NATIONAL INCOME
Definition: Is the total flow of income obtained by individual in an economy within a year.
OR
-Is the total value of all the expenditure by different people, government within an economy at a period of one year.
OR
-Is the value of final goods and service produced by a given country within a year.
NATIONAL INCOME ACCOUNTING / MEASURES OF NATIONAL INCOME
National income measures are used to estimate the value of goods and services produced in an economy.
The following components are used in calculation of national income -:
Gross Domestic Product (GDP)
The most important concept of national income is Gross Domestic Product. Gross domestic product is the money value of all final goods and services produced within the domestic territory of a country during a year.
Algebraic expression under product method is,
GDP=(P*Q)
where,
GDP=Gross Domestic Product
P=Price of goods and service
Q=Quantity of goods and service
denotes the summation of all values.
Gross National Product (GNP)
Gross National Product is the total market value of all final goods and services produced annually in a country plus net factor income from abroad.
Thus, GNP is the total measure of the flow of goods and services at market value resulting from current production during a year in a country including net factor income from abroad. The GNP can be expressed as the following equation:
GNP=GDP+NFIA (Net Factor Income from Abroad)
or, GNP=C+I+G+(X-M)+NFIA
Hence, GNP includes the following:
1. Consumer goods and services.
2. Gross private domestic investment in capital goods.
3. Government expenditure.
4. Net exports (exports-imports).
5. Net factor income from abroad.