Q.Define or explain the following concept:
National income
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Start your 14-day free trial to unlock the full solution →National income is the total money value of all final goods and services produced by a country's residents in one year, measured as NNP at factor cost. It is understood through the related aggregates GDP, GNP, NDP and NNP.
Meaning and definition: National income is the money value of all final goods and services produced by the normal residents of a country during a given year, counted after allowing for depreciation and net factor income from abroad. Marshall defined it as the labour and capital of a country acting on its natural resources to produce annually a net aggregate of commodities and services. In modern national-income accounting, national income equals Net National Product at factor cost (NNP at FC).
Key points to note in the definition:
- Only final goods and services are counted, to avoid double counting.
- It is measured for a definite period, usually one year.
- It is expressed in money value, so that unlike goods and services can be added together.
- It is measured at factor cost (income actually received by the factors of production).
Related aggregates:
- GDP (Gross Domestic Product): money value of all final goods and services produced within the domestic territory of a country in a year.
- GNP (Gross National Product): GDP plus net factor income from abroad — i.e. output attributable to the country's normal residents.
- NDP (Net Domestic Product): GDP minus depreciation (consumption of fixed capital). …
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