National income
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Transcript of National income
NATIONAL INCOME
MADE BY:ASHUTOSH
MESURING NATIONAL INCOME
METHODS
VALUE ADDED INCOME EXPENDITURE
MEANING OF NATIONAL INCOME
FROM INCOME POINT OF VIEW
“National income is the sum of factor incomes earned by normal residents of a country within and outside the country in the form of rent, wages, interest and profit in an accounting year.”
(factor incomes for factors of production)
CONCEPT
DEPRICIATION : Dep. is used to differentiate between GROSS and NET.
(GROSS = NET + DEPRICIATION) NET INDIRECT TAX : NIT is used to
differentiate between MARKET PRICE and FACTOR PRICE.
(MKT. PRICE = FAC. PRICE + NIT)
Cont……
NET FACTOR INCOME FROM ABROAD : NIFA is used to differentiate between NATIONAL INCOME and DOMESTIC INCOME.
(NATIONAL = DOMESTIC + NIFA)
EXAMPLES
1. GDP to GNP:
GNP = GDP + NIFA
2. GDP at MP to GNP at FC :
GNP at FC = GDP +NIFA – NIT
3. GDP to NDP :
GDP = NDP + DEPRICIATION
Domestic income and its Components
COMPONENTS
Compensation of employees
Operating surplus
Mixed income ofSelf employed
COMPENSATION OF EMPLOYEES
WAGES :This is a reward or compensation paid to employees for rendering services. It includes :
1.Wages and salaries in cash or kind.
2.Empolyer’s contribution to SSC schemes.
OPERATING SURPLUS
OPERATING SURPLUS
Income fromproperty
Income from Entrepreneurship
Parts of Income from Property
There are two parts :-
1. Rent
2. Interest
Parts of Income from Entrepreneurship
PROFIT
Corporate
tax
Dividend Undistributed profit
Mixed Income of Self-Employed
Income of own account workers (like farmers , doctors ,barbers) and unincorporated enterprise (like small shopkeepers , retail traders etc.).
They do not make proper accounts. They do not hire factor services from market
rather they have their own. In India they are known as unorganized
sectors so, their income is clubbed under mixed income head.
Steps Involved
1. Identify enterprises which employ factors of production.
2. Classify various types of factor income under three main heads.
3. Estimate amount of factor payments made by each enterprise.
4. Sum up all factor payments made within domestic territory to get NDP at FC .
5. Estimate NIFA to derive NATIONAL INCOM
Precautions
All transfer incomes are not included. Sale and purchase of second hand goods
are excluded because they are not part of production of this year’s.
Imputed rent of owner is included (assumed). Incomes from illegal activities like betting,
smuggling ,black marketing are excluded.