AP Inter 1st Year Economics Notes Chapter 7 National Income

Students can go through AP Inter 1st Year Economics Notes 7th Lesson National Income will help students in revising the entire concepts quickly.

AP Inter 1st Year Economics Notes 7th Lesson National Income

→ National income means the aggregate value of all final goods and services produced in the economy in one year.

→ There are different opinion about the definitions of the National income. They are classified

  1. Classical
  2. Neo classical
  3. Modern definitions.

→ Factors determining National Income are :

  1. Natural resources
  2. Quality and quantity of factors of production
  3. State of technology
  4. Political stability.

AP Inter 1st Year Economics Notes Chapter 7 National Income

→ Various conceptes related to the National income are :

  1. G.N.P.
  2. G.D.P
  3. N.N.P.
  4. N.I.at factor cost
  5. Personal income
  6. Disposable income
  7. Per capita income.

→ The various components of N.I. are
a) Consumption
b) Gross domestic investment
c) Government expenditure
d) Net foreign investment (X – M)

→ There are three methods for measuring National Income, they are :
a) Output method
b) Expenditure method
c) Income method.

→ National Income describes how we can view aggregate income of the economy and the circular flow of goods, services and incomes in a simple economy.

→ The National Income data is of use to the government, e.g. for formulating its macro economics strategy; and for businessmen, e.g: for planning new investment expenditure.

→ According to Marshall, “The labour and capital of country acting on its natural resources, produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the net annual income or revenue of a country.

→ Many factors influence and determine the size of National Income in a country. The factors are Natural Resources, Quality and Quantity of Factors of Production, State of Technology, Political Will and Stability, etc.

→ Different concepts of aggregate incomes suit different purposes of macro economic analysis. The various concepts are GNP, GDP, NNP, National income at Factor cost, Personal income, Disposal income and Per capita income.

→ There are five main components of National Income. They are 1) Consumption – C 2) Gross domestic investment – I, 3) Government expenditure – G, 4) Net foreign investment (x-m), 5) Net income from abroad.

→ Three methods of measuring national income are output method, expenditure method and income method.

→ Cairn Cross says “National Income can be looked in any one of the three ways, as the national income measured by adding up everybody’s income by adding up everybody’s output and by adding up the value of all things that people buy and adding in their savings.

Leave a Comment