National income or national product is defined as the total market value of all the final goods and services produced in an economy in a given period of time. There are many concepts of national income which are used by different economists and all of which are interrelated.
The total net value of all goods and services produced within a nation over a specified period of time, representing the sum of wages, profits, rents, interest, and pension payments to residents of the nation.
It includes income from all the productive sectors such as Agricultural, Industrial and Service Industry.
Final Goods: Final goods are those goods which have crossed the boundary line of production, and are ready for use by their final users. Final users may be consumers and any firm. Final goods as used by the producers are called capital goods.
Intermediate Goods: These are those goods which are not out of the boundary line of production and are yet not ready for use by their final users. These used are largely used as raw material.
Depreciation: A reduction in the value of an asset with the passage of time, due in particular to wear and tear. Depreciation is a non-cash expense that reduces the value of an asset over time. Assets depreciate for two reasons: Wear and tear.
Net factor income from abroad (NFIA): Factor income earned by our residents from abroad- Factor income earned by non residents within our country.
Transfer Payment: A payment made or income received in which no goods or services are being paid for, such as a benefit payment or subsidy.
A noncompensatory government payment to individuals, as for welfare or social security benefits are transfer payment. People sometimes get income without any productive activity.
Ex: Unemployment benefits, old age pensions etc.
Change in Stock: It is measured as the difference between “Closing Stock” of the accounting year and “Opening stock” of the accounting year.
Change in Stock = Closing Stock – Opening Stock
GDPMP: GDPMP refers to the market value of final goods and services produced within the domestic territory of a country during an accounting year.
GDPMP is the sum total of value added by all producing units within the domestic territory of a country during the period of an accounting year.
GNPMP: 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.
GNP=GDP+NFIA (Net Factor Income from Abroad)
NNPMP: Net National Product is the market value of all final goods and services after allowing for depreciation. It is also called National Income at market price. When charges for depreciation are deducted from the gross national product, we get it. Thus,
Personal Income (PI): Personal Income i s the total money income received by individuals and households of a country from all possible sources before direct taxes. Therefore, personal income can be expressed as follows:
PI = NI - Corporate Income Taxes - Undistributed Corporate Profits - Social Security Contribution + Transfer Payments
Disposable Income (DI) : The income left after the payment of direct taxes from personal income is called Disposable Income. Disposable income means actual income which can be spent on consumption by individuals and families. Thus, it can be expressed as:
Per Capita Income (PCI): Per Capita Income of a country is derived by dividing the national income of the country by the total population of a country. Thus,
PCI=Total National Income/Total National Population