1. What is National Income?
• National Income is the sum-total of factor-
incomes earned by normal residents of a
country during the period of one year.
• National Income is also defined as the sum-total
of market-value of final goods and services,
produced by normal residents of a country in
one year.

2. Three expressions of National
Income
• NY = M.V. of final goods and services
• NY = sum-total of factor-incomes
• NY = C+I (consumption+expenditure)

3. Gross Domestic Product at M.P.
• GDP is the market-value of final goods
and services produced within domestic
territory of a country during 1 year
inclusive of depriciation
• There are both resident as well as foreign
producers within domestic territory of a
country
• GDP= P*Q (Here P=Market Price and
Q=final goods and services)

4. • The term “gross” indicates that the latter
includes depriciation
• Only M.V. of final goods and services is
taken into account, not intermediate goods
and services
• Price of goods and services refers to their
prevailing M.P.

5. GDP does not include:
• Income from illegal activities
• Black-money
• Transfer-Payments
• Income from monetary transactions like
from shares and debentures
• Value of second hand goods
• Self-consumption services

6. Gross National Product at M.P.
• GNPmp is the market price is the M.V. of final goods and
services produced within domestic territory of a country
by normal residents during a period of one year.
• GNP is a broader concept than GDP.
• It includes NFYA (Net Factor Income earned from
Abroad)
• NFYA= Factor-Income earned by our residents in ROW
– Factor-Income earned by non-residents in our country
• GNP = GDP+NFYA
• If NFYA is positive, GNP>GDP
• If NFYA is negative, GNP<GDP

7. Relation between GDP and GNP
• Domestic Product is concerned with a
given geographical territory whereas
National Product can accrue in any part of
the world where normal residents of
country render their services.
• Therefore, National Product includes
NFYA while Gross Product does not
include NFYA

8. Net National Product at M.P
• Concept of National Product is more
practical than that of Gross National
Product because during the process of
production of final goods and services
there is some consumption of fixed-
capital, also called depriciation.
• N.N.P at M.P. = G.N.P. - Depriciation

9. Net Domestic Product at M.P
• Net Domestic Product at M.P. is the
market-value of final goods and services
produced within the domestic territory of a
country, exclusive of depriciation.
• NDP at M.P. = GDP – Depriciation
• NDP at M.P. = NNP at M.P – NFYA

10. Domestic Income Or N.D.P. at F.C
• Net Domestic Income is the sum-total of
factor-incomes generated within the
domestic territory of a country during a
period of one-year. (Domestic Income)
• NDP at F.C. = NDP at M.P – Indirect taxes
+ subsidies (or)
• NDP at F.C. = NDP at M.P – Net Indirect
Taxes

11. • GDP at F.C. = NDP at F.C + Depreciation
• NNP at F.C. or NATIONAL INCOME. It is
the total earning of all factors in the form
of interest, wages, rent and profits and
NFYA.
• NNP at F.C. = NDP at F.C. + NFYA

12. Gross National Product at F.C.
• GNP at F.C. is the sum total of factor
incomes earned by normal residents of a
country, along with consumption of fixed
capital, during a year.
• GNP at F.C. = NNP at F.C. + Depriciation

13. National Disposable Income
• National Disposable Income refers to the Net
Income at M.P. available to a country for
disposal. It is the sum-total of national income
NNP at F.C., Net Indirect Taxes and Net Current
Transfers from the rest of the world.
• NDI= N.I.(NNP at F.C.) + Net Indirect Taxes +
Net Current Transfers from ROW
• National Disposable Income is the income from
all sources (earned income as well as transfer
payments from abroad) available to residents of
a country for consumption expenditure or for
saving during a year.

14. Gross and Net concepts of National
disposable Income
• Gross National Disposable Income
includes current replacement cost, while
Net National Disposable Income does not.
• Net National Disposable Income= Gross
National Disposable Income – Current
replacement cost (which is depriciation at
the level of economy as a whole).

15. • Factor Income from Net Domestic Product
accruing to Private Sector = Net Domestic
Product at Factor Cost – Income from
Property and Entrepreneurship accruing to
the Government departmental enterprises
– Savings of Non-departmental
enterprises.

16. Private Income
• Private Income is the income of private-
sector obtained from any source,
productive or otherwise, and retained
income of corporations.
• Private-Income= Factor Income from NDP
accruing to pvt. Sector + NFYA + Interest
on National Debt + Current transfers from
Govt + Current transfers from ROW

17. National Income Private Income
1. It includes income both
in public and private
sectors of economy.
2. It includes only factor-
incomes. It does not
include transfers.
3. Interest on National
Debt is not included in
NI
1. It includes the income of
only private sector.
2. It includes both factor-
incomes as well as
current transfers from
Govt. and ROW
3. Interest on National debt
is included in Pvt.
Income

18. Personal Income
• Personal Income is the income actually
received by individuals and households
from all sources in the form of factor-
income and current-transfers.
• Personal Income includes the income
actually received by house-holds.
• Personal Income = Private Income –
Undistributed Profits (or corporate saving)
– corporation tax.

19. Private Income Personal Income
1) It is a broader
concept.
2) Private Income
includes corporate
taxes and corporate
saving.
1) It is a narrow
concept.
2) Personal Income
does not include
corporate taxes and
corporate saving.

20. Personal Income National Income
1) It is a concept
related to receipt of
income.
2) Income from
domestic product
accruing to Govt.
constitutes a part of
National Income, but
not of Personal
Income.
1. It is a concept
related to generation
of income.
2. Income from
domestic product
accruing to Govt
does not constitute a
part of National
Income

21. Personal Income National Income
3. Personal Income
includes both factor-
incomes as well as
transfer-payments.
4. Corporate savings
and tax are not a
part of personal
income
3. National Income
comprises of factor-
incomes only
4. Corporate savings
as well as
corporation tax are
integral components
of NI

22. Personal Disposable Income
• Personal Disposable Income is the
income remaining with individuals and
households after deduction of all taxes
levied against their income and their
property by Govt.
• PDI = Personal Income – Direct Personal
Tax – Miscellaneous receipts of Govt.
Administrative Dept or miscellaneous fees
and fines paid by households