Concepts of National Income

0 137

Concepts of National Income

There are various concepts of national income, they are as under.

1) Gross National Product (GNP): GNP is defined as the total market value of all final goods and services produced in a year. GNP is a monetary measure and avoids double counting. This implies it measures the market value of the annual output and the outputs here are final products

The GNP can be obtained by adding up:

1) Personal consumption expenditure.
2) What private business spends on replacements renewal & new investment called gross domestic private investment.
3) Net foreign investment (export surplus)
4) Government purchases.

2) National Product:
This can be obtained when-charge for depreciation is deducted from the GNP, in other words it means the market value of all final goods and services after providing for depreciation.


Net National Product (NNP)
OR                                                     = GNP – Depreciation
National income at Market price

3) National Income at Factor Cost:
It means the sum of all incomes earned by resource suppliers for their contribution of land, labour, capital and entrepreneurial ability which goes into the year’s net production. Thus difference between national income (at factor cost) and net not national product (i.e. national income at market prices) arises from the fact that Indirect taxes and subsidies. Hence National Income is

National Income at Factor cost = NNP – Indirect taxes + subsidies.

Leave A Reply

Your email address will not be published.