Definition of national income?

National Income (NI) is method used to measure the economic performance of a country, Calculation of total value of goods and services produced within a country’s borders over a specific period of time (a year).

Definition of national income accounting?

NIA this is method that measure the economic activity in country , it provides a numerical evaluation of total production of goods and services and allocation of income between savings , taxes, and consumption.

How is calculated NIA?

National income=Consumption + investment expenditure+ expense made by govt +(X-M).

X=export, M=import

(GDP=GNP=NNP)

• Three methods of National income

1.Income method

2.product or value added method

3.expenditure method

• Measurements of National income by Income method:

Net national income =employee compensation+operating surplus +

Net income + net factor income from abroad. (W+R+P+I)

(W= wages  and salaries.

R= income from rental sources.

P=profit

I=mixed income)

• Measurements of national income by product value added method:

    NI=GNP-cost of capital -Depreciation-indirect taxes.

• Measurements of National Income by Expenditure:

NI=National product = National Expenditure

Importance of National Income Accounting :

It provides policy makers with essential information about overall economic health of a country.

It serves as a valuable tool  for fiscal and monetary policy formulation.

Accurate national income measurements are essential for international trade and  investment decisions.

The data is crucial for monitoring economic growth, stability and progress.

• Disadvantages of National Income Accounting:

Errors in measurement like black market and underground activities are not included when Calculating GDP.

GDP only measures the market activity doesn’t take welfare into account.

Services of housewives is not included in this.

Ignorance and illiteracy of the people create problems in  collecting statistical data.