in  It has proved to be more practical also. The definitions of national income can be grouped into two classes: 1. We can draw and make inter-country comparisons by taking the national income analysis of two countries which will help us to know where we stand among the world economies. Modern definition given by Prof. Simon Kuznet. LS23 6AD, Tel: +44 0844 800 0085 Thus, all the definitions and National Income consider one year. The time is accepted as one year all over the world as it is concerned with the natural and seasonal factors. More on national income. It refers to that part of the personal income which is actually available to the consumers. Before publishing your Articles on this site, please read the following pages: 1. Factors to be taken into consideration while studying Gross National Product: (i) As GNP is the measure of money, so all kinds of goods and services produced in a country during one year are measured in terms of money at current prices and then added together. These three components are excluded from national income because they do reach individuals. The value of real national income is affected both by changes in real productivity and by changes in the terms of trade. But the product must be produced in the country alone as the net earnings from abroad are excluded. The national income deflated by a suitable price index. This is the true net annual income or revenue of the country or national dividend.” In this definition, the word “net” refers to deductions from the gross national income in respect of depreciation of capital equipment used in the creation of productive activity. GNI has gradually replaced GNP in international statis… Thus. Note here that the real GDP data is expressed at constant priceswhich mean that we have made an inflation adjustment. ... Largest Retail Bankruptcies Caused By 2020 Pandemic As we know at this point, the COVID-19 pandemic has thrown major companies in the US and the world over into complete havoc. But it should be remembered while calculating this income that the whole of the disposable income is not spend on consumption and a part of it is saved. Real terms Same as real. It also gives us an information regarding the personal consumption pattern. Although the definition of Prof. Pigou is precise, simple and practical but it is not free from criticisms. are not included in the national income, Prof. Pigou’s definition is used in exchange economy where goods and services are exchanged for money only, The definition takes into account the net value of goods and services which are exported and imported. Share Your Word File He has defined national income in practical prospective as: “The Net Output of Commodities and Services flowing in a year from the country’s productive system in the hands of ultimate consumers or into net addition to the country’s capital goods. The sale and purchase of old goods and of shares, bonds are assets of existing companies are not included in GNP because they do not make any addition to the national product and the goods are simply transferred. CallUrl('www-personal>umich>edu<%7Ealandearhtml',0), The term "economic growth" refers to an increase (or growth) in ~TildeLink() or product expressed usually as per capita income. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences. A "wage expressed in real terms" is just the real wage. Does Public Choice Theory Affect Economic Output? The flow is a continuous one. In 2011, the money value of GDP expands to $4,500m but during the year, inflation is 3% causing the general index of prices to rise from a 2010 base year value of 100 to 103 in 2011. (iii) The period of production is taken as one year. It is important to distinguish between the nominal and real value of a country's national output and income. 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