Question

List out the uses of national income

Answer 1

The following are some of the concepts used in measuring national income?

GDP:

1. GDP is the total market value of final goods and services produced within the country during a year.
2. This is calculated at market prices and is known as GDP at market prices. Thus GDP by expenditure method at market

prices = C + I + G + (X-M)
Where C – Consumption goods;
I – Investment goods;
G – Government purchases;
(X – M) is net export which can be positive or negative.

Net National Product (NNP) (at Market price):

1. Net National Product refers to the value of the net output of the economy during the year.
2. NNP is obtained by deducting the value of depreciation, or replacement allowance of the capital assets from the GNP. It is expressed as,
3. NNP = GNP – depreciation allowance.

NNP at Factor cost:

1. NNP refers to the market value of output.
2. NNP at factor cost is the total of income payment made to factors of production.

Personal Income:

1. Personal income is the total income received by the individuals of a country from all sources before payment of direct taxes in a year.

Per Capita Income:

1. The average income of a person of a country in a particular year is called Per Capita Income.
2. Per capita income is obtained by dividing national income by population.

`"Per capita income"="National Income"/"Population"`

Disposable Income:

1. Disposable Income is also known as Disposable personal income.
2. It is the individuals' income after the payment of income tax.
3. This is the amount available for households for consumption.

Real Income:

1. Nominal income is national income expressed in terms of a general price level of a particular year, in other words, real income is the buying power of nominal income.

GDP deflator:

1. The GDP deflator is an index of price changes of goods and services included in GDP.
2. It is a price index that is calculated by dividing the nominal GDP in a given year by the real GDP for the same year and multiplying it by 100.