Question

Explain the meaning of national income.

Answer 1

The meaning of national income can be explained with the help of the following points:

1. The total income of the nation is called national income. In real terms, national income is the flow of all goods and services produced in an economy during a year. According to NIC “A national estimate measures the volume of commodities and services turned out during a given period counted without duplication.”
2. According to Prof. A.C. Pigou: “National dividend is that part of the objective income of the community including of course income derived from abroad which can be measured in money.”
3. According to Prof. Irving Fisher: “National dividend or income consists solely of services as received by ultimate consumers, whether from their material or from their human environments.”
4. From the above definitions, it is clear that national income is a composite measure of all economic activities such as production, distribution, exchange and consumption. It is also an objective indicator of the economic welfare of the people in a country.