national income analysis - final
TRANSCRIPT
NATIONAL INCOME
ANALYSIS
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NATIONAL INCOME CONCEPTS
NATIONAL INCOME
NATIONAL INCOME : It is the sum of factor incomes- wages, interest, rent and profit received by the owners of factors of production - labour, capital, land and entrepreneurs of a nation during one year.
GROSS DOMESTIC PRODUCT(GDP)GROSS NATIONAL PRODUCT AT MARKET PRICES
NET DOMESTIC PRODUCTS AT MARKET PRICES
NET NATIONAL PRODUCT AT MARKET PRICES
NET NATIONAL PRODUCT AT FACTOR COST
AGGREGATES OR CONCEPTS
GDP is the market value of all the final goods and services produced within the domestic territory of the country during a year.
Measures of GDP :A. Gross measureB. Market valueC. New production
GROSS DOMESTIC PRODUCT
Gross national product at market prices is the monetary value of all final goods and services produced in the domestic territory of a country during a year plus net factor income from abroad (NFIA) .
GROSS NATIONAL PRODUCT
NET DOMESTIC PRODUCT AT MARKET PRICE is the net market value of all the final goods and services produced in the domestic territory of the country.
Formula : Net Domestic Product at Market Price = Gross Domestic Product at Market Price less Depriciation
NET DOMESTIC PRODUCT
NET NATIONAL PRODUCT AT MARKET PRICES is the net market value of all the final goods and services produced by the normal residents of a country during a year.
Formula : Net National Product at MP = GNP at MP less Depreciation
NET NATIONAL PRODUCTMP
NET NATIONAL PRODUCT AT FACTOR COST is the sum total of net value added at factor cost by all the normal resident producer enterprises of a country during a year.
Formula : NNP AT FACTOR COST = GNP AT FC LESS DEPRCITION
NET NATIONAL PRODUCTFC
1. GNP at mp = GDP at mp + NFIA
2. NDP at mp = GDP at mp - Depreciation
3. NNP at mp = GNP at mp - Depreciation
4. NDP at mp = NNP at mp - NFIA
5. NDP at fc = NDP at mp - Net Indirect Taxes
6. GDP at fc = GDP at mp - Net Indirect Taxes
7. NDP at fc = GDP at fc - Depreciation8. GNP at fc = GNP at mp - Net
Indirect Taxes9. GDP at fc = GNP at fc - NFIA
formulae
PRIVATE INCOME : It refers to the income earned by private enterprises and workers (both within the domestic territory and abroad) and current transfers from government and rest of the world.
PERSONAL INCOME : It is sum of all kinds of income received by the individuals from all resources.
PERSONAL DISPOSABLE INCOME : It is the sum of income available to persons from all the sources to dispose them off as they like.
RELATED CONCEPTS:
CIRCULAR FLOW OF INCOME
TWO-SECTOR MODEL
FOUR-SECTOR MODEL
METHODS OF MEASURING NATIONAL INCOME
PRODUCTION
INCOMEEXPENDITURE
THREE CONTINUOUS PHASES OF ECONOMY
THREE METHODS OF MEASURING
“NATIONAL INCOME”1) PRODUCTION METHOD OR VALUE ADDED METHOD
2) INCOME METHOD
3) EXPENDITURE METHOD
1. Final Product Method
1.VALUE ADDED METHOD -
•Also known as “Production Method”•To avoid the problem of “DOUBLE COUNTING”• It measures Contribution of each Individual Enterprise at a particular stage of production• The value of Intermediate goods is not calculated
1.VALUE ADDED METHOD - Country’s Gross Value added =
Total Value of gross output (∑ Pn x Qn)
- Total Value of Intermediate Consumption *
* Goods which are used for further production.
Concepts related to Value Added Method
Net value Added at Factor Cost = Value of Gross Output – Intermediate Consumption - Depreciation – Net Indirect Taxes
NNPFC = Net value added by Primary Sector + Net value added by Secondary Sector + Net value added at Tertiary Sector
INCLUDE
Imputed rent values of self-occupied houses
Net increase in stocks
DON’T INCLUDE Non–marketed goods
and services produced for self-consumption
Sale and purchase of second-hand goods
Trading of stocks and bonds
Goods and services produced in Govt. sector
PRECAUTIONS OF VALUE ADDED METHOD:
• Here, NI is estimated by adding Incomes earned by all the factors of production.
• Value added at factor cost or domestic factor income is the sum of payments received by all the factors of production during a year and within the domestic boundaries.
2.INCOME METHOD:
2.INCOME METHOD: Steps of Income Method
To identify and classify the enterprises which employ factors of production
Classification of Factor Incomes
Measure factor payments
Adding up of factor payments
2.INCOME METHOD: Components of Domestic Factor Income-1. Compensation to employees - The
payment made by producers to their employees in the form of:• Wages and Salaries in cash• Compensation in Kind• Employers’ contribution to Social
Security Scheme.
Key points to be remembered while estimating compensation to employees
It is a DOMESTIC CONCEPT REIMBURSABLE expenses are not included Employee’s OWN CONTRIBUTIONS to “Social Security Schemes” are not included INTEREST-FREE LOANS are not included, but the imputed interest is included. Compensation received by an employee from INSURANCE COMPANY is not included
2. Operating Surplus – The excess of Gross value added by the producer over the sum of compensation to employees , net indirect taxes and consumption of fixed capital.
2.INCOME METHOD:
2.INCOME METHOD:
COMPONENTS OF OPERATING SURPLUS
Income from Property
Rent
Royalty
Interest
Income from Entrepreneurshi
p
Profit
2.INCOME METHOD:3. Mixed Income of the self-employed- Income generated by unincorporated enterprises owned by the members of the household.
Components of Mixed Income - • Income of own account worker• Profits and dividends of unincorporated enterprises.
PRECAUTIONS OF INCOME METHOD: INCLUDE DON’T INCLUDE
Transfer Payments Illegal Money Corporate Profit Tax and Income Tax Windfall Gains Receipt from the sale of second-hand goods Death duties, gift tax, wealth tax and tax on windfall gains
Imputed Value of factor services
• NI is calculated by adding up all expenditures made on goods and services
during a year
3.EXPENDITURE METHOD:
GDPMP = C + I + G +(X-M)
3.EXPENDITURE METHOD:
Final Private Consumption Expenditure (C)
Investment Expenditure (I)
Final Government Expenditure (G)
Net Exports (X-M)
COMPONENTS OF GdP MP
3.EXPENDITURE METHOD:1.Final Private Consumption Expenditure (C) – Includes expenditure on Durable Goods Non-Durables Goods Services or Intangible Goods
2.Investment Expenditure (I) – Includes Business Fixed Investment Inventory investment Residential Construction Investment Public Investment
3. Goods and Services produced by the Govt. (G) – • Public Investment goods
4. Net Exports (NE) – It is equal to Merchandise Exports (X) minus Merchandise Imports (I)• NE = X – M
3.EXPENDITURE METHOD:
ITEMS TO BE EXCLUDED IN THE ESTIMATION OF GNP
o Sale and Purchase of securitieso Govt. Transfer Paymentso Private Transfer Paymentso Sale and Purchase of Second-hand goodso Non-marketed Goods and Serviceso Illegal Activities
ECONOMIC WELFARE AND NATIONAL INCOME
Is GNP a real indicator of GROWTH and DEVELOPMENT ?????
Not necessarily……What about the issues such as : Distribution of Income in Society Sustainable Development Standard of Living Employment Scenario Types of Goods being produced in the economy
To counter these problemsNew concepts are emerging……GREEN GNP
HUMAN DEVELOPMENT INDEXNET ECONOMIC WELFARE OR “NEW”
THANK YOU !!!
PRESENTED BY: TUSHAR SAINI URVASHI KOLI SHIVANGI AGARWAL
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