Page 218 - DECO405_MANAGERIAL_ECONOMICS

Unit 13: Basic National Income Concepts

services, distribute money incomes to all who help in production in the form of wages, Notes
rent, interest and profit, is known as Gross National Income.
National produce differs from domestic product by the amount of net factor income from
abroad.
The valuation of the national product at market prices indicates the total amount actually
paid by the final buyers while the valuation of national product at factor cost is a measure
of the total amount earned by the factors of production.
Personal income is calculated by subtracting from national income those types of incomes
which are earned but not received and adding those types which are received but not
currently earned.

13.4 Keywords

Disposable income: The amount of income left to an individual after taxes have been paid,
available for spending and saving.
Gross domestic product: The money value of all final goods and a service produced by normal
residents as well as non-residents in the domestic territory of a country but does not include net
factor income earned from abroad.
Gross national product: Total market value of all finished goods & services produced in a year
by a country's residents
National income: National income is a measure of the total value of the goods and services
(output) produced by an economy over a period of time (normally a year).

Nominal GDP: It is calculated by using the current prices to place value on the economy's
production of goods and services.
Personal income: Income received by persons from all sources. It includes income received from
participation in production as well as from government and business transfer payments
Real GDP: It is calculated by evaluating current production using prices that are fixed at past
levels, it shows the economy's overall production which changes over time.

13.5 Self Assessment

1. Choose the appropriate answer:

(a) The growth of an economy is indicated by an:
(i) Increase in general prices
(ii) Increase in national income
(iii) Increase in savings

(iv) Increase in investment
(b) The difference between NNP and NDP is:
(i) Depreciation
(ii) Current transfers from rest of the world
(iii) Indirect tax

(iv) Net factor income from abroad

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