Civil Services Exam 2016: Know Your GS (Inf.4) 4 KEY CONCEPTS OF NATIONAL INCOME

Civil Services Exam 2016: You will be tested on your knowledge the basic concepts in economics , the foremost of which are – GDP, GNP, NDP and NNP

 Civil Services Exam 2016 : Daily Infographics

Subject: Economics

National income accounting is a set of measures used to gauge the health of a nation’s economy for a given period. National Income is the total amount of income accruing to a country from economic activities in a year’s time is known as national income. It includes payments made to all resources in the form of wages, interest, rent and profits.

Gross Domestic Product (GDP)

GDP is the total value of goods and services produced within the country during a year. This is calculated at market prices and is known as GDP at market prices. Dernberg defines GDP at market price as “the market value of the output of final goods and services produced in the domestic territory of a country during an accounting year.”

GDP= Value of gross domestic output- value of intermediate consumption

Net Domestic Product (NDP)

NDP is the value of net output of the economy during the year. Some of the country’s capital equipment wears out or becomes obsolete each year during the production process. The value of this capital consumption is some percentage of gross investment which is deducted from GDP.

Thus Net Domestic Product = GDP at Factor Cost – Depreciation.

Gross National Product (GNP)

GNP is the total measure of the flow of goods and services at market value resulting from current production during a year in a country, including net income from abroad.

GNP= GDP + Income from Abroad
Or
GNP = GDP – Income from abroad

Income from abroad= trade balance + interest on External Loans+ Private Remittance

Net National Product (NNP)

NNP includes the value of total output of consumption goods and investment goods. But the process of production uses up a certain amount of fixed capital. Some fixed equipment wears out, its other components are damaged or destroyed, and still others are rendered obsolete through technological changes.

All this process is termed depreciation or capital consumption allowance. In order to arrive at NNP, we deduct depreciation from GNP. The word ‘net’ refers to the exclusion of that part of total output which represents depreciation.

So NNP = GNP—Depreciation

OR

NNP= GDP+ income from abroad- depreciation

TAKE THE QUIZ

1. Consider the following statement and identify the right one.i. Personal income refers to the income of individuals of a country.
ii. The income at their disposal after paying direct taxes is called disposable income

 I only

 ii only

  both

 d. none

Question 1 of 5

2. Which of the following is added to national income while calculating personal income?

 Transfer payments to individuals

 Social security contributions

  Corporate taxes

  Undistributed profits

Question 2 of 5

3. The national income estimation is the responsibility of _____________.

 NSSO

  CSO

  Finance Ministry

 National Income Committee

Question 3 of 5

4. National Income is ___________.

 Net National Product – Indirect Taxes + Subsidies

 Gross National Product – Direct Taxes

  Gross Domestic Product – Imports

  Net Domestic Product + Products

Question 4 of 5

5. Which statement is true ???

 National Income = National expenditure – indirect taxes

 NI = GNP – NNP

 NI = NNP – indirect taxes

 NI = PI

Question 5 of 5

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