Meaning Of National Income Or National Dividend w1x2q
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Meaning of National Income or National Dividend Normally, national income means the total of value of commodities and services produced in any country during a year. In other words, the net volume of production of commodities and services reaching to the ultimate consumers, by flowing through out the year, out of the production system of the country or the net volume of commodities and services relating to the capital goods of the country is called national income. National income has been defined, by different scholars as follows. “National income estimates measure the value of commodities and service turned out during a given period, counted without duplication.” …National Income Committee of India “The labor and capital of a country acting on the natural resources,
produce
annually
a
certain
net
aggregate
of
commodities, material and immaterial, including services of all kinds. This is the true net national income or revenue of the country or the national dividend.”
Prof. Marshall
“National income or dividend consist solely of services as received by ultimate consumers, whether from their national or form their human environment. Thus, a piano or an overcoat made for me this year is not a part of this year’s income but an addition to capital. Only the services rendered to me during this year by these things are income.”
Prof. Fisher
Thus, national income is the aggregation of wages, rent, interest and profit or is the total of rewards to be given to the factors of production for any certain period. Study of aforesaid definitions of national income make it clear that following things are important in respect of national income. 1.
National income is related to any particular country, like national income of India, Japan or America.
2.
This is a perennial flow, which is estimated, year after year, on annual basis.
3.
National income is calculated, on the basis of production and consumption, both
4.
National Income is measured in units of money.
5.
National income included commodities , as well as services.
6.
While computing national income, the value of commodities and services is included only once, i.e. duplication in computation is avoided.
Gross National Product (GNP) Gross national product means the total aggregation of value of commodities and services produced in any country during one year. Sometimes, it is also termed as total supply of the economy. In other word, gross national products is the market value of ultimate commodities and services produced during one year period in any country or national. Gross national product may be so defined: “The total of market valued of all ultimate commodities and services produced in any economy, during one year period is said to be gross national products.” Gross national product is computed by two methods:
(i) Expenditure Methods, and (ii) Income Method. While computing its, following points should be taken into consideration: 1.
Only the value of ultimate consumer goods and services be taken.
2.
It may be computed only in of money.
3.
The commodities and services received free of cost may not be included in its computation.
4.
The profit or loss accruing due to differences taking place in the market prices of the capital goods is not be included in its computation.
5.
The income received by illegal activities may not included in its computation.
6.
It should not include transfer payment and payments received under social security.
Net National Product ( NNP) The value obtained by deducting annual price depreciation of capital resources form gross national product is known as net national product. Many scholars it as national income at market price also. Net national product may be defined as follows. “The amount obtained by deducting the price depreciation of machinery etc. from the total of the market prices of all types of ultimate commodities and services produced during one year in a country is said to be net national product.” In of formulaNet national Product= Gross National Product-Depreciation.
Like gross national product, net national product may also be computed on market prices or factor prices. Actual increase or decrease in production may be known by net national income or NNP
National Income at Factor Cost National income at factor cost is known by deducing in direct taxed from the net national product and adding the subsidies received from the Government. In other words, when net national income is computed at factor costs, it is known as net national income or national income only. In of formula: National
income
=Net
National
Product-Indirect
Taxes+
Subsidies
Personal Income Personal income means that income which is actually received by the individuals or household in any country, during one year. In other words. The total monetary payment received by the individuals of any country in the form of income is know as personal income. To know this income, it will have to be kept in view that the total national income is not received by the individuals and the household. Rather, several types of deductions are made in it. Hence, to know it, and some allowances are added also. Hence, the formula for computation of personal income may be stated as follows: Personal Income=National Income-corporate Tax-Undistributed Business Payments.
Profits-Social
Security
Contribution+
Transfer
The advantage of computation of personal income is that is helps in assessing the purchasing power of the domestic sector of the economy
Disposable Income Disposable income means that income, which is available with the people in the country for spending. They may spend it or save it, according to their discretion. In other words, the amount obtained by deducting payment of direct personal direct taxes from personal income is known as disposable income. In of formula: Various Disposable income =Personal Income-Personal Direct Tax concepts of National Income Computation may be briefly expressed, as follows: 1.
GNPmp = Pub. Sect. prod.+ Pvt. Sect. Prod.+ Value of ECO. Ser.+ Foreign Earnings
2.
GNPFc = GNPmp –indirect Tax + Subsidy
3.
NNPMP = GNPmp – Depreciation
4.
NNPMP = GNPmp –Indirect Tax + Subsidy
5.
NDPMP = NNPmp -(Export- import)
6.
NDPFC = NDPmp –indirect Tax + Subsidy
7.
Disposable income = Personal income – Direct Tax ( Income Tax )
8.
Per Capita Income = National Income / Total Population
produce
annually
a
certain
net
aggregate
of
commodities, material and immaterial, including services of all kinds. This is the true net national income or revenue of the country or the national dividend.”
Prof. Marshall
“National income or dividend consist solely of services as received by ultimate consumers, whether from their national or form their human environment. Thus, a piano or an overcoat made for me this year is not a part of this year’s income but an addition to capital. Only the services rendered to me during this year by these things are income.”
Prof. Fisher
Thus, national income is the aggregation of wages, rent, interest and profit or is the total of rewards to be given to the factors of production for any certain period. Study of aforesaid definitions of national income make it clear that following things are important in respect of national income. 1.
National income is related to any particular country, like national income of India, Japan or America.
2.
This is a perennial flow, which is estimated, year after year, on annual basis.
3.
National income is calculated, on the basis of production and consumption, both
4.
National Income is measured in units of money.
5.
National income included commodities , as well as services.
6.
While computing national income, the value of commodities and services is included only once, i.e. duplication in computation is avoided.
Gross National Product (GNP) Gross national product means the total aggregation of value of commodities and services produced in any country during one year. Sometimes, it is also termed as total supply of the economy. In other word, gross national products is the market value of ultimate commodities and services produced during one year period in any country or national. Gross national product may be so defined: “The total of market valued of all ultimate commodities and services produced in any economy, during one year period is said to be gross national products.” Gross national product is computed by two methods:
(i) Expenditure Methods, and (ii) Income Method. While computing its, following points should be taken into consideration: 1.
Only the value of ultimate consumer goods and services be taken.
2.
It may be computed only in of money.
3.
The commodities and services received free of cost may not be included in its computation.
4.
The profit or loss accruing due to differences taking place in the market prices of the capital goods is not be included in its computation.
5.
The income received by illegal activities may not included in its computation.
6.
It should not include transfer payment and payments received under social security.
Net National Product ( NNP) The value obtained by deducting annual price depreciation of capital resources form gross national product is known as net national product. Many scholars it as national income at market price also. Net national product may be defined as follows. “The amount obtained by deducting the price depreciation of machinery etc. from the total of the market prices of all types of ultimate commodities and services produced during one year in a country is said to be net national product.” In of formulaNet national Product= Gross National Product-Depreciation.
Like gross national product, net national product may also be computed on market prices or factor prices. Actual increase or decrease in production may be known by net national income or NNP
National Income at Factor Cost National income at factor cost is known by deducing in direct taxed from the net national product and adding the subsidies received from the Government. In other words, when net national income is computed at factor costs, it is known as net national income or national income only. In of formula: National
income
=Net
National
Product-Indirect
Taxes+
Subsidies
Personal Income Personal income means that income which is actually received by the individuals or household in any country, during one year. In other words. The total monetary payment received by the individuals of any country in the form of income is know as personal income. To know this income, it will have to be kept in view that the total national income is not received by the individuals and the household. Rather, several types of deductions are made in it. Hence, to know it, and some allowances are added also. Hence, the formula for computation of personal income may be stated as follows: Personal Income=National Income-corporate Tax-Undistributed Business Payments.
Profits-Social
Security
Contribution+
Transfer
The advantage of computation of personal income is that is helps in assessing the purchasing power of the domestic sector of the economy
Disposable Income Disposable income means that income, which is available with the people in the country for spending. They may spend it or save it, according to their discretion. In other words, the amount obtained by deducting payment of direct personal direct taxes from personal income is known as disposable income. In of formula: Various Disposable income =Personal Income-Personal Direct Tax concepts of National Income Computation may be briefly expressed, as follows: 1.
GNPmp = Pub. Sect. prod.+ Pvt. Sect. Prod.+ Value of ECO. Ser.+ Foreign Earnings
2.
GNPFc = GNPmp –indirect Tax + Subsidy
3.
NNPMP = GNPmp – Depreciation
4.
NNPMP = GNPmp –Indirect Tax + Subsidy
5.
NDPMP = NNPmp -(Export- import)
6.
NDPFC = NDPmp –indirect Tax + Subsidy
7.
Disposable income = Personal income – Direct Tax ( Income Tax )
8.
Per Capita Income = National Income / Total Population
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