Question

Briefly explain various terms associated with measuring of national income. 

Answer 1

1. Gross National Product (GNP): It is the total value of goods and services produced and income received by the domestic residents of a country. It includes profit earned from capital invested abroad.
   GNP = C + I + G + (X – M) + NFIA

    

2. Gross Domestic Product (GDP): It is the value of the output of goods and service produced by the factors of production within the Geographical boundaries of a country.
   GDP = GNP – NFIA

    

3. Net National Product (NNP): It is arrived at by deducting Depreciation value from the Gross National Product.
   NNP = GNP – Depreciation

    

4. Net Domestic Product ( NDP): It is arrived at by deducting the value of depreciation from the Gross Domestic Product.
   NDP = GDP – Depreciation

    

5. Per-Capita Income: It is obtained by dividing the National Income by the population of a country.
   PCI = N.I/population
   In the above context,
   C – Consumption expenditure
   I – Investment expenditure
   G – Government expenditure
   NFIA – Net Factor Income earned from Abroad
   Depreciation – Wear and Tear expenses

    

6. Personal Income: It is the total money income received by all the individuals of a country from all possible sources before direct taxes.
   PI = NI Corporate Income Taxes – Undistributed Corporate profit – social security Contribution + Transfer payment

    

7. Disposable Income (DI): It means the actual income which can be spent on consumption by the people of the country.
   DI = PI – Direct taxes