MAULANA AZAD NATIONA INSTITUTE OF TECHNOLOGY

-BHOPAL
By: Santosh Sahani (141117017)
Praveen Dubey (141117026)
Prince kumar (141117019)
Rahul Talreja (141117070)
B.Tech 3rd Year

NATIONAL INCOME
TOPICS COVERD

Definition of national income

Concepts of national income
Methods to calculate national income
Factors effecting national income
Applications of national income
Limitations of national income
DEFINATION :
National income is the total value of a
country 's final output of all new goods and
services produced in one year
CONCEPTS OF NATIONAL INCOME

GROSS DOMESTIC PRODUCT ( GDP )

GROSS NATIONAL PRODUCT ( GNP )
NET NATIONAL PRODUCT (NMP )
NATIONAL INCOME AT FACTOR COST ( NI )
PERSONAL INCOME ( PI )
DISPOSABLE INCOME ( DI )
PER CAPTICA INCOME
GROSS DOMESTIC PRODUCT ( GDP )

Gross domestic product is the money value of all final

goods and services produced within the domestic
territory of a country during a year .
GDP - P " Q
where p - price of goods and services
q - quantity of goods and services
Includes : -Goods & services + government exp . +
private domestic investment in capital goods + exports
& imports
GROSS NATIONAL PRODUCT ( GNP )
Total market value of all final goods and services
produced annually in a country plus net factor income
from aboard .
GNP - GDP + NFIA ( net factor income from aboard )
Includes : Goods & services government exp . + private
domestic investment in capital goods + exports &
imports + net factor income from aboard
NET NATIONAL PRODUCT ( NNP )
Derived by subtracting depreciation allowance from GNP
NNP = GNP - depreciation
NATIONAL INCOME AT FACTOR COST ( NI )
sum of all incomes earned by resouces suppliers for their
contribution of land , labour , capital and organization
Nl = NNP +Subsidies -Interest
 OTHER TERMS

Personal lncome ( PI )
Personal incomne is the total money income received by individuals
and households of a country from all possible
sources before direct taxes.
P1 - NI - Corporate Income Taxes - Undistributed Corporate Profits .
Social Security Contribution + Transfer Payments.
Disposable Income ( DI )
The income left afterthe pavment of direct taxes frnn personal income
is called Disposable Income , Disposable income means actual income
which can be spent on consumption by individuals and families .
D1 - PI - Direct Taxes
Per Capita Income ( PCI )
Per Capita Income of a country is derived by dividing the national
income of the country by the total population of a country . Thus ,
PCI =Total National IncomeTotal National Population
METHODS OF NATIONAL INCOME ACCOUNTING

METHODS OF
NATIONAL
INCOME
ACCOUNTING

Value added Income Expenditure

method method method
METHODS OF NATIONAL INCOME ACCOUNTING

Three methods of measuring national income

1. Value added method
2. Income method
3. Expenditure method
Value added method
Value added is defined as the difference between total
value of output of a firm and value of inputs bought
from other firms.

GVA MP = Value of output - Intermediate Consumption

Sales + change in stock - Intermediate
Consumption
CALCULATION OF NATIONAL INCOME BY INCOME METHOD

The income method measures national income from the

side of payments made to the primary factors of
production in the form of rent , wages interest and
profit for their productive services in an accounting
year.
Land : rent
Labor wages
Capital : interest
Entrepreneur : profit
TOTAL INCOME - NATIONAL INCOME
Calculation of National income by expenditure method-

Total amount spent on goods and services produced in

a nation by households , firms , government and
foreigners .
1. HOUSEHOLD : CONSUMPTION
2. FIRMS : INVESTMENT
3. GOVERNMENT : GOV 'S SPENDING
4. FOREIGNERS : EXPROT IMPORT
C +1+G + ( X - M ) -TOTAL EXPENDITURE
FACTORS EFFECTING NATIONAL INCOME

Technol
ogy

FACTORS
EFFECTING Corrupt
Govern NATIONAL ion
ment
INCOME

Political
stability
FACTORS EFFECTING NATIONAL INCOME
Factors of production
Technology
Government
Political stability
Corruption
APPLICATIONS OF NATIONAL INCOME
Living Standard
Policy formation
International comparison
Business decision
Growth of economy
Helpful in removing inequalities in income distribution
LIMITATIONS OF NATIONAL INCOME
LIMITATIONS OF NATIONAL INCOME
In UDC , due to illiteracy GDP producer don't keep
regular accounts.
In UDC, lack of adequate statistical data
ERROR in
Measurement ( BLACK MARKET etc. )
Household production is ignored ( child - care , laundry
etc. )
Thank
You