A Presentation on

NATIONAL INCOME
Presented by- Group No. 3
Akanksha Singh 08PG003
Gagandeep 08PG015
Ketan Kanaujia 08PG027
Nisha Krishna 08PG038
Sonal Gupta 08PG050
Tavleen Kaur 08PG062
NATIONAL INCOME
Measure of the total value of the
goods and services(output)
produced by an economy over a
period of time (normally a year)
Also a measure of the income
flown from production, and/or the
sum total of all the spending
involved for the production of
output
THE CIRCULAR FLOW OF
INCOME
 Two-Way
Circular flow of
Income

Two way flow of income

 Three way flow
of income

Three way flow of income

 Four way flow of
Income

Four way flow of income

CONCEPTS OF NATIONAL
INCOME
1. Gross Domestic Product
2. Gross National Product
3. Net National Product
4. Per Capita Income
5. Personal Income
6. Disposable Personal Income
7. Corporate Income
8. Private Income
9. Real Income
10. Domestic Income
GROSS DOMESTIC
PRODUCT
 Total value of output (goods and
services) produced by the factors
of production located within the
country’s boundary in a year

GDP = GNP – Net income earned

from abroad
GROSS NATIONAL
PRODUCT
• Defined as current value of all goods
and services produced by the
economy during a given period

• GNP = value of all (final) goods and

services produced in a country in one
year + income earned by its citizens
abroad - income earned by foreigners
in the country
NET NATIONAL PRODUCT

Net National Product (NNP) is

arrived at by making some
adjustment, with regard to
depreciation, in GNP

GNP – Depreciation = NNP

PERSONAL INCOME
Current income received by the
individuals or households from all
sources including transfer income
from government and business
during the year

Personal income = net national

income + transfer payments –
undivided corporate profit –
corporate income tax – social
security contribution
DISPOSABLE PERSONAL
INCOME

Actual income which can be

spent on consumption by
individuals and families

Disposable income =
consumption expenditure +
savings
CORPORATE INCOME
Incomes and profits of companies
or public corporation

DOMESTIC INCOME
Income generated by the factors
of production within the country
from its own resources
PER CAPITA INCOME

Average earning of an individual

in a particular year

Per capita income = national

income of a
country/population of a country
PRIVATE INCOME
Income obtained by private
individuals from any source
whether productive or
unproductive

Private income = national

income(NNP at factor cost) +
transfer payments + interest on
public debt – social securities –
profits and surpluses of public
REAL INCOME

National income expressed in

terms of level of prices of a
particular year taken as base

Real NNP = NNP for current year

* base year index / current year
index
COMPUTATION OF
NATIONAL INCOME

• Output method or product

method
• Income method
• Expenditure method
PRODUCT METHOD OR
OUTPUT METHOD

Focuses on finding total output of

a nation by finding the total
production of the nation

GNI = Money value of total goods

and services + Income from
abroad
INCOME METHOD
Focuses on finding total output of
a nation by finding the total
income of a nation.

GNI = Rent + Wage + Interest +

Profit + Income from abroad.
EXPENDITURE METHOD
 Focuses on finding total output of a nation by
finding the total amount of money incurred/
spend in production of goods and services
GDP = E = C + I + G + (X-M)
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
where E is aggregate expenditure.
PROBLEMS IN CALCULATING
NATIONAL INCOME

• Conceptual Difficulties
Black Money
Non-Monetization
Overlapping of occupation
Services go unaccounted

• Statistical Difficulties
• Error of double counting
 USES OF NATIONAL
INCOME
 Helps study the rate of growth of an economy
 Helps study inter-sectoral growth
 Enables study of inter-class income
distribution
 Helps make international comparisons, living
standard of people
 Helpful in planning and evaluating plan
progress
 Helps measure capacity of each country to