National income or product itself is commonly expressed in terms of a measure of the aggregate output of the economy called gross national product (GNP). 1. national income - the total value of all income in a nation (wages and profits and interest and rents and pension payments) during a given period (usually 1 yr) value - the quality (positive or negative) that renders something desirable or valuable; "the Shakespearean Shylock is of dubious value in the modern world". But various economists are of other view that from the practical point this definition is less useful and improper because there are certain difficulties in measuring the goods and services in terms of money: (i) It is very difficult to estimate the money value of net consumption than that of net production. Another importance of national income analysis is that they throw light on inter-class distribution of national income. It includes not only the part of the production which is brought to the market for sale but also that part of the produce which is kept for self consumption. This shows the level of real spending the country can afford. It is only on the basis of these that the government can adopt measures to remove the inequalities in income distribution and to restore ‘regional equilibrium’. According to this definition, in the backward and underdeveloped countries of the world, where a major portion of the produce is simply bartered, correct estimate of national income will not be possible, because it will always work out less than the real level of income.

It is at the disposal of the consumers to save or consume or to use it in any way they like.

Mathematically, it is represented as, If you ever see "speculation" in this context, be sure to pay attention. These concepts have their significance in national income accounting. Fisher picked up in his study ‘Consumption’ as the criterion of national income whereas Marshall and Pigou regarded it to be ‘production’. 'Real National Income.'

Therefore, in order to obtain the disposable income, direct taxes are deducted from personal income. Real national income is nominal or money national income (output) adjusted for inflation. Modern definition given by Prof. Simon Kuznet. Per capita income refers to the average income of an individual in a particular year. Meaning and Definition of National Income or National Dividend 2.

Further, they are helpful in the assessment of the saving and investment potential of the community. It is not appropriate for an underdeveloped country where there is barter system is prevalent. It is obtained by deducting the value of depreciation or replacement allowance of the capital assets from the GNP. Thus, national income of the country is expressed in money terms. Gross National Income (GNI) is a measurement of a country's income.

Modern economy is a money economy. Real income is an economic measure that provides an estimation of an individual’s actual purchasing power in the open market after accounting for inflation. This definition is better than the Marshallian definition. Real national income : the actual quantity of goods and services produced. statistically correct estimate of the total production of goods and services in an economy. (iii) The period of production is taken as one year. The salient features of its being best as given as under: (i) It is the net aggregate of goods and services. Fax: +44 01937 842110, We’re proud to sponsor TABS Cricket Club, Harrogate Town AFC and the Wetherby Junior Cricket League as part of our commitment to invest in the local community, Company Reg no: 04489574 | VAT reg no 816865400, © Copyright 2018 |Privacy & cookies|Terms of use, Introduction to Macroeconomics [Head Start in A-Level Economics), GDP vs Migration - "Chart Match Up" Activity, Measuring the Standard of Living (Essay Technique Video), 10 Flaws in GDP as a measure of Living Standards, Distinguishing between Production and Productivity, National Income and the Standard of Living - Revision Presentation, Aspects of the Economic Cycle - Revision Presentation, Is national happiness going to be a better way to measure economies than GDP, in 2020? Share Your PPT File, Measurement of National Income in India: 8 Major Difficulties, Public Sector Enterprises or Undertakings in India. He has defined national income in practical prospective as: “The Net Output of Commodities and Services flowing in a year from the country’s productive system in the hands of ultimate consumers or into net addition to the country’s capital goods. ... Largest Retail Bankruptcies Caused By 2020 Pandemic As we know at this point, the COVID-19 pandemic has thrown major companies in the US and the world over into complete havoc. “By means of statistics of national income we can chart the movements of a country from depression to prosperity, its steady long-term rate of economic growth and development and finally, its material standard of living in comparison with other nations.”.

Thus. Important concepts have been discussed here under: Gross National Product has been defined as the total market value of all final goods and services produced in a year. Personal Income differs from Private Income in that it is less than the latter because it excludes undistributed corporate profits. But this definition takes into consideration only domestic income and ignores the concept of net income earned from abroad. It denotes the income received by an individual during a certain year in a country.

Share Your Word File Income is defined as all employee compensation plus investment profits. Consider this example. Although the definition of Prof. Pigou is precise, simple and practical but it is not free from criticisms. Real GDP measures the volume of output.

Although the goods sold in the black-market are priced and fulfill the needs of the people, but as they are not useful from the social point of view, the income received from their sale and purchase is always excluded from the GNP. It has proved to be more practical also. If we consider the example of piano or overcoat, as given by Fisher, only the services rendered to us during one year by them will be included in income. It includes all the income earned by a country's residents, businesses, and earnings from foreign sources.

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