Hence, Real National Income for 1999-2000 will be = 20000 x 100/250 = Rs. Should expenditure on government services be included in national income? (ii) Operating surplus which is the business profit of both incorporated and unincorporated firms. This is because the employees would have received money income equal to the value of free food, lodging, etc. NDP is the value of net output of the economy during the year. To find out the real GDP, a base year is chosen when the general price level is normal, i.e., it is neither too high nor too low. For example if the market price of rice is Rs. Thus, It shows that at constant prices (1993-94), GDP in 1997-98 increased by 135.9% due to inflation (or rise in prices) from Rs. We find that old scooters, cars, houses, machinery, etc. If we add net income from abroad to domestic income, we get national income, i.e., National Income = Domestic Income + Net income earned from abroad. For instance, in order to find out the per capita income for 2001, at current prices, the national income of a country is divided by the population of the country in that year. To find out the GNP, the data of all productive activities, such as agricultural products, wood received from forests, minerals received from mines, commodities produced by industries, the contributions to production made by transport, communications, insurance companies, lawyers, doctors, teachers, etc. This is shown in Table 3. Thus Personal Income = National Income – Undistributed Corporate Profits – Profit Taxes – Social Security Contribution + Transfer Payments + Interest on Public Debt. In common parlance, national income means the total value of goods and services produced annually in a country. As a result, the price of the commodity to the producer is reduced and equals the market price of similar commodity. But it is not possible to estimate the value of each factor input to production.
For these are the payments they receive for their productive services during the year. If they are included every time they are bought and sold, national income would increase many times. These are government expenditures but they are not included in national income because they are paid without adding anything to the production process during the current year. First, it is more difficult to estimate the money value of net consumption than that of net production. Consequently, the GNP would increase too much. The expenditure incurred by the government on goods and services is a part of the GNP. If disposable income is to be deduced from national income, we deduct indirect taxes plus subsidies, direct taxes on personal and on business, social security payments, undistributed corporate profits or business savings from it and add transfer payments and net income from abroad to it. It may last longer or for a shorter period. Similarly, horse-racing is a legal activity in England and is included in national income. interest on capital, wages to labor, rent for land profit to the stakeholders. The problem also arises with regard to capital gains. To run the offices, the governments have also to spend on contingencies which include paper, pen, pencil and various types of stationery, cloth, furniture, cars, etc. Therefore, all such services are regarded as final goods and are included in national income. This concept enables us to know the average income and the standard of living of the people. MACRO ECONOMICSIntroduction of National income:The concept of national income occupies an important place in economic theory national income asan economic tool it has acquired greater significance in recent past years.it has provided an index togrowth of an economy.In common … But the net national income earned from abroad may be positive or negative. Only the services rendered to me during this year by these things are income.” Fisher’s definition is considered to be better than that of Marshall or Pigou, because Fisher’s definition provides an adequate concept of economic welfare which is dependent on consumption and consumption represents our standard of living. Normally, NNP at market prices is higher than NNP at factor cost because indirect taxes exceed government subsidies.
If each time, this wheat or its flour is taken into consideration, it will work out to Rs.8000, whereas, in actuality, there is only an increase of Rs.2000 in the national income. 1426.7 thousand crores in 1997-98.
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