Scribd
Upload
339 views

Concepts of National Income (Lecture)

This document discusses key concepts related to national income accounting including: Gross Domestic Product (GDP), Gross National Product (GNP), Net National Product (NNP), Net Domestic Product (NDP), National Income (NI), Personal Income (PI), and Disposable Personal Income (DPI). It provides the formulas and explanations for how each of these concepts is calculated based on factors like depreciation, taxes, transfers, and income earned domestically versus abroad.

Uploaded by

mohammad bilal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
339 views

Concepts of National Income (Lecture)

This document discusses key concepts related to national income accounting including: Gross Domestic Product (GDP), Gross National Product (GNP), Net National Product (NNP), Net Domestic Product (NDP), National Income (NI), Personal Income (PI), and Disposable Personal Income (DPI). It provides the formulas and explanations for how each of these concepts is calculated based on factors like depreciation, taxes, transfers, and income earned domestically versus abroad.

Uploaded by

mohammad bilal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 22

CONCEPTS OF

NATIONAL INCOME
Gross Domestic Product (GDP)
Gross National Product (GNP)
Net National Product (NNP)
Net Domestic Product (NDP)
National Income (NI)
Personal Income (PI)
Disposable Personal Income (DPI)

2
EXPENDITURE APPROACH
OUTPUT APPROACH
INCOME APPROACH

3
GDP = C + I + G + (X- M)

C = Private consumption expenditure


I = Investment Expenditure
G= Government Consumption Expenditure
X = Value of Exports
M = Value of Imports
 Durable consumer goods
 Non-durable consumer goods
 Services
Gross Domestic Fixed Capital Formation +
Change in Stock (Inventories)

Gross Domestic Fixed Capital Formation:


Expenditure on purchasing land, factories,flats,office,
machinery, commission, legal charges
Comprises of:

Final government consumption expenditure.

Final government gross fixed capital expenditure.

Increases in stocks of government authorities.


Net export is the difference between the value of

Exports and imports (X-M) or NX


GROSS DOMESTIC PRODUCT
GDP is the total market value of all final goods and
services produced in the economy during a specific
period measured in money terms and not in
physical units.

9
National Product. GNP is the total value of all final
goods and services produced within a nation in a
particular year, plus income earned by its citizens
(including income of those located abroad), minus
income of non-residents located in that country.

10
Basically, GNP measures the value of goods and
services that the country's citizens produced
regardless of their location.

GNP=GDP+NFP

11
The difference is that GDP measures all
production within the Country ;

While GNP measures the value of goods and


services that the country's citizens produced
regardless of their location .

12
If we want to know NNP then we will have to deduct
Depreciation Allowance From GNP. We can write it
mathematically as

NNP= GNP - DEPRECIATION ALLOWANCE

13
If we want to know NDP then we will have to
deduct Depreciation Allowance From GDP.

We can write it mathematically as:

NDP = GDP - DEPRECIATION ALLOWANCE

14
NNP is the summation of market values of all
the goods produced and services provided in a
country.

But NNP does not show what actually has been


earned by the countrymen during a year.

15
In NNP the business taxes are also included. Such
taxes do not represent the incomes of the people.

Accordingly ,to know NI we will have to subtract the


indirect taxes and add subsidies in NNP.

NI = NNP – INDIRECT TAXES + SUBSIDIES

16
Personal income is the aggregate of all individual
income which is received directly by the
individual.

17
If we want to know PI we will have to add
transfer payments in NI and will have to
subtract Taxes on profit and undistributed
profit from NI.

PI = NI + TRANSFER PAYMENTS - TAXES


ON PROFIT - UNDISTRIBUTED PROFIT

18
NI doest not show how much amounts are possessed
by the people.

There are the persons who get incomes without


rendering their services. As the case of transfer
payments like pension, unemployment allowances
etc.

19
Disposable Personal Income tells us that how much
money per year do household actually have available
to spend.
To get DPI we will Subtract Direct Taxes from
Personal Income (PI).
Direct Taxes e.g. Income Tax, Property Tax etc.

DPI = PI - DIRECT TAXES

20
Under this method National income is calculated
through the summation of all cost of a product in
other word earnings of all factors of production
are added.

21
thanks

22

You might also like