Macroeconomic National Income
National Income is defined as the sum total of all the goods and services produced in a country, in a particular period of time. Normally this period consists of one year duration, as a year is neither too short nor long a period. National product is usually used synonymous with National income.
Concepts of National Income
There are different concepts of National Income, namely; GNP, GDP, NNP, Personal Income and Disposable Income.
Gross National Product (GNP)
GNP at market price is sum total of all the goods and services produced in a country during a year and net income from abroad. GNP is the sum of Gross Domestic Product at Market Price and Net Factor Income from abroad.
GDP at market price + Net Factor Income from Abroad = GNP at market price
While calculating GNP, the final goods and services of the following are considered:
(a) Consumer goods and services.
(b) Gross private domestic income.
(c) Goods and services produced by Government.
(d) Net income from abroad.
Approaches to GNP
There are three different approaches to GNP, namely income approach, expenditure approach and product approach.
1. Income approach
In income approach, we find the different categories of Income namely; (1) Wages and salaries (2) Rents
(3) Interest (4) Dividends (5) Undistributed corporate profits (6) Mixed incomes (7) Direct taxes (8) Indirect taxes (9) Depreciation (10) Net income from abroad.
2. Expenditure approach
In expenditure approach, we find the different categories of expenditure namely, (1) Private consumption expenditure (2) Gross domestic private income (3) Net foreign income (4) Government expenditure on goods and services.
3. Product approach
In product approach, we find the following categories of output.
(1) Final market value of goods and services
(2) Less cost of intermediate goods.
The following factors are to be considered while calculating the GNP:
1. Only those goods and services which can be measured by Money.
2. Market price of final goods and
Concepts of National Income
There are different concepts of National Income, namely; GNP, GDP, NNP, Personal Income and Disposable Income.
Gross National Product (GNP)
GNP at market price is sum total of all the goods and services produced in a country during a year and net income from abroad. GNP is the sum of Gross Domestic Product at Market Price and Net Factor Income from abroad.
GDP at market price + Net Factor Income from Abroad = GNP at market price
While calculating GNP, the final goods and services of the following are considered:
(a) Consumer goods and services.
(b) Gross private domestic income.
(c) Goods and services produced by Government.
(d) Net income from abroad.
Approaches to GNP
There are three different approaches to GNP, namely income approach, expenditure approach and product approach.
1. Income approach
In income approach, we find the different categories of Income namely; (1) Wages and salaries (2) Rents
(3) Interest (4) Dividends (5) Undistributed corporate profits (6) Mixed incomes (7) Direct taxes (8) Indirect taxes (9) Depreciation (10) Net income from abroad.
2. Expenditure approach
In expenditure approach, we find the different categories of expenditure namely, (1) Private consumption expenditure (2) Gross domestic private income (3) Net foreign income (4) Government expenditure on goods and services.
3. Product approach
In product approach, we find the following categories of output.
(1) Final market value of goods and services
(2) Less cost of intermediate goods.
The following factors are to be considered while calculating the GNP:
1. Only those goods and services which can be measured by Money.
2. Market price of final goods and