National income means the value of goods and services produced by a country during a financial year. Thus, it is the net result of all economic activities of any country during a period of one year and is valued in terms of money. National income is an uncertain term and is often used interchangeably with the national dividend, national output, and national expenditure. We can understand this concept by understanding the national income definition.
There are two Types of National Income
* Traditional Definition
* Modern Definition:
The labor and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend.
There are two sub parts of Modern National Income:
Gross Domestic Product
The total value of goods produced and services rendered within a country during a year is its Gross Domestic Product.
Further, GDP is calculated at market price and is defined as GDP at market prices. Different constituents of GDP are:
1. Wages and salaries
4. Undistributed profits
6. Direct taxes
Gross National Product
For calculation of GNP, we need to collect and assess the data from all productive activities, such as agricultural produce, wood, minerals, commodities, the contributions to production by transport, communications, insurance companies, professions such (as lawyers, doctors, teachers, etc). at market prices.
It also includes net income arising in a country from abroad. Four main constituents of GNP are:
1. Consumer goods and services
2. Gross private domestic income
3. Goods produced or services rendered
4. Income arising from abroad.
Q. What are Three Important Methods for Measuring National Income?
– Product Method
– Income Method
– Expenditure Method