Group Members Fahad Farid (5352) Rehan Ali Zaman (5622) Muhammad Muneeb (5616) Faraz Hamid (5220) Zohaib Zaidi (8806) Saad Ashraf (4927)
INTRODUCTION It means the total value of goods and services produced annually in a country.
It includes payments made to all resources in the form of wages, interest, rent and profits. CONCEPTS OF NATIONAL INCOME Gross National Product: It 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 income from abroad.
GNP at Market Prices: When the total output produced in one year is multiplied by their market prices prevalent during that year in a country, plus net income from abroad, it is called GNP at Market Prices.
GNP at Factor Cost: It is the sum of the money value of the income accruing to the various factors of production in one year in a country.
GNP at Factor Cost = GNP at market prices Indirect Taxes + Subsidies.
CONCEPTS OF NATIONAL INCOME Net National Product (NNP): NNP is GNP net of depreciation. NNP = GNP Depreciation
NNP at Market Prices: Net value of final goods and services evaluated at market prices: NNP at Market Prices = GNP at Market Price Depreciation
NNP at Factor Cost: Net output evaluated at factor prices. NNP at Factor Cost = NNP at Market Prices Indirect Taxes + Subsidies (or) = GNP at Market Prices Depreciation Indirect taxes + Subsidies CONCEPTS OF NATIONAL INCOME Domestic Income or Product: Income generated or earned by the factors of production within the country from its own resources is called domestic income or domestic product.
Domestic Income = National Income Net Income earned from abroad.
Personal Income: Personal Income is the total income received by the individuals of a country from all sources before direct taxes.
Personal Income = National Income Undistributed Corporate Profits Profit Taxes Social Security Contributions + Transfer Payments + Interest on Public Debt.
CONCEPTS OF NATIONAL INCOME Disposable Income: income that accrues after direct taxes have actually been paid. Disposable Income = National Income Business Savings Indirect taxes plus Subsidies Direct Taxes on Persons Direct Taxes on Business Social Security Payments + Transfer Payments + Net Income from abroad.
Real Income: Real income is national income expressed in terms of a general level of prices of a particular year taken as base. Real NNP = Current Year NNP x Base year Index / Current Year Index.
Per Capital Income: The average income of the people of a country in a particular year is called per capital income for that year. Per capita income = national income / population. Real per capita income = real national income / population. CONCEPTS OF NATIONAL INCOME Nominal GDP Value of output measured at actual prices (current dollar output) Does not correct for inflation
Nominal GDP = Current year Quantities x Current year Prices
Real GDP Value of output based on prices of some base period (constant dollar output) Eliminates effect of inflation
Real GDP = Current year Quantities x Base year Prices
GDP Deflator The GDP deflator shows how much a change in the base year's GDP relies upon changes in the price level.
GDP Deflator = Nominal GDP x 100 Real GDP METHODS OF MEASURING NATIONAL INCOME Product Method: Total value of final goods and services produced in a country during a year is calculated at market prices.
Income Method: The net income payments received by all citizens of a country in a particular year are added up i.e. net incomes that accrue to all factors of production.
Expenditure Method: The total expenditure incurred by the society in a particular year is added together- includes personal consumption expenditure, net domestic investment, government expenditure on goods and services and net foreign investment.
Value Added Method: Difference between the value of material outputs and inputs at each stage of production is the value added. DIFFICULTIES IN NATIONAL INCOME MEASUREMENT Difficulty of defining nation in the terminology national income.
There are a number of goods and services which are difficult to be assessed in terms of money.
The failure to distinguish properly between a final and an intermediate product.
Income earned through illegal activities are not included in national income.
Transfer payments- these earnings are a part of individual income and also government expenditure. DIFFICULTIES IN NATIONAL INCOME MEASUREMENT Capital gains or loss to property owners excluded from GNP because they do not result from current economic activities.
All inventory changes at original cost not replacement costs included in GNP measure.
Depreciation valuation adjustment is full of statistical difficulties.
With price increase, monetary NI increases though production may have gone down & with price fall monetary NI falls though production may have gone up.
Monetary NI an underestimation of real NI.
Public services cannot be estimated correctly.
DIFFICULTIES IN DEVELOPING COUNTRIES FOR NATIONAL INCOME MEASUREMENT Large non-monetized sector.
Lack of occupational specialization.
Several productive activities do not enter market transactions.
Many people do not keep accounts.
Adequate and correct production and cost data are not available. THANK YOU QUESTIONS?