What are the measures of National Income and Output

measures of national income

Measures of National Income and Output

National Income is the money value of all the final goods and services produced by a country during a period of one year. It consist of a collection of different types of goods and services of different types. There are basically 7 measures of national income and output which are as follows –

1. Gross Domestic Product (GDP)

Gross domestic product is the money value of all final goods and services produced in the domestic territory of a country during an accounting year. The concept of domestic territory of a country has a special meaning in national income accounting. Domestic territory is:

  • Territory lying within the political frontiers, including territorial waters of the country.
  • Ships and aircrafts operated by the residents of the country between two or more countries.
  • Fishing vessels, oil and natural gas rigs, and floating platforms which are under the control of the residents of the country in the International waters. It also includes the extraction areas in which the country has exclusive right of exploitation.

2. GDP at constant prices and at current prices

GPD can be estimated at current prices as well as at constant prices. If one uses the prevailing prices for the estimation of gross domestic product, this is known as GDP at current prices. So, if we say the GDP of India at current prices in 2016-17 is say 56,000 crores, we are measuring GDP on the basis of the prices prevailing in 2016 – 17. On the other hand, If one is using fixed prices to measure the GDP, that is prices prevailing at a point of time or in some base year. It is known as GDP at constant prices.

3. GDP at Factor Cost and at Market Price

The contribution of each producing unit to the current flow of goods and services is the net value added. GDP at factor cost is the sum of net value added by the different producing units and the consumption of fixed capital. The most important thing to note is that GDP at market price and at factor cost should be identical. This is because the final value of goods and services must be equal to the cost involved in their production. However, the value of goods and services is not same as the earnings of the factors of production. GDP at market prices includes direct taxes and excludes subsidies.

4. Net Domestic Product

Another measures of national income and output is net domestic product. When we calculate GDP, there is nothing about the provision of depreciation allowance. This means that GDP does not reveal the complete flow of goods and services through various sectors. It is a matter of common knowledge that capital goods like machines, equipment, tools, buildings,etc depreciate every year during the process of production. And after sometime they needs replacement. So net domestic product is the result of subtracting depreciation from GDP.

5. Gross National Product

GNP is another important measures of national income and output. There is contribution of non resident producers by way of wages, rent, interest and profits.The non residents works in the domestic territory of some other country and earn factor incomes. This factor income is known as net factor income from abroad. So, GNP is the product of gross domestic product and net income from abroad.

6. Net National Product

NNP is obtained when depreciation allowance is subtracted from GNP. There also exist a relationship between NNP and net income from abroad. If the net factor income from abroad is positive, NNP will be more than NDP. Similarly if net factor income is negative, NNp will be less than NDP. And if factor income is zero, NNP will become equals to NDP.

7. NNP at factor cost or National Income

NNP at factor cost is the value of goods and services produced during an accounting year. It can also be defined as the net value added at factor cost in an economy during an accounting year. NNP at factor cost is the sum of domestic factor incomes and net factor income from abroad.

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