has been estimating the
national income.
Definition of National Income
 National income is a measure of the
total value of the goods and services
(output) produced by an economy over a
period of time (normally a year).
 “ National income estimate measures
the volume of commodities and services
turned out during a given period counted
without duplication.”
Basic Concepts
 Gross Domestic Product (GDP) is the
total value of output (goods and
services) produced by the factors of
production located within the country’s
boundary in a year.
Basic Concepts
 Gross National Product (GNP) is the
total value of output (goods and
services) produced and income received
in a year by domestic residents of a
country. It includes profits earned from
capital invested abroad.
Basic Concepts
 Percapita income (or) output per person
is an indicator to show the living
standards of people in a country. If real
PCI increases, it is considered to be an
improvement in the overall living
standard of people.
Need for the Study of National
Income
 To measure the size of the economy
and level of country’s economic
performance.
 To trace the trend or speed of the
economic growth in relation to previous
year(s) as well as to other countries.
 To make projection about the future
development trend of the economy.
 To make international comparison of
people’s living standards.
Methods of Calculating National Income

Output or Product Method

 Inthe output or product method, the

measures of GDP are calculated by
adding the total value of the output (of
goods and services) produced by all
activities during any time period, such
as a year.
Methods of Calculating National Income

Income Method

 In the income method, the measures of

GDP are calculated by adding all the
income earned by various factors of
production which are engaged in the
production of output.
Methods of Calculating National Income

Expenditure Method
 In the expenditure method, the measures of GDP are
calculated by adding all the expenditures made in the
economy. The essential components of expenditure
are:
 C = consumption expenditures
 I = domestic investment
 G = government expenditures
 X = exports of goods and services
 M = imports of goods and services
 NR = net income receipts from assets abroad
The sum of all these aggregate expenditure provides us the measure
of national income.
 GDP = E = C + I + G + (X-M)
where E is aggregate expenditure.
SOURCE
 www.textbooksonline.tn.nic.in

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