NATIONAL INCOME

GDP= Market value of all final

goods and services produced in the
Domestic Territory of a country in
a financial year.
So it is summation PQ ,all at
current prices .So it is GDPmp
Includes only those with market
value..
GNP(Gross National Product)mp
= GDP+ Net factor income from
abroad.
NNPmp(Net nation. Pro) = GNP
– depriciation
NNPfc = NNPmp – Indirect taxes
+ subsidy (NATIONAL
INCOME)
THE IDENTITY

GNP = GNI = GNE

 MARSHALL
“The lab.& cap. Working on
its natural resources
produce annually a certain
aggregate of commodities
material and immaterial
including services of all
kinds….this is the true
national dividend or NI”
 PIGOU
 “National income is that part of the
objective income of the community,
including of course the income derived
from abroad, which are exchanged for
money”
PIGOU IGNORED

Barter
Mothers service
Marrying your maid
servant
 FISHER
“TheNationaincome/Divi
dend consists solely of
services as received by
ultimateconsumer,wheth
er from their material or
from their human
environmentThus Piano
or overcoat made for me
this year is not part of
this Ni rather the services
it renders this year is
income.
 KEYNES
Expenditure Approach- Y= C + I
Factor income approach-- Y =F + Ep
F is the factor income toall like wages,
interest ,rent
Ep is entrepreneurial profit
Sales – cost approach-- Y =A – U
A is Gross national product
U is the User cost (dep in use – dep
when not in use + exp. On maintainance
)
Y=A - U -V
Vis the supplementary cost beyond
managerial control like fire
,obsolescence etc
 METHODS OF
MEASUREMENT
 FinalProductmethod(double counting)
 soValue added method

producer stage Value of Cost of Value

output interme added
diate
goods
Farmer Wheat 500 ---- 500
Miller Flour 700 500 200
Baker Bread 1000 700 300
total 2200 1200 1000
 VALUE ADDED
 Value added = Value of the output – value
of intermediate consumption
 2200 - 1200 = 1000 , the market value of
bread.
Product method
Net value added ,Primary sector(FC) 2000
NVA IN secondary sector (FC) 1100
NVA TERTIARY SECTOR (FC) 1000
Consumption of fixed capital 500
Ind tax 850
(less) subsidies (-) 150
-------------
GDP mp 5300
(less) ind taxes(850-150) (-) 700
--------------

GDPfc 4600
(less)consumption of fixed capital (-) 500
---------------
NDPfc 4100
Net factor income from abroad 100
---------------
NNPfc/ National income 4200
Income method
Compen to emplyees 1500
Interst Rent Profit 600
Mixed income of self employed 2000
Indirect tax 850
(less) Subsidies (-) 150
Consumption of fixed capital 500
--------------
GDPmp 5300
(less) Net ind tax (-) 700
GDPfc 4600
(less)con.fixed cap (-) 500
--------------
NDPfc 4100
Net factor incom from abroad 100
-------------------
NNPfc/NI 4200
Expenditure method
Pvt.fin.con . Exp 3500
Govt.fin.con exp 600
Investment exp 1300
Export of G&S 400
(less)imports (-) 500
---------------
GDPmp 5300
(less)net ind tax (-) 700
GDPfc 4600
(less) con. Of cap goods (-) 500
-----------------
NDPfc 4100
Net factor income from abroad 100
-----------------
NNPfc/NI 4200
 DIFFICULTIES
Cocept of Nation- not only geographical
boundaries but also income earned by
nationals in foreign countries

Services carried out of charity or mercy

if included cant be evaluated in terms of
money
Choice of methods- income /
exp/consumption?
Stage of economic activity-
Production(GROWTH)
/consumption(welfare)
Double counting
Transfer payment
Illegal earning- gambling
etc
Non availability of data
Non monetised sector - self
consumption or bartered
Calculation of depreciation
Price level changes