The Income Approach
Components of National Income
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
1. Compensation of Employees: wages and
salaries paid to employees

2. Rents: income received from supplying
property resources

3. Interest: income paid to the suppliers of
money capital (loans, deposits, bonds...)
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4. Profits: two accounts:
A. Owner’s income: income from partnerships
and unincorporated businesses
B. Corporate Profits: income to owners of
corporations and subdivided into:
Corporate income tax
Dividends
Undistributed corporate profits (retained
earnings)
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
The previous are components of national
income: income received from participating in
production process.

Yet, need to add other components:
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From National Income to GDP



Indirect Business Taxes: sales taxes, excise
taxes, business property tax, license fees, and
customs duties.
Consumption of Fixed (private and social)
Capital: to count depreciation allowance
Net Foreign Factor Income: the difference
between income Kuwaitis gain from supplying
resources abroad and income foreigners gain
by supplying resources in Kuwait.
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Other National Accounts:
1. Net Domestic Product (NDP)=
GDP – Consumption of fixed capital (Dep.)
“NDP is GDP adjusted for depreciation”.

NDP
– net foreign factor income
– indirect business taxes
= NI
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2. Personal Income (PI): all income received
(earned or not):
NI
– Social security payments
– corporate income tax
– undistributed corporate profits
+ transfer payments
= Personal Income
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3. Disposable Income (DI): personal income
after paying personal taxes:
After paying your tax, you can consume your
income (C) and\or save (S):
DI = C + S
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GDP
- consumption of fixed capital
= NDP
- net foreign factor income
- indirect business tax
= NI
- SS
- corporate income taxes
- undistributed corporate profits
+ transfer payments
= PI
- personal tax
= DI
-C=S
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