Measures of National Income

GDP - Gross domestic Product

Sum of money value of all final goods and services produced within the domestic territories of a country during an accounting year.

GDP = Factor Cost + Market Price

GNP - Gross National Product

It is the aggregate final output of citizen and business of an economy in a year

GNP = GDP+NFIA(Net Factor Income From Abroad)

NFIA = Income Received from abroad for rendering factor services - Income paid towards services rendered by foreign nationals in the domestic territory

NDP & NNP

Net Domestic  & Net National Product

NDP = GDP - Depreciation

NNP = GNP - Depreciation

Depreciation is the reduction in value due to wear & tear

National Income  = NNP at the factor Cost

National Income

4 Sectors of Economy

• Firm
• Consumers
• Government
• External/International Market

Firm Gives Goods & services
Consumers are the factors of Production

Salary = Expense+savings

Savings = banks provide(Invests) those savings as loans to firms

Leakages - When money kept in Household but not invested

Stocks & Flows

Any economic variable which has been accumulated as a specific point of time for flow is stock

The variable which increases  or decreases the stock

Change from savings o investment is capital formation

Dependency Ratio = Ratio of the people who are dependent / independent People

Thus National Income is defined as the money value of all the final goods & services produced in an economy during an accounting period of time generally one year