Income earned by all factors of production
Concept of National Income
Reflects the economic performance of a country
Introduction
Measures of National Income
GDP, NDP, GNP, NNP, etc.
Interaction between households and firms
Circular Flow of Income
Factor and product markets
Market value of all final goods and services
Gross Domestic Product (GDP)
Within a country's borders
Net Domestic Product (NDP)
GDP minus depreciation
Gross National Product (GNP)
GDP plus income from abroad
Net National Product (NNP)
Concepts and Aggregates Related to National Income
GNP minus depreciation
National Disposable Income (NDI)
NNP plus other current transfers from the rest of the world
Income of the private sector
Private Income
Includes factor income, transfers, etc.
Income received by households
National Income Accounting
Personal Income
Excludes undistributed profits
Personal Disposable Income
Value Added Method
Methods of Calculating National Income
Income Method
Personal income minus personal taxes
Summing value added at each stage of production
Summing incomes of all factors of production
Expenditure Method
Summing all expenditures in the economy
Avoid Double Counting
Only count final goods and services
Include Only Final Goods
Exclude intermediate goods
Precautions for Calculating National Income
Include Imputed Rent of Owner-occupied Houses
Estimate rental value of owner-occupied properties
Include Goods and Services Produced for Self-consumption
Macroeconomic Identities
GDP and NDP
NDP = GDP - Depreciation
GNP and NNP
NNP = GNP - Depreciation
NNP and NDI
NDI = NNP + Net current transfers from the rest of the world
NDI and Personal Income
Include subsistence farming, etc.
Personal Income = NDI - Undistributed profits - Corporate taxes - Social security contributions + Transfers
Personal Income and Personal Disposable Income
Personal Disposable Income = Personal Income - Personal taxes