Measurement Of National Income – An Overview Flow of Product Approach Components of GNP GNP = Private Consumption (C) + Gross Private Domestic Investment.

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Presentation transcript:

Measurement Of National Income – An Overview Flow of Product Approach Components of GNP GNP = Private Consumption (C) + Gross Private Domestic Investment (Ig) + Government Expenditure on Goods and Services (G) + Net Exports (E) Earnings or Cost Approach Earnings or Costs As Sources Of GNP GNP = Wage + Interest + Rent and Other Property Income (double counting of intermediate goods purchased from other firms excluded by the value added technique). + Indirect Taxes that show up as an expense of generating the flow of products + Depreciation + Profit

Different Concepts of National Income GNP = C + I g + G + X. NNP = C + I n + G + X. GDP = Value of goods and services produced within the nation’s geographic territory, irrespective of the ownership of the resources.  GDP = GNP – Net Factor Income earned abroad. Similarly, NDP = NNP – Net Factor Income earned abroad.

Purchasing Power Parity- PPP Income PPP Income = GNP Income Official Ruppee/Dollar Exchange Rate PPP of Indian Ruppee PPP (Purchasing Power Parity) of Indian Rupee = Number of Indian Rupees Required to purchase a representative goods and services in India that one US Dollar will buy in USA

Nominal Vs Real Income Nominal Income = Income measured at current price Real Income = Nominal Income/Income Deflator where Income Deflator is price index

GROSS NATIONAL PRODUCT (GNP), NATIONAL INCOME (NY) AND DISPOSABLE INCOME (DY) GNP = C + I g + G + X, where C = Private Consumption Ig = Gross Private Investment G = Govt. Expenditure on Goods and Services X = Net Exports NY = GNP – Indirect Taxes – Depreciation DY = NY – Direct Taxes – Net Business Saving +Transfer Payments by Govt.

Net exports (X) Government Expenditure on Goods & Services (G) Gross Private Investment (I) Private Consumption (C) Depreciation Indirect Taxes National Income (NY) Direct Taxes Net Business Saving Transfer Payments GNP, NATIONAL INCOME (NY) AND DISPOSABLE INCOME (DY) – GRAPHICAL REPRESENTATION GNP DY