Managerial Economics National Income

Topics: Macroeconomics, Economics, Keynesian economics Pages: 11 (2713 words) Published: November 17, 2010
Assaignment topics:

Nature , conceps , measurement of nation income
Classical and Keynes approaches

----The t otal sum of goods and services produced by t he people of a count ry wit h t he help of capit als and national resources called Nat ional Income (Prof. Alfred Marshall) We can define Nat ional Income as t he collective achievement of a nat ion. In t his way, t he Nat ional Income is t he aggregat e of t he individual incomes. (Prof. Gardner Ackley) Nat ional Income is t he basic concept of economic, which refers t o t he market value of t he goods and services produced during a part icular year. (Prof. Richard Lipsy)



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


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 (NNP) is arrived at by making some adjustment, with regard to depreciation, in GNP

GNP – Depreciation = NNP

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


Actual income which can be spent on consumption by individuals and families  Disposable income = consumption expenditure + Savings

Incomes and profits of companies or public corporation

Income generated by the factors of production within the country from its own resources

Average earning of an individual in a particular year
Per capita income = national income of a country/population of a country

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

12) Measurement of national income in an economy is very important because it gives an estimation of the welfare of the economy. National income is the total of the value of the goods and the services which are produced in an economy. The basic measures of national income include GDP, GNP, GNI, NNP and NNI. There are three approaches through which national income can be calculated including; output approach, income approach and expenditure approach. All of these approaches give the same value of the national income.

The method for calculating National Income by Output, Value Added method: GDP at market price = Value of Output in a year - Intermediate consumption NNP at factor cost = GDP at market price - Depreciation + NFIA (Net Factor Income from Abroad) - Net Indirect Taxes The measurement of National Income by Income Method:

NDP at factor cost = compensation of employee + operating surplus + Mixed income of self employee National Income = NDP at factor cost + NFIA (net factor income from abroad) The measurement of National Income by Expenditure Method:

GDP = C + I + G + (X - M)
C = Personal consumption expenditures
I = Gross investment
G = Government consumption
X = Gross exports
M = Gross imports
There are three methods which are commonly used for the measurement of national income. These methods include output value added method, income method and expenditure method.
National Income by Output, Value Added method:
GDP = Value of Output yearly - Intermediate consumption
NNP @ factor cost = GDP at market price - Depreciation + NFIA - Net Indirect Taxes National Income by Income Method:
NDP @ factor...
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