3. What is National Income? Explain methods of calcit ating National Income?
Answers
Answer:
National income is the sum total of the value of all the goods and services manufactured by the residents of the country, in a year., within its domestic boundaries or outside. It is a net amount of income of the citizens by production in a year.
To be more precise, national income is the accumulated money value of all final goods and services produced in a country during one financial year. Computation of National Income is very vital as it indicates the overall health of our economy for that particular year.
Gross Domestic Product, abbreviated as GDP, is the aggregate value of goods and services produced in a country. GDP is calculated over regular time intervals, such as a quarter or a year. GDP as an economic indicator is used worldwide to measure the growth of countries economy.
Goods are valued at their market prices, so:
All goods measured in the same units (e.g., dollars in the U.S.)
Things without exact market value are excluded.
Constituents of GDP-
Wages and salaries
Rent
Interest
Undistributed profits
Mixed-income
Direct taxes
Dividend
Depreciation
The Formula for Calculation-
GDP = consumption + investment + government spending + exports - imports.