In economics, an aggregate measure of the total income earned by a nation's factors of production in a given time period. This includes income earned both by consumers and by corporations. It is the net domestic product minus indirect business taxes.


National Income is the total amount of wealth produced within a country over a specific time period. For convenience and comparison purposes, national income is usually measured over a calendar year. The symbol Y is used to signify National Income.

National Income may be calculated in three ways:
1. by adding up the total value of all types of production (output method)
2. by adding up all the incomes received by the individuals and firms (income method)
3. by adding up the total value of all sales of goods and services (expenditure method)

The Output Method

1. Primary Sector Production
2. Industrial Production
3. Distrubution, Transport, and Communications Output
4. Government Services
5. Professional Services and Entertainment
6. Adjustment for Stock Appreciation
7. Adjustment for Financial Services
8.   + Net Factor Income from Rest of World
9.   = Net National Product At Factor Cost (Y)
10. + Depreciation
11. = Gross National Product at Factor Cost
12. + Taxes on Expendicture
13. - Subsidies
14. = Gross National Product at Market Prices

Notes.
i.When calculating total production, care must be taken to  avoid double counting.
ii.Any capital consumed during the course of of production must not be included. Producers price their output to include an element of compensation for capital depreciation.
6.This is the rise or fall in value of stocks due to price changes alone. This increase in value gives rise to an element of profit which does not arise from the production process and thus must be excluded.
7.Excess of interest of dividends received by financial institutions over payments of interest to depositors.
8.This is the sum of returns to foreign owned factors of production used in a country, and the returns to domestically owned factors in use abroad.

The Income Method

1.  Agricultural Income:
a.  Income from Self-employment and Trading Income
b.  Wages and Salaries2.  Non-agricultural Domestic Income:
a.  Wages and Salariesb.  Other Income
c.  Actual and Imputed Rent
3.  Adjustment for Stock Appreciation
4.  Adjustment for Financial Services
5.   + Net Factor Income From Rest Of World
6.   = Net National Product at Factor Cost (Y)

Notes
i.Transfer payments are excluded, as they are simply the redistribution of wealth. Transfer payments include educational grants and unemployment benefit.
ii.Incomes in kind must be included. Incomes in kind are incomes received in non-monetary form e.g. company car.
2b.This includes trading profits of companies etc.
2c.Includes estimated rent for owner-occupied housing.

The Expenditure Method

1.  Consumption Expenditure
2.  Investment Expenditure
3.  Government Expenditure
4.   + Imports
5.   - Exports
6.   = Gross Domestic Product at Market Prices
7.   + Net Factor Income From Rest of World
8.   = Gross National Product at Market Prices
9.   - Indirect Taxes
10. + Subsidies
11. = Gross National Product at Factor Cost
12. - Depreciation
13. = Net National Product at Factor Cost (Y)

Notes
1.Total personal expenditure on consumer goods and services.
2.Gross Domestic Capital Formation eg. building of airports, hydro-electric schemes, office equipment etc

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Only the Income Method gives the National Income figure directly. The other two methods give the figure GNP at market prixes. This can easily be converted to Net National Product at Factor Cost.

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