Short note on national income. Study Notes on National Income (With Diagram) 2022-10-22
Short note on national income Rating:
Christopher Columbus was an Italian explorer and navigator who is credited with the discovery of the Americas. Born in the Republic of Genoa in 1451, Columbus was a skilled mariner who had a passion for exploration.
In 1492, Columbus received funding from King Ferdinand and Queen Isabella of Spain to embark on a journey to find a westward route to Asia. Columbus believed that he could reach Asia by sailing west across the Atlantic Ocean, and the Spanish monarchy saw this as an opportunity to expand their empire and increase their trade with the East.
On August 3, 1492, Columbus set sail from Spain with three ships: the Nina, the Pinta, and the Santa Maria. After a treacherous journey that lasted more than two months, Columbus and his crew landed on an island in the Bahamas on October 12, 1492.
Despite the fact that Columbus had not reached Asia as he had intended, he still considered the voyage a success. He believed that he had discovered a new route to the East and named the islands he encountered the West Indies.
Columbus made three more voyages to the New World, exploring the Caribbean and parts of Central and South America. He brought back gold, spices, and other valuable commodities, which helped to enrich the Spanish monarchy and establish Spain as a major European power.
However, Columbus's legacy is not without controversy. The arrival of Europeans in the Americas had a devastating impact on the indigenous peoples who lived there. Many of them were subjected to violence, enslavement, and diseases brought by the Europeans, which led to a significant decline in their populations.
Despite these negative consequences, Columbus's voyages had a significant impact on the course of history. They opened up the New World to exploration and colonization, which led to the establishment of new trade routes and the exchange of ideas, goods, and people between the Old World and the New.
Overall, Christopher Columbus was a significant figure in history who is remembered for his bravery, determination, and curiosity. His voyages helped to shape the modern world and continue to be celebrated and studied to this day.
Class 12 Economics Notes for National Income and Related Aggregates
Similarly, in macroeconomics, the equilibrium level of national income has been reached when there are no economic forces operating to change the level of national income. This residual income is paid to the organiser of production as profit. Again, some part of C + I + G is not spent on domestically produced goods and services but on goods and services produced by foreigners. Factor cost is the input cost that producer has to incur in the process of production. National income consists of the aggregate value of all goods and services produced by the community in a given period, usually a year, deducting wear and tear and depreciation of the plants and machines that were used in the production of goods and services constituting national income.
Gross Investment: Gross investment refers to the total addition made to the physical stock of capital during a period of time. These can be in the form of compensation like rent for use of Land, Salaries for employees for providing Labour, interest on capital, and profit for Entrepreneurs. Similarly, domestic residents may participate in the production. GDP includes these services by valuing them at their cost. The following aspect needs to be considered in respect of Net Domestic Product at Market Price.
Personal Incomes PI : Personal income PI can be defined as the sum of all kinds of incomes received by the individuals from all sources of incomes. Hence, the sum of theincomereceived byfactors ofproduction inthe formof rent, wages, interest and profit is called NationalIncome. National Product : ADVERTISEMENTS: This is found by adding up the value of all final goods and services produced by firms during the year. Relationship of National Income with NDI Year 2005 — 2006 Rs in crore. We know that production takes place only in firms.
The market worth of all goods and services generated by a firm throughout an accounting year is referred to as the value of output. Sales are calculated by multiplying output with a price. They are used to compare the economic welfare among countries hence knowing which country is better off and by how much. The problem is partially overcome by using money as the unit of measurement — this greatly simplifies the adding up, but it gives rise to the problem of distinguishing between real and nominal values. Fourthly, the GNP does not include unpaid services rendered by the members of the household but such unpaid services also increase the level of welfare. On the output side the value of the national product is equal to the sum total of values added by all the productive units of the economy.
What is National Income? Concept, definition, measurement and all you need to know
If the national income is equitably distributed, then the standards of living will be high. Gross NDI includes depreciation whereas Net NDI is exclusive of depreciation. Now, if prices are rising, the value of the new items are likely to rise faster than the value of the old items. This adjustment is made by adding personal interest income and subtracting net interest. When goods and services produced by normal residents within and outside of a country in a year are valued at a constant price, i. Similarly, if prices are falling, the value of the new items are likely to fall less than that of the old items. Question and Answers for doubts on Factor Incomes 1.
This represents saving- investment identity of the simple one sector model of the economy. If the products are not meant to satisfy immediate wants of the people, then an increase in per capita income may not lead to a higher economic welfare. It includes the cost of production like wages, input prices, profits, rent, interest, etc. National Income Identities : It can be seen from national income accounting that actual saving S of an economy is equal to actual investment I during a given period of time. These aggregates of national income are defined as under: — Aggregate 1 — What is GDP MP or Gross Domestic Product at Market Price? Vedantu is the go-to website for every student when it comes to looking for answers regarding anything academic-related. It begins lay collecting the prices of thousands of goods and services. It makes last-minute revision easy for the students.
What is National Income? Meaning, Measurement, Formulas & more
Again, the improvement in welfare resulting from increased spending power may be offset by a reduction in welfare resulting from loss of leisure. National Income Estimate in an Open Economy: As in a closed economy, in an open economy also we can look at the national income from three sides — the production side, the income side and the expenditure side. It includes also transfer incomes like pensions, family allowances, unemployment allowances, sickness allowances, old age benefits and social security benefits. Social welfare is defined as the sum of economic and non-economic well-being. Read: Problem of Double Counting According to national income and related aggregates class 12 notes, counting the value of a commodity more than once while estimating national income is double counting.
National Income and its Aggregates Class 12 Notes Economics
Thus, the wages of these public servants are used as a measure of the value of their output. Travel allowances, bonuses, lodging allowances, and medical expenses are also included. Normal Resident of a country: A person or an institution who normally resides in a country and whose Centre of economic interest lies in that country is called a normal resident. The two will only be equal: a if wages and prices are such that firms plan to product what is currently being produced; and b if firms are able to implement their production plans successfully. All chapters are important when it comes to preparing for the examination.
This measures the total monetary value of all the goods and services produced by the people of a country regardless of whether they in or outside the country. The households are the owners of factors of production, the services of which they sell to firms in exchange for income such as rent + wages + interest + profit. Net factor income from abroad is added to the domestic product to get the value of National Income. Now let us consider the output side of the national income. Note: NI stands for National Income Personal Disposable Income: Disposable income, also known as personal disposable income, is the amount of money available for household consumption, savings, and spending after deducting income taxes.
Thus, let Y stand for GDP. Nominal GDP measures the pound value of the output of the economy. The national income accounts further divide national income into five components, depending on the way income is earned. Consumer Price Index C. When goods and services produced by normal residents within and outside of a country in a year are valued at current years prices, i. The factors of production — land, labour and capital are primary factors of production and their contractual payments are called factor incomes.