Q.Define National Income and explain the various concepts of National Income.

National Income is the total money value of all final goods and services produced by the normal residents of a country in a year. The chief concepts are: GDP, GNP, NDP, NNP (each at market price or factor cost), National Income (= NNP at factor cost), Personal Income, Personal Disposable Income and Per Capita Income — distinguished mainly by whether depreciation, net foreign income, and indirect taxes/subsidies are included. ## Definition National Income is defined as the money value of the total flow of final goods and services produced by the normal residents of a country during an accounting year. Marshall, Pigou and Fisher defined it in terms of production, income and consumption respectively. In India it is usually measured as Net National Product at Factor Cost (NNPfc). ## Various concepts of National Income 1. Gross Domestic Product (GDP): the money value of all final goods and services produced within the domestic (geographical) territory of a country in a year, whether by residents or foreigners. 2. Gross National Product (GNP): GDP plus net factor income from abroad (income earned by residents abroad minus income earned by foreigners within the country). GNP = GDP + Net Factor Income from Abroad. 3. Net Domestic Product (NDP): GDP minus depreciation (consumption of fixed capital). NDP = GDP − Depreciation. 4. Net National Product (NNP): GNP minus depreciation. NNP = GNP − Depreciation. 5. Market price and factor cost: any of the above measured at market price includes net indirect taxes (indirect taxes minus subsidies). At factor cost these are removed. Value at Factor Cost = Value at Market Price − Indirect Taxes + Subsidies. 6. National Income (NNP at Factor Cost): this is National Income proper — the sum of incomes (rent, wages, interest, profit) earned by the factors of production owned by the normal residents of a country. National Income = NNP at Market Price − Indirect Taxes + Subsidies. 7. Personal Income: the total income actually received by individuals and households from all sources before paying direct taxes. Personal Income = National Income − (undistributed corporate profits + corporate taxes + social security contributions) + transfer payments. 8. Personal Disposable Income: the income actually available to individuals for spending and saving. Disposable Income = Personal Income − Direct (personal) taxes. 9. Per Capita Income: the average income of a person in the country. Per Capita Income = National Income / Total Population. ## Summary table | Concept | Ho …