67 crores (Rs. National income by product method is measured by the value of final goods and services at current market prices. GNP at Market Prices = GDP at Market Prices + Net Income from Abroad. National income data are significant for a country’s per capita income which reflects the economic welfare of the country. It includes payments made to all resources in the form of wages, interest, rent and profits. It does not take into account the financial exchange of shares and stocks because their sale and purchase is not real investment. But if, during the current year, a portion of a house is constructed anew, the increase in the value of the house (after subtracting the cost of the newly constructed portion) will be included in the GNP. But it is difficult to distinguish properly between a final product and an intermediate product. For instance, it can tell us whether agriculture is contributing more or the share of manufacturing is falling, or of the tertiary sector is increasing in the current year as compared to some previous years.
7 crores) are deducted from the net domestic product of Rs.
This can be done by measuring GDP at constant prices which is called real GDP. In this case, national income is greater than domestic income. Their main constituents are inter-related and each particular account can be used to verify the correctness of any other account. Again, it often happens that the cost of production of a commodity to the producer is higher than a price of a similar commodity in the market. But the definitions advanced by Marshall, Pigou and Fisher are not altogether flawless. Capital gains are excluded from national income because these do not arise from current economic activities. In fact, the Commerce Introduction of national income 1. Profits which are not distributed by companies and are retained by them are included in the GNP. In practice, while estimating national income, any of these three definitions may be adopted, because the same national income would be derived, if different items were correctly included in the estimate. The economists propound short-run as well as long-run economic models or long-run investment models in which the national income data are very widely used. MACROECONOMICSProduct concepts in nationalincome BY:CHALU ROY 2.
A housewife renders a number of useful services like preparation of meals, serving, tailoring, mending, washing, cleaning, bringing up children, etc. Every country exports to or imports from certain foreign countries. In reality, it is not possible to make a clear demarcation as to which service protects the people and which protects the productive process. GDP is the total value of goods and services produced within the country during a year. 3 per kg but it costs the producers in certain areas Rs. In other words, the total amount of income accruing to a country from economic activities in a year’s time is known as national income. But if he spends the amount for using it as a taxi, it is investment expenditure. and the estimated rents of all such assets as are used by the owners themselves. According to Pigou, a woman’s services as a nurse would be included in national income but excluded when she worked in the home to look after her children because she did not receive any salary for it. In both the situations, the national income does not depict the real state of the country. This is because the rental income or the imputed rent which the house-owner gets is for making investment on the new house. which cannot be estimated accurately in money terms. Its calculation is shown in Tables 1, 2 and 3. This is included in national income. But it is not very reliable, because in every country due to unequal distribution of national income, a major portion of it goes to the richer sections of the society and thus income received by the common man is lower than the per capita income. GDP at factor cost is the sum of net value added by all producers within the country. The inter-relationship among the various concept of national income can be shown in the form of equations as under:Before publishing your articles on this site, please read the following pages: Thus, the difference between the value of material outputs and inputs at each stage of production is called the value added.
The problem also arises with regard to capital gains. It is only on the basis of these that the government can adopt measures to remove the inequalities in income distribution and to restore regional equilibrium. Such services performed by paid servants are included in national income.
GNP by value added = Gross value added + net income from abroad. It, therefore, becomes difficult to measure in money the service-value of these goods from the point of view of consumption.
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