Summary National Income

National Income - Comprehensive Notes


1. What is National Income?
National Income is the total value of goods and services produced within a country during a specific
period, usually one year. It is measured either at Factor Cost or Market Price.


Key Features:
- It is calculated annually.
- It includes all final goods and services produced.
- It serves as an indicator of a country's economic health.


2. Methods to Measure National Income
(A) Production Method
In this method, the total value of goods and services produced within a country is calculated.
Formula:
National Income = Total Production Value - Value of Intermediate Goods


(B) Income Method
This method calculates National Income by adding up all factor incomes earned by individuals and
firms.
Formula:
National Income = Wages + Rent + Interest + Profit


(C) Expenditure Method
This method calculates National Income by summing up all expenditures made on goods and
services.
Formula:
National Income = C + I + G + (X - M)


3. Important National Income Terms
Term Definition
GDP Total value of goods & services produced within a country.
GNP GDP + Net Income from abroad (exports, remittances).
NNP GNP - Depreciation (loss in value of assets).
National Income NNP at Factor Cost (after removing indirect taxes & subsidies).